Airbnb Has Long Looked Like a Threat to Hotels. Its Ambition Runs Further Than That

Airbnb told more than 170 news organizations that it will now build a differentiated destination-travel business. Making money that way demands far tighter control of the supply chain. It is a question not only of cost and staffing, but of how fast and how well Airbnb can turn itself into a “travel platform.”

Applause, whistles, screams. If not for the magenta screen flashing the Airbnb logo at center stage, you might have thought you had walked into a concert.

This was the morning of November 17, Pacific Time, at the Orpheum Theatre in downtown Los Angeles. The man on stage taking the applause and the cheers was Airbnb CEO Brian Chesky.

The line for the keynote started forming at 8 a.m. An hour later, the 90-year-old Orpheum was packed with nearly 2,000 people: Airbnb hosts and staff from more than 100 countries, plus more than 170 news organizations from around the world, 17 of them Chinese.

This was the company's third global “Host Summit,” and the three-day event drew 7,000 people in all — a scale said to be unprecedented. It may also have been the least host-centered Host Summit yet. At the keynote, the most important session of the three days, Airbnb staff put the press in the front rows with the best sightlines and sent most hosts up to the theater's second floor.

The screaming came mostly from hosts and Airbnb staff who were too excited to stay in their seats. Airbnb does not pay hosts' costs for the summit; attendees bought their own tickets, at $275 or $345.

The Host Summit is Airbnb's event of the year. Beyond the ceremony, its real purpose is to lay out the company's strategy and market plans. This was the first year Airbnb invited Chinese media.

What the crowd was cheering was also why Airbnb had summoned 170-odd news organizations: two new products, “Experiences” and “Places,” and a redesigned app. That day Airbnb's new app took the front page of the U.S. Apple App Store, and a video ad went up on the company's YouTube account.

Put simply, “Experiences” is a platform that connects travelers with local “guides” at their destination, and “Places” collects the destinations Airbnb has picked out as worth visiting. Neither was built as a separate app. Both sit inside the Airbnb app next to the existing “Homes” business. “Homes, Experiences, and Places — all in one app,” as the YouTube ad puts it.

In Chesky's telling, “Experiences” and “Places” are a big step in Airbnb's shift from short-term rental platform to “travel platform.” The company also plans to fold in services like restaurant and flight booking. As with rentals, Airbnb does not provide the service itself; it builds the place where travelers and providers find each other.

“We want to create magic,” Chesky said of the thinking behind the new products. What makes a trip special, he said, is not the destination but what people experience there. A warm, unhurried afternoon by a river with family and friends means more than being packed into a crowded tourist attraction.

That is what Airbnb really wanted to get across: it is no longer content to solve where travelers sleep. It wants to become a travel services platform that pulls together more of the industry.

“Experiences” is the vehicle for that. The product has launched in 12 cities, among them Los Angeles, Detroit, Paris, London, Cape Town, Seoul, and Tokyo. Programs run one to three days and mostly cost $200 to $300.

Like the rental business, “Experiences” needs a host — Airbnb calls them “experts” — to design the route and lead travelers along it. In London, a designer with 20 years in the trade takes fashion lovers around local vintage and boutique shops. In Tokyo, $322 buys an afternoon learning how sushi is made from a chef with more than 30 years behind the counter. Airbnb plans to take “Experiences” into 50 countries next year, Shanghai among them.

Yume Shimazaki, a Superhost in Tokyo (Airbnb's label for hosts who meet certain standards), first heard about “Experiences” from Airbnb's Japan staff, though she was not among the first 500 “experts.” She has been renting out a place in the Hiroo area of Shibuya ward since 2013, and has hosted more than 100 guests in three years.

The launch did not surprise her. As a full-time host of three years, she knows how much backpackers want a local experience. She had already designed and printed a mini-map of her neighborhood for guests, marking the restaurant, bookstore, or café worth a stop on every corner.

“Right now I recommend places, but I'm getting ready to recommend locals worth meeting,” Yume told QDaily. Rather than tell people where the coffee is good, she would rather introduce them to the story of an interesting barista. That is more or less what “Experiences” is doing.

Her bigger reason for doing it is keeping the peace with her neighbors. “My neighborhood is old, and a lot of elderly people live here. At first they didn't like it. They didn't understand why strangers kept coming and going from my place.” Now she greets her neighbors, tells them she is an Airbnb host, and explains what Airbnb is. Because her guests brought business to local shops, people gradually dropped their guard and their resentment.

You can find veteran hosts like Yume all over the world. Their seniority comes partly from running listings and partly from the job they do for Airbnb. Yume talks with Airbnb's Japan office once or twice a month, and she is one of more than 20 “community organizers” the company has in Tokyo. Airbnb has set up community centers in cities around the world where hosts can meet, and the people who run them sometimes also lobby local governments to make Airbnb legal where they live.

Legality — or getting along with the government — is a problem Airbnb's rental business runs into everywhere. This October New York's governor signed a bill passed by the state legislature that bars anyone from listing an entire home on sites like Airbnb, with fines of up to $7,500. In Paris, Berlin, Barcelona, and elsewhere in Europe, government bodies have tightened the rules on short-term rentals too.

Near the main venue in Los Angeles, trucks and marching groups carrying anti-Airbnb slogans were not hard to find. That is why the U.S. press remains more interested in the policy trouble Airbnb faces city by city.

Airbnb has already given ground in various ways: releasing its rental data to placate New York's government, paying hotel tax to Los Angeles. You can also read it the other way around. Uncertain rules and uncertain public opinion are themselves part of why Airbnb is launching new services. It needs a new source of revenue to lean less on a business that a new law could shut down at any time.

