Conventional wisdom tells us to ‘expect the unexpected,’ and Airbnb news certainly delivered this week, most notably when a guest in Los Angeles received a surprise visit from a SWAT team!
Margot Lee Shmorak, CEO and Co-founder of Hostfully, joins Jasper (our homeless host) to discuss that incident as well as the unexpected negative view of Airbnb presented by a few high-profile Democrats on the national stage in the US.
They also cover the story of a couple who was pleasantly surprised by Airbnb’s new payment options as they planned their honeymoon trip, and an op-ed explaining why Airbnb’s growth in China is sluggish despite their best efforts. Listen in to understand why anything more than modest growth is unexpected in the Chinese market.
Article #1: Hotel Industry Details Plans to Fight Airbnb
- High-profile Democrats raised concerns about Airbnb
- Questioned housing costs, racial discrimination, and consumer protection and safety w/ FTC
- Accused Airbnb of evading local tax laws
- First time issue raised at national level
- Hotel lobby gave $1.3M to congressional candidates during past election cycle
- Airbnb spent $485,000 on lobbying in 2016
- Polarizing stance is surprising
Article #2: Why Airbnb’s China Expansion is Stumbling
- Name rebrand ‘Airbiying’ is awkward
- Homesharing not part of Chinese culture
- Only 19% motivated by social aspect
- Only 6.5% of Chinese trust strangers
- Price difference between Airbnb and hotels is much smaller
- Competition is much bigger
- Tujia boasts 10 times the number of listings
- Regulations make it difficult for foreign companies to do business
- The city of Paris has roughly the same number of Airbnb listings as all of China
Article #3: Airbnb Guest Surprised by SWAT Team Looking for Fugitive
- New Yorker staying at Airbnb in Los Angeles
- Overwhelmed by officers looking for ‘Ashley’
- Shot video of the incident
- Nervous that local regulations might prohibit Airbnb, he initially claimed to know the fugitive
- Later admitted that he did not
Article #4: Airbnb is Quietly Testing Flexible Payment Plans for Guests
- Airbnb is testing a feature that allows guests to put down a 50% deposit to reserve a luxury property
- Remaining balance is due two weeks prior to arrival
- Invented other systems in regions where paying with an international credit card isn’t an option, i.e.: Cuba and Brazil
- Demonstrates Airbnb’s willingness to experiment
Article #1: thehill.com/policy/technology/329120-the-hotel-industry-is-planning-a-washington-showdown-with-airbnb
Article #2: techinasia.com/talk/airbnb-china-expansion-stumble
Article #3: news.com.au/finance/business/travel/airbnb-guest-surprised-by-swat-team-looking-for-fugitive/news-story/0e0d2ee58092d045e8915466a30a59cb
Article #4: fastcompany.com/40410787/airbnb-is-quietly-testing-flexible-payment-options-for-guests
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Complete Transcript for Get Paid for Your Pad Episode 148
Welcome to Get Paid For Your Pad, the definitive show on Airbnb hosting, featuring the best advice on how to maximize profits from your Airbnb listing, as well as real-life experiences from Airbnb hosts all over the world. Welcome.
Jasper: Before learning about Aviva IQ, I used to spend so much time managing my guest communications manually. Now, with Aviva IQ’s easy-to-use automated service, my workload has reduced by 80%. Did I mention it’s free? Automate your Airbnb messages now at www.avivaiq.com.
Welcome, everybody, another episode of Get Paid For Your Pad, and today I am hosting this episode together with Margot, cofounder and CEO of Hostfully. So, Margot, how’s it going?
Margot: It’s going great. Thanks for having me.
Jasper: Yeah, it’s always a pleasure. How’s life in San Francisco?
Margot: Oh, it’s great. The weather’s getting warmer, lots of tourists around. It’s beautiful here. How is it there in Holland?
Jasper: Well, I’m homeless now.
Jasper: Yeah, so it’s a bit of a struggle. Fortunately, my cousin, he was nice enough, generous enough to offer me a place to stay, which basically means that I get to sleep in my own bed. Because I sold my house in Amsterdam, my apartment, after five years of Airbnb hosting, I have sold the house, and so my Airbnb journey in Amsterdam has finally come to an end. I hosted my last guests just about a week ago.
