Lessons from Airbnb: Businesses aren't just built on good ideas, big markets

livemint.com:

Airbnb CEO and co-founder Brian Chesky has dubbed the company a ‘fundamentally broken business’, which is certainly unusual. CEOs normally sound upbeat and Chesky, on the face of it, has reasons to be optimistic. The company has global brand recognition and is the pioneer in a business with strong traction.

Airbnb, which was founded in 2007, has aggregated over 4 million hosts who have welcomed 1.4 billion guest arrivals in almost every country. Unlike many startups, it is profitable. In 2022 (it uses the calendar year as its fiscal year), it declared $8.4 billion in revenues with a net profit of $319 million and in the first six months of 2023 (January-June), it posted $4.3 billion in revenues and $767 million in profits.

So why does Chesky claim the business is “broken"? It’s running into trouble with local and municipal authorities in many places. It receives a slew of customer complaints and host complaints and struggles to deal with these. Chesky admitted in interviews that the company has scaled up too fast.

Common issues disgruntled customers highlight in reviews include hidden charges that are not stated on the website, flattering pictures that conceal flaws with the property, outright fake properties, organised theft targeting travellers, and so on. Municipal authorities in many places like New York, Paris and Florence, have started to impose rules to regulate short-term rentals, apart from levying taxes, tightening licensing requirements and setting ceilings on the maximum days a property can be rented out. Many hosts also complain their margins are being squeezed.