The company, valued at $30 billion, has another problem to think about. Eight years in, it has a fairly mature operation and business model, and if it does not offer something different soon, rivals could pass it — especially companies rooted in their own local markets. Being close to home gives local firms a natural advantage in government relations, which often gives them more staying power against international competitors. If Airbnb does not innovate on a larger scale, being overtaken by local imitators on their own ground may only be a matter of time.

In China, for example, Airbnb is well known but has moved slowly. Xiaozhu understands local needs better, which makes it feel friendlier to many hosts who run listings on both platforms. Another company that calls itself China's Airbnb, Zhubaijia, which books overseas short-term rentals mainly for Chinese travelers, has already listed on China's over-the-counter New Third Board.

Laura Modi does not see “Experiences” as Airbnb taking on local travel agencies or local tour guides head-on. She is a senior manager at Airbnb, responsible mainly for recruiting hosts and “Experiences” providers around the world.

“We're in a very special position. We can give travelers a complete travel experience. We're not competing directly with local companies; we're trying to provide a whole experience,” she said in an interview with QDaily. “We have standards, and if local travel agencies or guide companies meet them, they can sign up on our platform too.”

Airbnb does need those people. For a platform that provides no service itself, more suppliers means more kinds of travelers served. In a sense the whole thing is pointless unless it reaches scale. But Modi said they are in no hurry to add numbers. They want people — or companies — who are willing to take part, who can offer a point of view, and who have unusual access in some field.

Chesky said Airbnb began planning “Experiences” two years ago. After a few months of trial operation, it now has 500 providers in 12 cities, some of them individuals, some organizations with unusual expertise.

The signs were there earlier. Over the past year, most Airbnb news that was not about policy fights concerned the company pushing past the limits of the room and widening what it offers travelers.

Last October it began testing a service called Journey in San Francisco, using local hosts to build three- or five-day itineraries for visitors. This August it briefly launched a separate app, Airbnb Trips, with city tourism features and local services like restaurant reservations and museum tours. A month later it bought a Barcelona startup, Trip4real, again for what it knew about local travel experiences. And although it was not short of money, Airbnb raised $1 billion in debt in June and another $800 million in a funding round in September, all to be spent on travel services and global expansion.

“Everything we do is driven by people,” Chesky said of Airbnb's position.

That is also the hardest link in the chain to control. Whether it is hosts or “experts,” how to keep these people motivated over time and how to guarantee service quality are not entirely up to Airbnb.

One such mishap happened on November 18, during an “Experience” Airbnb arranged for the press. Because of traffic, QDaily and two other Chinese outlets arrived late and nearly missed the core of a program listed at $289 on Airbnb.

“Experiences” and “Places” both lean on people far more than the old rental service did. Modi thinks one of the most important things in all of this is providing a special kind of access, which is what can keep people coming back to “Experiences.” “We want our ‘experts’ to be able to offer a certain kind of access,” she said. “It's access the people you meet on the road can't give you — someone's knowledge and skill in a particular field.”

Seth is exactly the kind of person with access Modi describes. A producer at a Los Angeles reality-TV company, he was invited a few months ago to become an “expert,” showing travelers how reality shows get made. He says he did it to meet more people. Judging by past reviews, travelers signed up because they were curious about how television gets made.

Modi says Airbnb spends an average of an hour reviewing each “expert” application. After that comes a conversation and an interview, and before a program goes live the “expert” must complete five hours of training, including what to do when something goes wrong — for instance, “What if it suddenly starts raining while 10 people are hiking?”

Of the 500 “Experiences” now live, most came in by direct invitation from Airbnb, which gives the company decent control over quality. Across the travel industry, deep destination travel — more personal experiences and services — is widely seen as an under-competed market with a lot of room to grow.

But Airbnb has to recognize that differentiated destination-travel products are harder to copy and harder to scale. Making money that way demands far tighter control of the supply chain. It is a question not only of cost and staffing, but of how fast and how well Airbnb can turn itself into a “travel platform.”

After the 2016 Host Summit ended, one thing struck the Chinese reporters: Airbnb had flown in 17 Chinese outlets, and the summit said almost nothing about the Chinese market.

“Our first priority in China right now is building the brand. We've run a series of marketing campaigns aimed at Chinese millennials, especially so they think of Airbnb when they travel in Asia,” Julian Persaud, Airbnb's head of Asia-Pacific operations, told QDaily. The rapid growth in Chinese travel abroad, he said, gives the company confidence in the market.

He is right about the numbers. Chinese travelers made about 120 million trips abroad in 2015, first in the world for the third year running, and the outbound market should keep growing. As the middle class expands, more people will travel overseas on their own and look for lodging with some character.

This November Airbnb formally opened its China office in Beijing. In the two months before the Host Summit, co-founder and CTO Nathan Blecharczyk signed cooperation agreements with the governments of Shenzhen, Chongqing, and Shanghai, planning to open up China's “travel resources” to foreign visitors. That was clearly groundwork for “Experiences.” If all goes well, people will be able to book a Shanghai “Experience” on Airbnb in 2017.

But becoming a travel platform means Airbnb's Chinese competitors are not only giants like Trip.com Group. Qyer, which grew out of a travel community, has been building differentiated destination services abroad since last year, and over the past year almost every online travel service in China has moved into destination ground services. Beyond the domestic players, Airbnb also faces destination-service companies already in China, such as TripAdvisor and Agoda.

What surprised me a little was that Modi could not answer questions as basic as the average age of Airbnb's Chinese hosts.

The challenge Airbnb faces in China may be much bigger than the company expects.

Cover image from Airbnb