And so, I had to get rid of all my furniture, and so I figured, I had two really nice beds, if I give those beds to some family members, then, you know, they kind of have to let me crash. Because I was talking to my cousin, I was like, “Look, my bed is in your house, okay. You’ve got to let me sleep in my own bed.”
Margot: Exactly. I was actually just thinking, so when you turned off your Airbnb listing in Amsterdam, you get to keep all the photos of it and everything, right, so that’s the place where you can go back and reminisce about your property?
Jasper: Well, it’s funny that you mention it because I was just thinking about that. You know, I haven’t taken down the listing yet. The listing’s still there, but I’ve obviously put it at ‘inactive’ or ‘snooze’. You can snooze your listing, so I snoozed it, but I haven’t actually thought about, what am I going to do with this listing? Do I get to keep my reviews when I start my new listing?
Jasper: I don’t know how it works.
Margot: Yeah, well, aren’t the reviews associated with your profile, not just your listing? I think that’s how it works. So, you should keep it, but just have it be inactive, because if you get rid of it, then I’m not sure how that works for the reviews for your profile. So, keep it.
Margot: Yeah, definitely keep it.
Jasper: So, I’ve got to look into that. But, anyway, I’ve already bought an apartment in Columbia, as some people may know, as I’ve talked about it before, but, yeah, so now I have to transfer the money, and then the apartment will be mine. But now, for a few days, I get to enjoy my status as a homeless person, which is something that I’ve always aspired to be. It’s always been my ambition to be homeless.
Margot: It’s like being a true minimalist.
Jasper: Yeah, exactly. Exactly.
Margot: Yeah, cool. Well, I’m glad you’re enjoying it. And, also, you get to have a high-quality bed, which is the most important thing, no matter where you stay, in my opinion, so that’s great.
Jasper: Absolutely. I mean, a good night of sleep is definitely the most important part of the experience when you’re staying at somebody’s place, I think, and it’s also important for us as hosts. Well, I guess, technically, I’m not a host anymore, but soon I will be. But, you know, having a very comfortable bed is definitely something that is really important, I think.
Margot: Definitely. That’s one of the things, actually, that we are always trying to find ways to connect our users with at Hostfully. We have some partnerships with a sheets company and a bed company, just so we can offer our customers some freebies every now and then because we also believe that the bed is one of the keys to great hospitality in an Airbnb. So, I totally agree with you there.
So, let’s dive into this week’s news.
Margot: Yes, let’s do it.
Jasper: What do you have?
Margot: Well, I’ve got some more regulatory stuff. I know that we’ve talked about regulatory a lot, and you’ve talked about it a lot on the show, but this past week, we had an interesting article from The Hill, which reports on stuff that’s happening on Capitol Hill in the U.S., and some really big-name Senators – Brian Schatz of Hawaii, Elizabeth Warren of Massachusetts, who is a very polarizing figure in this country, and Dianne Feinstein who comes from California – these three Democrats sent a letter to the Federal Trade Commission in July, raising concerns about the short-term rental industry and were really making some claims that the short-term rental industry helps to propagate some issues around discrimination, is evading local tax laws, also flies in the face of some of the safety and fire inspection standards.
And so, in some markets, the group that these Senators were working with, which is the American Hotel & Lodging Association, said that Airbnb is dodging payment of local lodging taxes, which is something we’ve heard a lot about, but the most surprising part about this article was that they have these three really big-name, very popular Senators pro-championing the hotel side of things, and it’s the first time I’ve seen it happen at the national level. So, that’s pretty exciting.
Jasper: So, you would expect those Senators to be more in favor of Airbnb?
Margot: I just wouldn’t have expected them to take such a polarizing stance. I think that a lot of the constituencies for these Senators have mixed feelings, and I don’t think that there is a clear point of view that they are wanting to champion. So, I was surprised that they came out on the side of kind of old, stodgy business instead of new business, but maybe that’s just who got to them first. I don’t know. I could see them just as easily championing some of the things that Airbnb has been championing.
