Spending the night in a castle or a five-star apartment with views were once exclusive luxuries that are now within the reach of people on a budget. This is the promise of Airbnb – a notable success story of the collaborative economy.
General Manager, Jeroen Merchiers, who runs operations in Northern, Southern and Eastern Europe and Russia, met with EMBA alumni in Barcelona this week to share the inside track on Airbnb’s success.
A graduate of the IESE EMBA, Merchier’s online career began in Groupalia before he made the leap to Airbnb. The company was founded in 2008 by Brian Chesky and Joe Gebbia. A popular conference in San Francisco meant that the city’s hotels were fully booked. Chesky and Gebbia posted an online offered their apartment to attendees seeking somewhere to stay. The positive response they received led them to create a online community geared toward putting people from around the world in contact with each other. The key to their success, said Merchier, was the "variety of accommodation available and the convenience of online booking."
A New Model of Consumption
The business model of Airbnb is based on collaborative consumption. "We moved from the philosophy of ownership to the philosophy of ‘I don’t need my own car.’ We want to be active participants in this kind of consumption," explained Merchiers. The Airbnb user is someone who embraces this lifestyle and seeks unique experiences through specific kinds of accommodation. "Airbnb connects people who have something in common." This makes it more comfortable for users to cross the ‘red line’ of opening their homes to strangers.
Building Trust Through Transparency
The Airbnb website doesn’t host advertising but instead takes a commission on each transaction. "We earn three percent from the host and between six and 12 percent from the guest. We don’t charge for trying the application or for posting ads." To guarantee both the transparency and the security of payments, all transactions are carried out online. Airbnb has so far carried out more than 25 million transactions and has become an important new source of income for people who open their homes to travelers.
The popularity of the company, says Merchiers, stems from a combination of the human touch – because the site’s users are also connected in real life – and safe, reliable technology.
A Self-Regulating Community
Another strength of Airbnb is its community of users who collaborate to maintain security and control quality. This kind of cooperation, says Merchiers, makes it possible to detect abuses and eliminate them. "Our starting premise is that people are good. But we are proactive in eliminating the occasional bad apple."
In order to become part of the Airbnb community, members have to give their names and link their account to a social networking site, which makes it easier to to identify them and avoid "irregularities," says Merchiers.
"Personal opinion is very important when it comes to evaluating accommodation." Airbnb has, however, resisted calls to establish a fixed set of standards because it considers that the user experience would "lose its charm."
Dialog with Government
But it’s not all plain sailing. Like other collaborative businesses, Airbnb has had adapt to regulations that could threaten its sustainability. The Uber example, which has made headlines recently, illustrates the need to balance services against the different laws in distinct countries.
Uber, which connects drivers of private vehicles with passengers seeking transport, has been met with fierce opposition from the taxi industry.
In Spain, Airbnb has had to navigate 17 different sets of regulations, one per autonomous community, since coming to the country in 2012. "It’s important to establish a dialog. We don’t ask for permission, but we do announce our presence," said Merchiers. Airbnb is confident that regulations won’t be a problem for its expansion, since its business model still isn’t covered by the current legal system.
For more on the sharing economy, read IESE Prof. Pedro Videla’s blog post on collaborative consumption, The Sharing Economy: An Ocean of Unconscious Cooperation.