Leigh Gallagher - The Airbnb Story: How Three Ordinary Guys Disrupted an Industry, Made Billions . . . and Created Plenty of Controversy

Copyright 2017 by Leigh Gallagher

All rights reserved

For information about permission to reproduce selections from this book, write to or to Permissions, Houghton Mifflin Harcourt Publishing Company, 3 Park Avenue, 19th Floor, New York, New York 10016.

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Library of Congress Cataloging-in-Publication Data is available.

ISBN 978-0-544-95266-9

Cover design by Michaela Sullivan

Cover illustrations Getty Images

Author photograph Christos Karantzolas

e ISBN 978-0-544-95387-1
v1.0117

For Gil, Zeb, Anna, Noa, and Ava,

the ultimate home sharers

BRIAN CHESKY AND I were sitting across from each other in the velvet, high-backed, regal-feeling chairs of the lobby bar of the Fairmont San Francisco hotel.

It was early November 2015, and we were there so that I could talk to him about the idea of writing a book about his company, the home-sharing platform Airbnb, to use the phrase the company has been so successful at popularizing. There was some irony in the fact that we were at a hotel, and not just any hotel: this was the exact venue that hosted the international design conference in 2007 that had maxed out San Franciscos hotel supply and had given Chesky and his cofounder Joe Gebbia their goofy idea to rent out air mattresses on the floor of their three-bedroom apartment in the South of Market district.

Indeed, it was fewer than thirty feet from where we were sitting where Chesky had walked up to one of the designers hed most revered to tell him about this new business idea, only to have him immediately dismiss it as ridiculous (I hope thats not the only idea youre working on were his words). That comment would mark the start of a long stretch of painful rejection and ridicule. But it also marked the start of Airbnb, the company that Chesky now commands, a juggernaut today with a $30 billion private-market valuation, some one hundred forty million guest arrivals, to use the companys term for tracking the travelers who book on its platform, and an inventory that is three million listings strong. (A note on metrics: the phrase guest arrivals refers to the number of people who have arrived at an Airbnb listing for a new trip, a term the company uses to be consistent with international tourism standards; this book will henceforth refer to this number as either guest arrivals or guests.) At this point, Chesky frequents hotels only really for speaking engagements, and he had come to this one to address the Fortune Global Forum, my place of employs annual gathering of CEOs from around the world. Cheskys speaking slot was in between former U.S. secretary of defense Leon Panetta and Jamie Dimon, CEO of JPMorgan Chase.

Chesky and I had regrouped afterward in the lounge to talk about the project I was proposing. I thought Chesky would be open to my idea, and he wasbut not without some reservations. The problem with a book, he says, clearly having given it some thought, is that its a fixed imprint of a company at a particular moment in time. I wasnt sure where he was going, so I asked him to elaborate. Im thirty-four, he continued. Our company is young. Were going to go on to do many more things from here. His point was that it was still early in the game. Whatever I would publish in 2017 about Airbnb, he said, would very quickly be outdated, yet thats what readers would remember. The media, he pointed out, were already behind: Where everyone thinks Airbnb is today, he said, is where we were two years ago.

The thought reflected Cheskys ambition as much as it reflected his pragmatism. But he said he was open to cooperating for the book, and he trusted me to get it right. The meeting was ten minutes long. It was a good day: the night before, after a protracted fight, Airbnb had successfully beat back a ballot initiative in San Francisco to dramatically curb its operations. Chesky was soon leaving for Paris for the Airbnb Open, the companys annual celebration of its hoststhose people who deliver the product upon which the Airbnb platform is based. As we left the lounge, he talked excitedly about what the company had planned: on one single evening, hundreds of Parisian hosts were scheduled to open their homes to the entire group for a series of coordinated dinners all across the City of Lights. Its going to be one of the worlds largest simultaneous dinner parties, he said excitedly.

And with that, the thirty-four-year-old billionaire left the room.

The first time I heard about Airbnb was in 2008. At the time, I was in charge of the section of Fortune magazine that covered the quirkier side of business, and wed gotten word about a couple of scrappy entrepreneurs who were gaining some attention during the 2008 presidential election season for hawking collectors-edition boxes of fictitious breakfast cereals called Obama Os and Capn McCains. They were recent Rhode Island School of Design grads trying to build word of mouth for their newly formed start-up, AirBed & Breakfast, which let people rent out sleeping quarters in their homes to other people who needed a place to stay. I thought the business idea itself was nothing new, but the cereal gimmick was plucky and had gotten some national attention, so we ginned up a short piece on it to run in Fortune. I didnt give it more than a passing thought.

Over the next year or two, though, the company started to gain buzz, edging onto the radar of our tech-reporting team. Someone brought it up internally as a company to watch. Wait a minute, I thought. Those guys? I was not involved with Fortunes tech coverage, which meant that I didnt always know what I was talking about when it came to the companies coming out of Silicon Valley. But I also felt that distance gave me a healthy arms-length perspective on the self-important euphoria that seemed to waft out of the region. As the keeper of Fortunes 40 under 40 list, I was also used to breathless pitches from companies claiming they would change the world in one years time, only to be significantly humbled the next. I sometimes took a certain amount of pleasure in pointing out when I thought certain ideas were overblown and overhyped. This new company, I thought, was one of them.

I made a mental list of all the other companies that already existed that offered the ability to rent someones home or space in it: HomeAway.com, VRBO.com, Couchsurfing.com, BedandBreakfast.com. I wondered how this new company could be so different. What is it about these tech start-ups, I remember grousing to a colleague, that think they can take an old, unoriginal idea; gloss it up with a slick, minimalist, design-friendly website; and re-release it back onto the marketplace as something new?

But this company was going to be different from all those others, and in a short time that would become clear. Soon, Airbnb had become a thing. You could rent someones home for a night, but people had also started to upload quirkier spaces: a treehouse, a houseboat, a castle, a tepee. Millennials in particular were drawn to this new way to travel that was both affordable and adventurous; you could stay in peoples homes in neighborhoods off the conventional tourism grid, connecting with like-minded souls, for much less than the cost of a hotel. Listings and bookings started to catch fire. As early as 2011, Airbnb raised a mega $112 million from backers, was valued by investors at more than a billion dollars, and had booked one million overnight stays on its platform. Over the next few years, it would leave those figures in the dust: one million bookings turned into five, ten, fifty, and then one hundred forty million guest arrivals by the end of 2016some seventy million of which had occurred in just the past twelve months. Its valuation jumped to $10 billion, to $25 billion, and to $30 billion, where it sits as of this writing. Yet the company still has low awareness and low penetration in the housing market. Analysts predict it will get many times larger than it is today.