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Redesigning travel

Airbnb's co-founder Joe Gebbia talks to VIKRAM KHANNA about how his company is bringing travel back to where it used to be
Saturday, March 18, 2017 - 05:50

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IN 2016, more than 80 million people stayed at properties listed on the accommodation sharing platform Airbnb, which has over 3 million listings in about 65,000 cities spanning 191 countries and counting.

These numbers put this nine-year old company far ahead, in terms of room nights provided or global reach, of even the biggest hotel chains like Marriott, Hilton Worldwide, and the Hyatt. Its valuation - estimated at around US$30 billion - is about the same as that of the Hilton and Hyatt combined. Yet Airbnb does not own a single hotel property. The company's short history is now the stuff of legend in the hospitality industry. In summary, the story goes like this: Two 20-something graduates from the Rhode Island School of Design, Joe Gebbia and Brian Chesky, rent an apartment in San Francisco in 2007. One day their landlord decides to hike their rent by 20 per cent overnight, and being jobless, they can't afford it. In the midst of wondering what to do next, they notice there's a design conference in the city and all the hotels have been sold out. They decide to inflate an airbed in their living room and offer it on design blogs, throwing in breakfast as well. They get three bookings. They create a website called Airbed & Breakfast. A new business is born.

But it doesn't catch on easily. Silicon Valley's venture capitalists (VCs) view with incredulity the idea that people would be willing to share their homes with total strangers. But Gebbia & Co (now including a third partner, Nathan Blecharczyk) press on, ploughing in their savings and maxing out on their credit cards. In desperation, they fall back on their design skills. During the 2008 US election year, they create "limited edition" boxes of cereal branded "Obama O's" and "Cap'n McCain's" (after the two presidential candidates) as collectors' items to sell online at US$40 apiece. This offbeat idea generates much publicity and they are able to make US$30,000 - enough to keep the company alive a little longer. Some more seed money trickles in. In 2009, they join an incubator in San Francisco called Y Combinator and get their first significant funding (US$600,000) from Sequioa Capital which enables them to clear their credit card debt but more importantly, yields game-changing new ideas for their business. Airbnb gains traction. Not just more homes and apartments but even castles, villas, igloos and tree-houses start appearing on its site. By 2011, 120,000 guests have stayed at accommodation on its platform and the site has gone global. More VCs now buy the story and the big money starts to pour in. Airbnb takes off like a rocket and the three partners become billionaires.

But this is only the end of the beginning.

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I meet 35-year old Joe Gebbia in Airbnb's modishly colourful Singapore offices at Cecil Street, where the company occupies three floors. Slim and athletic, dressed in all black, he seems shy and self-effacing, but friendly. I ask him first if he ever dreamed, when he was in design school, that he would end up in the hospitality business. He thinks for a moment and then says: "Good design is hospitable to the user." In fact, he continues, it was design that really neutralised the "strangers are dangers" bias, which everybody is taught since childhood and which was the single biggest obstacle that Airbnb faced.

"We had to design Olympian levels of trust between people who had never met,'' he says. "It begged the question: can you design for trust?"

To do this, Airbnb took a different route to building its platform from the usual route taken by companies in Silicon Valley. Typically, Silicon Valley companies design for massive scale from the word go. Airbnb did not. The game-changing piece of advice they got from the founder of the incubator Y Combinator, Paul Graham was - at first, do things that don't scale. Mr Gebbia recalls: "Paul said to us: 'Go out on the road, talk to your early adopters, ask them what their biggest challenges are, learn from them.' ''

So the Airbnb founders flew to New York City, where they had a number of hosts. They visited their homes. One of the problems they noticed was that the hosts didn't know how to take good photos of their living spaces. The pictures featured on the site, often taken with mobile phones, did no justice to the properties they were supposed to depict. So Mr Gebbia and his partners volunteered to take photos themselves, for free, to the delight of the hosts. "We took beautiful, wide angle images in high resolution,'' he recalls. "People could actually see what they were paying for, so people started paying.