One of the things that Airbnb is saying is that they have struck over 250 government partnerships over the last year, and they’ve really shown their seriousness of purpose when it comes to putting in place very fair rules to partner with local legislators and tax laws, and other safety and fire regulatory issues. So, anyway, I’m surprised that they were able to get such high-profile Democrats to side with them right now.
Jasper: I don’t know much about politics in the U.S., but can’t they just pay those Senators?
Margot: Potentially, but I think that that’s probably illegal. I’m not an expert on that either.
Jasper: Or are those called lobbyists?
Margot: Yes, they’re called lobbyists. Yeah, the American Hotel & Lodging Association, I believe, raised something like $1.5 million and ended up giving away $1.3 million to further their agenda last year. So, they’re raising big money. And then, Airbnb, similarly, raised about $485,000, so about half that, to champion some of their causes. So, we’re definitely going to continue to see a lot of fighting, and I think it’s going to end up going up to the federal level, which will be interesting here in the U.S.
Jasper: Yeah, it will definitely be interesting to see how this plays out. But, by the way, have you ever heard what the origin of the word ‘lobbying’ is?
Jasper: So, I heard this anecdote. I don’t know if it’s true, but somebody told me that when Abraham Lincoln was still President of the U.S., he would go to this hotel bar, get really drunk, and then on his way home…
Margot: People would wait in the lobby?
Jasper: Yeah, exactly. You know, when he’s drunk, he’s easily influenced, so all these politicians would wait in the lobby to wait for him because they weren’t allowed… The lobbyists or the people who were trying to influence, they weren’t allowed in the bar when he was there, so they were all waiting in the lobby for him to come out, and then try and influence his opinion on certain matters.
Margot: Well, that makes a lot of sense because that’s what they’re doing.
Jasper: It’s a very interesting story, isn’t it?
Margot: Yeah, that’s cool. Yeah, it is kind of a strange word.
Jasper: I have no idea if it’s true.
Jasper: Anyway, there’s also some article, a pretty interesting article, actually, about Airbnb’s expansion in China, or should I say the lack of Airbnb’s expansion in China, because, you know, they’ve been active in China for quite a while. They started in 2013, so it’s almost four years, and they really haven’t grown that much. They only have about 80,000 listings in the country, and I mean, it’s the country where like, what is it, 20% of the world population lives?
Jasper: And, you know, their competitors are much bigger. There’s a lot of things that you would expect to be different. But, there’s a really interesting article, and there’s actually quite a lot to talk about.
Margot: Yeah, I would recommend people read this article. It’s in Tech in Asia, and it’s by Ziwei Li. It’s a great article. I totally recommend it for anyone who’s interested in Airbnb, but let’s talk a little bit about it because there’s a lot to talk about in this article.
Jasper: Yeah. So, it starts with commenting on the name. So, Airbnb did it like a rebrand, and they came up with a Chinese name for the platform, and I don’t know how you pronounce it. You have a minor in Mandarin, I believe?
Margot: I do.
Jasper: So, I’ll let you pronounce it.
Margot: Yeah. So, it’s three words. The first word is ‘ai’, which means love, and the second word is ‘bi’, which, I actually don’t know the meaning of this word in this context, but the third words is ‘ying’, which means like welcome, like ‘huanying’, which is what you say to welcome someone. So, the name is ‘Aibiying’, and the critique of this, and I am totally… It’s been 15 years since I studied Chinese, so I really don’t speak it, (just a qualifier), but the meaning is ‘to welcome each other with love’, and the Chinese users are saying it’s really awkward to pronounce and it uses a weird combination of characters, like the order of the characters is in a strange way. And just having studied Chinese, I know that there are these colloquialisms and kind of commonalities in the way that you structure sentences and words, and so this could be just super-awkward.
But, that’s where it starts, so it just gets more and more hairy after that. You want to go on to the next section?
Jasper: Yeah, and it’s an interesting article. And, you know, Airbnb is really ambitious about it’s growth in the future because, other than the new name, it also introduced its Trips and Experiences products in Shanghai, and it announced it would double down on investment and scaling the team in China. So, they’re really looking to up the pace a little bit, but the author of the article kind of argues that it’s just not really going to happen, and there’s several reasons.
