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Wednesday May 21st, 2014 - 11:05AM
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Given a choice of staying inside a giant seashell-inspired home (or even an owl’s head!), or staying in a big box with lots of other little boxes inside, one can only wonder what the selection would—should—be.
If you’re Brian Chesky, though, the choice is abundantly clear: The former beats the latter every time. Individuality is key.
Chesky, CEO and one of three co-founders behind Airbnb, the web-based housing rental site connecting hosts and travelers worldwide, would, by all accounts, be the first to admit he’s not “a hotel guy.” Yet, his drive to give his rapidly growing online empire of lodging options for travelers the semblance of a hospitality company, complete with a guest-winning service culture, has led him to take a giant step in that direction: the hiring of Joie de Vivre Hospitality founder Chip Conley, who is a bona fide hotel guy—just not your typical one.
A maverick in the industry long bent on showing that the little boxes inside the big box—aka hotel rooms—do not need to look like they could slide across a baking sheet based on their often cookie-cutter models, Conley is in his element at Airbnb, where the offerings of places to stay are as unique as the hosts listing them—and where a certain notoriety of late also has come to rest.
After reportedly being pursued by Chesky for a period of time, Conley joined the company last year as head of global hospitality and strategy, a role carved out for him in order to take Airbnb to the next level.
“Brian Chesky asked if he could use me as an advisor since I was a hospitality CEO for 24 years, and he wanted to take Airbnb from being a tech company to being a community-driven hospitality company. He then invited me to give a speech on ‘Hospitality Innovation’ at their headquarters, and I was hooked at that point as I met so many young, idealistic, smart employees who were enchanted with the idea of sharing/teaching hospitality to hosts in 192 countries,” Conley told Hotel Business.
The scene at the six-year-old company’s San Francisco base likely reminded Conley of his own niche carving within the lodging industry. In 1987, he ostensibly launched the eclectic Joie de Vivre brand in the same city as Airbnb with the opening of the Phoenix Hotel. Using psychographics rather than demographics to understand his guests and deliver the hotel experience they were looking for, he subsequently grew Joie de Vivre Hospitality to a celebrity-vaunted collection of boutique properties that were often modeled on trendy magazine formats.
Following a series of outside investments into the company and shifts at the C-suite level, Conley sold his interests in the JdV management company. Today, the hotel brand operates under parent company Commune Hotels & Resorts while Conley remains asset manager for the dozen-plus hotels he still owns.
Conley acknowledged the JdV/Airbnb start-up parallels were part of the appeal in coming on board.
“I’m a curious 53-year-old who started Joie de Vivre when I was 26. The founders started Airbnb at that same age and it’s fascinating—enabled by technology—how quickly they’ve been able to grow the company based upon many of the culture- and innovation-driven principles I’ve believed in for years. For me, to teach hundreds of thousands of hosts around the world the generosity of spirit that’s embedded in hospitality is a dream come true. It’s amazing how engaged these micro-entrepreneur hosts are with the idea of delivering hospitality to their guests,” he said.
Spreading the word on hospitality is at the core of what Conley is being tasked to do by Chesky and his partners: co-founders Nathan Blecharczyk, who handles technical strategy, and Joe Gebbia, who leads the product team in terms of brand and development.
According to Airbnb, one of Conley’s first responsibilities centers on creating a “hospitality lab” in Dublin, Ireland, where an educational program (aka hospitality 101) has been developed, aimed at the hosts behind the 600,000-plus listings populating the Airbnb site. “Airbnb Hospitality” will be composed of hospitality tips, online webinars and offline workshops.
His day-to-day finds Conley spending a great deal of time with data scientists at Airbnb. “Fifteen years ago, hoteliers couldn’t fathom why they needed revenue managers. Today, any hotelier of size who doesn’t understand why they need to be hiring data scientists is seriously behind the times,” said Conley. “So, I spend a lot of time reviewing our analytics and gaining insights about what our guests want and then figuring out how we can deliver it to them. Brian and I meet for a high-level strategy discussion every weekend when we’re both in San Francisco.”
Conley stressed his role as head of global hospitality and strategy is to help Airbnb’s hosts around the world “be as good as they can be and help chart the course for what strategies this company will pursue.”
“Hospitality is at the very heart of what we do at Airbnb,” stated Chesky. “When people think about the meaningful experiences they’ve had through Airbnb, their hosts’ warm welcome or thoughtful gestures are always at the core. No one in the industry is better qualified than Chip to help our hosts redefine hospitality.”
Conley has his work cut out for him. The private company, founded in 2008, has accelerated at a dramatic level and is expected to maintain its momentum as even greater numbers of hosts and travelers enter the sharing-economy arena. Currently, there are 600,000 listings (up from 300,000 in early 2013) on Airbnb—130,000 of those in the United States— and there have been a total of 11 million guests since the company started.
