They're often considered similar businesses, but intuitively it seems to me that, long-term, Airbnb will be valued higher than Uber and other ridesharing companies.
Home rentals seem to be simpler market to operate in than coordinating real-time supply and demand between drivers & riders. Additionally, Uber seems to be facing issues on the driver side of the business - they have a $650 driver acquisition cost & a 12% monthly churn rate [1].
It seems to me like this is the economics problem of a return on capital (Airbnb) vs. return on labor (Uber, etc.) playing out in the on-demand space.
The main thing is that Airbnb has a global economy of scale - having more hosts in Japan actually does benefit their guests who reside in New York year-round. Competitors to Airbnb similarly must achieve global scale in order to compete in a serious way. There are one or two meaningful exceptions (China, possibly the US domestic market), but essentially any Airbnb competitor must achieve global scale in order to be a serious threat.
By contrast, Uber has to fight to win each city, and most of its users will use Uber for the most part within that city. Adding more drivers to Tokyo does not have a meaningful impact on the resident of New York.
It’s not nothing, but the difference is at least an order of magnitude.
Consider: I am probably 0% likely to book an Airbnb in my own city. Almost all of my Airbnb’s will be somewhere else, so I only really care about remote stock.
By contrast, something like 90%+ of my Uber rides are going to be local. In many of the places I might travel to, I don’t need Uber at all (the location is rural/suburban, the public transit system is cheap and effective, cabs are widely available, etc).
That is a good point. But presumably most of Uber's revenue comes from the residents of a city who are in town most of the time. Opening up in a new city doesn't benefit Uber as much as it does Airbnb where all properties are accessible options to all of its users.
But the New Yorker knows that AirBNB is the place to find their place in Tokyo, with few non-hotel alternatives. When you got to Tokyo, even if you don't have Uber installed, you will find a cab.
I think those competitors at a global scale already exist in the form of the big hotel booking sites like agoda/booking.com, they have the global scale and global customer volume to directly compete with airbnb in this space and for them it's just adding another offering that compliments the offering they already have.
On the other hand Uber is now operating mostly aboveboard while Airbnb, at least in its single largest market (NYC), is like Napster in its second incarnation—-while it may itself not be violating any laws the overwhelming majority of its facilitated transactions are illegal. That’s a dicey thing to invest in.
> the overwhelming majority of its facilitated transactions are illegal.
Any source on that? I know some municipalities regulate rentals now, but to say that the vast majority of them operate illegally is a bold claim to make with no data presented.
NYC is crazy expensive. The govt will go after landlords first and then the subleases nest.. So if everyone in a building is airbnb but not directly owned by the landlord then forget it.
The New York Times claims NYC is Airbnb's largest US market[1]. And CityLab claims NYC is Airbnb's 3rd-largest market worldwide.[2]
However, with respect to whether "the overwhelming majority of its facilitated transactions are illegal":
Speaking strictly for NYC (the town I live + Airbnb host in), I think the more relevant metric is- what percent of Airbnb's revenue comes from the illegal kind of rental (i.e. rentals of the entire unit for more than 90 days of the year) vs the legal kind (whole-unit rentals totaling less than 90 days per year, as well as shared-unit rentals of any length)? According to Gothamist, 75% of its NYC revenue came from whole-unit rentals.[6] How much of that was legal is anyone's guess, but this is one reason why Airbnb was fighting tooth and nail to stop the recent city council legislation.[7]
NB- Another reason is that, once the city collects hosting data, it will likely use its housing inspection mandate to shut down most if not all Airbnb rentals in the city (not just illegal ones) at the behest of the local hotel employee's union. But that's me speculating, so take it with a grain of salt.
Keep in mind that Airbnb made $140 million in NYC in 2018[3], had $2.5 billion in 2017[4], and over $1B in revenue in Q3 of 2018 alone[5]. So the percentage of revenue it contributes is likely between 4-4.5%. If this went away overnight, the company would probably be fine as long as the damage ended there. But there's no guarantee of that, since other cities are considering similar legislation and are looking to see what the outcome of the above battle will be.
In the end, NYC will probably succeed in approving a permit system similar to San Francisco's, which will be enough to get the city the information it needs to shut down any Airbnb host it wishes.
Cities all over Europe have restricted or banned short rentals and many more are considering it.
It will be messy and probably the results difficult to measure.
On the other end Airbnb is collecting tourist taxes on behalf of some cities.
This is particularly interesting because you have a corporation helping a city in something they struggle with (collecting taxes) and making themselves irrepleaceable.
Smart move.
> whole-unit rentals totaling less than 90 days per year, as well as shared-unit rentals of any length
The multiple dwelling law does not allow any whole units to be rented for less than 30 days. There’s no exception for less than 90 days in a year total.
From the MDL:
A ‘class A’ multiple dwelling is a multiple dwelling that is occupied for permanent residence purposes… ‘Permanent residence purposes’ shall consist of occupancy of a dwelling unit by the same natural person or family for thirty consecutive days or more and a person or family so occupying a dwelling unit shall be referred to herein as the permanent occupants of such dwelling unit.
Per your own link that means 75% of nyc Airbnb revenue is derived from facilitating illegal transactions.
I am curious if Mayor Bill de Blasio will go after landlords who permit or partake of this following his recent declaration they will confiscate property of landlords they consider abusive or failing to maintain property to new standards. Of course he plans to turn them over to non profits which is code for politically connected groups which support him, but the idea that they don't put an Airbnb clause into the abusive category isn't baseless.
AirBnb is going to get knocked down a peg or two once the states get involved, they are able to dance around many cities and their attempts to reign it in but once a state level attorney comes for them it won't be simple.
however as with uber this comes down to private property rights, who do you choose to side with. Me, I am with the property owners as a Libertarian but I am with government regulation so that it is not abused to the injury of others. Specifically the idea of evicting people or requiring them to vacate during high profile events in town
> however as with uber this comes down to private property rights, who do you choose to side with. Me, I am with the property owners as a Libertarian
What about the property rights of the landlord? The co-op? Fellow condo owners? In addition to violating state law most of these units in NYC are being rented in violation of signed agreements (leases, proprietary leases, condo rules incorporated into purchase agreements).
What im not sure about is Airbnb's moat. They have a great brand name and all, but their service is very limited: 15% is a very large cut to take on these transactions. What prevents another company from doing the same at 12% and costing 50% to operate?
Nothing prevents another company from doing that, but all of the hosts & guests are already on Airbnb. Two-sided marketplaces are very difficult to start, but once they have some momentum, it's even more difficult to unseat them.
Look at Craigslist - terrible UI, hundreds of startups have tried to challenge it in the past 15+ years, and yet it's still my go-to when I need to sell some old furniture.
Craigslist has a fantastic moat: they are insanely operationally efficient. To make more money than craigslist at a lower cost is virtually impossible.
The real entrance cost to becoming a host in airbnb is not airbnb, its having a house. And a host will use airbnb or whatever to keep the appartment occupied. It can absolutely be commoditized, much like Lyft and Uber have. A service that posts your apt in multiple websites would make that permanent.
Today they must own the demand side: i have never seen something become so popular with no little ads (particularly in argentina, it was incredible to see it going from 0 to ubiquitous in 2 years). But demand on apartment rentals is incredibly price sensitive, demonstrated by the competition airlines have.
I have friends who worked at Craigslist, and was astonished to hear them describe a team of IIRC 35-40 employees. They have somewhere around 50 now? Makes you wonder what those 3k+ employees at Twitter all do.
While this doesn't explain all of the difference, Twitter tries, and largely succeeds, to distribute both Tweets and likes in mere seconds, all around the world, while maintaining a search that can find any string in relatively recent messages.
That this is a substantially harder mandate than that of Craigslist I take as a given.
Sure. Unless, let's say, a company that's already used by travelers to book travel options enters the space and/or syndicates the data to hotel search engines in addition to their own website. If I can find both hotels and apartments in hotels.com, why do you think I'd use airbnb? (Assuming apartment owners don't mind listing their space in multiple sites - which is a hard problem to solve but not an impossible one. It has less churn on the supply side compared to, let's say, Uber)
I'd argue that CL actually has a fantastic UI, it presents all the information you need, and nothing you don't, in a format that is quick to read. The only feature it's missing (or was missing the last time I needed it) is a map based list of housing for rent so you can simply filter out 90% of the listings that you'd never consider based on location anyways. That and a "prevent all Craigslist stereotypes from responding to my listing" button.
But it's not about presenting information. It's a completely different experience.
AirBnB handholds the traveller from the moment they start looking to when they're going on the trip. CL just presents an ad, and lets the parties email/text on their own. AirBnB handles the financial transactions, with all that that entails, and CL does not. AirBnB facilitates the communication between the landlord and the customer. They also let you add on "experiences" as part of your trip. They also include an identity verification system for both landlords and consumers, and there's a review/rating system for both. It might not be perfect, but Craigslist has nothing like it. For example, I generally avoid renting places that don't have reviews, and landlords can choose to ignore/reject renters who have built up a bad reputation.
CL, on the other hand, has a reputation for being full of scammers and other shady people.
It _could_ introduce more barriers to reduce scammers, but that would come at a cost to both buyer and seller UX.
There is value in simplicity, and the market thus far agrees.
Craigslist is the anti-thesis to the hubris-fueled notion that technology can and should solve every problem, including dishonesty. I've not yet been scammed on Craigslist because I've built up a valuable skill in identifying scammers in general rather than relying on an imperfect system implemented differently on all marketplaces. In return, I do not get scammed as a _seller_, which is something most marketplaces seem to neglect.
More broadly, we often blame human nature on software implementations, as if there was a software solution to (all of) such without trade-offs.