And I think the main reason, you know, it’s that the home-sharing is just not really part of the culture in China. And one of the figures that they show is that 72% of people who will do home-sharing were primarily motivated by financial returns, and only 19% was interested in making new friends. So, you know, it’s viewed more as a business than as a cultural experience, and I think that’s a big thing.
And it also states that… Let me see. It states something that, in China, meeting strangers and sharing things with strangers is not really something that a lot of people do. A lot of people, they’re worried about safety and about privacy, and stuff like that. So, I think that’s the first major point. It’s just not really part of their culture.
Margot: Yeah, and I had native Chinese people tell me this, where… Here’s some stats from the article. So, like only 6.5% of people trust strangers, and stranger trust rating from 2016 has even fallen to around 1%. So, there’s just like this really big reluctance to trust a stranger. And really, the feeling, if you want to frame it more negatively, is that everyone is going to screw you. And that is really what a lot of Chinese people have told me, that it’s very common.
So, you know, I guess my comment on this is that if you were to rewind like 10 years back, so we’re in 2017, to like 2007, I’m sure a lot of people would have said the same thing about the United States. And I bet Airbnb, who has developed and really focused on building a brand of trust, will look at this as a fun challenge. And, I mean, I hope that they are able to do the same thing they’ve been able to do in the United States, but it is a really big challenge, about building trust. And Airbnb’s brand and user experience here in the United States is all about building trust, and that’s something that Gebbia and Brian Chesky have been talking about for a long time, it’s just whether they can really do that in a new country with a new culture that maybe is even more against sharing with strangers.
So, anyway, that’s my comment on that.
Jasper: Yeah, well, you know, I know a bunch of people in China. I’ve been there before, I have some friends who’ve lived there, and one thing I did notice is that they always seem to be worried about safety wherever they travel. For example, I was in Paris a couple weeks ago, and I remember, some of my Chinese friends were telling me that they didn’t want to go to Paris because it was too dangerous. And it’s funny because, I mean, I don’t feel like Paris is a particularly more dangerous place than anywhere else in the world, really, but it’s just kind of their focus, I think.
Margot: Yeah, that’s interesting. Yeah, I never would have thought that.
Jasper: Yeah, exactly. I mean, in the U.S., I think people think of Paris as this romantic city, you know, but in China, people think it’s dangerous.
Margot: That’s interesting. By ‘dangerous’, like pickpocketing, like violent crime kind of dangerous, or dangerous like…? I don’t know. It’s just interesting. Like, what is it, really? I would like to understand, what is it, really, that scares people, because there’s a bunch of different layers, you know?
Jasper: Yeah. I think it’s like getting robbed.
Margot: Oh, it is? Like theft. Interesting.
Anyway, let’s move on with this article. There’s a bunch of other points. Another point is that, in most countries, the difference between an Airbnb and a hotel room, in price, is quite significant, and that difference is a lot smaller in China. There’s an interesting price comparison chart in the article. And so, they compare cities like Beijing and Shanghai to cities like New York, London, Berlin, etc., and yeah, it’s true, the price difference is a lot smaller.
So, Chinese hotels are a little bit cheaper or the Airbnbs are little bit more expensive, one of the two, but I think it’s the hotels. I think the hotels are just generally a lot cheaper in China, and so you don’t really get too much of a price advantage there.
Margot: That’s right, because if you look at this chart that we’re looking at right now, the price differential in other markets is somewhere close to around 50%, or even more, but then when you look at the Chinese markets, it’s closer to 30%. You know, I’m just ballparking, but just so people understand the big difference. It’s like a relative difference, not an absolute difference between the two.
Jasper: Yeah, exactly.
Margot: Yeah, totally.
Jasper: Yeah. Yeah, for sure. And then, also, there are a lot of people who just prefer to stay in hotels. They’ve asked people, you know, “What’s your preferred type of accommodation when you travel?” And only 27% mentioned short-stay apartments. The majority mentioned chain hotels or regular starred hotels. So, you know, if people have less of a preference to stay in short-stay apartments, and also, the price difference isn’t as big, then it’s kind of easy to understand why the demand is not that high.