More than 80% of lodging listers offering accommodations in some 34,000 cities own their apartments or homes. Rentals may be a “hosted” situation, i.e., the owner is on site to provide services, or “self-serve” for guests (owner not on site during stay).
Airbnb does not disclose its annual sales/revenue. It does take 3% from hosts and between 6-12% from guests who list and book, respectively, with the site.
Chesky has made known his aspirations for Airbnb to be a “full-blown hospitality brand.” Asked what that brand might look like, Conley commented, “Suffice it to say, there are three legs on this stool: technology, design and hospitality. We better be impressive in all three of these areas and there’s a strong synergy among them. We are also moving beyond accommodations and are focusing on how we curate our guests’ experience for their entire trip.”
This could presumably incorporate any number of services now handled independently by travelers, e.g., getting a taxi to the airport, or via a hotel’s concierge.
Some industry observers might suggest that rather than mimic any hotel company in being a conduit for accommodations, Airbnb may ultimately lean more toward the realm of a major travel agency or destination management company if the thought is to provide an entire package of services and/or recommendations to those guests who book through Airbnb.
“We want to provide the experience that you’re at home, wherever you go,” said Conley. “We’re always testing new ways to help our hosts deliver the experience of home to their guests, but we don’t have anything to announce at the moment” in terms of added services.
The aspiration to be a “full-blown hospitality brand” carries with it the need for some core standards. Conley was asked what’s in place now that fulfills the basics in terms of rentals accepted, and how he sees the bar being raised on those as the company matures.
“This was the first thing I focused on when I joined the company in April 2013: How do we create nine hospitality standards that we would use to evaluate the effectiveness of our hosts? We rolled them out last fall and I’ve traveled to 16 major markets around the world teaching in-person ‘Hospitality Moments of Truth’ classes to thousands of hosts. We have more than a half-dozen means of educating our hosts and we’re introducing new ways to recognize our best hosts and share best practices. Airbnb can never be as consistent or as standardized as a chain hotel, but we can improve the dependability of the guest experience so that the host properly manages the expectations of the guest with respect to what they’re offering with their listing.”
He added he’s also been pulling pages from the traditional industry’s best practices book. “For example, one thing I learned long ago was that 87% of hotel guests with a minor irritation never mention it to the hotel front-desk staff. So, the more a hotel staff is proactive early in a guest’s stay in building a rapport, the more likely a guest will tell them about a problem that might arise so it can be solved. Similarly, we encourage our hosts to reach out to their guests within the first 24 hours after arrival for this same reason.”
Conley indicated this is one of the reasons why traditional hoteliers who are proactive should not view Airbnb as a threat.
“Successful hoteliers aren’t threatened. They’re effective because they constantly innovate and improve, and their measurement for success is more internally based than external. So, I don’t think Airbnb should threaten successful hoteliers who are focused on providing a great value proposition to their guests,” said the executive.
Noting some bricks-and-mortar operators and chains lobbed negative comments when they saw reports of Airbnb outstripping the major hotel chains in terms of room count and pricing, Conley, a hotel owner himself, acknowledged, “It’s not apples to apples because we’re not building any structures, so we’ve been able to add rooms a lot more quickly than a hotel chain. Our hosts also rent out their homes on a part-time basis for supplemental income, so their prices can be a bit more flexible.”
The most common type of rental for Airbnb is primary homes in urban centers. But a huge part of the site’s cachet is its listings for unusual properties, such as a home in the city of Longyerbyen at the North Pole or the one shaped like a dog in Cottonwood, ID—and, yes, there’s that Owl House (near Liverpool, England) and Casa Caracol, the seashell-style house in Mexico. There are lofts and studios, castles and a caravan, water towers and Airstream trailers—and any number of offerings that could appeal to every type of taste and budget.
Conley does not see Airbnb as a direct competitor to most hotels. “On the margins, Airbnb does compete with moderately priced hotels that aren’t providing a great value proposition, as well as some serviced apartments. But studies have shown that Airbnb has created some new demand—much like Southwest Airlines did back in the 1970s (it originally was considered ‘Greyhound in the sky’)—of people who choose to travel and stay longer in a destination due to increased affordability.”
Vis-à-vis the lodging industry, Conley said Airbnb’s purpose for existing “is not to be a disrupter. It’s to help people feel like they can feel at home anywhere by connecting you with locals and quite often staying in residential neighborhoods. ‘Living like a local’ is increasingly what seasoned travelers are looking for. This is what boutique hotels offered in the U.S. three decades ago and—just like boutique hotels didn’t submerge the hotel industry— Airbnb can influence the industry in the same positive ways.”
