The phone rang just after 3 p.m. on a lush afternoon in Silver Lake, Los Angeles. Dane O’Neal jumped out of the shower to answer. A stranger – well, basically a stranger – was on his doorstep.
Mr. O’Neal invited this stranger inside and showed him the second bedroom from which you can see all of L.A. – downtown, Griffith Park, the Pacific Ocean, everything . The stranger would leave two days later. A few hours after that, another stranger would arrive.
Mr. O’Neal is on the frontline of Airbnb, which likes to bill itself as something between a company and a movement – “the trusted community marketplace for people to list, discover, and book unique spaces around the world.”
While some municipalities have been less than enthusiastic about the trend, Airbnb’s response to Hurricane Sandy may have changed some minds. Those displaced in New York and area are now using the rental site to find free temporary housing.
Before the storm, The Wall Street Journal reported last month that Paypal co-founder/Facebook investor Peter Thiel was on the verge of investing about $150-million, a deal that would put Airbnb’s valuation at $2.5-billion.
“It puts the company pretty much on par with HomeAway – and HomeAway has three times the inventory,” said Douglas Quinby, senior director of research at PhoCusWright. “I can say from our consumer research, we don’t see the current uptake awareness that points a straight line to justify that type of valuation. But at the same time, I’m reluctant to question motives of Peter Thiel.”
The perception of Airbnb is that while it might be the place to find a mushroom dome cabin in Aptos, it was also born in the same petri dish as Couchsurfing.com and the sublets section of Craigslist. But can a company named after the air mattresses that CEO Brian Chesky would put on his floor for conferences in earlier versions of the business model really compete against the Hilton?
Enter Mr. O’Neal, who has spent his career in the fashion industry, and began running his extra room as a funky Silver Lake micro hotel through Airbnb just over a year ago. If you deal in art, if you’re a musician on tour, an actor in town for a gig – if your business is even remotely creative – you’ve stayed with him, and are drawn to Silver Lake, which Forbes recently crowned the hippest neighbourhood in the United States.
Mr. Quinby was intrigued by the idea that business travellers might be using Airbnb. Earlier this year, he studied the habits of 2,000 business travellers. “I’d be surprised if there’s a single managed traveller, who is staying in Airbnb.” (“Managed” representing cases where a business traveller won’t get reimbursed if they book outside of corporate policy.)
The intriguing discovery from Mr. Quinby’s study, however, was that 70 per cent of business travellers were now unmanaged. That is to say, Mr. O’Neal’s market.
Mr. Quinby also noted that a group of his PhoCusWright co-workers going to a conference in Berlin had just made a big booking on Airbnb.
The biggest reason was cost. Not just cost, but the ease of unlocking that lower cost. “They’ve made everything about staying in another person’s house very easy,” said Jason Clampet, former head of content programming for Frommers.com, now co-founder of the travel analysis startup Skift. “You aren’t sending a certified cheque. You aren’t logging into a site waiting for an e-mail back from a person a week later.”
Between its review system and integration with Facebook, Airbnb has mitigated what Mr. Clampet calls the “creep factor.” There is a transparency. You know basically what you’re going to get, but without the homogeneity.
“What Airbnb can offer that the Hilton can’t, especially if you’re a road warrior, is that you’re actually at a home. If you’re someone who stays at hotels a lot you know exactly what the room’s going to be like before you walk in there. The idea of staying in a residential neighbourhood as opposed to a business district is really attractive.
“The flip side of my enthusiasm for Airbnb – the way Airbnb likes to tell it – is hotels are going after them with crazy regulations, making it hard for them to do business. Regulations exist for a reason. As someone who lives in a condo building, I wouldn’t be happy if my neighbour was using Airbnb five days a week,” Mr. Clampet added.
Beyond the financial savings, which compound on longer out-of-town projects, there is a sense of home that a hotel can’t provide. Mr. O’Neal encourages his guests to make tea and coffee in the morning, have a bowl of cereal. (The hosts drawn to Airbnb have an intrinsic sense of hospitality.) It doesn’t hurt that the Airbnb model turns them into competitors, who must differentiate their micro hotels against each other – positive reviews being the currency of this “share economy.”
Mr. O’Neal, who has spent the past 10 years in Silver Lake, is concerned that you avoid the 110 at certain hours and not leave L.A. without trying the best Thai restaurant. I realized that I had left my dress shirt hanging in his closet. The next morning, he had folded it up and put in the mail.