Thank you for putting my thoughts into words. Couldn’t agree more. Think of the comfort CL users have after 10-15 years of the same workflows, the same UI, the same expectations. The skill of vetting scammers shouldn’t be understated and transcends CL.
When I log into a “modern” app today there’s almost always a new feature in my face or an old feature moved to a new location (or simply deprecated)
Exactly. The kinds of transactions that take place by the thousands (just guessing, might be off by an order of magnitude or two?) on a daily basis on AirBnB, i.e. guests giving complete strangers money over the internet in advance to stay in their homes, and hosts inviting complete strangers over the internet into their homes in the first place, simply has no chance of ever becoming mainstream on a platform like Craigslist.
This is precisely because they're the kinds of transactions that most people would never even consider to take part in without first being able to establish a certain level of trust in the other party.
I think this is probably the biggest competitive advantage for AirBnB against challengers in the space. Bootstrapping a 2-sided marketplace is hard enough to begin with, but doing so while building up a network of trust among users so they can comfortably partake in transactions with a high trust-barrier is even harder.
Is it impossible to generate fake reviews, fake rental transactions, multiple accounts, etc. on air bnb?
The perception of safety could be more dangerous for some using air bnb as opposed to those on CL who are fully aware that there is no safety net nor hand-holding.
I love their UI. It's fast and does exactly what it needs to do, with the bonus that I don't have to download 12 js frameworks to look at a damn listing.
Big hotel booking sites like booking.com/agoda already have the customers and the world wide logistics for handling this stuff, I can see them becoming direct competitors to airbnb in this space.
Because it's Facebook. I know they are heavily spamming that feature but I have literally never seen anything on there of any value. It's a crappy feature that should go away.
Their social network and brand recognition is their moat for now. Hosts and guests trust Airbnb. An upstart will have overcome a lot of momentum to take on Airbnb in the broad market.
I suppose the landlords could port their reviews to a new platform by linking to the Airbnb listing similarly to how people used to post their eBay reviews when selling on forums. But yeah having all those reviews viewable natively for comparison is nice for renters.
Marketplace network effects – Hosts are more likely to use Airbnb because they have the most guests. Guests are more likely to use Airbnb because they have the most hosts.
Instant book – A host can only have "instant book" on for one platform at a time, otherwise their listing could get overbooked. They'll likely leave this on for Airbnb because they have more guests than any other platform, which adds friction to booking for other platforms.
Same as booking.com: users won't spend a second on looking at the second largest directory and directory customers cannot afford to not be present the one end users are looking at, they will grudgingly pay. The only question is which of booking and airbnb will survive, as their market overlap keeps getting bigger. In any case, those providing the actual hospitality service seem to be getting the short and of the stick.
Yeah I was thinking exactly that a couple days ago while I was booking a beach condo on a different site. Airbnb has a fair amount of competition in the vacation rentals market, and there doesn't seem to be a good defense against that. When I'm looking for a place to rent for vacation, I start with Google and end up visiting several sites. Airbnb is frequently one of them, but never the only one.
I'm not sure about the moat either. While planning a trip recently, I checked out Airbnb, Booking.com, VRBO and Homeaway.com for the same area. I found that Booking.com and Homeaway.com both had some of the same listings. So landlords are certainly trying to bypass the moat. (Homeaway.com is in fact co-hosting Airbnb listings through a partnership, but they're also apparently transitioning away from that to become a full-blown Airbnb competitor.)
I suspect the moat won't matter that much, since a consumer ultimately doesn't care about which service they end up booking with, as long as it seems trustworthy, and landlords have little reason to be loyal to one service when there's no downside to being non-exclusive.
15% is a small cut. Ever sold inventory on Booking.com or Expedia? It’s a lot more than 15%. Plus AirBnB actually collects the money for you and you are paid on the day of check in. I own a small hotel in France and AirBnB is far more profitable and easy to use than Booking or Expedia. The marketing value alone is worth far more than 15% — but that 15 also includes credit card fees as well. It’s a great deal.
The standard commission rates for booking.com are 15% in fact. There are ways to push that up due additional marketing (preferred status takes it to to 18% and had requirements on average review scores last I checked).
So I don't know where you're getting your impression from that booking charges more than those 15 percent, but you may wish to recheck your numbers.
Can't comment on ease of use on the supplier side.
Source: I know that because I used to work there, ran the infrastructure eng and prod teams.
Interesting, are there also hotels in AirBnb now? In Europe I most of the time end up with Booking.com even though I regularly check AirBnb too -- if the prices are close to each other (as they surprisingly often are), I'll always go with a hotel.
network effects. Buyers want to be where the most sellers are and sellers want to be where the most buyers are.
to win over an existing market you need to offer something dramatically better somehow or angle it dramatically differently, not just a 3% cost difference. Remember craigslist was basically free.
On the other hand, in a bad economy, more people are likely to rent their extra rooms at lower costs, and whether vacationing or even living for short term, consumers are more likely to pay.
There is then the argument that such a time would quickly be bad for aurbnb bc the fees quickly cost more than the marketing or insurance are worth.
Do you have any sources on that? I have family in the hotel industry and anecdotally the entire industry in my area took a nose dive in the last recession. Not quite the same as general demand for travel but it's more relevant to how Airbnb would perform in a recession.
Adding to that, I'd say that a big part of how "monetizing labour" compares to "monetizing capital" is, in simple terms, that monetizing capital (homes) has more too to maneuver. Ironically, labour (drivers) is the more commodified market.
Uber is a market maker in a world with hard price competition on both ends: drivers and passengers.
Since "rentals" is more variable, a 5-10% change in price/cost/income is tolerable. You can redecorate a rental, for example, to affect its value. Seasonality can shift price by a lot. Etc. This generally lends better to a thick, market-liberal layer.
It's a slight irony (again) that this is the end point. Airbnb was innovative. It changed my travel habits immediately. But, conceptually it's just a holiday rentals site. Nothing new apart from quality and scale. One rental's ROI will be very different from another's. One consumer's choice will be very different from another's. It's a differentiation market. Diverse product, flexible prices.
For an Uber customer/contactor, both the app and the drivers are commodities. What Uber probably needs to do is ruthless efficiency, low marginal costs. Not many SV-startup style companies have that mentality, so hard road ahead.
Also, being capital-oriented, Airbnb gets better over the long term. At this stage, much of Airbnb's stock comprises properties bought or leased specifically to be an Airbnb business.
What's bad for cities is not building enough housing for people who want to be there. That includes people who want to be there for a short time. Airbnb is bad for some city stakeholders, but good for other ones (e.g. people who want to rent out their apartment while they're away on vacation).
That assumes you have an infinite city. However, unless you want to destroy the historical center of the city with skyscrapers, you do not have unlimited space for the housing to grow.
Peter Thiel was specifically talking about people thinking that the businesses are similar, while they're not. AirBnB has a much higher network effect, because there's a huge difference in the listings, while I don't usually care which taxi company I use.
But as a customer, your approach to both marketplaces is very different. With Airbnb, I'm far more discerning because a bad host can ruin a long planned vacation.
With Uber, a bad driver means an uncomfortable 45 minutes. Uber can tolerate bad actors more than Airbnb
Interesting point. I also think the non-fungibility of Airbnb's listings will help them maintain their margins. For many Uber customers, a ride is a ride is a ride.
Another angle is that Airbnb also carries differentiated inventory vs. a completely commoditized good. If you are booking a guys ski trip vs a romantic weekend vs family reunion you are looking for a unique property. Airbnb, as the largest player, is most likely to have differentiated inventory, and therefore, the first place someone looks. So as a two sided market place, Airbnb has more value.
I usually prefer staying in hotels and will look for Airbnb only as a second choice.
Reasons are:
- Price is usually higher on Airbnb.
- Airbnb crazy fees for multiple people, cleaning scam, outrageous service fees etc.
- Inconvenience to not have a 24H reception where I can get my keys.
The real genius of Airbnb is that they convinced a lot of people that they shouldn't look for Hotels anymore, which sadly is what a lot of my friends are doing (automatically looking for an Airbnb).
They are different experiences. AirBnB can give you an entire place to yourself, complete with a fully equipped kitchen, multiple rooms, facilities such as a pool, balcony, and so on. An AirBnB is often located where people actually live, not in the middle of a busy downtown.
With a hotel, you get... a hotel room. There are some great hotels out there that stand out in many ways, especially if you're very wealthy, but your average hotel is very average. Generic interior design, generic wall-to-wall carpeting, generic wall art, a mini fridge where a soda costs $10, and some kind of weird desk/table/cabinet setup that's mostly home to a lonely-looking Keurig machine and an ice bucket.
I can't speak for anyone else, but I genuinely don't want to visit a hotel. The only time I'd be interested is if I'm staying 1-2 nights for a business trip or something where the only purpose is to have a place to sleep and store one's property.
Good hotel still have pools, can be located outside of downtown, and sometimes even in-room kitchens (if that's what you want). They also have maid service, room service, and a front desk.
The only advantage you get from an AirBnB is a unique facade, paired with having to clean up after yourself and possible fire and health code violations.
I lived in a hotel for a month. It was hell. That was before the AirBnB era and at a time when VRBO wasn't really an option and was inconvenient.
I agree that for simple stays - check in, do stuff, stay a day or two, leave - hotels are great. But for long periods, AirBnb can be much, much better.
For me the line is: are you staying long enough to need to do laundry or where you will get to the point don't want to eat out most/every meal? Then AirBnB is a better choice.
I agree that, for periods of a week or more, AirBnB can be a better option but...the chances of encountering problems are significantly higher. My worst experiences thus far have all involved noisy, disruptive neighbours.
In a hotel, you can address this problem quite easily. With AirBnB, you have to just live with it.
There are exceptions, but most hotels are nothing like an Airbnb home. You'll find that a multi-room suite with a kitchen is very, very expensive compared to an Airbnb.