"Of course, this was not a scaleable solution. We couldn't travel the world forever taking photos of apartments. But it gave us an indicator that this would be worth investing in. So today we have a system where professional photographers take pictures of homes."

But hosts had other problems with the Airbnb platform. "They showed us the things we hadn't seen,'' says Mr Gebbia. "They showed us the aggravations of our product that we didn't know existed until we had left the comfort of our studio, gone to New York and sat with them in their living rooms. They said to us, 'why does your site do that? We want it to do this.' For example, people had issues with the booking calendar - keeping it up to date, syncing it with their Google calendar or their Ical or their Microsoft Outlook. People wanted buttons that were specific to them. Then there was the issue of money. At the time, people were paying in cash. We brought this whole cash economy online - which seems the obvious thing to do now, but it wasn't then.''

Now, guests transfer money via credit card to Airbnb, which in turn releases the funds to hosts - in the currency of their choice - after check-in. No cash changes hands.

It was through this un-scaleable, interactive, painstaking process that Airbnb was able to refine its platform to a level that created enough trust between strangers to enable transactions to happen - and then, scale was easy. "It was through those conversations that we demystified the gap between our product and our market fit,'' says Mr Gebbia. "Up to that point, the gears weren't touching so we weren't moving anywhere. It was by listening to our community and designing for them that the gears started to turn.''

But as Airbnb became successful and spread across the world, problems began to surface. In several cities across Europe and the United States, irate residents and local officials complained that Airbnb listings were driving up rents and property prices in popular locations, turning quiet neighbourhoods into tourist hotspots teeming with transient visitors and violating laws that require a minimum tenure for rentals. Complaints also came from representatives of the hotel industry, who view Airbnb as an unwelcome and unfair competitor. They point out that the company is not held to the same standards as hotels with respect to safety and other regulations, nor subject to taxes the way they, and their guests, are.

Airbnb has argued that it helps middle-class families earn more income, although it has accommodated some of the concerns by taking down illegal listings and cooperating with tax authorities by adding taxes to booking charges. It is also working on complying with other local regulations, which vary from place to place.

In Singapore, guidelines from the Urban Redevelopment Authority (URA) prohibit home-owners from renting out their properties for less than six months. But the URA is studying the option of creating a special category of private homes that will be permitted to offer short-term rentals.

Mr Gebbia views the pushback against Airbnb as another case of initial resistance to innovation and change. "Many innovations that are commonplace today met with resistance and confusion when they first entered the world," he points out. "It took a bit of time for them to become an everyday part of society.''

He notes, for example, that sharing music online was opposed when it was introduced. Even the ATM machine was outlawed for many years in the United States - the idea that people could simply withdraw money from a computer in the wall was viewed as bizzare. Even the motor car was declared illegal when the Ford Model T was introduced early in the last century - the horse and buggy industry fought back. "It just takes sitting down and working out ways to make the sharing economy work in cities,'' he says.

In Singapore, Airbnb is working with the government to devise a workable model for short-term accommodations. "We have forged partnerships with over 200 different cities to create fair regulations and enable them to collect taxes," Mr Gebbia points out.

One of the cities that Airbnb considers especially progressive in respect of space-sharing is Seoul in South Korea.

"Seoul has twice the population density of New York City,'' he says. "They have realised that in order to maintain the quality of life, they can't continue building upwards, and they need to make better use of the things they already have, which is a deep and entrenched value of the sharing economy.

"You look at the world around you and ask, how can we use the things we have more efficiently? That's a very important realisation at a governmental level.''

Seoul has acted on this idea, he points out. It has created shared parking lots, renovated high-rise apartment buildings to be shared by young college graduates and empty nesters and even started an incubator programme to fund the next generation of sharing economy companies.

As for the hotel industry, it has less to worry about than some of the complaints would suggest, according to Mr Gebbia.

