Dumb company name, good idea

Jenna Wortham has an article in The New York Times about a novel new way to get a room:

When Lisa Marion’s roommates moved out of her apartment in Toronto in February, she scrambled to find replacements. But instead of finding one or two, she found thirty. Marion, 26, has been using Airbnb, a website that streamlines the process of renting out her extra bedrooms to travelers. The service has unexpectedly turned her into a bed-and-breakfast owner, bringing in roughly $1,800 a month, a nice cushion as she works on starting her own business. “It pays my rent with a little left over,” she said. “I’ve been able to upgrade my place, paint, and get new furniture, which in turn means I can charge more.”
Airbnb, which says it is handling ten thousand guests a night, is at the center of a boom in new companies that are creating a market for places to stay: a spare room, a house when the owners are on vacation, or even a backyard treehouse.
Some of these businesses are riding the surge of interest in all kinds of web ventures; Airbnb plans to announce that it has raised $112 million from investors. Last month, Wimdu, a similar venture in Europe, raised $90 million. Smaller competitors like 9flats, Roomarama, and iStopOver are also hoping to take a bite of the short-term rental market. These companies say they are helping hosts like Marion become microentrepreneurs, while giving adventurous travelers insights into how local residents live, whether they are visiting Japan or Los Angeles.
“We started realizing there is a growing trend of people who are doing this and making a living on Airbnb,” said Brian Chesky, who founded the company in 2008 with Joe Gebbia and Nathan Blecharczyk. “That’s what turned this into a movement and tipped it into the mainstream.”
But those who choose to welcome strangers into their homes in this way must be prepared to deal with more than just changing towels. Hosts may run into trouble if their neighbors, or worse, their landlords become aware of their rotating houseguests and disapprove. Such short-term rentals are considered illegal in some New York City buildings, according to the Buildings Department. The city says that this year it is on pace to more than double the 483 complaints about such activity that it received last year.
Then there is the unpredictability of the guests themselves. Marion said one guest stole a bottle of whiskey and drank it in her bathroom. (She eventually coaxed him out, and he later brought her flowers to apologize.) One Airbnb host in the Bushwick neighborhood of Brooklyn was not pleased to return to her apartment after a short vacation and find a trash can full of rotting produce.
Guests have their own tales to tell. A recent Airbnb client who rented a room in Manhattan described a host who wanted to watch television late into the night, on a set in the same room as the bed he was supposed to use.
Airbnb and similar sites try to prevent bad behavior by letting people leave ratings and reviews of both hosts and travelers, much like eBay. Users who connect their Facebook accounts to the site can see if they and a potential guest or host have any mutual friends or a shared alma mater. The site lets hosts require a rental deposit to cover damage or other problems.
To use Airbnb, site visitors search for listings in their destination city. Once they have found a place, they can send a message to the host with any questions about the room or its location. They then pay for the stay in full using a credit card or PayPal. Airbnb holds the money until a day after guests check in, ensuring that they are not swindled out of their cash. The site makes money by charging a transaction fee for each reservation.
Much has been made of the Internet’s power to eliminate middlemen, like travel agents or real estate brokers. But in easing transactions, short-term rental sites are useful middlemen in a market that would not otherwise exist on a global scale. Similar sites are popping up to rent other goods; NeighborGoods and SnapGoods list things like ski equipment and power tools, and Getaround, a start-up in the Bay Area, connects car owners with people who want to rent cars.
Fans of Airbnb and its competitors say the drawbacks of staying in a stranger’s home, or letting one into yours, are offset by the advantages. Hosts can make money to help with or even cover the cost of rent or mortgage payments. And travelers who elect to stay in a home instead of a hotel can save a few dollars and gain something even more valuable: a resident’s-eye view of the places they visit.
Zoelee Worsley, 34, who lives in London and does online marketing for nightclubs, said that on a recent trip to Los Angeles she and her husband could not find a hotel close enough to the sights they wanted to see. “You can be a little more precise about your location,” she said. “And we hired a car and didn’t have to worry about paying extra when we parked.” While they were in Los Angeles, they rented their apartment in London to help cover the cost of their trip. Worsley said they were considering moving into a roomier two-bedroom apartment and using Airbnb to subsidize the rent. “I don’t think I’d ever stay in a hotel again,” she said.
Airbnb’s founders say they are actually complementing hotels and infusing the lower-trafficked areas of popular destinations like New York with business they would not have otherwise. “We’re bringing local tourism beyond the big districts of a city,” Chesky said.
Of course, hotel owners might not be too happy to face competition from start-ups like Airbnb, whose hosts are not required to charge lodging taxes or meet safety requirements. The laws around these kinds of rentals are complicated and murky, housing officials and specialists in real estate law say. Leases vary from place to place. In New York, opportunistic brokers have been seeding Airbnb with multiple properties that they own or lease, and filling them with a revolving door of travelers. The city passed a law in May meant to curb such behavior. “What the city is attempting to discourage is someone buying or leasing residential rooms and turning them into a hotel room,” said Kathleen McGee, who works with special enforcement in the mayor’s office. Airbnb says people who use the service are responsible for making sure they are not violating local laws. “We’re not classified as the brokers, we’re just the service,” Chesky said.
Airbnb started in a living room in San Francisco when its founders decided to rent a couple of air mattresses in their shared apartment during a design conference. Since then it has grown into a global marketplace with a hundred thousand listings, including high-end exotica like seaside villas in Greece and entire islands in Fiji.
The company recently moved into an expansive, echoing office in the Potrero Hill neighborhood of San Francisco. Several of its meeting rooms are decorated to look like some of Airbnb’s most popular listings, including a minimalist loft in Tokyo and a rustic treehouse in California.
Airbnb’s new $112 million investment round, led by Andreessen Horowitz, Digital Sky Technologies, and General Catalyst, gives the company a hefty valuation of one billion dollars, according to a person briefed on the deal who was not authorized to speak publicly. It plans to use the money to expand overseas.
Greg McAdoo, a venture capitalist at Sequoia Capital, which has backed Airbnb, said it did so because the service has room to grow as its users mature. “We looked past the airbeds and air mattresses because we realized the same people that might rent an air mattress today may someday be married with a family and looking for a similar transaction with a different kind of property,” McAdoo said.