Margot: That’s right, yeah.
Jasper: And then, there’s also a bunch of competitors that are much bigger than Airbnb.
Margot: Yes. There’s Tujia, is the largest one. They have about 10 times…more than 10 times the number of listings that Airbnb has today, and actually, that same company has more than 3 times its next competitor. I don’t know the name of this next competitor here, but Tujia is by far the market leader, and then Airbnb is woefully behind in kind of fourth or fifth place, depending on what you’re looking at to measure it.
Jasper: Yeah, exactly. The biggest one has over a million listings and Airbnb only has about 75,000 or 80,000. I mean, that’s the same amount of listings that Paris has, by the way.
Margot: Really? Wow.
Jasper: You know, just to put things in perspective.
Margot: Yeah, yeah. The million listings? There are a million listings in Paris?
Jasper: No, I mean 80,000. I don’t know the exact number. I think it’s like 70,000 or 80,000 in Paris.
Jasper: And that’s the amount of listings that they have in the whole of China.
Jasper: So, I mean, they’re definitely really, really small still.
Margot: Yeah. Yeah, definitely.
Jasper: And then, of course, other than the demand and the silly name and everything, there’s also the fact that, in general, it’s just really hard to do business in China for a foreign company. I mean, we’ve seen Uber, who gave up on China a while ago. And, obviously, there’s a lot of regulation in China that the government has, and the regulators and authorities that have a big say in what’s happening in the country, and it’s pretty easy for them to make it a bit harder for the foreign companies than the local companies.
Margot: Yeah, totally. And the regulatory stuff is not even just on the companies, but it’s also on all the payment processing that happens between the travelers who are trying to book Airbnbs. The Chinese government has a lot of levers that they can pull even to get in the way of that. You know what I mean?
Jasper: Right. Exactly, yeah.
Margot: Like, they could just prohibit the ability to pay Airbnb for a listing, or prevent the actual supplier, the Airbnb host, from receiving payment. So, there’s just a bunch of different ways that the Chinese government puts controls around things that are not the same as they operate in Europe or in the U.S.
Jasper: Exactly. So, you know, it’s going to be really interesting to see if Airbnb’s going to succeed in China, or maybe they’ll pull out in a few years, just like Uber did, but the author of this article definitely has the opinion that they’re going to have a very challenging road ahead.
Margot: That’s right. Yeah, it’s a great article. I highly recommend checking it out. It’s just really well written and goes into some nice details about the dynamics between the two.
Jasper: Absolutely. It has some really interesting graphs and charts and stuff, which is always good.
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Let’s quickly touch on another article, just because it’s kind of funny. This is an article in an Australian newspaper, news.com.au, and it talks about… It’s interesting because this is an Australian site, but this is about something that happened in Los Angeles, so it must be on different sites, as well.
But, anyway, so there’s a guy who paid $800 to stay at a property in Los Angeles, and on a certain night, he got surprised when a SWAT team showed up. And he actually shot a video of the whole thing, so you can actually watch a video. You see the police agents and stuff, police officers. But, apparently, the host, a woman called Ashley, they had a warrant for her arrest, and so they kind of bulldozed into the apartment, looking to arrest this person. So, this Airbnb guest was kind of a little overwhelmed by that.
Margot: Yeah. That happened to me once when I was in my mid-20s, where the police showed up because they found my car, where it was located. It had run out of gas, and they thought that something had happened to me. And I have to tell you, I had like trauma for a few weeks after that because it’s really stressful. So, I was just looking at this video, thinking about how stressful it was for this poor Airbnb guest, but, at least, he took it in stride. I mean, he took a video.
Jasper: Yeah. And there was one interesting little detail, as well, because they initially asked the guest if he knew who Ashley was. And, you know, this guy’s from New York, and so his first instinct was to say no because he’d heard stories of Airbnb guests getting kicked out of the apartment because Airbnb hosting is illegal in certain places in New York.
