How Airbnb’s CEO Is Trying to Fix Airbnb
Reading Time: 11 minutesBrian Chesky on all those fees, the crackdown in New York City, and how his company swears it’s changing., Airbnb CEO Brian Chesky explains what he plans to do about cleaning fees and New York City’s crackdown.
Brian Chesky is on a mission. The Airbnb CEO says he’s undergoing a big new push to improve his popular—but sometimes infuriating—service where 4.5 million hosts offer an alternative to hotels. He’s reimagining everything from cleaning fees to search (now you can select for king beds!), hoping make people fall in love with Airbnb again.
Every day is a lesson in competing incentives for the man. Chesky knows that staying in a good Airbnb can make a trip special. But paying exorbitant cleaning fees, doing chores, and dealing with abrasive or uncommunicative hosts can ruin it. This makes his job one of the hardest in tech. He has to please his hosts and the hundreds of millions of guests staying with them. And as an $80 billion publicly traded company, he also has to make money.
I recently sat down with Chesky in New York for a broad discussion about Airbnb, and published our full conversation on my Big Technology Podcast. (You can listen on Apple Podcasts, Spotify, of your podcast app of choice). In the excerpt below, we discuss those pesky fees, how the company lost and regained sight of what its customers wanted, and how he really feels about New York City’s crackdown on Airbnb.
Alex Kantrowitz: On behalf of all Airbnb customers and on behalf of everything that is good in the world, please do away with the cleaning fee.
Brian Chesky: OK, should we talk about the cleaning fee? If I was a host, I probably would not charge a cleaning fee. We thought about removing the cleaning fees. A home is different than a hotel. A hotel, they’re going to have cleaners, and it’s not like you don’t pay a cleaning fee; the cleaning fee is baked into the nightly rate. We want to move to an all-inclusive pricing, where if hosts have a fixed cost, they can amortize that fixed cost. Sometimes they actually do need a cleaner; they want to pay a living wage and they might live half-hour out of town. We really want that rate to be baked in the nightly rate.
Last December, we created a toggle that you could turn on for a ‘total price display.’ It’s essentially the way hotels price, where any of their fixed costs are amortized across their nightly rate. About a third of our guests turn on the price toggle.
The other thing we do is rank the very best-value properties high, so if somebody has a property that is of lower value, it’s going to get downranked in search results. And I think that has created an incentive for hosts to lower their price and be more competitive. One of our secret sauces, and part of the challenge of Airbnb, is we have to make sure we balance the needs of 4.5 million hosts with hundreds of millions of guests all over the world.
But the most important thing is, I hear that you want a simple service, what you see is what you’re going to get, the price is a fair price, you don’t have owners’ checkout chores when you leave, and that Airbnb is always a better value than a hotel, because it was always founded as an affordable alternative. And that’s something that we’re totally focused on.
It is hard to manage a two-sided marketplace. But it seems that everybody would be better served—hosts as well—if this cost was baked in at the front.
This is primarily a U.S. phenomenon. In Europe, prices are regulated, and you have to show the total price up front. We would love it if they regulated pricing in the United States. But here’s the problem: When people come to Airbnb, if we only show upfront pricing, and people aren’t aware, they’re often confused and go to competitor websites that have progressive pricing.
At the end of the day, I think people want to see what they’re going to get upfront. Prices today on Airbnb globally are actually lower compared to hotels, they’re 1 percent below a year ago. So I hope that over the course of next year, we continue to make progress on affordability.
Would you call for regulation in the U.S. that would make everybody display upfront pricing?
Not only do we call for regulation, we actually went to the White House with President Biden, who has called out hotels for resort fees. After we made the upfront pricing change, they called us out as the standard.
We argued for a model enforced against everyone fairly. If you don’t do that, one company does upfront pricing, the other doesn’t. Some customers are savvy enough to know that the prices are not apples-to-apples, but many people aren’t. What ends up happening is a lot of people end up under a false pretense that we’re more expensive, and we see this in the data. We’re doing our very best to try to educate people.
You’re getting passionate.
Let me just say this, I actually stay in the details of the product. I think most of the CEOs at S&P 500, Fortune 100 companies, I think most of them aren’t really in the details of their product. At some point, these companies get so big, that it’s pretty typical that you get a little detached, that it’s someone else’s job to listen to customers, but it’s not your job. And I’ve always wanted to be the kind of company that felt more like a startup. When I started Airbnb, my two friends, we were the customers. And then I would meet the customers. And it was easy because there weren’t many of them. And we’d go door to door meeting hosts and talking to guests, and we’d say, ‘What can we improve?’
