Airbnb may soon be worth more than all but three of America's largest hotel chains.
The website that lets you rent people's homes and apartments is reportedly finalizing a deal to raise about $500 million more from private equity firm TPG Capital and other investors, bringing the company's valuation to $10 billion.
All this from a site that's only been around since 2008.
Staying in a stranger's place is not only acceptable now, but for an increasing number of people, it's the preferred way to book a vacation rental. It helps tourists feel more like locals.
The trend has been dubbed the "sharing economy." And as that name suggests, investors and corporate executives aren't the only ones sharing the wealth. Airbnb is also making "hosts" -- people who list their properties up for rent on the site -- a lot of money.
We asked three of Airbnb's top hosts about their experiences and whether they think Airbnb lives up to its reputation – and valuation – especially in light of recent news about tax issues and questionable activities taking place in rentals, including an X-rated "freak fest."
Each of these hosts rents his or her place more than 100 days a year and makes over $15,000, enough to pay most, if not all, of their rent or mortgage.
Perry Hoffman, a host in California, has even had his home featured on Airbnb's Top 40 "wish list" of neatest places to stay in the world.
Perry Hoffman (Mojave Desert, California)
What are the benefits to being an Airbnb host? I got married and I moved. I had this house in this beautiful place. It made sense to rent it out. For one, I would like to share it with people because everyone who has ever stayed there comes away with such a great experience. It's so different in the desert. The house is in the middle of nowhere. It's a beautiful setting. Part of this is just wanting to share that experience with people. And it's a good source of income.
How did you get started? About a year ago, I was on another site, but I kept hearing people talk about Airbnb. Every time I turned around, someone was talking about it. Plus, it's nice because they don't ask for a yearly fee. So it's very attractive for hosts.
Any bad experiences? I don't care as long as they don't hurt anything. Really, I think there was only one [bad] time, and this was absolutely before Airbnb a couple of years ago. There were six people. Now I don't do that anymore. Four is the max because I feel like once you get to six, you're possibly asking for trouble. Then it's a party. I had to clean up so many cigarette butts. They didn't steal anything, but man they made a mess.
How do you screen people? The people that write me become like my friends. They tell me their life story. They really want to communicate who they are to me. That's mostly a positive thing. When they walk into the house, they immediately communicate with me. They say, 'Wow, we're so happy to be here. We love your home.' And if there's anything they can't figure out, it's easy to communicate back with me.
What's your biggest issue with Airbnb? Not allowing us to communicate until you reserve. I find that a bit annoying, but I understand where they are coming from because then you could just make arrangements outside and PayPal each other. The taxes have been pretty easy. I contacted the county where my house is and they send me a form every three months, and I pay my percent.
Is Airbnb worth $10 billion? I had never thought about it, but maybe I would buy some stock if I could. They only seem to be going forward. It's just more interesting to stay in someone's unique home than to stay in a hotel. I don't know if things will change the bigger [Airbnb] gets or the more popular they get, but I imagine it will just benefit me to get more people.
Maureen McNally (New York City and Washington DC)
What are the benefits to being an Airbnb host? I made $15,000 last year through Airbnb. I charge about $125 on average. If I go away for a weekend, I rent my apartment.
How did you get started? In 2008, Obama had just been elected and I was living in Washington DC, and I thought I should really take advantage of this moment. I rented out my apartment for more than a month's rent for inauguration weekend. That was the world to me, an entire month's rent.
Any bad experiences? No. When I travel, I bring my laptop and iPod with me. I hide my jewelry. I figure if you're going to walk out of my apartment with my TV or sofa, you're probably paying me more than my sofa or TV is worth.
How do you screen people? To be honest, if someone shoots me an email, I don't just say yes. I have an exchange with them. I ask them questions about what they want to do in my neighborhood. It's part of your responsibility to get someone that you trust. Just because Airbnb verifies [someone's identity] doesn't meant anything. That's why I have a conversation with everyone and poke around. I've probably had 2 or 3 different people where the conversation was getting weird and so I didn't let them stay.
What's your biggest issue with Airbnb? I don't think they're clear about taxes and regulations. They host conference calls every now and then and they ask all New Yorkers to call in. I have emailed back multiple times saying giving me 24 hours'[ notice isn't possible for me to be on the call. They also post blog posts here and there saying everything is OK and 'we're working on it', but this is my apartment and it's part of my livelihood.
Is Airbnb worth $10 billion? I've been doing this for six years now. It has grown in so many ways. I can't explain it. In very beginning when I was talking about doing it, my parents were like, 'you are crazy!' Even my friends had similar thoughts. Now, it's normal amongst people my age [in their 20s] where you go on vacation to no longer stay in a hotel. As more people hear about it and hear different people's stories, everyone is feeling more and more comfortable.
Brett Huneycutt (San Francisco)
What are the benefits to being an Airbnb host? How compelling the economics can be for someone in my position, a young professional who travels a lot. I spent 50% of my time (about 180 nights) last year away from San Francisco, yet I basically was able to pay for my rent by renting my apartment out on Airbnb. That's super compelling economics and can change other economic decisions I make in my life. I'm more willing to travel now because I'll make a few hundred dollars on Airbnb and that will pay for my flight or hotel.
How did you get started? I've been a host and a guest on Airbnb for the last 18 months. I originally decided to list my place because I was interested in learning more about the company and participating in the "sharing economy" first-hand. The same part of me wants to practice being an Uber driver was the same part of me driving me to join Airbnb. (Note: I haven't been Uber driver yet because I don't have a car and they don't work with scooters yet.)
Any bad experiences? No. I've had 30 to 40 guests. The worst thing that happened was that someone smoked in my apartment. It was annoying, but it worked out.
How do you screen potential guests? I typically trust Airbnb to do the screening. I have enabled this feature called Instant Book, so anyone with positive reviews can book my apartment. I know something could happen. I guess I don't really have possessions that are super-duper important to me. And Airbnb has stepped up and done the right thing when really bad things have happened.
What's your biggest issue with Airbnb? Airbnb has a couple of things to do to improve the host experience. The biggest thing is continuing to convince people that it's a safe and normal thing to do. When I tell people I rent my apartment out on Airbnb, they sort of wonder 'Wow…why? What do you do with your stuff?' There's more user education that Airbnb has to do. There's also some stuff they have to do to make it easier to manage [your property]. I wrote a recent blog post on this, especially pricing issues.
Airbnb also has a lot to improve on the guest experience. It's still a little bit too hard to book. I find that often when I'm traveling, I'll still book a hotel because you know exactly what you're going to get.
Is Airbnb worth $10 billion? I think the economics for Airbnb's business is very attractive because they don't have any of the major capital costs that a normal hotel chain has and they can grow to the extent that people want to become hosts and stay at Airbnb. So Airbnb just has to focus on making it a really awesome experience for their customers.
We're shifting from an ownership society to a sharing economy. I think the idea is that you know, historically, people buy houses and they buy cars and they buy power tools and they buy golf clubs they use three times of year. And it's actually a pretty inefficient way of using those goods.
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