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The Airbnb effect: Fueling start-up ecosystems around the world

  • Airbnb is the No. 3 company on the 2018 CNBC Disruptor 50 List, announced Tuesday.
  • The home-sharing site, with a valuation of $31 billion, now has 5 million listings in 191 countries.
  • The company is upending the hospitality and travel industries while fueling the creation of start-up ecosystems around the world.
The Airbnb app on display in Paris, France.
Chesnot | Getty Images
The Airbnb app on display in Paris, France.

Airbnb is one of a handful of companies that has made CNBC's Disruptor 50 List every year since the ranking began in 2013. This is due to the home-sharing giant's revolutionary business model that has upended the hospitality industry.

In just 10 years Airbnb has become a dominant player, with 5 million listings in 191 countries, more than 300 million customer bookings and a valuation of $31 billion. It's no wonder, then, that the No. 2 most valuable private company in the United States, behind Uber, ranks third on the 2018 Disruptor 50 list, announced Tuesday.

Airbnb, which matches travelers with people who want to rent their homes on a short-term basis, has a huge war chest of private funding, and it is expanding by buying and investing in new business lines, such as payments, property management and restaurant reservations. Last year it made key acquisitions: Tilt, a payments start-up that allows people to more easily split bills; and Luxury Retreats, a company that manages vacation homes. It also announced an investment in Resy, a restaurant reservation app.

Airbnb's vast reach has opened opportunities for smaller companies to hitch their wagon to the internet comet, putting the home-sharing site at the center of an ecosystem of supporting companies around the world. These dozens of start-ups act as intermediaries between hosts and guests of Airbnb, or provide services that Airbnb doesn't. They include cleaning services, property management, customer checking and even pricing advice.

"Start-ups take advantage of the scale, durability and efficiency in the Airbnb marketplace, which helps these start-ups find guests and grow quickly," said Reid Hoffman, LinkedIn co-founder and partner at Greylock Partners, a venture firm that has invested in Airbnb. "All start-ups start with zero users; they need to get in front of users to grow. Big platforms like Airbnb have lots of users."

Going global but staying local 

The fact that Airbnb is a platform designed for localization with tools for language translation has helped spawn local start-ups globally. Today Airbnb is available in 26 languages. The company also has a far-flung network that contracts with thousands of local photographers and videographers to provide the core content so each neighborhood page has an authentic local feel.

Airbnb didn't start out anticipating the emergence of these companies, but over time it has become receptive to them. In 2015 the company created a "Host Assist" section on its web, listing offshoot companies that provide services to hosts. "As a company founded by hosts and led by hosts, we wanted to ensure that our host community played a key role in developing the right tools to make them successful," Joe Zadeh, then Airbnb's vice president of product, said in a news release.

Start-ups that have benefited from the Airbnb ecosystem include Pillow, which helps manage rentals in multifamily buildings; Dharma Home Suites, which bills itself as "boutique corporate housing"; and Niido, which has received a $200 million investment from real estate giant Brookfield to build Airbnb-branded apartments designed for short-term rentals.

One service provider to Airbnb hosts is GuestReady, a Swiss-based start-up with offices in Kuala Lumpur, London, Paris, Singapore and Hong Kong. Co-founder and CEO Alexander Limpert thought there was an opportunity to provide cleaning and laundry services to Airbnb hosts, but he soon saw the demand was broader. "Hosts wanted an end-to-end solution," said Limpert, whose company will do everything from taking pictures of properties to writing the listing to checking guests in and out.

GuestReady obtained an initial $750,000 seed round in 2016 and a $3 million round last fall that included investments by Impulse VC, a fund backed by Chelsea soccer team owner Roman Abramovich and Swiss realty firm Senn and Partners.

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When he was working for the Intercontinental Hotels Group, Nakul Sharma wrote a strategy paper analyzing the impact of home-sharing services like Airbnb. He concluded the start-ups weren't a threat. "I thought Airbnb did a fantastic job of opening up the home category," said Sharma. But he also saw a business opportunity. "Just like you have brands like Marriott and Hilton that manage hotels, perhaps in the future you would have brands that manage homes."

"Start-ups take advantage of the scale, durability and efficiency in Airbnb marketplace." -Reid Hoffman, Co-founder of LinkedIn and partner at Greylock Partners

Sharma quit his job to launch Hostmaker in 2012 to provide the kinds of hospitality services that hotel chains deliver. Sharma, the founder and CEO, cites the ability of hotel chains to distribute listings across platforms, to manage properties and to manage the guests as well. "All the things hotels were good at, I thought could be adapted for home stays." Many of his customers are managers of multiple properties listed on Airbnb. London-based Hostmaker has raised $24 million from VC firms, including Ventech and DN Capital, operates in eight cities and has grown to 200 employees.

Nakul Sharma, CEO of Hostmaker.
Photo: Emily Sandy Photography | Hostmaker
Nakul Sharma, CEO of Hostmaker.

Riding the coattails of Airbnb made sense to Guy Ward Thomas, an investment manager for DN Capital. His firm wanted in on the fast-growing, short-term rental market. "The question was how do we get a piece of this market and get access to growth in this sector without taking on Airbnb?" he said. They decided on Hostmaker because of the team's previous experience in the hotel business.

Ian McHenry also approached the Airbnb ecosystem with property management in mind, but he quickly concluded it was a crowded field. He pivoted when he realized that property owners needed help setting prices for their rentals. Drawing from McHenry's experience in dynamic pricing and revenue management, Beyond Pricing develops software that helps hosts with multiple properties set prices, drawing on such factors as fluctuating demand, days of the week and important nearby events. He says the right pricing can increase revenues as much as 40 percent.

In 2017, said McHenry, Beyond Pricing helped set prices for $1 billion of bookings across 150,000 listings. The company, based in San Francisco, has raised $3.5 million from venture capital funds including Phoenix-based Social Leverage and Bullpen Capital of San Francisco.

The Airbnb market play

Tucking your company into an ecosystem may seem like a safer play than going alone, but it can also create a dependency. All the CEOs interviewed said they benefited from the Airbnb ecosystem, but they broadened their revenue stream by working with other home-rental platforms. GuestReady's customers include booking.com, Expedia and Home Away. It is also working with long-term rental sites such as Spot A Home. Beyond Pricing's customers include luxury rental sites onefinestay.com and Oasis Collection.

But the ecosystem is growing more complicated because the players are blurring the lines. Airbnb has indicated it will work not just with homeowners but with bed-and-breakfast operators and boutique hotels. On the other side of the lodging market, Marriott has tested home-sharing and announced plans to expand its involvement in this area.

One company working on a pilot program with Marriott is Hostmaker. "Running a business is about managing risk," said Sharma, "so we manage homes across many different channels."

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