Brian Chesky, Airbnb
In just 10 years, Airbnb has grown from a modest home-share site into one of the biggest disruptors in travel. It's enjoyed the kind of success most startups can only dream about - and with a new slate of product offerings and ambitions that extend into the next century, the company claims it's just getting started.
Brian Chesky and his three co-founders started Airbnb with an air mattress in their apartment. Now, the 36-year-old CEO oversees a travel company worth $31 billion.
It’s Airbnb’s 10-year anniversary. Can you believe how much the company has grown and how fast things have happened?
I think it’s pretty surreal. When we started Airbnb, I remember thinking, “It’s going to be huge - one day thousands of people will use it,” and 300 million people later… We did not imagine when we built Airbnb that millions of people would use it.
I’ll give you an example: When we started Airbnb, it was called AirBed and Breakfast. We thought it would be the company that we’d launch to pay our expenses until we thought of the big idea.
It wasn’t clear - and by the way, there’s a lesson here - that especially in businesses like ours, which are oriented in community that require people to behave a little differently, it’s pretty hard to connect the mental dots to something being really
Maybe now it’s a little easier, but nobody, even us, thought millions of people would stay in people’s homes in urban areas. That was not an obvious thing. So it’s been an unexpected and wild and crazy journey.
Co-founder and CEO
If you had to attribute Airbnb’s growth to three key things, what would they be?
I’ll give you one unless you want three – when I entered Y Combinator, which is an incubator, they gave us these T-shirts to wear. It was kind of like a joke, but on the front of the T-shirt it just said, “Make something people want.” It seems almost
too easy to work, doesn’t it? Make something so insanely great that people love it, and if people love it they’ll tell their friends about it.
Paul Graham used to tell us, “Make something 100 people love, not something a million people kind of like.” So we did not go into this to start a business. We did not go into this to figure out travel distribution or this or that. We only tried to get
into this to try and make something really great that we would want ourselves and for our friends.
That’s still how we make things. With [the launch of] Airbnb Plus, there was a lot of research around it, a lot of data and a lot of insights,
but at end of day, the most important principles are, are we proud of this and would we want this ourselves? That always is going to end up being the most timeless of principles.
You’ve talked about how Airbnb will not file for an IPO this year. What else do you need to accomplish as a brand first?
Well we’ve certainly accomplished everything we need to as a brand. I think we would need to have a CFO and an independent board of directors. The third really big thing that I don’t think companies even do when they go public, and partly why it’s painful
for companies - we want to basically institutionalize our intentions before we go public.
In other words, if you have a fuzzy notion of what you want to become, the public markets are going to crush you because they are very principled about the economic markets and you’re up against [institutions with experience for] decades and decades.
It’s really important that you’re intentional and you’re clear about how you’re going to react.
For example, if you don’t have a plan to be long-term oriented, you will be short-term. No matter how much you wish you were long-term oriented, you’re going to manage the company quarter by quarter.
And by the way, the vast majority of travel companies you cover are managed quarter to quarter, not decade to decade. It’s almost a joke if you ask them where they’ll be in a decade. Maybe they’ll have an opinion, but you really think they could run the
company that way? No, they run the company based on the next quarter. Their equity and incentives are paid quarter to quarter based on EBITDA. But you know what - guess how much a customer cares about your quarterly EBITDA? They don’t care.
Do you think an IPO will come next year?
Too soon to tell. Somebody once said there’s four reasons you go public - this is very prescriptive. Technically, it’s a capital raise - you need money. The second reason for a lot of companies is it’s a branding event. Third is you have a currency to
buy a company. Your currency is set by the public market, so now you can buy companies. Fourth, it’s a liquidity event, employees and shareholders get money by selling stock.
We have billions of dollars in the bank, we do not need more money. We do not need a public branding event - we got plenty of press [at our press conference last week] - we don’t need that. We’ve been able to acquire all the companies we want to, including
Luxury Retreats, with private stock.
So it comes down to a single thing, which is giving liquidity to investors and employers. The vast majority of our investors - we have many of them - are seeking to buy more stock or hold stock rather than sell stock. And employees, we do want to make
sure they have ongoing liquidity. Going public is a way to solve that.
There might be the right time to go public, but there’s not like this burning need to go public. There’s more just a need to make sure that the right people have liquidity they need.
Tech CEOs don’t wake up saying, “I’m marching to go public.” I’ve never heard of anybody thinking of that as a milestone. It’s not really a milestone, not for a CEO.
Will lower commissions for hotels on Airbnb remain a key differentiator compared to OTAs?
Yeah. We’ve done a lot of surveys with boutique hotels, and many of them are not incredibly happy about the commissions they’re paying and they’re seeking alternatives. If we can be an alternative, we’ll be there for them.