I've never encountered an Airbnb where you have to clean up after yourself, nor have I encountered an Airbnb that has fire and health code violations.
But again, different experiences. For example, a two-bedroom vacation home with a private pool, its own parking space, maybe its own beachfront, etc. is going to be nothing like a hotel.
Good hotels also overcharge for parking, have slow, sketchy WiFi, charge $10 for a bottle of water and every person you encounter requires a gratuity. I like hotels but they can be annoying and everything in the hotel is overpriced and designed to squeeze your wallet. There is no excuse for a bottle of water that costs $10 when the same bottle at the 7-11 outside sells it for $1.99. Even worse are hotels that charge a mandatory “resort fee.”
You're just going to bad hotels. Every hotel I've stayed at in the US in the past quarter (around six of them) had ~16 Mbps free Wi-Fi, complimentary water bottles in my room each day, and free parking (with the exception of hotels in Manhattan or the likes).
I'll admit that gratuity is annoying, but that's a cultural problem with the US, not something specific to hotels. We just happen to live in a country where every person who serves you is expecting a tip. And to be fair, if I was staying at an AirBnB that for whatever reason had housecleaning or other service, I'd probably have to leave a tip there too.
* Always with public transport, no parking needed
* I've never tipped anyone in a hotel
* EU roaming is free, no need for wifi
* Fill the minifridge with my own beverages
All the AirBnbs I've stayed at have been somewhat sketchy, while this rarely happens with a hotel. Furthermore, I know hotels are fully legal and won't cancel my booking.
AirBnb is a clear winner when traveling with a small group though, as a multi-bed apartment is a better holiday experience and much cheaper than multiple hotel rooms.
I think you’re just staying at boring hotels? If I’m travelling somewhere I’ll actually try and find a unique hotel/property - I consider it part of the experience itself. I never get the “we can go for cheap option because we’ll be visiting the city/area”.
After all the fees the nicer AirBnbs usually end up more expensive than nice hotel.
(Two sites I sometimes use for hotels that are still in the relatively affordable category and not just for ultra wealthy - slh.com and Relais&Chateaux)
1) I find with Airbnb I'm more likely to get lower quality from expectations to what is received.
2) Hotels are better are redressing issues whereas AirBnB doesn't seem to care, and you can't really say to Airbnb I want another room type thing on the spot either.
3) For price, I think it's cheaper for groups most of the time. When traveling alone for work I'd say I use it 30-50% for the cost benefit vs hotel.
Another issue is I feel I can't give honest reviews. As if say every 3rd or 4th place is below par I suspect people wont accept you if they see you give a bunch of brutally honest reviews, so I tend to give nice reviews so it leaves my booking options open for when I do use it.
I completely agree with you. Especially on point 1 and 2. I've had 2 negative experiences with Airbnb, and I can say that it would never have happened at a hotel.
- The first one had a host cancelling a week before my trip. It was a long expected Christmas trip, and I had booked well in advance. Airbnb offered a $30 voucher on their platform, but there was no more availability in the city, so we had to pay a hotel for three times the initial price, the voucher expired before we could use it.
- The second one had a room in very bad conditions. We decided to get a hotel and quickly found something much nicer for half the price. We notified the host that we would not stay, but since we were backpacking abroad it was very hard to contest anything with Airbnb. Ultimately we still payed the full price of our Airbnb booking.
My (newly substantiated) reason for choosing a hotel room:
- Security
Just stayed in an AirBnb that was broken-into during our stay. Window smashed, laptops stolen when we were gone for a couple hours.
It feels like we were watched when we arrived, were observed to leave, and then robbed.
We were shaken and ran-off to a hotel.
Really appreciated the hotel staff, secured elevator, anonymity of it all (lots of undifferentiated rooms in a long hallway), deadbolt, additional locks.
At this moment, feeling like I'll never stay at an airbnb again.
> I would guess that you’re much likelier to be a victim of theft at a hotel than at a residential [AirBnB] home
This seems like a made up guess, hotels have security and 24x7 surveillance and staffing. Further, at a hotel, there are folks you can turn to. AirBnB's service department is invisible. AirBnB's online complaint process feels more like a trial which places the burden of proof on the customer, rather than a hotel, whose employee's often go out of their way to make things right.
For example, if you're harmed at a decent hotel, the staff will call the cops on your behalf and do their own investigation. AirBnB will more likely require you to submit a completed police report to their online portal before they start to look into it.
I rented a place with AirBnB in NY once. I knocked on the door and the guy answered with a lit joint in his hand. Another was passed out on the couch. Gross, unclean bathroom.
But whatever shit happens. It was cheap so maybe buywer beware.
What was surprising was the flacid and uncaring support from AirBnB. They insisted on charging for time stayed (the evening of check-in) and refused to refund their fees and the cleaning fees. Why? Made no sense to me given Amazon's eagerness to make refunds for goods with actual COGS.
Haven't done it again since and I travel > 100 days a year.
It is absolutely a guess. I can’t find any statistics. Hotels feel less safe to me because by definition there are many parties who have access to your room.
Hotels feel more safe to me because there is a clear chain of responsibility and accountability. AirBnB is a thousand miles away and can only guess what actually happens at their properties.
To break into an apartment, walk up to the street door, ring any neighbour's doorbell and say the name of any company that delivers parcels, newspapers or advertising in that area.
There's something really nice about being able to cook in an AirBnB, after the kids have taken their showers and are in their PJs, and all sit around the table as a family, and then have them do the bed routine shortly after, perhaps after watching a bit of TV.
At a hotel, you generally have to at least exit your room to go to the restaurant in the hotel... which breaks the whole "family groove" and makes it harder to keep the kids "in the zone" (everybody has to change clothes, etc . I find it much more difficult to manage because the hotel is essentially a bedroom/bathroom, nothing more.
After having a couple of neighbors straight across the hall that illegally (meaning without knowledge of them being there by the landlord or the authorities) sub leased the place for 4 month thought it's a good idea to turn their sublease into an illegal hotel I will never, ever again stay in an AirBnb.
Unless you have experienced this personally you can't imagine the impact on your quality of life of such action in a multi party dwelling.
The original "idea" of AirBnB was to offer travelers a much more unique and personal travel experience, staying in someone's home, rather than a generic and bland hotel. That still exists on AirBnb, but it doesn't scale to the level AirBnB needs to become a publicly traded accommodation accompany.
To scale up, the focus changed to inexpensive low-service accommodations with little character, or regard for the surrounding community. AirBnB is eating itself in the name of growth. In theory, it was a great idea, and I have no doubt it'll continue to make money in its current incarnation, but it's not building what it set out to create.
In Australia my anecdotal experience is that hotels are ALWAYS more expensive than Airbnbs, usually at minimum $150 a night and going straight up from there. Also the benefit of having a whole house with all the facilities using Airbnb is usually far better than any hotel, though I do enjoy staying in nice hotels now and then.
This is purely anecdotical. Short-term rentals exist mostly because of high hotel prices (well, and poor hotel service - but that is already covered by the high price, as 'high price' is a term relative to the quality of goods).
I always check prices on hotels and airbnb, and I mostly book airbnb. Because it is cheaper (even with fees and everything).
Only in Asia. In Western countries Airbnb is almost always cheaper than hotels. I still use Airbnb in Asia because you get nicer places with more space.
>In Western countries Airbnb is almost always cheaper than hotels.
In my experience traveling across Europe it depends - for example just last month I was in Vienna and Marriott was cheapest on the days we were looking (apples to apples comparison). But then in Budapest AirBnB was cheaper. Got the best deal on booking for Amsterdam and London. You still need to go trough multiple sites if you're looking for the best deal.
The pricing depends on demand and supply, Airbnb doesn't set the prices, it can recommend prices, however the final decision is with the hosts.
So in a place with a lot of demand and little supply, the prices tend to be high and vice versa. Airbnb pricing is really a small projection of your local housing and rental market. I've managed to find cheaper places to stay on Airbnb than hotels and vice versa.
Amazing what a company can do when they ignore regulations and simply extract wealth out of our communities. 80% of their profit comes from huge corporate listings yet they advertise themselves as a "home-sharing" site. Nonsense.
Vancouver brought in regulations to try to regulate Airbnb into actually behaving like the service is intended, that is to ensure that people are simply renting out other rooms in their residence and are not buying condos with the explicit purpose of renting them out full time like virtual hotels.
It's abundantly clear that Airbnb has zero interest in helping Vancouver enforce these rules. Vancouver has had to struggle to enforce its rules and is failing at doing so.
There aren't any laws here for Airbnb to comply with. That's my point: the regulations are on the hosts. If the Government wants to regulate Airbnb, they need to pass legislation that requires Airbnb to do something. Exactly as they did with YouTube via DMCA.
You are just incorrect. For example, Airbnb was required to comply with host registration and caps on short stay rentals in San Francisco (e.g. discussed in [0]). Airbnb is legally required to demonstrate its own compliance, separately from what laws govern hosts themselves.
It seems premature to claim whether Airbnb is subject to more laws like this or not. Many cities have enacted new regulations or sued Airbnb over failures to comply with existing laws, and it seems like a complex legal issue still in the midst of being hashed out.
Dude, that was my entire point. Airbnb was required, via legislation, to do something, thus they are doing it. Advocating that they do something without being required to is what I'm commenting on.
I think we’re talking past one another. Nobody is saying Airbnb must demonstrate compliance with laws they are not subject to. Instead, I’m saying they might be required to demonstrate compliance with existing laws (not special new laws) if various city-led lawsuits against them end up revealing that Airbnb had been subject to various types of regulation all along (despite Airbnb’s insistence to the contrary).
So ebay doesn't have to prevent people from selling illegal guns? YouTube doesn't have to prevent people from illegally distributing copyrighted material?