Renters/tenants who do not own their own space also are eligible to list on Airbnb; however, the company encourages such hosts “to have open communications with their landlords about what they are doing and check local laws.”
Local laws have put the spotlight on Airbnb in recent months, notably in Portland, OR, San Francisco and New York, where the latter state’s Attorney General Eric Schneiderman’s office went to court earlier this month with the company seeking information on unit listers who may be violating state housing laws regarding short-term rentals. (New York law bans nearly all apartment rentals under 30 days; although it’s not illegal for immediate family members to stay short term as guests or to rent a room if the primary resident is in-house at the time and all facilities are available to the paying guest.) The law is similar in San Francisco, where it is illegal for both tenants and owners to rent their dwellings for less than 30 days. There, however, the city is considering regulating short-term rentals and hosting services. Part of that proposed legislation calls for hosts to pay the city’s 14% hotel sales tax. Airbnb reportedly indicated it would collect such taxes on behalf of its hosts there, as well as in Portland, OR, where sales and lodging taxes are 11.5%.
Commenting on such regulations, Conley noted, “We’re in nearly 35,000 cities around the globe, each with its own set of laws and regulations. Some cities have existing laws that are accommodating to Airbnb, and many cities have changed their laws to be more accommodating. Suffice it to say that many 20th-century regulations didn’t account for the sharing economy of the 21st century so, one city or state at a time, our hosts and public policy teams are working with local officials to address concerns.
“We are starting to work with cities to collect and remit transit occupancy taxes,” he added, “but it’s hard to generalize here since the process of collecting taxes is so diverse across municipalities.”
The lodging/occupancy tax issue is one of several the traditional lodging industry is keeping top of mind regarding Airbnb, which is touted for its innovation and dramatic growth, which Conley noted comes more from word-of-mouth than customary brand advertising.
Addressing hoteliers’ concerns, Katherine Lugar, president/CEO of the American Hotel & Lodging Association (AH&LA), said, “The U.S. hotel industry works to make significant investments to provide safe and innovative customer experiences. These include remarkable new improvements in the ‘mobile’ experience, enabling consumers to book their rooms directly and in real time, check in remotely, and even use their phone as their room key. But being innovative is no justification for ignoring the laws and regulations that are on the books, and the government should not pick winners and losers in the marketplace. A level playing field—ensuring short-term online rental companies adhere to the same city, state and federal laws— is absolutely crucial. Whether it is complying with fire and safety laws, adhering to ADA-accessibility requirements or paying occupancy taxes to local governments, short-term online rental companies should be held to the same standard as hotels.
“Competition is a hallmark of our industry,” she continued. “It is important that competitors are treated fairly by the law. Moreover, hotels are good corporate citizens and neighbors. The same cannot be said about short-term online rentals; there are too many unknowns, and neighbors never know to what they will be exposed.”
Other issues raised around the hosting model, particularly in New York City, have been chronicled in tabloid stories alleging prostitutes and other atypical guests are finding their way to Airbnb-listed rentals, particularly in apartment buildings, causing concern among other tenants. Airbnb reportedly assisted those hosts whose apartments were allegedly compromised and also cooperated with police officials.
While there is no formal vetting process by Airbnb for hosts and guests, Conley said, “Our users can vet each other in a number of different ways. Hosts and guests review each other after each stay, and these reviews are public so you can see what kinds of experiences other people in the community have had. Hosts and guests also message each other before booking, which allows them to ask anything they need to ask before making a reservation. This messaging happens on our platform so that we can take care of the payment, and make sure each transaction is secure…plus, if we find a host is just not living up to our hospitality standards, we can remove the host and their listings from Airbnb.”
In terms of liability, the executive added on top of a host’s renter’s or homeowner’s insurance, “we have an extra layer of protection with our Host Guarantee. We will reimburse a host for up to $1 million in damage if something happens to their property.”
As for guests, Airbnb holds their payment for 24 hours after they check in. “If the guest gets to the listing and it’s not as advertised, or there’s something wrong, then we will rebook them or refund them,” said Conley, adding: “A brand is a promise. I invite you to keep an eye on how we evolve and expand our promise over the next few years.”
—Stefani C. O’Connor
Tags: Chip Conley • Airbnb • Hospitality •
For our special report, “A View from the C-Suite,” we took the temperature, so to speak, of executives representing our broader readership to present the views from not only the brands, but from leaders who head owner, broker, lender and management firms. Our executive lineup in this issue includes Jim Merkel, CEO, Rockbridge; Teague Hunter, president, Hunter Hotel Advisors; Jon Wright, president/CEO, Access Point Financial; John Belden, president/CEO, Davidson Hotels & Resorts; and Keith Cline, president/CEO, La Quinta Holdings Inc.