"There's plenty of travel demand to go around - tourism is one of the biggest industries in the world,'' he says. "We're making the pie of accommodations bigger by offering more choice to people.

"There will always be room for traditional accommodation. The markets are also quite different: people tend to stay longer in Airbnbs and they get to stay in parts of cities where traditional accommodations don't even exist.

"In reality, occupancy rates of hotels in the US have seen record numbers in the last couple of years alongside our growth. In fact our founding story is based on hotels being sold out - we do better when hotels are sold out.''

Airbnb is also leveraging its platform to address social problems - a topic Mr Gebbia elaborated upon during a talk at the Singapore University of Technology and Design this week. "One of our missions now,'' he says, "is helping displaced people find housing - which is our core strength. There are more displaced people today than at any time since World War II." The response has been encouraging - hundreds of hosts in several countries have offered to open up their homes to refugees.

Beyond accommodation

But Airbnb plans to go far beyond helping people find places to stay. "In 2012, we mapped out our vision for the future where Airbnb is not just about accommodation,'' says Mr Gebbia. "It's about designing the whole trip: taking the values of the company - great design, scalable technology and trust between strangers - and imbuing those values into every part of your trip, from the time that you leave to the time you come back. Why should you have to use a dozen different services? What if we could simplify and design each of those experiences for you, from transportation to accommodation to answering the question, 'what can I do here, in this city?' "

And so, Airbnb has started a service called Trips, which enables users to book experiences online. Mr Gebbia launched Trips in Singapore earlier this week. Locals have started to offer off-the-beaten track experiences to visitors (and to other locals). So you can now learn to make dumplings at One Kueh at a Time in Berseh Food Centre (which Mr Gebbia himself tried), craft earthenware at Thow Kwang Pottery Jungle in Tuas which uses a wood-fired dragon kiln, and grow your own crops by learning about urban farming at One Kind House, an urban farm cum restaurant on the east coast that describes itself as a "21st century kampung".

Airbnb expects to extend its Trips - also called its "Experience Marketplace" - to 50 cities by the end of this year. Mr Gebbia is confident that the experiences won't, even over time, get "commoditised" and become tourist traps. He explains: "There's only one Eiffel Tower and it's a tourist trap because everybody flocks there. But with our community, there will be an infinite number of 'Eiffel Towers'; there are as many experiences out there as there are people."

Trips adds a social dimension to Airbnb's offerings. "It's also a way for guests from all over the world to come together for specific activities. So when you're learning to make dumplings or ceramics, you're able to meet different travellers from around the world who are in Singapore at the same time."

Airbnb has also created an app that allows people to meet up at the same time at the same place. "So we recreate the intimacy of meeting other travellers as part of the Airbnb network.''

A new community of travellers - not just tourists - is what Airbnb is creating. The way Mr Gebbia sees it, this is what tourism used to be all about. "We're just bringing it back to where it was,'' he says. "If we ask our grandparents about their travels when they were kids, they'd say they stayed at boarding homes, farm houses, guest rooms, bed and breakfasts, tiny inns. Before the traditional accommodation industry took off in the mid-20th century, that was how people travelled and how they experienced the world. We're just using the Internet and a 21st century lens to bring things back to the way they used to be.''


JOE GEBBIA
Co-founder and Chief Product Officer
Airbnb

Born on August 21, 1981 in Atlanta, Georgia, USA

Education

BFA (Graphic Design and Industrial Design), Rhode Island School of Design (2005)

2005: Freelance designer, Kaiju Studios, Providence, Rhode Island

2006: Industrial designer, Chronicle Books, San Francisco

2008: Co-founded Airbnb in San Francisco, with Brian Chesky and Nathan Blecharczyk

Current role: Shaping Airbnb's future innovation, culture and design aesthetic

Serves on Board of Trustees, Rhode Island School of Design

Net worth: US$3.8 billion as of Feb 2017

Signatory to The Giving Pledge: a commitment to giving away the majority of his wealth

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