Both of those exist because regulators forced them to. The suggestion here, apparently, is that Airbnb should just do it out of the kindness of their heart. If the government wants more oversight, regulate them.
"“It will potentially require home-sharing sites like Airbnb and their hosts to comply with local hospitality rules in every city in the United States,” Stemler told PacerMonitor. “It could also make home sharing sites responsible under the Civil Rights Act and the American with Disabilities Act. They would also have to comply with just about any law or restriction that a local government maintains pertaining to hotels.”"
What a dumb response. Airbnb isn't going to do something it's not required to. Suggesting that they have a moral responsibility to enforce the law on hosts is silly. If you want them to build a system that assists law enforcement, pass legislation that requires they do.
I'm not the person you are asking but I'll lay out how I understand this argument from what I've read about the housing market in Portland, OR, which has a big housing crisis right now.
Available housing, apartments, condos, etc, is being eaten up by short-term renters. The price of short-term rentals are more expensive than long-term rentals, but due to so much inventory not being free for long-term rentals, the price for long-term rentals has gone up a lot. This is the same inflation that we see in the expected vacation destinations but in non-traditional locations, like Portland and it's suburbs.
AirBnB is supposedly built to empower individuals to post a rental here or there. What has been found is that it has enabled and encouraged individuals and companies with large inventories to convert long-term rentals into short-term ones. And that 15% that AirBnB takes is simply passed onto the consumer - which then affects the price of long-term rentals.
Airbnb makes no effort to control the legal aspect of people letting appartments on their site, nor do they give tax agencies the means to collect taxes. In fact, at some point, they offered their european renters to collect earnings on nameless credit cards from Gibraltar.
There is also the negative effect of renting prices going up, or having your neighbour replaced with 3-4 party organizers a month.
They aren’t “extracting wealth” from communities any more than Booking.com does. In fact, AirBnB creates wealth. A person renting out a room on AirBnB is economically better off than if they didn’t.
Building something creates wealth. Changing the channel through which payment occurs doesn't create wealth. The host's revenue comes from displacing hotels; the guest's savings come from increased rent for other tenants. If you consider the negative externalities imposed on neighbors, there'd be a stronger argument that AirBnB destroys wealth.
Incorrect. They are removing apartments from the supply, thus raising rents. A couple airbnbs in a huge apartment building have many external costs that are carried by the other tenants.
I have an axe to grind against mini-hotels that operate without regulation that raise rents for everyone while providing massive money to a small number of interests.
Airbnb isn't doing anything illegal, the hosts are. If New York wants to put forward legislation that obligates Airbnb to develop a system for tracking that, great. But they aren't going to do it unless they have to.
What's that supposed to mean? Do you think this person was the literal, direct victim of such practices, and as such "has a [personal] axe to grind?" If so, although it exhibits bias, it also exhibits the phenomenon.
Which just comes to show that those regulations were stupid in the first place. Let's face it, a lot of the wealth they extract is out of big chain hotels, not the "community" and it is actually good that this wealth spread across the board rather than within few hotel chains.
It's going to be interesting to watch Airbnb IPO at just below the valuation of Priceline.com / Booking Holdings, while Priceline has 3x the revenue and 50-100x the profit. That's a helluva bet on Airbnb still having immense growth left in the tank, as the IPO valuation is already pulling at least five or six years of growth forward.
I also have a sneaking suspicion that whilst AirBnB have undeniably executed well, Booking.com is at least as well placed to go after AirBnB's market as the reverse (AirBnB-type rooms, apartments and villas at competitive prices do exist on Booking.com albeit in much smaller numbers, they also have a strong brand and hosts aren't tied to a single platform).
The other interesting comparison point is Sabre: completely the opposite end of the distribution scale and not a rapid growth company, but they're significantly more profitable than AirBnB at a tiny fraction of the valuation (and have an excellent moat)
The difference to me as a consumer is that Booking has commoditized its customer support to an infuriatingly low quality. Admittedly I don't use Air BnB often but I will go miles out of the way (literally and figuratively) to avoid dealing with their systems requiring "travel insurance" for what used to be simple customer service requests.
What kind of customer service requests are you thinking of? As I've used booking services quite extensively, but never actually had any need to contact customer service.
To me it feels like Priceline have already started moving in that direction.
There's a Booking.com ad in Australia that is very AirBnB-esque (to the point that my partner thought it was an AirBnB ad until the Booking.com tagline came up); so my feeling is that they're ready and keen to compete in that space.
Booking is at 78.68B. From first hand experience I think Airbnb's technology is at least 10x better than Booking's (I visited and talked to both Airbnb and Booking.com employees in their respective offices).
> I think Airbnb's technology is at least 10x better than Booking's
Perhaps a cynical or unpopular point of view but until the technology becomes a hindrance, does that really matter? Its not as though people are going to these sites because they have great technology. They go to them because the prices are good and they have good UX I assume?
I'm assuming "technology" means the UX in this case, and it is absolutely a big part of the reason I keep coming back to AirBNB while I plan an upcoming vacation with multiple stays. I can find places with the constraints I'm looking for quickly, and conveniently see them laid out on a map. The UX on other sites I've tried make it more difficult to find places where I want to stay.
Interesting, as I find AirBnb's mobile UX somewhat worse than Booking/Hotels. Especially the map view is next to non-functional, always scrolling to wrong places and unintuitive swiping between properties. Could be issue only on Android though, as I haven't tried the iOS app.
I don't think that's cynical at all, just pragmatic.
I used to run infrastructure for Booking until a couple of years ago. I'll honestly admit that there's lots of tech debt. AMA - but I'll say that I'll provide no response time SLO due to work travel.
> "For starters, Airbnb says it was profitable on an EBITDA (earnings before interest, taxes, depreciation and amortization) basis for the second year in a row in 2018."
Not sure if this is financial engineering or if they're actually profitable, but I'm so curious to see how Wall St responds to this "profitability", especially since growth plays (e.g., FAANG) just cratered in Q4'18.
Not to get too involved in the dichotomy but I'm interested to see if AirBnB plays like a Snapchat (i.e., tons of hype then gets killed in the public markets), or more like a Dropbox (i.e., takes a bit of a haircut but share price remains fairly stable).
"profitable on an EBITDA basis" is about as mainstream a finance metric there is outside of the basic GAAP metrics (and many regard EBITDA to be more reliable than GAAP).
I think We Work did a great job of destroying mainstream understanding of EBITDA with their 'community adjusted EBITDA' which took a well defined term and made it part of completely meaningless term.
Yes, "Community-adjusted EBITDA" is a nonsense metric. That said, it is not EBITDA, and given that WeWork is still private, I don't see any reason to believe the average person has had their conception of EBITDA irreparably damaged by it (or even impacted at all).
Compared to snapchat, they have a much more compelling value proposition, and a much more robust monetisation strategy. I don't know what their valuation should be, but I can't see any comparison with snap.
Should be pretty reliable metric, they're not an asset-heavy company (aka they don't own a lot of property etc.) so depreciation isn't likely to be a major part of their expenses anyway.
Most companies are evaluated based on EBITDA as well anyways
EBITDA of $1 (or anything) doesn't tell me anything unless I understand what the prior period EBITDA were.
- Were they also $1 in the prior period on EBITDA? That would indicate that their growth is stalled and they can't fix profitability problems. An IPO could help address that with the right allocation of raised funds, maybe.
- Did they lose $1 billion on EBITDA in the prior period? That would indicate that they've rapidly solved their profitability issues, but an IPO might indicate that they're overvalued and want to dump that problem on the market so that they can correct down to a good market cap vis a vis their earnings.
- Did they make $1 billion on EBITDA in the prior period? An IPO would indicate investors scrambling for the exits.
And so on. Even if earnings are paltry compared to their scale, if they are massively improved over the prior period, that is a potentially good indicator of performance to come.
It's hard to react to unforeseen conditions in the market and/or grow the company when you have no war chest. You could borrow more money, then you'd no longer be 'profitable' for at least some amount of time.
So i've heard this refrain for years to come but then there are so many counter examples. Amazon for one. They've never posted a profit yet they've managed to react and out maneuver most companies with sizable war chests.
I've had an Airbnb "experience" and it's literally just a local tourism company doing a neighborhood tour. They existed way before Airbnb had experiences. It's a convenient way for them to advertise and facilitate a transaction.
Consider that Airbnb is more than 10 years old and has received (hundreds?) of millions in investment, and only now after a decade is profitable.
This is something like a human child, even including the rule-skirting and risky behavior that sometimes leads to opportunities that others don't have (a practice that has also helped Uber become dominant).
So I wonder what the business world would look like if we treated more businesses with a longer term support and nurturing mentality... would we have more success?
Even some of the pivots and direction changes of Airbnb are reminiscent of a growing human changing hobbies or finding their balance of skill + motivation.
I suspect a good part of the success (measured in multiple ways) of Silicon Valley is due to this finding and support that elsewhere is unmatched. Banks certainly aren't supportive parents, and the stock market is the school bus bully.
I would debate the phrasing of that answer. The value unit ($) is implicitly pluralized. Fully written out, that phrase would be "four point four billion dollars". The value unit is pluralized, but the numbers are not pluralized.
This article seems to be just a marketing push before the IPO. As an investor it doesn't tell me anything. Profit can mean many things, especially when the non-GAAP measure is used. Tech IPOs tend to have lot of stock options cost associated and non-GAAP measures tend to hide them.
Most properties you can book on Airbnb are also available on Expedia's HomeAway. And it's already publicly traded. Also many of the same apartments are advertised on Booking.com. Both of those services were running before AirBnb came. So Airbnb's main advantage is that it made short-term rentals more consumer friendly and populated the idea to hosts, who might not have done it professionally before (which, if you ask me is a bad thing, as I've checked in into so many properties run by hosts who have no clue how to provide B&B services).. anyway.. Airbnb IPO? Yawn.