As we went on this hypergrowth rocket ship from 2009 to 2019, I think we got further and further removed from the customer. And we went from us talking to customers to hiring people to talk to customers, to people who manage people who manage people who talk to customers. Now, what I’m describing is almost every technology company in the world—almost every large company has layers of management. And there’s a detachment that emerges over time—and happened to us—between the leaders of the company and the customers, and the feedback the customers give you and the roadmap that you have. What we wanted to do over the last couple of years is to flatten that to have our ear on the ground.
So we completely overhauled product development at Airbnb. I came to the conclusion that the classic way that we’ve developed products through 2019 was some average of the people I hired who brought their methodology from their company—I picked some kind of general average that seemed to make everyone happy. And guess what, no one was really happy, especially the customer.
During the pandemic, we lost almost 80 percent of our business in eight weeks. We had to simplify the company, we had to get back to basics. And we realized what we should do is focus on our core business, make it as lean as possible and build something that people truly love.
Are you interested in advertising—that is, allowing hosts to pay for prominence? I’m looking at Skift, and they estimate the first year for Airbnb would make $317 million in advertising. That could go to $1.25 billion by 2026, and $3.7 billion by the end of the decade. I mean, talk about high-margin business.
One of the things that Jeff Bezos said was you should focus on the most perishable opportunities first. There’s all these things you could do, but if you can do something later, don’t do it now. We felt like the most perishable opportunities were around fixing our service because if people are complaining, the last thing they want is an ad platform. They want the service improved.
Travel is finally recovering in the post-pandemic world, so there’s a lot of market share available. We want to expand our service and recruit as many hosts as possible, and that’s the most perishable opportunity. The bigger we get, and the stronger the ecosystem gets, the more potential value an ad platform has down the road. So we’re not rushing into anything. I want to make sure the ads don’t get in the way of a good user experience. But you’re right, it is a billion-dollar revenue opportunity with very high margins. The bigger we get, the more valuable that opportunity is.
You mentioned at the Figma conference how you structure your organization, and when you finished people said Airbnb is done with product managers. How is the move away from traditional product management going?
I went onstage at Figma and said we got rid of the classic product management function, and people assumed I meant I got rid of all the product managers; I didn’t. What I meant was we replaced it with a product marketing function.
In a typical tech company, you have what they usually refer to as three legs of the stool: You have engineering, you have design, and you have product management. Oftentimes, product is what we might only call an inbound function; their job is to build software and ship it, their job isn’t always to figure out how to market the features that they built. I think it’s a weakness in a lot of modern software companies that people don’t think about: Who is this for?
Product marketing at Airbnb is inbound and outbound. Product management is the building of the software, while product marketing is deciding what to build, and figuring out how you’re going to talk about the product, and distribute the story to the customer. If you build a product, and no one knows about it, was it worth building? Probably not. I also find that if you think about the story of the product, as you’re building, it affects how you’re building it, it often makes the product simpler.
Wait, what does that mean? That the marketing comes first and everything flows from there?
The story comes first. But for a lot of these features, you discover the product along the way, and it often starts with an insight. So for example, Airbnb rooms. We had a core insight that a lot of people were nervous about staying in a house with another host because they didn’t know who the host was. And so we developed this idea of a host passport, this new type of profile that they would fill out and you’d be able to get a sense of who they are.
A lot of product managers just look at data, and data is important, but it’s only part of the story. Product and marketing should be connected. I always feel like you can tell the health of an organization by seeing how close engineering and marketing are. And by the way, I bet you at many companies they don’t even know each other, they may never talk to each other. And that’s a red flag, because you really want the product engine of the company and the storytelling engine to be working in lockstep. If they’re disconnected, that’s not good for anyone.
Do you inject ideas into this process?
Yeah. I want to be clear that the majority of ideas do not come from me, but I always bring something to the table. We have a really rigorous blueprint. We have a rolling two-year plan that we update every six months, and I hold the roadmap—not the head of product. So I make all final product decisions. Now, I’m not making every decision unilaterally. I’m like an editor. Most things are recommendations, and I’m changing things 5 to 10 percent, because my job is to balance every stakeholder inside the company because it’s functional, there’s no general managers. I basically keep a living roadmap document that is kept updated with a two-year horizon.
