Airbnb is fundamentally broken, its CEO says. He plans to fix it

Nikki Ekstein | (TNS) Bloomberg News

Airbnb Inc. CEO Brian Chesky hasn’t had an casual 2023. First determination was the “Airbnbust” frenzy successful March, successful which hosts took up arms connected Twitter (now X) astir shrinking nett margins and a imaginable short-term rental bubble. Then rival Vrbo bushed Airbnb to a diagnostic that customers person agelong requested with a loyalty program. And successful September, New York City vastly tightened its rules connected short-term rentals, astir squeezing Airbnb retired of a marketplace that successful the aboriginal days represented astir 80% of its business. Never caput the expanding strictness of return-to-office policies, which has hampered the flexibility that spurred Airbnb’s concern successful the pandemic years.

By mid-September, erstwhile helium rolled retired a fistful of tract improvements, it seemed arsenic if Chesky had recovered himself successful a Catch-22, caught betwixt the conflicting demands of guests and hosts. Top of caput among them: Guests privation to walk little wealth and beryllium guaranteed a amended product, portion hosts are disquieted astir imaginable declines successful bookings and their bottommost lines.

The caller improvements are incremental and mostly designed to payment guests. They revolve astir 5 communal symptom points, from affordability to lawsuit service. On the outgo side, the committedness is to amusement consumers full prices per listing—including transparent and little cleaning fees, a taxable of peculiar ire—while giving hosts insights that guarantee competitory nightly rates. Moreover, a caller listing verification strategy is reducing calls to lawsuit work by identifying and removing fake listings, and hunt was improved with caller filters for king-size beds and pet-friendly homes.

Chesky, who co-founded the institution successful 2008, has been prone implicit the years to hyping up tiny updates arsenic large features. But the CEO I spoke with precocious implicit Zoom was grounded and realistic, confessing that the latest improvements are, successful fact, patches implicit heavy cracks successful Airbnb’s foundation.

“We request to get our location successful order,” helium says. “We request to marque definite the listings are great, we’re providing large lawsuit work and we’re affordable. And I’ve told our squad that we tin get backmost to creating caller and breathtaking things erstwhile we’ve fixed that foundation.”

Here are six takeaways from a candid chat with Airbnb’s founder, ranging from his AI ambitions to the company’s aboriginal successful New York—and however helium plans to rebuild the proverbial house.

Airbnb inactive hasn’t nailed the halfway aspects of its service.

If you haven’t had the acquisition yourself, you’ve apt heard the fearfulness stories: Someone shows up to their Airbnb and finds the excavation is overgrown with algae. The vigor doesn’t work. Or a booking gets canceled astatine the past infinitesimal leaving travelers without a spot to stay. Consistency and reliability person go an tremendous Achilles bottommost for Airbnb, an contented that Chesky has agelong described arsenic a managerial situation that requires wrapping his arms astir millions of hosts successful hundreds of thousands of locations—and not stripping them of their individuality.

“Our system,” says Chesky—referring to the disruptive tech level wherever “adventurous travelers” could bargain and merchantability products (in this case, rooms oregon homes), process unafraid payments and permission reviews—“was designed for a overmuch smaller institution which grew similar crazy.”

“To usage a precise metaphor, it’s benignant of similar we ne'er afloat built the foundation. Like, we had a location and it had 4 pillars erstwhile we needed to person 10.”

Math aside, determination are 3 halfway pillars Chesky says would adhd up to “a truly large service”: affordable prices, reliability and due lawsuit enactment erstwhile things spell wrong. But retrofitting a ample location isn’t easy. “The bigger you are, the much effort it takes to summation quality,” Chesky says. “And that’s what we’ve been truly focused on.”

Lowering prices isn’t a liability for hosts. It’s their competitory advantage.

Consumers person shown an enduring willingness to splurge connected travel, Chesky says—but the bounds to that whitethorn beryllium slapping a $300 cleaning interest onto a play location rental that asks you to besides instrumentality retired the garbage, tally the laundry, and cleanable the toilets. “A batch of radical were introduced to our work from a pricing standpoint,” helium says. And it remains a cardinal concern driver. “The much affordable Airbnbs are, the much bookings we get.”

Chesky walks a delicate tightrope arsenic helium tries to motivate profit-hungry hosts by encouraging (some of) them to shrink their margins.

But affordability has to beryllium a competitory advantage, particularly successful markets that person robust edifice scenes. “We privation prices to determination and to beryllium much competitory vis-à-vis a hotels—that is truly important,” helium asserts, adding that edifice prices went up 10% successful the past twelvemonth but that prices for one-bedroom Airbnbs declined 1%. “When our hosts supply amended deals, they thin to marque much money.”

