Airbnb is offering lots of experiences. Results may vary.
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Search Airbnb’s “experiences” listings in Baltimore, and you can sign up for a printmaking/dance workshop, attend a private concert at a musician’s home or play “bubble soccer” encased in a giant inflatable ball.
The company known mostly for its short-term rentals wants an even bigger share of the roughly $180 billion tours and activities industry. Airbnb just hired a former top Disney executive to run its Experiences business, all while it’s gearing up for an initial public offering expected later this year and grappling with concerns about safety and fraud.
I spoke with Aric Jenkins, a staff writer at Fortune, about Airbnb’s challenges ahead of its potential IPO. The following is an edited transcript of our conversation.
Aric Jenkins: Airbnb basically gets hit from two fronts. On one side of it is the regulatory issues that have plagued it for years now. Cities are basically realizing over time that people are using Airbnb in a way that does not quite benefit the actual people who live in the cities because now there’s a lack of housing units that are dwindling [due to] more of the housing units being used for short-term housing at Airbnb. That, of course, just drives the price up. On the other hand, recently, [Airbnb] got into some controversy regarding trust and safety issues. There was a mass shooting in a house out in Orinda, California, where five people died. Right on that same day, Vice had published an article about a nationwide scam that had encompassed all these different people over the course of, I think it was eight cities and close to 100 different listings.
Amy Scott: What steps has the company taken to address some of these concerns?
Jenkins: They have decided to do 100% verification of homes and experiences. They are going to go through all their listings using a combination of their own reviews that are already on the platform to come to this conclusion about whether things such as photographs, the cleanliness of the apartment, the basic amenities are all accurate and say what they are.
Scott: Another question looming before a company goes public is whether it’s profitable. What do we know about whether Airbnb makes money, and how much?
Jenkins: Airbnb has said for the last few years that they are profitable on an EBITDA [earnings before interest, tax, depreciation and amortization] basis. That basically means that they are profitable before all the things like taxes and interest — things like that come into play to let investors know, “We think that we’re pretty much on the path to profitability.” We can’t know for sure until they file their S-1 prospectus — a document investors look at when researching a company that’s getting ready for a future IPO — and open their books up to the public, which they have said that they, in a press release, intend to do this year.
Scott: If this company is trying to become all things travel, is there a risk of losing the cool factor?
Jenkins: I think so. I think it’s a fundamental philosophical question that the company is going to have to grapple with. People love Airbnb because it offers that live-like-a-local mantra, but you talk to people who use the service, and they feel that it’s becoming more and more [like] another real estate broker. I think they’ll definitely have to work hard to maintain that [coolness], because now that they are a public company, they will have the scrutiny of the public markets, and the investors are going to want them to tap into new pools of revenue as much as they can. But they also have to do that without selling out, if you will.
Related links: More insight from Amy Scott
As Airbnb expands its Experiences business ahead of its IPO, more anecdotes are piling up about less-than-favorable experiences using the platform. In response to its expose, nearly 1,000 people wrote to Vice with complaints, ranging from the classic bait and switch, to charges for fake damages, to scams to pressuring guests to leave five-star reviews.
Allie Conti, a writer for Vice, has a story about how she accidentally uncovered the business of Airbnb scams after her own vacation went bad. Hint: If your host calls you 10 minutes before you’re supposed to check in and tells you there’s a plumbing problem with the house but they’ve got another place you can stay at, proceed with caution.
A little background on the “experience economy”: Authors Joseph Pine and James Gilmore introduced the concept in the Harvard Business Review back in 1998, before selfies and social media fueled the trend. An early pioneer of the experience economy, the authors wrote, was Walt Disney himself.