The Adrian Loveridge Column – Rise of Airbnb

It seems almost incomprehensible that a simple impromptu idea fashioned just ten years ago, has grown into a company that is now estimated at being worth US$31 billion or a higher valuation than Expedia, Hilton or American Airlines.

From the conception days of buying three air mattresses to place on the floor in a loft room to help offset their rental property in San Francisco, the three founders, Brian Chesky, Joe Gebbia and Nathan Clecharczyk are now holding shares, which individually the pundits estimate are presently worth US$3.7 billion.

The company of course is Airbnb.

Despite these staggering figures Airbnb earned ‘just’ US$100 million last year from US$2.6 billion in revenues or a return of around 4 per cent. According to Forbes its larger publicly traded competitors have margins of about 27 per cent.

The concept is a really simple one, connecting people who have vacant homes and apartments with people wanting to rent them. However, not content with accommodation only, the company has diversified into selling guided tours with Experiences and helping with restaurant reservations through its partnership with Resy.

Airbnb’s Chief Executive Officer (CEO) Brian Chesky’s plan, such as it is, is to draw loosely on Amazon for inspiration, turning Airbnb into an everything store, but for travellers. Chesky hopes that a billion people will use Airbnb by 2028 (only another ten years away) which represents a giant leap from the roughly 400 million people who have stayed in an Airbnb registered property in the decade since start-up.

With 100 million people who have already stayed in an Airbnb so far this year, that stated objective does not sound too far-fetched.

What many forget is that Airbnb was not an overnight success story.

Originally called Air Bed and Breakfast, 12 months after the concept was implemented, the founding trio, were only taking 10 to 20 reservations a day. So they turned to seven so called ‘angel investors’. In return they received five rejections and two ignored emails. The ‘ask’ at that time was for 10 per cent of the company for US$150,000, which would now be worth an estimated US$3 billion at perceived market value.

Apparently the biggest single obstacle, in the early days, was that potential renters were not comfortable inviting strangers that they had met on the internet to stay in their homes. Or as co-founder, Joe Gebbia, so accurately articulated ‘ it was a real battle to figure how you can cross this bias that was working against us, that strangers equal danger’ adding ‘it’s something that we’ve all been taught since we were kids’.

They began staying with Airbnb hosts to learn what needed to be done, built out a peer review system so people could rate each other, added round-the-clock customer service and dramatically improved the quality of the website linked images.

The company now has over 5 million property listings and on one single night during August this year, a mind boggling 3.5 million guests stayed at one of those listings.

As the outside competition grows, creating a negative impact on Airbnb’s accommodation supply problem, the speculation mounts in financial circles, exactly when the company will be taken public.

19 comments

  • PoorPeacefulandPolite

    I would think that it would be much more advantageous for hosts in Barbados to pay a commission (with applicable taxes) to a listing agent that has its origin and base in Barbados. A properly operated (and officially approved) local listing agent would offer guarantees for both visitors and hosts alike. Experienced self-cater renters would be persuaded to give up on the likes of AirBnB and HomeAway simply because they are too large and too remote to care or help resolve issues. They also potentially damage our proposed “brand” building exercise and take out much too much of the sector’s foreign exchange revenue by encouraging informal extraregional payments.

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  • I agree with the previous poster that a local listing agent could be an advantage to Barbados. However, how do you convince the hosts to list with a fledgling company which has no reputation and little presence on the internet?

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  • @ Adrian Loveridge

    You said and I quote “…It seems almost incomprehensible that a simple impromptu idea fashioned just ten years ago, has grown into a company that is now estimated at being worth US$31 billion or a higher valuation than Expedia, Hilton or American Airlines…”

    Again, you speak a statement that is an indictment on the successive governments of Barbados, which, having no vision, and being a collection of “inferior superiors” are consistently incapale of producing anything meaningful.

    I wonder if you know what a wombat is Loveridge?

    De ole man will give you a little lesson in wombats and their singular status in the animal kingdom

    “…Of all the many mysteries that surround the common wombat, it is hard to find one as baffling as its ability – broadly acknowledged as unique in the natural world – to produce faeces shaped like cubes.

    Why the pudgy marsupials might benefit from six-faced faeces is generally agreed upon: wombats mark their territorial borders with fragrant piles of poo and the larger the piles the better.

    But quite how the animals produce the awkward-shaped blocks – and they can pass up to 100 per night, presumably with some trepidation – has proved a harder one to work out.

    Scientists who find themselves intrigued by the phenomena have made little progress beyond ruling out the nagging suspicion that the animals possessed square anuses…”

    We are besieged by a leadership of “SQUARE ANUSES” and consequently any ideas that you and others who have come before you, will be processed by these political wombats and will utlimately deposited by these inferior superiors as pup, which one would not even mind IF IT was even similar to that of the wombat!

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  • Interesting article Adrian.
    It certainly shows that the digital world is the future – Airbnb, Uber etc
    What do we do? We can either get on board or create something new.

    The positive thing about Airbnb is that they are already known and highly used. The negative is that we are but a small fish in a big pond.

    Can we do our own thing? The answer is yes and so we can control our message and destiny.
    The Barbados Tourism Authority should use Facebook. This social media giant can target the exact clients we want. A typical example can be the east coast of the USA.

    1) 50+ persons who own their homes, like to travel, with grown kids, and live on the east coast of USA close to the flight gateways.
    2) Honeymooners. 27 – 35 years old. University degree, like to travel, no kids, and live on the east coast of USA close to the flight gateways.
    3) Golfers. 40+ age, member of a golf club, teenage kids, own their home, and live on the east coast of USA close to the flight gateways.

