Those who copied us haven't been successful: Nathan Blecharczyk

Interview with Co-founder & chief technology officer, Airbnb

San Francisco-based homestay rental major Airbnb wants to leverage the India market meaningfully, eight years after it was founded. Its two million listed homes have hosted some 18 million guests across 191 countries since 2008. Valued at $24 billion, the company is aiming for big numbers in India. Co-founder and chief technology officer, Nathan Blecharczyk, in India to promote the service, spoke to Karan Choudhury and Nivedita Mookerji on the business. Edited excerpts:

What brings you to India and what are your plans for this market?

India is an ongoing commitment. Airbnb is in 191 countries and certainly people have been using it in India for some time. But now we feel India has reached a critical point in terms of momentum in growth. Therefore, we’re making it a focus of ours to start actively promoting Airbnb in India.

We see huge potential, though we are still in the early days. We think we can play an important role in the estimated $40-billion Indian tourism market by 2020.

What market share is Airbnb likely to have in the country?

We don’t have any fixed targets. In other mature markets, we currently have a single-digit share and have a path to double-digit share. There is no reason to think it’s not possible in India over the coming years. We’ve started to have meaningful gain here already.

A recent book titled What’s Yours Is Mine by Tom Slee highlights the darker side of the shared economy, citing examples of Uber and Airbnb, among others. Do you agree that shared economy masks a darker reality?

 
I think Airbnb is an exciting new model. We are democratising travel, we’re making it possible for an ordinary person to participate in the global travel industry. As a company, we are giving people a tool kit to become micro-entrepreneurs. It is an opportunity that would otherwise not be there. In terms of the darker side of shared economy, this new model has raised a bunch of questions about how it fits in with existing policies. I think those are fair questions, but that does not mean the idea (of shared economy) is bad. We have to have conversations about how new models get reconciled with existing rules.

What is the future of shared economy?

Over a few dozen countries have passed new policies specifically addressing home sharing and have been quite favourable towards it. I think the existing policies do not recognise us as they were written long back, but what is refreshing to know is that when new policies are passed, they generally support the benefits of home sharing and we are working with governments to address any concern.

Taxes are one issue that has commonly come up and we’ve made agreements with various governments to help them participate in the shared economy to help collect the appropriate tax.

At this point, another shared economy company, Uber, is facing regulatory issues in India. Has Airbnb, too, faced regulatory problems in India?

So far, we have had very positive conversations with the government. We were happy to hear the government tends to look at home sharing. Though it is very early, I think the right conversations are beginning to happen. What we let guests know is that they need to comply with local rules and regulations and we find increasingly new ways to educate them about those.

What is the revenue-sharing model like between the host and Airbnb?

The hosts set their own price and get to keep 97 per cent of the tariff; we keep three per cent. The guest also pays a small service fee that varies according to the length of the stay and price.

What is the lowest room tariff you have on offer and the highest?

You are not allowed to charge less than $10 a night. Around the globe, we have properties for as much as $10,000 a night, too. We have different types of places — castles, private islands, boats, tree houses, igloos.

There have been recent cases of room booking cancellations by Airbnb hosts in destinations such as Amsterdam. How does the company cope with such incidents?

Those things are very rare and most of it is handled by the review system. The guest is reviewing the host. In the search results, we show the best hosts first. So, you get rewarded for good behaviour and that makes it very competitive. But, if a host is not performing well, they go lower in the search results and we remove them after a certain point. If you fall below minimum standards, one gets removed.

What’s your view of the online hotel aggregator, Oyo Rooms, which started on the Airbnb model but later shifted to another format?

We have pioneered this model and our success has inspired many others to either do the same thing directly or variations of it. None of the clones has become successful. There are a couple of reasons for this. It is actually quite complicated to get it right in terms of offering a good user experience.

One of our advantages is scale, Airbnb can offer accommodation in 191 countries and the biggest selection. Travellers really want that. That is the advantage we have.

So we do not actually see any direct competitors, as they have not been successful. People are trying other models now. It is healthy to try new things, the travel space is huge space and there is room for different models.

What is your expansion plan in this market?

We’ve enjoyed really good growth over the past year and we expect that to continue. I would expect the number of homes to increase from 17,000 by the end of this year. We have grown by 115 per cent since last year in terms of listing.

In Asia, where is India in the pecking order?

Asia as a whole has grown by 370 per cent. A lot of that is driven by China, which has had an explosive growth, both overall and linked to Airbnb. I think India is becoming sizeable and growth is there.

Who do you see as your competition here?

There is no direct competition in India, nothing that is equivalent to our model.

Start-ups are increasingly witnessing valuation markdown, and investments are not forthcoming. What’s your take on the slow investment scene?

Not all companies are the same. Some are running into harder times and some are doing things that are not sustainable to grow their business. The fundamentals that drive Airbnb are quite sustainable and profitable. We feel we are in a good place and have a strong valuation. We are well capitalised, in a position to make investments but also in a position where we do not have to necessarily make investments. We have a lot of choice.

But, you are not profitable and are burning cash. Isn’t it?

The unit economics of this business are profitable and we have raised a lot of money. We look at how we can invest that money for growth. So, we have the choice to spend more money, as we have the balance sheet to do so. The core of the model is profitable.