When Nate Blecharczyk and his roommates couldn’t afford a hike in their rent, they decided to rent out a room for a weekend and stumbled upon a new business idea.
Since 2008, Airbnb has grown to become one of the biggest community marketplaces in the travel industry, with over 4 million guests using the platform. The company has now set up a base in Australia, and has big plans for the country.
We spoke to Blecharczyk about his business journey and Airbnb’s plans for Australia during his recent trip to Sydney.
How would you explain Airbnb in a few sentences?
On our website, individuals have put up their extra rooms, entire homes, and other types of space and made it available to travellers to discover and stay by the night as an alternative to a hotel. We have 350 000 properties around the world, in 192 countries, 40 000 different cities. In some cities like Sydney for example, we have 2800 properties, but in others like New York and Paris we have 19 000. There’s an incredible assortment of options and every one is different because every one is actually someone’s home…there’s incredible diversity.
It’s possible to find something that gives you a little bit of a different experience; it’s a lot more of a local experience. Imagine waking up and the different between coming out of a hotel room and being in the hallway or lobby and lining up for the buffet breakfast, versus waking up and stepping out into a residential neighbourhood and going to the corner café. It’s a different way to travel.
How did you come up with the idea?
We were solving our own problem – there are 3 of us that started the company together, and the other two are designers. We’d all been roommates together, and I decided to move out because the rent had been raised but then the other two could no longer pay rent either. At the same time there was a design conference in San Francisco back in October 2007 and all the hotels were sold out, so they decided to rent the extra room to designers who needed a place to stay.
They were expecting guys like themselves, 25-year-old males but instead a 35-year-old woman from Boston wanted to stay, a father of four from Utah, a man from India. They made about $1000 that weekend. They all went to the conference together, had a great time, and then a few months later the three of us thought that that was a win-win situation, why don’t we make a platform that can enable that for other people in other situations?
How did the company grow?
It was certainly a new idea, and one that was very foreign to almost everybody at the time, and it took a while for us to figure out what it would take to make people feel comfortable and to win people over. We grew primarily through word of mouth, so that’s an effect that is very slow to build. However it’s why we’re still growing so quickly, because people have these amazing travel experiences that are shaped by the place they stay at, or their host, or the neighbourhood, and then they talk about that and how Airbnb made that possible for them.
A key part of our platform is to build trust and some of the things we do in that regard is, as a traveller, if you find something you like and you book it, you pay through the website and you pay Airbnb, so we hold your money until after you arrive, before we give it to the owner. That way, if you need to cancel or if the place isn’t as described, you can just call our support line and get your money back, so that gives the guest a lot of confidence around their money. Then when the stay is over, both the guest and the host review one another.
As a result, not only do you see a description of the property through the eyes of the host but also through the eyes of all the people who stayed there. Over 70% of folks review the properties so there’s just tons of these stories. As a host, nobody stays in your home without you explicitly accepting or declining, so when you make that decision we present you with the guest’s picture and details, their past reviews, you can ask them questions, and if they’ve connected their Facebook account you can see which of their friends are on Airbnb and if they’re trusted.
So we really arm you with a lost of information so that you can feel comfortable. Since then we’ve gone a little bit above and beyond to offer a safety net to those who still might be on the fence, we have a $1 million host guarantee, so if you’re concerned that a stranger in your home might take something or damage the property up to $1 million, you can file a claim with Airbnb and we’ll reimburse you, just to show you how confident we are in this system.
Why did you think now was the right time to come to Australia?
6 months ago we opened an office here based on us believing Australia’s a very promising market, since Australians are well known for their love of travel and going for long trips, so they’ve always been huge users of the Airbnb product as travellers. But what happens is people start off being guests then come home and want to become a host, so increasingly we were seeing more and more properties pop up here.
It’s been 6 months now and there’s been great success over that period, so I can over to celebrate with the team and acknowledge what they’ve done. We now have over 8000 properties in Australia, 3000 added in the last 6 months.
How do you think Australian consumers will respond?
I think Australians are early adopters in lots of ways, so although awareness is relatively low because that takes time, I think there’s been a huge appetite here for this type of product. What we sell here is an experience, it’s a new way of travelling that’s more personable and local, and I think a lot of people want that in this day and age, where everything’s become commoditised and cookie-cutter – everything’s the same.
How do you plan to grow awareness in Australia?
I think the most important thing is providing positive experiences. That’s what fuelled our growth to date, and I think that’s the right way to grow your business, as opposed to big, flashy marketing. It’s important to provide a great experience. We work closely with our hosts to help them do that. For example, what the office here in Sydney does is reach out to the host community and help them to be successful on the platform. When they’re successful, we’re successful.
What are your plans for Airbnb in the future?
The awareness is still low, so when I think about New York and Paris where we have 19 000 properties, I think Sydney can have that number too. When you have that depth of inventory, you can really find places that are personalised to you and to your style. You can also find a host related to your industry, if you’re an entrepreneur you can find another entrepreneur. There are also things we’re doing with the product to round out the experience.
One thing is neighbourhood guides, where for a dozen different cities we’ve created a characterisation of every neighbourhood which consists of photos taken through photographers we contracted and descriptions sourced from our community, which give guests a really good sense of what it will be like to stay in this neighbourhood. It’s not just about the home you’re staying in, it’s the whole picture.
What advice do you have for entrepreneurs and start-ups?
- Pace yourself. Even us, with all our success, it took well over a year before we had any traction or sense of direction, and that can be hard when you’re not making any money and there’s a lot of uncertainty.
- Choose your partners carefully. You’re getting into a long-term relationship and the company will fall apart if you fall apart.
- Be original. I see a lot of people all gravitating as a herd to the same set of ideas but never has there been a time where there’s been so much opportunity to rethink things.
- Demonstrate some degree of success and traction before looking for funding. It’s a lot easier a conversation when you can show what you’ve done instead of just pitching an idea. Pitching an idea is pretty old-school at this point…these days everything is in the cloud, virtual, you buy it on demand.