70 Business The EconomistOctober 12th 2019
T
hey arethe two most prominent examples of what used to be
called the “sharing economy”. Founded in 2008 and 2009, re-
spectively, Airbnb and Uber pioneered asset-light platforms to
bring together providers and consumers of particular services—
accommodation for the first, transport for second. Both firms be-
came bywords for entire categories: startups now claim to be
Airbnb for dogs or Uber for doctors. But Uber’s stockmarket flota-
tion in May did not go well. Its share price has fallen by nearly 35%
since its listing (and that of its rival Lyft, which went public in
March, by 50%). As Airbnb prepares to go public next year, its boss,
Brian Chesky, has been making the case for his company, both to
the press and behind closed doors. He is keen to get across that,
sharing-economy heritage notwithstanding, Airbnb is no Uber.
Mr Chesky founded the firm with his friends Joe Gebbia and
Nate Blecharczyk, after he and Mr Gebbia, both unemployed de-
signers, began renting out an airbed in their San Francisco apart-
ment to make extra money. He originally thought it would be a
side-hustle while he started a social-media startup. As is often the
way, the side-hustle turned out to be the better idea. After an initial
focus on renting spare beds in cities during conferences, when ho-
tel rooms were scarce, the startup expanded into rental of entire
properties. In 2009 Airbed and Breakfast became Airbnb. Since
then more than 500m stays have been booked through its plat-
form, which now offers more than 7m properties (including 4,900
castles and 2,400 tree-houses) in over 100,000 cities. Each night,
around 2m people around the world stay in an Airbnb.
Having been in roadshow mode for several months, Mr Chesky
has polished answers for everything up his sleeve. Not that there is
much room up the former bodybuilder’s sleeve: his rippling phy-
sique sometimes strains the buttons of his shirt. Oof! He cleanly
dispatches a question in a television interview about safety and
hidden cameras, then flips it around into an opportunity to talk up
Airbnb Plus, a premium tier of properties that are even more close-
ly vetted. Pow! He bats away the notion that he is worried about
Marriott, a hotel giant that is launching a rival to Airbnb called
“Homes & Villas”, instead seeing it as an endorsement of his mod-
el. Indeed, Airbnb is punching back, letting hotels list rooms on its
site and investing in properties custom-built for Airbnb rental.Thefirmhas grand designs to move beyond accommodation,
and provide the entire trip: where to go, what to do and how to get
there, not just where to stay. It intends to team up with airlines to
“elevate” the experience of air travel. As part of this effort earlier
this year Airbnb hired Fred Reid, the founding chief executive of
Virgin America, though Mr Chesky is cagey about details. Already,
users of the Airbnb Luxe service (where those castles, and other
fancy venues, are listed) are assigned a “trip designer” to help them
arrange transport, restaurants and other perks. Indeed, Airbnb’s
main growth plans hinge on offering users not just a bed but an ex-
perience, “designed and led by inspiring locals” to boot. Airbnb Ex-
periences, launched in 2016, uses the Airbnb platform to link
guests with locals who can provide things like guided tours or
cooking workshops. In June it added Airbnb Adventures, which ar-
ranges trips for up to 12 people in exotic places. People don’t travel
to sleep, Mr Chesky likes to say, but to have an experience.
So far, so Uber. The ride-hailing giant, too, has expanded into
areas like food delivery and road freight. But here the similarities
end, starting with money. Whereas Uber has yet to turn a profit
(and, sceptics say, never will), Airbnb says it is already profitable
(to be precise, ebitda-positive) and has been since 2017, when it is
thought to have earned $93m on revenues of $2.6bn. That is not the
only distinction. For ride-hailing firms like Uber and Lyft, supply
and demand must be matched in the same city; a driver in Manhat-
tan is no use to a rider in Mumbai. Airbnb’s listings, by contrast, are
global. Any property anywhere can potentially appeal to any user;
a Mumbaiker may want to stay in New York. A telltale sign of
Airbnb’s superior “network effects” is that whereas drivers for
Uber often drive for Lyft, and vice versa, doing their utmost to play
the platforms off against each other, most of Airbnb’s listings do
not appear on any other platform.
Unlike Uber drivers, few of whom were previously riders,
Airbnb hosts typically start out as renters first. Since it is a middle-
man for property rather than labour, Airbnb has avoided the con-
troversy about “gig economy” exploitation, and the vexed question
of whether ride-hailing firms should treat drivers as employees.An accommodation with regulators
More broadly, Airbnb decided earlier than Uber to work with regu-
lators rather than fighting them. It has struck deals in more than
500 big cities around the world. It says it has collected more than
$1bn in hotel and tourism taxes in America alone and is “on track to
become the world’s largest single collector of these taxes”.
A few worries linger. One has to do with its long-running feud
with regulators in New York, who in February demanded data
about New Yorkers who are listing properties for short-term rental
on the site, in violation of local laws. Another pertains to protests
in cities, such as San Francisco, where residents gripe that renting
properties to tourists leaves fewer for long-term renters, making
already high prices unaffordable. Airbnb has also grappled with
the problem of some hosts being racist towards guests.
These concerns pose the biggest threats to a smooth stock-
market debut (expected to be by the trendy mechanism of a direct
listing) in 2020. Airbnb’s most recent funding round valued it at
$31bn. In the meantime, Mr Chesky tirelessly talks up its growth
potential. This month Airbnb launched Animal Experiences, a
subcategory of experiences, from honeybee therapy to llama-trek-
king to elephant-spotting. It is a reminder, if one were needed, that
although they are often lumped together, Airbnb is not at all like
Uber and Lyft—but a different beast entirely. 7Schumpeter Chalk and cheese
As Airbnb prepares to go public, it is keen to point out how it differs from Uber