Does anyone know if this was due to a trim the fat internal cost cutting in classical MBA form? This sounds like more trying to stoke interest into the IPO. Other than IPO shenanigans they have felt like they are in general decline in interest from my local scope and the only successful ones I have heard of are people that genuinely need a houseworth of space for two weeks or more internationally.
Is profitability necessarily a good milestone? Wouldn't it indicate that AirBnB has reached a local growth maxima and doesn't know where to invest the rest of its huge amount of cash effectively to generate more returns?
I plan on shorting Airbnb once it IPOs. It will only go down in the short term. Regulations were at an all time low and will slowly ramp up. For better or for worse, these regulations will hurt Airbnb.
I'd be curious to hear from anyone who seriously thinks Airbnb will be able to achieve substantial growth in the next 5 years, given the increasing likelihood of a slowdown and more regulations from large cities.
I will sell you the puts myself. You're ignoring a massive market for vacation rentals outside of major metropolitan areas that AirBnB has conquered from craigslist.
The risk for regulation has passed as citizens see AirBnB as an accepted reality. Hotels aren't happy, but rightfully see AirBnB as a competitor.
> The risk for regulation has passed as citizens see AirBnB as an accepted reality. Hotels aren't happy, but rightfully see AirBnB as a competitor.
I agree with your overall, but I'm not so sure I agree with this part.
South Lake Tahoe just passed a voter initiative in November that bans AirBnB (and VRBO) except for a few places right next to the major hotels. It was, not surprisingly, heavily supported by the major hotels.
I was just reading about this. Looks like the measure barely squeaked by (less than 1 percent margin) and parts of it are on hold pending a lawsuit.
I’m very conflicted about these types of bans. I have an apartment which I share with extended family, and we share the costs. Technically the way these bans are written would prevent us from doing that without somehow getting everyone’s name of the lease which would not be practical.
I wish that people would fine heavily for actual bad behavior, and let fair economic arrangements between respectful parties happen. But I also understand that enforcement is very difficult, and most people are assholes.
Under the new rules, you can only rent out your primary residence that you actually live in (not second homes/condos), and you can only do that for up to 90 days a year. That'll remove a pretty large percentage of the AirBnB inventory if it's enforced, since a lot of units on AirBnB are investment properties used purely to rent out, not anyone's primary residence.
South Lake Tahoe is exactly the kind of market that OP isn't talking about (if I'm reading it correctly). There are tons of places where hotels simply aren't dominant.
A good framing for me: If Airbnb were just looking to compete with hotels, this wouldn't be that exciting of a business, even if I knew they could survive. What's exciting about Airbnb is that they're looking to win in places that hotels aren't.
Pacific Grove, too. I was just staying in an AirBnB in PG in October. Signs in yards opposing "measure M" which turned out to be an initiative to "keep Pacific Grove a community"... which means no short-term rentals.
> vacation rentals outside of major metropolitan areas that AirBnB has conquered from craigslist.
Last time I looked, many/most vacation rentals are multiply listed on VRBO, etc. Is there a reason to think that AirBnB is stickier than the other vacation rental sites?
That hasn't been my experience. The other way around has - most VRBO listings are cross-listed on AirBnB, but AirBnB has a large superset of VRBO listings. As a guest, that makes me want to go to AirBnB over VRBO, because I know they'll always have selection, while if I go to VRBO I see largely the same listings I would've on AirBnB.
My experience is that as long as you go to a tourist destination (like Hawaii, Croatia or Santa Cruz) VRBO is fine, but as soon as you start to go off the beaten track (like Northern Northern California past Redding, or suburban rentals near major cities, or rural college towns) AirBnB has much more selection. I just did a quick test at my alma mater (Amherst MA) and VRBO had 4 listings, AirBnb had 15.
When your reputation score stays with the platform and is a major factor in who will host you, it behooves you to pick one platform for all your travel and stick with it, so getting the "long tail" of non-resort travel is a big coup for AirBnB.
I believe that this is because historically VRBO had a listing fee but they didn't have a booking fee and didn't take a cut of the booking. AirBnB I believe takes only a cut of the booking, so it costs nothing to have a listing and you price your booking taking the cut in mind. The economics work better for a place that rents sporadically. HomeAway pivoted VRBO after the buyout to have both a listing fee and a booking fee.
Also, isn't EVERY analyst predicting a recession sometime between now and 2 years from now? In the event of one, vacation rentals are the first thing people cut back on.
>You're ignoring a massive market for vacation rentals outside of major metropolitan areas that AirBnB has conquered from craigslist.
But it’s still at the end of the day just a real estate play. If AirBnB wants to make another dollar, they have to list another property. They can’t just jack the prices like Netflix because they have serious competition on every front. There’s no services they are launching which will provide the kind of returns that technology investors are looking for. It’s linear growth at best.
They've started exploring helping people add ADUs and will almost certainly investigate how they can continue to increase their supply. That said, on the high end, they absolutely can continue to increase prices, and that's probably a much stronger lever than most think.
I am super bullish on AirBnB as rare company that can credibly consider a variety of humongous future aspirations. I could see it getting involved in all sorts of travel, lodging and housing industries. Very, very few companies have demonstrated the ability to combine the imagination and execution as AirBnB. I don't think the regulatory environment will be even a speed-bump on its path.
What has AirBnB done that's imaginative beyond VRBO and similar ilk?
> I don't think the regulatory environment will be even a speed-bump on its path.
They certainly haven't treated it as such. "Laws? Fuck'em". Witness: New York. Witness: Gibraltar-issued anonymous credit cards to avoid taxation issues.
I'm not sure these are things to be proud of or aspire to.
I've been exclusively living on airbnb for past 6 months and I've paid "Occupancy taxes" [1] on all of them. My impression was that states are now in friendly tax relationship than an antagonistic one with airbnb.
Having worked at the main competitors, I wouldn't advise to do that.
It is a fantastic business with a fat 20 to 30% margin on every booking. There is plenty of market left to capture, between mouth to mouth rentals and what used to go on craiglist, or never wanted to go on craiglist because it wasn't trustworthy.
1. There's usually a limited number of shares to short an IPO
2. Given the extreme volatility of IPOs and small amount of past history on a company's fundamentals, this will essentially be gambling with the potential of unlimited downside
Shorting any stock always has the potential of unlimited downside. The only thing that makes this different is your personal evaluation of the riskiness (i.e. - "essentially gambling"). All stock positions are "essentially gambling" when taken to the extreme.
edit: whoever downvoted this, do you not understand how buying puts works? your risk is capped at the money you spent on the contracts. you can only lose that amount.
That sounds like hedging a bad idea with another bad idea. Options expire, so not only do you have to be right that the stock will go down, but you also have to be right that it will go down before your options expire. The further away the expiration, the higher you'll be paying for implied volatility. This sounds like a terrible strategy for a hunch that regulations are going to eventually impact Airbnb at some fuzzy point in the future.
I couldn't help but notice that by that logic auto insurance is a bad idea. Not only you have to be right that you get into an accident. But also you have to get into that accident before contract expires.
Would he pay premium for the options? - Sure. But that buys something. Limiting the loss vs shorting for example. Besides shorting isn't exactly free either.
Auto insurance is risk management, not investing. Auto insurance doesn't expire. OP can keep being wrong for years, buying options over and over until they're no longer liquid. I guess you can do that with any stock. The market already prices that in (implied volatility as I mentioned).
The point is, you don't use options for investment decisions where you don't know the timing of when you'll be right, unless you're hedging another investment.
Every single auto insurance in US I had is a 6 or 12 month contract which expires at the end. The expiration time/date is very specific to the minute.
You usually get a new contract after that which you can choose to pay premium for or loose coverage otherwise.
Yes I'm aware, since they suggested puts instead of calls. I'm not sure what your point is since my argument applies in either case. It's much less probable to be right about both price and timing. You won't have unlimited losses, but you will likely be wrong and lose money, unless you're the one writing the regulations.
> It's much less probable to be right about both price and timing
But that's priced into any analysis of the puts. If you're just arguing that speculation in general isn't prudent, then I'm with you, but you can't really say that a particular bet would be a "terrible strategy" (if you mean that in a negative EV sense?) when we don't know what the prices will be.
I have conflicting thoughts on this. In the US, it's true that in the near term regulations are likely to get more, rather than less onerous at the local and state level. At the federal level, I don't anticipate any changes in either direction until at least 2020, but probably longer, as this is the kind of issue that is generally hyperlocal as opposed to splitting entirely on party lines (the cynical view is that it's prone to capture).
That said, Airbnb's most promising growth opportunities aren't in the US in my opinion, they're international. While there's always a risk of regulation, the world is huge and has a lot of places who'd love to be this year's Iceland (although they might regret that 5 years from now) driven by cheap flights and/or housing.
Also - a slowdown could be counterintuitively good for Airbnb, as constituents may start lobbying to relax some of the more onerous regulations so that they can more easily make money via Airbnb (regardless of the accuracy, it can easily be cast as the hotel lobby vs. the recently unemployed family who has a room he wants to rent out).
Ultimately, I guess my position is that it's almost definitely overvalued right now, but not by as much as bears think it is and that I think they can probably remain a good business for the foreseeable future assuming good leadership.
Highly disagree, I see Airbnb growing massively in the developing world as local safety+tourism infrastructure, desire to travel there, and internet familiarity/enough English to make a listing among those living there increase in the next 10-20 years. Of course, Airbnb is already big in places like Bali, but over time I see essentially all areas of Indonesia, Malaysia, Ecuador etc. becoming vacation destinations
My mom has done it with my help. From what I've seen, it's a bit more profitable than renting out directly, but also very time consuming (especially cleaning and housekeeping). If you factor in the time it takes to manage the Airbnb it probably isn't much more profitable than regular renting, unless you manage a large number of Airbnb's or have a large amount of free time and enjoy the whole hosting thing, like my mom who is retired and loves meeting tourists.
