Lex’s Newsletter: Airbnb Must Leave Hosts A Note: “Don’t Be Picky”

Dear reader,

I travel between California and the UK quite frequently. I have stayed in many Airbnbs. Living rooms have become more and more annoying. Host instructions are proliferated.

I entered rooms littered with notes telling guests not to slam doors, wear shoes or turn on the heat after 4pm. Other impositions include emptying the bins and signing the contract. These minor annoyances add up to additional costs, such as cleaning fees.

As a result, Airbnb has lost some of its competitive edge over hotels. Stays used to be much cheaper. This was very appealing to the travelers and the hosts who hosted them.

US start-up Airbnb was the middleman, splitting the cost savings. Freerooms are not regulated like hotels, nor do they have hotel-style management fees. Airbnb was full of venture capital and willing to sacrifice profits for growth.

Airbnb founder and CEO Brian Chesky spent six months at Airbnbs last year, so he must be well aware of the shifting balance of benefits. This explains why Airbnb has tried to simplify the booking process, for example showing the total rate from the beginning.

Unusually for a technology CEO, Chesky has a lot of goodwill with both clients and investors. The past year was tough for the tech sector in general, but Airbnb was emerging from the pandemic and seemed to be in good shape. Freed from the constraints of lockdowns, travelers hit the road. Airbnb reported its first annual GAAP profit of $1.9 billion, up from a $352 million loss a year earlier.

This year it seems complicatedA. Airbnb hoped that remote working would allow independent customers to move from one location to another, booking extra long stays. This didn’t quite work. Companies have dragged their employees into the office.

The first quarter of the year looked OK. Revenues increased 20% and net income was $117 million compared to a $19 million loss last year. There was the inevitable declaration that AI features would be integrated into services. Now the company is warning that the second quarter won’t be as impressive. The share price fell 10% in after-hours trading.

Still, there’s reason to be hopeful. Airbnb has broken free from its lending addiction. The buyback program announced late last year should mean the company is confident about the sustainability of its positive free cash flow. Last quarter, that was $1.6 billion.

Airbnb also says it’s less nervous about the impact of the economic downturn than one might expect. If more people are looking for extra income, Airbnb hopes it can increase the number of hosts. That’s also why it’s trying to encourage more users to book rooms instead of entire homes, adding security details about hosts to make people feel comfortable. The average daily rate would drop, but Airbnb could appeal to a new generation of cost-conscious users.

A year ago, personal finance site NerdWallet estimated that in the United States, the average cost for a hotel room per night was $178, while the average cost for an Airbnb was $314. But the Airbnb rate includes both apartments and rooms. According to Airbnb, the average nightly rate on the site is just $67.

In a interview with The Verge this week, Chesky paints it in a rather romantic light, saying he wants to go back to some of his original ideas. He said, “For many years, I felt like we were starting to drift away from where we started because we started with people who were with each other.”

It’s a good strategy, certainly better than the still disappointing attempt to push “experiences”.

To be successful, Chesky needs to do better at educating hosts on how to treat guests. Too often, travelers feel like an irritating consequence of a financial transaction rather than a valued customer. Airbnb should discourage attempts by hosts to burden guests with homework or limit normal behavior during stays.

Chesky needs to remind everyone what made Airbnb attractive in the first place.

Elsewhere in technology

by Leah Finnegan The Baffler review of journalist Ben Smith’s new book, Traffic: Genius, Rivalry and Disappointment in the Billion Dollar Race to Go Viral, it also serves as a major insider’s point of view on the rapid rise and sudden fall of US digital media.

Cashless stores make sense, but Amazon’s “Just Walk Out” system hasn’t sparked a revolution in retail. The information has a good breakdown of what happened. My opinion is that what was offered in the shops was not good enough. Uninteresting lunch items aren’t going to bring people back, no matter how cool the technology is.

Have fun for the rest of the week,

Elaine Moore
Deputy head of the Lex

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