Jasper: And so, initially, he told the cops, “Oh, no, I don’t know who this person is.” But then, later, he kind of admitted that he did know, and so that was kind of a little tricky. Like, when there’s 10 cops showing up and they’re looking for this person, they have an arrest, and then you start lying to them, it doesn’t really help the situation.
Margot: Exactly. He’s kind of implicated, even though he had nothing to do with anything.
Jasper: Yeah, exactly.
Margot: Poor guy.
Jasper: I think, in the end, it was good.
Margot: Yeah, yeah. It sounds like it. It sounds like he took it in stride, which is good.
I saw there was one other article, a small thing. Do we have time to bring this one up, the one about the payment options?
Jasper: Yeah. It’s just a quick one.
Margot: Yeah. So, this just has to do with Airbnb experimenting and testing some more flexible payment options for guests. It’s an article in Fast Company, and it’s about how, for some of the luxury, expensive listings, or maybe even just within this person’s region, they were testing a 50% payment plan, where instead of paying the whole deposit up front, the guest puts down 50%, and then, I think, a few weeks beforehand, they have to pay the second 50%.
And then, that article in Fast Company also refers to some past work that Airbnb did in Cuba and Brazil to change the way that payments were happening between potential travelers and hosts – in Cuba, partnering with a middleman to get some of these small casas particulares online, which is a new market, one that was opening up. And then, in Brazil, they actually partnered with this company that allowed for a payment option where you would print this card from Airbnb, and then go to a local store, and then pay, and then the store would indicate that you had paid, and you had 24 hours to do that to book an Airbnb in Brazil. And these really changed the ways that Airbnb was able to capture revenue from potential travelers.
So, that’s a good article, too. I thought it was really nicely written, and also, kind of shows how much experimentation Airbnb has done over the years, and probably, how much they will be doing moving forward.
Jasper: Wow, cool. Yeah, that’s pretty interesting. I’ve actually been. Have you ever been to Cuba?
Margot: I have. I loved it.
Jasper: Did you stay in one of those casas?
Margot: I did. Did you? Have you done that?
Jasper: Yeah, yeah. I went in 2006, like over 10 years ago.
Margot: Yeah, I went there in 2009, and we stayed in two of them, and it was crazy. The second one we stayed at, it was in Viñales, and my husband had stayed there five years prior, and they had his picture and pulled it up, and it was like coming home again, the same family.
Margot: It was cool, yeah.
Jasper: That’s amazing.
Margot: We had a great time.
Jasper: And the one thing that I remember from my trip to Cuba was that… You know how everybody hitchhikes?
Jasper: And so, I rented a car and drove around the country. And, you know, they have bus stops, but there’s no buses, or maybe the bus comes every two or three hours, and so there’s people hitchhiking at the bus stops. And I was told that you were supposed to pick people up, and so I stopped, and then a cop actually got into my car. He was hitchhiking, so I gave a ride to a cop.
And, you know, it was funny because my Spanish was reasonable, so I was kind of chatting to him a little bit, and then I made some sort of a joke. I told him something like… Because, you know, in Cuba, the highways are completely empty. At least, back in the day when I went, they were completely empty. Like, a horse-and-carriage here and there, and a few cars, but that’s a pretty wide highway, so you’re kind of by yourself. So, I was joking to the cop. I was like, “Well, you know, there’s no one on the road, so I could be going pretty fast, but I guess I have to stick to the speed limit now that you’re in my car, right?”
Margot: What did he say?
Jasper: He was laughing. He was like, “No, don’t worry. You can drive fast. I want to get home.”
Margot: Cool. Yeah, we picked up hitchhikers, actually, because we rented a car, and we picked up probably at least a dozen different people while we were there. It was really fun to meet people that way because it’s just a short period of time, and it’s very culturally acceptable and really safe, especially when you’re with somebody else. So, it was really fun.
All right, well, that’s it for today. Thanks, Margot, for joining.
Margot: Yeah. Thanks for having me.
Jasper: Always a pleasure to have you, and good luck with everything.
And to the listeners, thanks for listening, and of course, on Monday, we’re back with another episode, so we’ll see you then.