I would also add that the city and location probably influence the economics and profitability of it a lot.
I wouldn't buy a separate residence for this - the regulatory environment in general is highly biased against that use case, so it comes with an unacceptably large legal risk IMO.
Instead, I'd suggest buying a primary residence that is a duplex or is larger than you need, and subletting out the extra room(s) or other half of the unit. Your financial commitment is much less (just the difference between purchase prices of larger vs smaller houses), financing via mortgages is much more reasonable, and legal statutes that cover this use case tend to be more favorable to you.
Several of my friends bought places in Palm Springs to do this in 2012-2015. They've made an absolute killing so far. But who knows what will happen if another recession comes.
I grew up there and my dad owns a real estate brokerage. I can confirm that this is pretty common, and it's a great example of Airbnb making a market that has existed longer than I've been alive (vacation rentals in a resort city) orders of magnitude more accessible to the average person. I've seriously considered (to the point of starting to model it) buying something that can credibly be called "walking distance" to the Coachella venue and seeing how much of the of the mortgage in that month (two Coachellas + Stagecoach) + the tennis tournament in March.
Compared to some of the most expensive housing in the USA? I'd bet more 2bd 2ba homes are sold <200k in the USA than the other way around by a long shot.
The difference is that Palm Springs is a resort city with something like 150 golf courses, is 2 hours from LA, 2.5 hours from San Diego, 1.5 hours from Orange County, and even has Big Bear ~1.5 hours away if you like to ski in the winter without having to make a weekend trip (it's not great snow, but it is a mountain).
It's true, you get a phenomenal home that's essentially part of a giant resort for much lower than LA (and you're only 2 hours from LA, 2.5 from San Diego, and 1.5 from Orange County). Yes, the summer is awful, but if you like golf or tennis and can work remotely, you can always leave for the summer. I'd be happy to put you in touch with my dad if you're actually interested (no pressure if you prefer to avoid an agent right now or have someone you already work with though).
Home rentals seem to be simpler market to operate in than coordinating real-time supply and demand between drivers & riders. Additionally, Uber seems to be facing issues on the driver side of the business - they have a $650 driver acquisition cost & a 12% monthly churn rate [1].
It seems to me like this is the economics problem of a return on capital (Airbnb) vs. return on labor (Uber, etc.) playing out in the on-demand space.
[1] https://seekingalpha.com/article/4231786-will-wall-street-sh...
By contrast, Uber has to fight to win each city, and most of its users will use Uber for the most part within that city. Adding more drivers to Tokyo does not have a meaningful impact on the resident of New York.
Consider: I am probably 0% likely to book an Airbnb in my own city. Almost all of my Airbnb’s will be somewhere else, so I only really care about remote stock.
By contrast, something like 90%+ of my Uber rides are going to be local. In many of the places I might travel to, I don’t need Uber at all (the location is rural/suburban, the public transit system is cheap and effective, cabs are widely available, etc).
Especially internationally. If I’m in a country that doesn’t speak my language but they have uber, you better believe I’m ubering left and right.
Any source on that? I know some municipalities regulate rentals now, but to say that the vast majority of them operate illegally is a bold claim to make with no data presented.
Speaking strictly for NYC (the town I live + Airbnb host in), I think the more relevant metric is- what percent of Airbnb's revenue comes from the illegal kind of rental (i.e. rentals of the entire unit for more than 90 days of the year) vs the legal kind (whole-unit rentals totaling less than 90 days per year, as well as shared-unit rentals of any length)? According to Gothamist, 75% of its NYC revenue came from whole-unit rentals.[6] How much of that was legal is anyone's guess, but this is one reason why Airbnb was fighting tooth and nail to stop the recent city council legislation.[7]
NB- Another reason is that, once the city collects hosting data, it will likely use its housing inspection mandate to shut down most if not all Airbnb rentals in the city (not just illegal ones) at the behest of the local hotel employee's union. But that's me speculating, so take it with a grain of salt.
Keep in mind that Airbnb made $140 million in NYC in 2018[3], had $2.5 billion in 2017[4], and over $1B in revenue in Q3 of 2018 alone[5]. So the percentage of revenue it contributes is likely between 4-4.5%. If this went away overnight, the company would probably be fine as long as the damage ended there. But there's no guarantee of that, since other cities are considering similar legislation and are looking to see what the outcome of the above battle will be.
In the end, NYC will probably succeed in approving a permit system similar to San Francisco's, which will be enough to get the city the information it needs to shut down any Airbnb host it wishes.
[1] https://www.nytimes.com/2018/07/18/nyregion/new-york-city-ai...
[2] https://www.citylab.com/equity/2018/03/what-airbnb-did-to-ne...
[3] https://www.bloomberg.com/news/articles/2018-07-24/airbnb-s-...
[4] https://www.reuters.com/article/us-airbnb-results/airbnb-had...
[5] https://www.pymnts.com/earnings/2018/airbnb-third-quarter-re...
[6] http://gothamist.com/2018/06/28/city_council_takes_on_airbnb...
[7] https://ny.curbed.com/2018/7/19/17590164/airbnb-nyc-law-prop...
The multiple dwelling law does not allow any whole units to be rented for less than 30 days. There’s no exception for less than 90 days in a year total.
From the MDL: A ‘class A’ multiple dwelling is a multiple dwelling that is occupied for permanent residence purposes… ‘Permanent residence purposes’ shall consist of occupancy of a dwelling unit by the same natural person or family for thirty consecutive days or more and a person or family so occupying a dwelling unit shall be referred to herein as the permanent occupants of such dwelling unit.
Per your own link that means 75% of nyc Airbnb revenue is derived from facilitating illegal transactions.
AirBnb is going to get knocked down a peg or two once the states get involved, they are able to dance around many cities and their attempts to reign it in but once a state level attorney comes for them it won't be simple.
however as with uber this comes down to private property rights, who do you choose to side with. Me, I am with the property owners as a Libertarian but I am with government regulation so that it is not abused to the injury of others. Specifically the idea of evicting people or requiring them to vacate during high profile events in town
What about the property rights of the landlord? The co-op? Fellow condo owners? In addition to violating state law most of these units in NYC are being rented in violation of signed agreements (leases, proprietary leases, condo rules incorporated into purchase agreements).
Look at Craigslist - terrible UI, hundreds of startups have tried to challenge it in the past 15+ years, and yet it's still my go-to when I need to sell some old furniture.
The real entrance cost to becoming a host in airbnb is not airbnb, its having a house. And a host will use airbnb or whatever to keep the appartment occupied. It can absolutely be commoditized, much like Lyft and Uber have. A service that posts your apt in multiple websites would make that permanent.
Today they must own the demand side: i have never seen something become so popular with no little ads (particularly in argentina, it was incredible to see it going from 0 to ubiquitous in 2 years). But demand on apartment rentals is incredibly price sensitive, demonstrated by the competition airlines have.
It simultaneously helps the organization’s tax efficiency and MAYBE something interesting gets developed
That this is a substantially harder mandate than that of Craigslist I take as a given.
AirBnB handholds the traveller from the moment they start looking to when they're going on the trip. CL just presents an ad, and lets the parties email/text on their own. AirBnB handles the financial transactions, with all that that entails, and CL does not. AirBnB facilitates the communication between the landlord and the customer. They also let you add on "experiences" as part of your trip. They also include an identity verification system for both landlords and consumers, and there's a review/rating system for both. It might not be perfect, but Craigslist has nothing like it. For example, I generally avoid renting places that don't have reviews, and landlords can choose to ignore/reject renters who have built up a bad reputation.
CL, on the other hand, has a reputation for being full of scammers and other shady people.
It _could_ introduce more barriers to reduce scammers, but that would come at a cost to both buyer and seller UX.
There is value in simplicity, and the market thus far agrees.
Craigslist is the anti-thesis to the hubris-fueled notion that technology can and should solve every problem, including dishonesty. I've not yet been scammed on Craigslist because I've built up a valuable skill in identifying scammers in general rather than relying on an imperfect system implemented differently on all marketplaces. In return, I do not get scammed as a _seller_, which is something most marketplaces seem to neglect.
More broadly, we often blame human nature on software implementations, as if there was a software solution to (all of) such without trade-offs.
When I log into a “modern” app today there’s almost always a new feature in my face or an old feature moved to a new location (or simply deprecated)
This is precisely because they're the kinds of transactions that most people would never even consider to take part in without first being able to establish a certain level of trust in the other party.
I think this is probably the biggest competitive advantage for AirBnB against challengers in the space. Bootstrapping a 2-sided marketplace is hard enough to begin with, but doing so while building up a network of trust among users so they can comfortably partake in transactions with a high trust-barrier is even harder.
The perception of safety could be more dangerous for some using air bnb as opposed to those on CL who are fully aware that there is no safety net nor hand-holding.
I love their UI. It's fast and does exactly what it needs to do, with the bonus that I don't have to download 12 js frameworks to look at a damn listing.
You could argue that Craiglist's brutalist aesthetic is its genius.
Traditional vacation rentals charge 15~20%, but they truly handle the key hand offs and such.
Instant book – A host can only have "instant book" on for one platform at a time, otherwise their listing could get overbooked. They'll likely leave this on for Airbnb because they have more guests than any other platform, which adds friction to booking for other platforms.
I suspect the moat won't matter that much, since a consumer ultimately doesn't care about which service they end up booking with, as long as it seems trustworthy, and landlords have little reason to be loyal to one service when there's no downside to being non-exclusive.
So I don't know where you're getting your impression from that booking charges more than those 15 percent, but you may wish to recheck your numbers.