What are your ambitions for hotels, and what’s your market size?
In our presentation [last week], we showed seven categories for Homes, including four new ones. We actually have more than million vacation homes around the world, and we’re going to continue to scale those. It’s hard to know which homes are vacation
homes because before today we didn’t have a category.
Bed and breakfasts: We have 180,000 places to stay on Airbnb that are classified as B&Bs, but we’ve had a very fuzzy definition, so we want to clean up the data, but I expect us to possibly have as many or more B&Bs one day than Booking.com or anybody
You’re currently working with SiteMinder - do you have other hotel partners lined up?
We are going to have other partnerships, but we don’t have anything to announce today. I’m very excited about SiteMinder because they really open up a world of opportunity for us within the boutique hospitality community - and the B&B community.
B&Bs, by the way are, one of the biggest opportunities. There are so many. Before Airbnb there was the B&B for hundreds of years. It’s hard to know how many B&Bs there are in the world, it’s not a very clear classification, but I’m very excited about
Another Airbnb one-to-one is coming up
Looking at Airbnb’s latest announcements, what was the decision behind creating these subdivisions within the brand?
The idea was basically to be able to have something for every type of traveler. We said we want everyone to be able to belong in travel and experience anywhere. We’ve definitely done the anywhere part; we haven’t yet done the everyone part.
We want to make sure we double down on our roots with the Superguest program and social stays [and property types like] Private Room and Unique.
For families, people traveling for work or people with a little higher expectation of quality or comfort we have Plus, Family and Work collections, and we also have the luxury travel segment with Beyond.
I think the idea is that after today there should be basically a home for everyone. There are very few exceptions. Two exceptions are maybe if you’re going to a banquet conference and you want to be in the conference in a chain hotel, then we’re still
not going to be the choice for you.
Or a business traveler that gets in a midnight and wake ups at 8 am and leaves, maybe we’re not best solution. For most other travel use cases, we now have a place to stay and a great option.
As you branch out beyond your core home-share product, do you risk diluting your brand?
It’s something you have to be very, very careful about, and that’s why we’ve had guardrails and we decided that everything we do has to honor the principles of being local, personal, unique, people powered.
I think everything we showed today is very consistent with that. Airbnb Plus: These still are homes powered by people. The vast majority of these homes, people live in them, they’ve got unique style, personality. They really showcase spirit of Airbnb.
For Beyond by Airbnb, we still want to have the Airbnb spin with local community, local experts - these incredibly magical experiences that are still in homes. Design is a part of our culture and roots, and we want to make sure that’s a part of it.
With traditional hospitality, we’re really targeting the small boutiques, especially the next generation that have community built into them. We’re really trying to make sure that we can find something for everyone that’s consistent with our principles.
I want to turn to Experiences - what are your plans to scale there and who do you see as competitors?
It’s pretty different. I think that similar to when Airbnb first launched, there wasn’t a lot of like Airbnb. You had VRBO, but that was more seasonal, a more classified site. Airbnb has not historically had competitors in its core market.
Now HomeAway and Booking.com are trying to compete. I think though with Plus and all these new products it’s going to be more difficult [for them to compete].
I think Experiences is similar to the launching of Airbnb. There are mass tour operators, and there are plenty of them, but we don’t see these completely as competitors because they’re totally different experiences. You want to go on a double-decker bus
- that’s completely different than going to underground concert.
I think this is more of a new category. If you think about it, the big four expenses in travel are flights, accommodations, restaurants and shopping. Shopping is a huge expense for travel. Why do so many people shop when they travel? Is it because they
love shopping? Some people.
I actually think people use shopping as a form of entertainment and a way to understand the city - walk around a city and go into a store and buy stuff. People will continue to shop in the future, but if more and more people can spend some of their money
on experiences that’d be great.
And by the way - people that offer Experiences, they can sell things to do you as well. I think it just democratizes ways you can spend money.
The other thing is that a quarter of our bookings are people booking things in their own city. Locals don’t book double-decker buses but they do book concerts in their own city.
A recent Wall Street Journal article said that Experiences hasn’t been profitable, but the company
says it plans to be profitable?
Yeah, we’ll be profitable.
Can you elaborate on that?
We’re approaching a million booking run rate for Experiences. That is going to be growing by orders of magnitude. I don’t know when exactly, but we’ll be profitable. It’s not a major importance to be profitable, but it’s growing really, really fast, faster
than I expected.
When we first started with Experiences, we started with mostly three-day immersions. Those were very popular from an excitement perspective, but initially the price point was probably a little more than a lot of our travelers were willing to pay for.
We learned that starting with three-hour experiences was a great way to start. We’re still going to be doubling down on these longer traveler adventures and immersions, but once we figured out the formula for these typically three-hour experiences and
activities, it really just started taking off.
