NEW YORK — He appeared against a blue screen. Brian Chesky, the short-term rental wunderkind who founded Airbnb at the age of 27 and now commands a company with a market cap of more than $82 billion.
From air mattresses to riches.
Chesky, remote, was one of the featured speakers at the Skift Global Forum and the irony of him absent on stage was not lost on the audience. In January of 2022, New York City adopted Local Law 18, which, among other things, requires short-term rental hosts to register with the Mayor’s Office of Special Enforcement (OSE) and prohibits platforms, like Airbnb, from processing transactions for unregistered short-term rentals. Enforcement began in September 2023 and only applies to properties rented for less than 30 days. Other parts of the law include that no more than two paying guests can stay in a short-term rental at a time and that hosts be physically present while their properties are being rented.
It was a quasi-death knell for STRs and a boon for hotel owners, if you believe Chesky, when prompted in conversation with Rafat Ali, founder of Skift. “There’s been this giant question: ‘What happens when you ban Airbnb in the city?’” Chesky said. Since Airbnb’s inception, there had been no answer because there was no such ordinance. As Chesky put it, New York City decided to play out the experiment and now, a year in, there is data—a response to the question.
“There’s two results, one expected, one unexpected,” he said. Of the former, Chesky said that because there were no longer Airbnbs on a short-term basis, the only game in town flipped back to hotels, which were able to raise their rates with less lodging supply and competition. Chesky said without citation that hotel prices on a year-over-year basis have gone up 7.4% in the city.
Local Law 18 was ostensibly meant to address the housing crunch, Chesky said, but, according to him, the average rent in New York City is up, unexpectedly, 3.4% (again not citing a source). According to Apartmentlist.com, New York City rental prices are up 2.2% YOY August 2024.
“We want to make sure that when we have regulation with cities, it’s a win-win,” Chesky said. “I don’t think New Yorkers won. I don’t think the city won. I don’t think people visiting New York won. I think the only people that won were hotels.”
In the Hopper
Airbnb’s stock is down 4% year-to-date but it is still pushing forward and innovating with a pipeline of coming attractions. Though Airbnb’s DNA is in short-term stays, Chesky is adamant in building out its longer-term stays, which currently stands at 17% of its business (defined as stays 30 days or longer). “This is going to be a huge opportunity,” he said, framing it this way: “If you wanted to go to Buenos Aires for 45 days, what website do you go to get a rental?” He said that the longer the reservation, the higher the stakes are for what he calls “sight unseen,” where you can’t see it before you book it. “So stays of 30 to 90 days, really monthly to seasonal stays, that’s a huge growth opportunity for Airbnb.”
And then there are the products. In April 2023, Airbnb paused the onboarding of new experiences and removed them from its homepage. The move was made to allow Airbnb to focus on its core business. But they will be making a comeback, according to Chesky.
Airbnb next month will give its winter release that will include a new and novel hosting service, matching people that have homes but don’t have time to host, with people that have time to host but don’t have homes. Next May, Chesky promised numerous offerings, including experiences coming back in a much bigger way. “I anticipate every year we launch two to three things that could eventually generate a billion dollars a year,” he said, revealing to the audience that 40% of Airbnb’s revenue is now free cash flow. “My bread and butter is going to be in innovation.”
AI Ride
No tech CEO gets out of a discussion without being asked about artificial intelligence and its current and future implications. On this, Chesky is quite persuaded. “This is probably going to change the world more than the Industrial Revolution,” he said of AI.
Chesky is a close confidante of OpenAI founder Sam Altman, having helped him navigate some of the several publicized crises he dealt with. “I believe in the importance of AI and I think that we have to get [it] right,” he said. “The question isn’t, ‘Will we get the technology right?’ It’s, ‘How will the technology intersect with society?’” He said he wanted to be helpful and thoughtful about how AI is brought to the masses.
That AI is going to change the world is not a novel idea, but it is worth preparation, because, as Chesky put it, “It’s going to change the world much more than anybody realizes.”
It’s also going to take time, he said, longer than anyone realizes. “This decade, things aren’t going to change as much as people think, and next decade, things are going to change a lot more,” he said.
While Nvidia and its chips and ChatGPT and its model set the groundwork, Chesky said the most important layer is the application layer, but “there really hasn’t been a lot of development or breakthroughs at that layer,” he said. “The holy grail is going to be when we figure out the interface at the application layer that connects to the model.”
The future for Airbnb could involve a lot more than what it is now. Imagine Amazon if it stuck to only selling books or if Apple never released the iPod, Chesky posited. The evolution of Airbnb into something beyond homes isn’t only hypothetical, it’s likely. “If we start with travel, that’s our nearest adjacency,” Chesky said. “That makes the most sense. But if we start with travel, that means everything we sell will be a subset of our core business. And, eventually, we do think there’s a path to be doing more than just travel, but we’re going to start with the way that consumers think about us now, which is travel.”