Can't comment on ease of use on the supplier side.
Source: I know that because I used to work there, ran the infrastructure eng and prod teams.
to win over an existing market you need to offer something dramatically better somehow or angle it dramatically differently, not just a 3% cost difference. Remember craigslist was basically free.
IMO demand for ridesharing will not lower in bad economy compared to Airbnb which is driven by consumers mostly using during travel.
There is then the argument that such a time would quickly be bad for aurbnb bc the fees quickly cost more than the marketing or insurance are worth.
Adding to that, I'd say that a big part of how "monetizing labour" compares to "monetizing capital" is, in simple terms, that monetizing capital (homes) has more too to maneuver. Ironically, labour (drivers) is the more commodified market.
Uber is a market maker in a world with hard price competition on both ends: drivers and passengers.
Since "rentals" is more variable, a 5-10% change in price/cost/income is tolerable. You can redecorate a rental, for example, to affect its value. Seasonality can shift price by a lot. Etc. This generally lends better to a thick, market-liberal layer.
It's a slight irony (again) that this is the end point. Airbnb was innovative. It changed my travel habits immediately. But, conceptually it's just a holiday rentals site. Nothing new apart from quality and scale. One rental's ROI will be very different from another's. One consumer's choice will be very different from another's. It's a differentiation market. Diverse product, flexible prices.
For an Uber customer/contactor, both the app and the drivers are commodities. What Uber probably needs to do is ruthless efficiency, low marginal costs. Not many SV-startup style companies have that mentality, so hard road ahead.
Also, being capital-oriented, Airbnb gets better over the long term. At this stage, much of Airbnb's stock comprises properties bought or leased specifically to be an Airbnb business.
(My gut says Airbnb.)
AirBnB has renters and listings. Uber has riders and drivers.
As long as you have enough of the two sides, you can have a rival.
With Uber, a bad driver means an uncomfortable 45 minutes. Uber can tolerate bad actors more than Airbnb
That being said, here are the risks on the supply side for both in very different ways:
- Uber: Drivers are fungible and can move to any platform they want. Two risks here...unbundling (already happening) and driver acquisition cost.
- ABnB: If their supply bundles itself together, it doesn't need to pay a distribution fee and ABnB is done.
I usually prefer staying in hotels and will look for Airbnb only as a second choice.
Reasons are:
- Price is usually higher on Airbnb.
- Airbnb crazy fees for multiple people, cleaning scam, outrageous service fees etc.
- Inconvenience to not have a 24H reception where I can get my keys.
The real genius of Airbnb is that they convinced a lot of people that they shouldn't look for Hotels anymore, which sadly is what a lot of my friends are doing (automatically looking for an Airbnb).
With a hotel, you get... a hotel room. There are some great hotels out there that stand out in many ways, especially if you're very wealthy, but your average hotel is very average. Generic interior design, generic wall-to-wall carpeting, generic wall art, a mini fridge where a soda costs $10, and some kind of weird desk/table/cabinet setup that's mostly home to a lonely-looking Keurig machine and an ice bucket.
I can't speak for anyone else, but I genuinely don't want to visit a hotel. The only time I'd be interested is if I'm staying 1-2 nights for a business trip or something where the only purpose is to have a place to sleep and store one's property.
The only advantage you get from an AirBnB is a unique facade, paired with having to clean up after yourself and possible fire and health code violations.
I agree that for simple stays - check in, do stuff, stay a day or two, leave - hotels are great. But for long periods, AirBnb can be much, much better.
For me the line is: are you staying long enough to need to do laundry or where you will get to the point don't want to eat out most/every meal? Then AirBnB is a better choice.
In a hotel, you can address this problem quite easily. With AirBnB, you have to just live with it.
I've never encountered an Airbnb where you have to clean up after yourself, nor have I encountered an Airbnb that has fire and health code violations.
But again, different experiences. For example, a two-bedroom vacation home with a private pool, its own parking space, maybe its own beachfront, etc. is going to be nothing like a hotel.
I'll admit that gratuity is annoying, but that's a cultural problem with the US, not something specific to hotels. We just happen to live in a country where every person who serves you is expecting a tip. And to be fair, if I was staying at an AirBnB that for whatever reason had housecleaning or other service, I'd probably have to leave a tip there too.
* Always with public transport, no parking needed * I've never tipped anyone in a hotel * EU roaming is free, no need for wifi * Fill the minifridge with my own beverages
All the AirBnbs I've stayed at have been somewhat sketchy, while this rarely happens with a hotel. Furthermore, I know hotels are fully legal and won't cancel my booking.
AirBnb is a clear winner when traveling with a small group though, as a multi-bed apartment is a better holiday experience and much cheaper than multiple hotel rooms.
1) I find with Airbnb I'm more likely to get lower quality from expectations to what is received.
2) Hotels are better are redressing issues whereas AirBnB doesn't seem to care, and you can't really say to Airbnb I want another room type thing on the spot either.
3) For price, I think it's cheaper for groups most of the time. When traveling alone for work I'd say I use it 30-50% for the cost benefit vs hotel.
Another issue is I feel I can't give honest reviews. As if say every 3rd or 4th place is below par I suspect people wont accept you if they see you give a bunch of brutally honest reviews, so I tend to give nice reviews so it leaves my booking options open for when I do use it.
- The first one had a host cancelling a week before my trip. It was a long expected Christmas trip, and I had booked well in advance. Airbnb offered a $30 voucher on their platform, but there was no more availability in the city, so we had to pay a hotel for three times the initial price, the voucher expired before we could use it.
- The second one had a room in very bad conditions. We decided to get a hotel and quickly found something much nicer for half the price. We notified the host that we would not stay, but since we were backpacking abroad it was very hard to contest anything with Airbnb. Ultimately we still payed the full price of our Airbnb booking.
Just stayed in an AirBnb that was broken-into during our stay. Window smashed, laptops stolen when we were gone for a couple hours.
It feels like we were watched when we arrived, were observed to leave, and then robbed.
We were shaken and ran-off to a hotel.
Really appreciated the hotel staff, secured elevator, anonymity of it all (lots of undifferentiated rooms in a long hallway), deadbolt, additional locks.
At this moment, feeling like I'll never stay at an airbnb again.
This seems like a made up guess, hotels have security and 24x7 surveillance and staffing. Further, at a hotel, there are folks you can turn to. AirBnB's service department is invisible. AirBnB's online complaint process feels more like a trial which places the burden of proof on the customer, rather than a hotel, whose employee's often go out of their way to make things right.
For example, if you're harmed at a decent hotel, the staff will call the cops on your behalf and do their own investigation. AirBnB will more likely require you to submit a completed police report to their online portal before they start to look into it.
But whatever shit happens. It was cheap so maybe buywer beware.
What was surprising was the flacid and uncaring support from AirBnB. They insisted on charging for time stayed (the evening of check-in) and refused to refund their fees and the cleaning fees. Why? Made no sense to me given Amazon's eagerness to make refunds for goods with actual COGS.
Haven't done it again since and I travel > 100 days a year.
To break into an apartment, walk up to the street door, ring any neighbour's doorbell and say the name of any company that delivers parcels, newspapers or advertising in that area.
There's something really nice about being able to cook in an AirBnB, after the kids have taken their showers and are in their PJs, and all sit around the table as a family, and then have them do the bed routine shortly after, perhaps after watching a bit of TV.
At a hotel, you generally have to at least exit your room to go to the restaurant in the hotel... which breaks the whole "family groove" and makes it harder to keep the kids "in the zone" (everybody has to change clothes, etc . I find it much more difficult to manage because the hotel is essentially a bedroom/bathroom, nothing more.
https://www.bridgestreet.com/
You can cook there, etc -- they are fully serviced (eg you get cleaning people once or twice a week, beds are made and replaced and so on).
Usually these apartments are in clusters, and areas of a country that are well policed (at least in my experience).
I also prefer apartments if I stay somewhere for more than a week, or with family.
Unless you have experienced this personally you can't imagine the impact on your quality of life of such action in a multi party dwelling.
To scale up, the focus changed to inexpensive low-service accommodations with little character, or regard for the surrounding community. AirBnB is eating itself in the name of growth. In theory, it was a great idea, and I have no doubt it'll continue to make money in its current incarnation, but it's not building what it set out to create.
I always check prices on hotels and airbnb, and I mostly book airbnb. Because it is cheaper (even with fees and everything).
Only in Asia. In Western countries Airbnb is almost always cheaper than hotels. I still use Airbnb in Asia because you get nicer places with more space.
In my experience traveling across Europe it depends - for example just last month I was in Vienna and Marriott was cheapest on the days we were looking (apples to apples comparison). But then in Budapest AirBnB was cheaper. Got the best deal on booking for Amsterdam and London. You still need to go trough multiple sites if you're looking for the best deal.
So in a place with a lot of demand and little supply, the prices tend to be high and vice versa. Airbnb pricing is really a small projection of your local housing and rental market. I've managed to find cheaper places to stay on Airbnb than hotels and vice versa.
Source: https://www.airbnb.ca/help/article/125/how-is-the-price-dete...
Note that Airbnb does take a service fee, but in reality so does your hotel.
It's abundantly clear that Airbnb has zero interest in helping Vancouver enforce these rules. Vancouver has had to struggle to enforce its rules and is failing at doing so.
It seems premature to claim whether Airbnb is subject to more laws like this or not. Many cities have enacted new regulations or sued Airbnb over failures to comply with existing laws, and it seems like a complex legal issue still in the midst of being hashed out.
[0]: https://www.sfchronicle.com/business/article/Airbnb-loses-th...
https://www.pacermonitor.com/articles/2018/08/02/airbnb-host...
Can you elaborate on this?