    Use an initial budget of USD 30.000/moth. With a potential cost per target of USD 0.20 to 0.30 we can reach at a minimum 100.000 unique persons per month.

    What we need for this to be successful is a well designed, colorful and easily navigated website where clients can book their hotel easily. This should have search parameters broken down by price, number of stars per hotel, location, beach/no beach, meal plan etc

    The facility should be added whereby clients can book a hotel room preliminary and the booking can be held for 4 hours at no cost. This gives them time to find their flights separately.

    We can add rental cars and ancillary services as well.

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  • peterlawrencethompson

    @PoorPeacefulandPolite
    A local listing agent would be doomed to failure. Do the arithmetic. With a margin of 4% there is no way that a purely local listing agent would be able to afford to get the traffic to direct any meaningful business toward its listings. If they raised their margin then nobody would list their property with the local listing agent.

    @Aubrey’s suggestion is much more sensible… Facebook already has the traffic and the ability to target valid prospects. But why must it be left up to the Barbados Tourism Authority? The local AirBnB hosts can do this on their own if they collaborate… so can the Barbados Hotel & Tourism Association. Why do we expect the government to constantly give things to lazy and inert private sector? 😉

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  • @Peter

    You know the answer, we lack what the Jamaicans have in abundance, an ‘innate’ entrepreneurial spirit.

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  • PoorPeacefulandPolite

    @Peter

    Four percent margin? Who mentioned 4%? An official Barbados government accommodation listing would ensure that local hosts would pay the 10% of the nightly rental charge plus 7.5% VAT plus the $2.50 room rate. Right now most of them aren’t pay squat.

    Once upon a time HomeAway used to charge each host an annual subscription starting at US$ 400.00 per annum for inclusion in their listing. . . and then they got greedy and started charging a prorated “booking fee” that included a whole set of transaction costs some of which were plainly off-putting to some potential travelers and hosts.

    Hosts would have to adjust their pricing so as to explain the extra “booking fees” and so show that they are in properly in compliance with the new taxes. The booking fee (which includes the host’s prepaid rent) would be credited directly to a BTMI bank account held in Barbados for the registered host to claim as his/her rent component.

    BTMI can surely incorporate a straightforward online listing like this for local hosts either on a subscription or even using the same popular commission basis. It would be an excellent complement to their general promotion of the island in fact to include “a self cater option” in their message. Vacationers that want to find holiday accommodation in Barbados go straightaway and Google the words BARBADOS ACCOMMODATION first – not AirBnB or HomeAway !!

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  • Dear PP and P :
    Your commission and banking proposal makes sense, however, do all hotels operating in Barbados follow the same procedure?

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  • PoorPeacefulandPolite

    @ Robert MacD

    Hotels shouldn’t be using an AirBnB booking platform at all. AirBnB is more appropriate for the thousands of little self-cater apartments in the island that serve the low-budget-medium-term-staying visitor. This informal sector can be harnessed without being distressed if they were offered an indigenous, trusted and reliable listing mechanism. I can’t get BTMI or BHTA to understand how simple (and inexpensive) it can be. An AirBnB type listing agency can probably be operated out of little more than garage space !!

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  • Pingback: TRAVEL:The Adrian Loveridge Column – The Rise of Airbnb

  • Had to look at Guyanese Online.
    Some interesting post there …
    Should it make the blogroll?
    Caribbean Trade Law seem to have gone quiet, but I see it (she) is still active.

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  • Thanks for the prompt.

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  • Peterkin Brome
    14 November at 16:50

    The report from the meeting last evening with the Beaches Project at Heywoods has revealed that the parking area to the beach will be on the eastern side of the property close to the present highway. A guard will then escort the residents of St. Peter to the beach. This changes the access to the beach it also effects the elderly residents of the Heywoods community who has accessed the beach freely in the past and would subject the residents access to the whim and fancies of a Guard or the present management or any future management if the property changes hands. This arrangement is against any norms and the culture of the people of Heywoods. The Heywoods Group meeting will be on Sunday at the Public Park in Heywoods and we invite all interested persons in this matter to attend to discus this development.

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  • Posted this on the Batts Rock blog less than a month ago:

    Since Gabby led that motley crew along the beach at the Crane we have heard of a householder erecting a fence on the beach behind his home and now this, I suspect there are other instances which have not been brought to the public’s attention.
    It is slow and insidious, we are like the proverbial frog in the pot with the water slowly coming to a boil soon the only beach we will be able to call our own will be the one at North Point which no one wants.
    +++

    SLOW AND INSIDIOUS
    SLOW AND INSIDIOUS
    SLOW AND INSIDIOUS

    BOIL WATER BOIL!

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  • @ Sargeant,

    Bajans will soon forget what a “sea bath” meant especially to older people who lived near the coast.

    The concrete wall from Batts Rock to Maycocks is ” SLOW AND INSIDIOUS ”

    I am thankful that I spent the first 19 years of my life in Barbados in the 50s and 60s.

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  • David BU

    Barbados based LIAT pilots have joined the NUPW.

    What are your thoughts on this interesting development?

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  • @Artax

    Interesting, not sure what to make of it except to observe the NUPW must have better backchannels to government agencies. LIAT is government (s) owned after all.

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  • BREAKING NEWS sort of.

    ” THE BARBADOS WORKERS’ UNION (BWU) and the Barbados Hotel & Tourism Association (BHTA) have reached a three-year agreement to take the sector through to 2020.”

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