We have 5,000 Experiences now. The major way to grow is to add more. We have 55,000 on the waitlist. I’ve kind of purposely kept it small. I asked the leaders, I said, “Don’t rush growing this because the bigger it gets the harder it is to improve it.”
It’s really easy to make something small really great and then fix it; it’s super hard to fix something once it’s really big. Our real focus with Experiences this time was quality - let’s nail the quality first, and then we’ll scale it.
Ninety-one percent of Experiences when people leave a review are five-star. That’s a lot higher than Homes. Our core Homes marketplace is 70%.
What flight ambitions are on the horizon?
I think that aviation is in our future; it’s a matter of when and exactly how. In November 2016, I stood on stage and had an icon of a plane behind me. That’s a pretty clear confirmation that we’re looking at the space.
We’ve been exploring a lot of things in aviation but the world doesn’t need another flight booking company that’s exactly like the other five flight booking companies that were before them - if we do something in aviation it’s going to be completely different
than anything you’ve ever experienced or we’re not gonna do it.
If we can’t do that I’m going to wait until we can. There’s no purpose for us to put out a commodity that everybody else does. It’s not enough for the interface to be different. It has to actually be a different experience or a different way of buying
it or a different cost structure.
Name somebody in the hospitality industry that you admire.
Two come to my mind: The first is Chip Conley. That’s why he worked for me. I had him come to Airbnb to do a talk because I read his book Peak. I didn’t realize he lived two blocks from the office and he was retired and not doing anything.
I’m like well you’re in your early 50s, you have a lot of energy, you live two blocks from me and you know how to teach hospitality and I need help - maybe you should work for me. So he did for four years. He’s still an advisor for the company. He advised
on the things we just launched.
Second person is Danny Meyer. I think he’s done great stuff with Union Square Ventures. He’s also an investor in Resy, and we’re an investor in Resy.
I’ll just say one other thing about this - this is important - this is to me a contrast to some of the other companies that you cover: When Chip Conley said he got into the hospitality industry, he said they were in the capital “H” Hospitality industry
and lowercase “b” business. He said now it’s lowercase “h” hospitality and capital “B” Business. The people who used to go into the industry were deeply passionate about hospitality, and they happened to want to have a good business.
Now it’s kind of been inverted - that’s his opinion. I don’t know enough about the industry to tell you for sure except that if you ask a lot of people when they travel, they say this is not an industry that’s always putting the customer first. I do think
that travel can be much better, much more pain-free, more magical. The romance of the golden age of travel I think can come back.
When you ask people in the travel industry what idea they wish they came up with, they’ll often say Airbnb. What idea do you wish you would have thought of?
There are so many that I think are such good ideas. Uber and Lyft are I think pretty amazing innovations. I remember meeting the founders of both companies in the early days before anybody thought it would be really big. I certainly didn’t think of those
ideas, but I felt like I thought I knew back then what other people didn't quite know that this was going to be massive.
My hat goes off to all the companies in the ride-sharing space, it’s been amazing. Now you see bike sharing, and bike sharing could be as big as car sharing - maybe bigger.
I think if I could make some crazy prediction, I might be wrong, but I think bike sharing could be as big because bikes are cheaper, significantly, and the next generation is going to want to move around. There’s a lot of coverage on self-driving cars
- they’ll be massive - but bike sharing is also going to be really big, and shuttle services and shuttle sharing.
I think you’re going to have a Balkanization of how you move around the city. Ride sharing will be incredibly important - it might move toward self-driving cars - but then shuttles, which are basically the modern buses, are going to see a revolution.
You have one of the most high-profile startups - why do you think it’s so hard for smaller travel companies to break into the space, and why is there so much failure?
That’s a great question. I think the answer might be incredibly simple but not obvious. The problem in travel is distribution. Kind of this chicken and egg problem: It’s super hard for a company that’s small to compete with companies that are really large
and have distribution.
We had 330 million people search dates last year, and revenue grew more than 50%. You can extrapolate to say it won’t be long before half a billion people search dates on Airbnb. So we have massive distribution, but it’s important to remember there was
a date we had no distribution, we were tiny.
So what I would say to people, something somebody told me: If you want to create something new in a world where scale wins, you must be 10X better. If you are going to offer something different and it’s not 10X better, or a step change better, then you’re
just going to be too small and you can’t compete.
There’s always room for the next startup. There’s room for a couple people in an apartment to create a travel company that could be the biggest in the world, but they’re not going to do it by copying us or Expedia or anybody else.
They’re going to do it by doing something 10X better than we’re doing, and that’s how somebody would win. And I don’t know what that is, and if I did I would do it.
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