Available housing, apartments, condos, etc, is being eaten up by short-term renters. The price of short-term rentals are more expensive than long-term rentals, but due to so much inventory not being free for long-term rentals, the price for long-term rentals has gone up a lot. This is the same inflation that we see in the expected vacation destinations but in non-traditional locations, like Portland and it's suburbs.
AirBnB is supposedly built to empower individuals to post a rental here or there. What has been found is that it has enabled and encouraged individuals and companies with large inventories to convert long-term rentals into short-term ones. And that 15% that AirBnB takes is simply passed onto the consumer - which then affects the price of long-term rentals.
There is also the negative effect of renting prices going up, or having your neighbour replaced with 3-4 party organizers a month.
Building something creates wealth. Changing the channel through which payment occurs doesn't create wealth. The host's revenue comes from displacing hotels; the guest's savings come from increased rent for other tenants. If you consider the negative externalities imposed on neighbors, there'd be a stronger argument that AirBnB destroys wealth.
Yeah, you don’t have an axe to grind here, I’m sure.
So yeah.
That being said, there are _many_ communities upset by AirBnB's influence on their area. Example: https://www.theadvocate.com/new_orleans/news/article_ad1c91a...
Of course, Googling for that article turns up, primarily, AirBnB listings in New Orleans.
The other interesting comparison point is Sabre: completely the opposite end of the distribution scale and not a rapid growth company, but they're significantly more profitable than AirBnB at a tiny fraction of the valuation (and have an excellent moat)
There's a Booking.com ad in Australia that is very AirBnB-esque (to the point that my partner thought it was an AirBnB ad until the Booking.com tagline came up); so my feeling is that they're ready and keen to compete in that space.
Perhaps a cynical or unpopular point of view but until the technology becomes a hindrance, does that really matter? Its not as though people are going to these sites because they have great technology. They go to them because the prices are good and they have good UX I assume?
It is very cell phone and cable billing, there is only a very loose relationship between the advertised price and what you will actually pay.
I think HomeAway was a little bit better about this, amortizing the fees over the length of the stay and including in the listed per night price.
I used to run infrastructure for Booking until a couple of years ago. I'll honestly admit that there's lots of tech debt. AMA - but I'll say that I'll provide no response time SLO due to work travel.
Not sure if this is financial engineering or if they're actually profitable, but I'm so curious to see how Wall St responds to this "profitability", especially since growth plays (e.g., FAANG) just cratered in Q4'18.
Not to get too involved in the dichotomy but I'm interested to see if AirBnB plays like a Snapchat (i.e., tons of hype then gets killed in the public markets), or more like a Dropbox (i.e., takes a bit of a haircut but share price remains fairly stable).
Most companies are evaluated based on EBITDA as well anyways
Current valuation? Who knows, but I see ~$30B being mentioned in a few media reports.
Assuming that AirBnB eventually becomes an enormous, stable, established company with a P/E ratio of ~15, that would mean ~$2B in profit per year.
Will be interesting to see if they achieve that!
- Were they also $1 in the prior period on EBITDA? That would indicate that their growth is stalled and they can't fix profitability problems. An IPO could help address that with the right allocation of raised funds, maybe.
- Did they lose $1 billion on EBITDA in the prior period? That would indicate that they've rapidly solved their profitability issues, but an IPO might indicate that they're overvalued and want to dump that problem on the market so that they can correct down to a good market cap vis a vis their earnings.
- Did they make $1 billion on EBITDA in the prior period? An IPO would indicate investors scrambling for the exits.
And so on. Even if earnings are paltry compared to their scale, if they are massively improved over the prior period, that is a potentially good indicator of performance to come.
It's hard to react to unforeseen conditions in the market and/or grow the company when you have no war chest. You could borrow more money, then you'd no longer be 'profitable' for at least some amount of time.
https://qz.com/1341589/amazon-can-make-loads-of-money-when-i...
Still, they are killing it, truly.
This is something like a human child, even including the rule-skirting and risky behavior that sometimes leads to opportunities that others don't have (a practice that has also helped Uber become dominant).
So I wonder what the business world would look like if we treated more businesses with a longer term support and nurturing mentality... would we have more success?
Even some of the pivots and direction changes of Airbnb are reminiscent of a growing human changing hobbies or finding their balance of skill + motivation.
I suspect a good part of the success (measured in multiple ways) of Silicon Valley is due to this finding and support that elsewhere is unmatched. Banks certainly aren't supportive parents, and the stock market is the school bus bully.
Probably at least worth between 50 and 100 billions now, I would say $80-$120 billions.
YC will be funded for a couple centuries with that IPO.
i.e. should be "raised $4.4 billion" not "raised $4.4 billions"
On a mobile here - did anyone look out for financial statements?
I'd be curious to hear from anyone who seriously thinks Airbnb will be able to achieve substantial growth in the next 5 years, given the increasing likelihood of a slowdown and more regulations from large cities.
The risk for regulation has passed as citizens see AirBnB as an accepted reality. Hotels aren't happy, but rightfully see AirBnB as a competitor.
I agree with your overall, but I'm not so sure I agree with this part.
South Lake Tahoe just passed a voter initiative in November that bans AirBnB (and VRBO) except for a few places right next to the major hotels. It was, not surprisingly, heavily supported by the major hotels.
I’m very conflicted about these types of bans. I have an apartment which I share with extended family, and we share the costs. Technically the way these bans are written would prevent us from doing that without somehow getting everyone’s name of the lease which would not be practical.
I wish that people would fine heavily for actual bad behavior, and let fair economic arrangements between respectful parties happen. But I also understand that enforcement is very difficult, and most people are assholes.
Under the new rules, you can only rent out your primary residence that you actually live in (not second homes/condos), and you can only do that for up to 90 days a year. That'll remove a pretty large percentage of the AirBnB inventory if it's enforced, since a lot of units on AirBnB are investment properties used purely to rent out, not anyone's primary residence.
A good framing for me: If Airbnb were just looking to compete with hotels, this wouldn't be that exciting of a business, even if I knew they could survive. What's exciting about Airbnb is that they're looking to win in places that hotels aren't.
Last time I looked, many/most vacation rentals are multiply listed on VRBO, etc. Is there a reason to think that AirBnB is stickier than the other vacation rental sites?
My experience is that as long as you go to a tourist destination (like Hawaii, Croatia or Santa Cruz) VRBO is fine, but as soon as you start to go off the beaten track (like Northern Northern California past Redding, or suburban rentals near major cities, or rural college towns) AirBnB has much more selection. I just did a quick test at my alma mater (Amherst MA) and VRBO had 4 listings, AirBnb had 15.
When your reputation score stays with the platform and is a major factor in who will host you, it behooves you to pick one platform for all your travel and stick with it, so getting the "long tail" of non-resort travel is a big coup for AirBnB.
1. Has more volume of listings.
2. There are much cheaper options on airbnb than other sites like VBRO.
3. More trustworthy and better brand recognition.
But it’s still at the end of the day just a real estate play. If AirBnB wants to make another dollar, they have to list another property. They can’t just jack the prices like Netflix because they have serious competition on every front. There’s no services they are launching which will provide the kind of returns that technology investors are looking for. It’s linear growth at best.
> I don't think the regulatory environment will be even a speed-bump on its path.
They certainly haven't treated it as such. "Laws? Fuck'em". Witness: New York. Witness: Gibraltar-issued anonymous credit cards to avoid taxation issues.
I'm not sure these are things to be proud of or aspire to.
Regulations are positive for airbnb not negative.
1. https://www.airbnb.com/help/article/654/what-is-occupancy-ta...
It is a fantastic business with a fat 20 to 30% margin on every booking. There is plenty of market left to capture, between mouth to mouth rentals and what used to go on craiglist, or never wanted to go on craiglist because it wasn't trustworthy.
2. Given the extreme volatility of IPOs and small amount of past history on a company's fundamentals, this will essentially be gambling with the potential of unlimited downside
Good luck!
edit: whoever downvoted this, do you not understand how buying puts works? your risk is capped at the money you spent on the contracts. you can only lose that amount.
Would he pay premium for the options? - Sure. But that buys something. Limiting the loss vs shorting for example. Besides shorting isn't exactly free either.
The point is, you don't use options for investment decisions where you don't know the timing of when you'll be right, unless you're hedging another investment.
Every single auto insurance in US I had is a 6 or 12 month contract which expires at the end. The expiration time/date is very specific to the minute. You usually get a new contract after that which you can choose to pay premium for or loose coverage otherwise.
But that's priced into any analysis of the puts. If you're just arguing that speculation in general isn't prudent, then I'm with you, but you can't really say that a particular bet would be a "terrible strategy" (if you mean that in a negative EV sense?) when we don't know what the prices will be.
That said, Airbnb's most promising growth opportunities aren't in the US in my opinion, they're international. While there's always a risk of regulation, the world is huge and has a lot of places who'd love to be this year's Iceland (although they might regret that 5 years from now) driven by cheap flights and/or housing.
Also - a slowdown could be counterintuitively good for Airbnb, as constituents may start lobbying to relax some of the more onerous regulations so that they can more easily make money via Airbnb (regardless of the accuracy, it can easily be cast as the hotel lobby vs. the recently unemployed family who has a room he wants to rent out).
Ultimately, I guess my position is that it's almost definitely overvalued right now, but not by as much as bears think it is and that I think they can probably remain a good business for the foreseeable future assuming good leadership.
Do you see Google, Facebook etc being hurt by the regulations put in place in the last 10 years?
I would also add that the city and location probably influence the economics and profitability of it a lot.
Instead, I'd suggest buying a primary residence that is a duplex or is larger than you need, and subletting out the extra room(s) or other half of the unit. Your financial commitment is much less (just the difference between purchase prices of larger vs smaller houses), financing via mortgages is much more reasonable, and legal statutes that cover this use case tend to be more favorable to you.