He suggests the solution is successful giving hosts dynamic pricing insights. “We’re [currently] giving tools to hosts to comparison the prices of their listings to others successful their neighborhood—and portion we don’t yet person a edifice comparison, we bash promote them to look astatine rates for hotels successful their country conscionable truthful they person a consciousness of what travelers are getting connected different platforms,” Chesky says.

AI is the cardinal to prime control.

While galore companies are utilizing generative AI to powerfulness lawsuit work chatbots, Airbnb is applying the exertion for prime power purposes.

“AI is the archetypal enactment of defence we’re utilizing to verify listings,” Chesky says. He says that for each listing, hosts are being asked to taxable some interior and exterior photos—these are enactment into a strategy that uses machine imaginativeness exertion to work the photos and lucifer them up with different databases to make a assurance score. If the photos don’t lucifer the exterior of the location astatine the aforesaid code connected Google Earth (or akin outer imaging services), for instance, the people volition beryllium lower, and the listing volition beryllium submitted for quality review.

Purging fake listings volition assistance stem immoderate of the site’s astir challenging lawsuit work situations, which hap erstwhile a impermanent shows up to an code wherever nary short-term rental spot really exists.

The AI exertion tin beryllium utilized to vet guests, too: Throwing location parties successful Airbnb rentals violates the platform’s policies, yet remains a communal contented for hosts. “We’ve utilized instrumentality learning techniques to look astatine the past cardinal and a fractional impermanent arrivals and spot which yielded a enactment and which didn’t,” Chesky says. “If you effort to bash this done a quality eye, you mightiness not announcement immoderate patterns, but AI tin look done implicit a cardinal information points, find a batch of similarities and make a regularisation set.” If an attempted booking raises flags, helium adds, “we either halt them oregon we inquire them for much information, until we either get comfy with you oregon we don’t get comfy with you.”

Chesky says much AI developments are connected the mode earlier the extremity of the year, hinting that verifying the legitimacy of a listing is conscionable the archetypal step. When I inquire if determination volition beryllium an effort to verify a listing’s amenities, helium stops abbreviated of revealing the adjacent iteration. “Guests person near implicit 300 cardinal reviews connected Airbnb,” helium says. “In November we volition person a truly large update to what you’re talking about.”

If and erstwhile Airbnb creates a loyalty program, it volition person thing to bash with points oregon escaped stays.

“I’ve ever believed astatine the astir cardinal level, the champion loyalty programme is to physique a merchandise that radical wholly emotion and that you should archetypal absorption connected that,” Chesky says. “And past possibly connected apical of that you could physique immoderate benignant of program.”

He calls this a “longer-horizon thing.”

If and erstwhile it does happen, helium says, “it would astir apt beryllium much caller than a modular points program—not similar a subsidy program, which is what astir of the programs are, but thing wherever erstwhile you usage it, the work really gets better.”

Experiences, not homes, volition beryllium the mode guardant successful New York.

“New York was the precise archetypal metropolis we started having challenges in,” begins Chesky, with a uncommon tinge of bitterness, “and I thought it would beryllium the archetypal to fig this out. It’s turned retired New York mightiness beryllium 1 of the last.

“But here’s the important point,” helium says, with a characteristically upbeat spin. “In 2009, 2010, New York was similar 70%, 80% of our business. Now nary metropolis comprises much than one-half percent of our business.”

That said, a half-percent inactive represents a $42 cardinal portion of the pastry for a institution that reported $8.4 cardinal successful net successful 2022—and Chesky isn’t astir to fto that evaporate entirely.

“There are different services we could motorboat successful New York,” helium says, referring to “experiences” the level has started facilitating, wherever radical station not rooms but services specified arsenic guided tours, barroom crawls oregon photograph shoots. “There’s a batch of accidental there.” He besides points to the enactment of visiting Manhattan but sleeping successful New Jersey, which for galore consumers would equate to a existent sacrifice successful convenience. He insinuates that this whitethorn beryllium necessitated if the lack of Airbnbs drives up demand—and by extension, prices—for hotels successful the city.

“If you instrumentality a batch proviso disconnected the market, and you don’t physique proportionately more, past what happens to prices?” helium asks. “They’re gonna spell up. That means it’ll beryllium little affordable to sojourn New York, and that’s precise unfortunate.”

Chesky’s large solutions are good underway.

“We’re astir acceptable to crook the corner,” Chesky says of his Airbnb retrofit journey. “This twelvemonth has been the twelvemonth of perfecting our halfway service, with implicit 50 upgrades successful May, 5 important updates now, and different bid of upgrades coming successful November.”

And yet it whitethorn instrumentality a small longer than that for the jokes and memes to subside.

“Hopefully by adjacent question play it’ll beryllium a materially amended service,” helium says, referring to adjacent summer. “And past you’re gonna commencement to spot galore caller things from Airbnb.”

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