I have found that this system is far superior for Airbnb. Whether this is a good system for other companies? I’m not certain yet. If you really care a lot about design, you care a lot about craft, you care a lot about the core technical talent of the company, and if you’re a company where the CEO wants to be fairly hands-on, if the CEO has a pretty good product sensibility, if you are really just one app and one brand, and you don’t want to do lots of disparate things, then I would argue to be as integrated as possible.
When I told people about this model, the biggest criticism was, they said, ‘You’re going to be a huge bottleneck, everything’s going to be slower, and you’re not going to ship as much.’ What we found is that we’ve shipped more than we ever have. The velocity is somewhere between 2x and 5x greater than it was before.
I didn’t invent this model, Walt Disney did things this way, Steve Jobs did things this way. And Elon in his own way.
I want to talk to you about loneliness. I read a tweet that said, ‘Airbnb is ruining the communal feel of the neighborhood I live in … tourists come in for a couple of days and leave. So personally, I think a top priority should be a policy that restricts the number of Airbnbs.’
OK, like, there’s a couple things going on here. Let’s start with the neighborhood. And let’s then zoom out to loneliness. I think they’re just distinct topics.
On the neighborhood topic, we want to strengthen the communities we’re in, and I do not think communities should be totally transient. The way we’ve tried to solve this is not for us to impose caps on cities, but to work with cities and let them impose their own restrictions. If you take the top 200 markets in the world, 80 percent of them have a law on the books in our jurisdictions, there’s some regulation in place. We’ve learned that a one-size-fits-all imposition in every city doesn’t work. The No. 1 principle is to treat every city personally, comply with local laws, regulations, and really make sure that cities have the right choice and the right solution for them.
Then there’s this concept of overtourism. And overtourism is a very real thing. But overtourism isn’t too many people in the world traveling. Overtourism, I believe, is too many people going to the same place at the same time. One of the things I love to do with Airbnb is redistribute travel. Instead of having everyone go to the same cities in the same districts, spread people out to as many places as possible. So we’re seeing a lot of what we call travel redistribution, people traveling to more locations than flooding the same zones.
Loneliness, first of all, is much bigger than Airbnb. Loneliness has been rising since World War II. We’re much more part of the solution than the problem, let’s start with that. It’s mostly that people aren’t going to as many physical places, the mall is now Amazon, the theater is now Netflix, the office, for many people, is now Zoom. Not as many people go to church, and fewer people live with their families. I think one of the big solutions is just to get people to spend time in the physical world.
The way Airbnb can be part of the solution is to encourage more people to travel with their friends, their family, their loved ones. Also, by the way, when they do travel, we would like people to feel less transient, so they have a context and community in the neighborhood that they’re hosted in.
I am curious what you think about what’s happening in New York right now. Something like 77 percent of the short-term rentals have been taken off the market since New York had this clampdown on Airbnb. What are your thoughts?
I think it’s hugely disappointing. It’s a cautionary tale for New York, it’s a very bad decision, and I think they’re gonna come to regret it. The big challenge here is that a lot of our hosts were everyday people. I think there was this thought that a lot of people were professional real estate prospectors.
Tens of thousands of hosts won’t be able to host. And another consequence is going to be that if people are now going to travel to New York City, there will obviously be fewer Airbnbs, and they’re not going to build enough corresponding hotel rooms in the near term. And so you’re gonna have more demand, less supply, and probably prices will go up.
I do think this could have been a win-win. I really wish there was a way we could have worked together. We ultimately want to exist in cities, in a way that works for them. But we don’t want to do business if we’re not welcome. And so obviously, this is how it’s played out.
I’m optimistic that at some point in the future, we maybe all will be able to come back to the table, and people will realize—wait, I can use Airbnb and most other cities in the world, there’s got to be a workable solution for Airbnb. And maybe the question shouldn’t be, ‘Should Airbnb exist?’ But maybe the question should be ‘How should Airbnb exist?’ Right now, the way we exist in New York is for stays longer than 30 days. And the way we exist in New York is to book an Airbnb ‘experience.’ We have these three-hour walking tours or cooking classes, or music experiences. I’m optimistic that at some point down the road, there will be a way to work together. But probably not any time soon.
Douglas Gorman contributed to this piece.
Reference: https://slate.com/technology/2023/10/airbnb-brian-chesky-interview-cleaning-fees-nyc.html
Ref: slate
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