6 ms·

http://www.paulgraham.com/airbnb.html http://www.paulgraham.com/airbnb.html

by epa 6y ago

vecter 6y ago
pg is surprisingly prescient in his predictions about the potential size of the opportunity. This might just be survivorship bias though, but still, one takeaway I got from the email exchanges is that pg really evaluated founders on both the idea/market opportunity and the qualities of the founders themselves: I'd recommend having the debate after meeting them instead of before. We had big doubts about this idea, but they vanished on meeting the guys. To be fair, pg probably has more signal on the founders as individuals and VCs may not get as much signal based on a pitch meeting, but you could also argue that one of YC's edge was their focus on identifying stronger founders moreso than great ideas, whereas VCs, given their general strategy of investing more in large priced post-seed rounds care more about traction and market opportunity and less on the "intangible" traits of the founders. It's interesting that pg also believed in the eventuality of AirBnB competing with and taking a lot of market share away from hotels. Fred and the "older" guys at their firm didn't believe this.
- treis 6y ago
  It's interesting that they both missed the real killer edge here. Fred said it was Etsy, Paul said it would move up into hotels. Neither are really what happened. Turns out in most places it's profitable to arbitrage long term property cost and AirBnB income. So you have a bunch of small time operators buying or leasing property and putting them on AirBnB. AFAICT that seems to be the bulk of AirBnB business. Not Etsy (person to person) nor Hotels. But a new kind of "hotel" that consists of one person running a handful to a couple dozen apartments.
  - agustif 6y ago
    Reality and organic matters are much more messy than predictive simple abstract models.
  - deleted 6y ago
    [deleted]
  - lotsofpulp 6y ago
    >But a new kind of "hotel" that consists of one person running a handful to a couple dozen apartments. The most important part of Airbnb is creating a hotel "chain" or "brand" without having to deal with things like zoning or licensing or insurance for hotels. While Hilton/Marriott/IHG/Hyatt/Accor/Choice/Wyndham/etc collect 10% to 20% in exchange for putting their brand on the line, Airbnb also was able to create a business where they can take 18% without putting their brand on the line, and keeping the ability to dump all the liability on the hosts. However, I think this is a weakness for Airbnb long term, but they may be able to take advantage in the short term. Quality control for real world products, especially volatile ones such as abodes rented night after night, are costly and I'm willing to pay a premium to make sure there are some double or triple checks going on.
    - JohnJamesRambo 6y ago
      I kind of despise Airbnbs for this reason. It's usually some clean on the surface mess that was mostly cleaned up by the previous guests. I got sick of having to wash all the dishes, take off sheets, etc when I check out (usually having to check out at 11 am or earlier, so it can be as easy as possible on the host to rent it out again!). When I vacation I want a hotel room that someone else professionally cleaned, not more chores and what feels like staying in someone's dirty house. And we stay in some of the nicest Airbnbs, my brother is a doctor.
    - treis 6y ago
      Those chains don't really deal with zoning or licenses. The actual hotels are almost all franchises. The real difference, as you allude to, is centralized reputation. If you stay at a crappy Marriott you blame Marriott. If you stay at a crappy Airbnb you blame the host. It will be interesting what happens in the long run. There's now a proven market for apartment style hotel options. I could see a reputable brand move into the space.
      - lotsofpulp 6y ago
        My point was that the above mentioned brands only offer their product in a properly licensed and insured hotel. They couldn't have came onto the scene and enabled small time owners to flaunt local laws like Airbnb did without great reputational risk.
  - agentdrtran 6y ago
    Who knew it's cheap to create hotels when you don't have to pay any of the fees/taxes hotels do?
    - pochamago 6y ago
      I feel like what a lot of the gig economy experiment has shown is that we have created too high of a entrance floor for new businesses. A lot of the taxes and expensive regulations are certainly well intentioned, but making them mandatory prevents a lot of people with entrepreneurial drive but low resources from getting into the game. It also creates a higher cost for people who would be glad to get a cheaper option with some risk of discomfort. It's so hard to roll back regulations once they've been put in place, though, that the only way you can create these options is to build entirely new models that skirt the entire structure.
  - tonyhb 6y ago
    Airbnb own and operate HotelTonight, which is a foray into hotels. It can (and I think certainly will) get there. Anecdotally, HotelTonight is my go-to for booking any hotel, any time.
    - lotsofpulp 6y ago
      If it's Hilton/Hyatt/Marriott/IHG/Choice/Wyndham, you can go to the hotel brand's website, you will get the same room for cheaper if you are part of the free hotel rewards program. You're also more valuable to the hotel since you'll be paying netting the hotel more income than someone coming from HotelTonight (since the hotel doesn't have to pay HotelTonight commission), therefore more eligible for perks or upgrades.
      - jashmatthews 6y ago
        Due to rate parity clauses member rates on OTAs like Expedia basically match the franchise reward rates. They’re often the same rate plans in the software hotels use for managing their rates. I checked Hilton SF downtown for next week and it’s $91 on HT and $95 on Hilton Honors rewards pricing.
        lotsofpulp 6y ago
        In my hotel tonight app, I searched Hilton San Francisco for a 1 night stay in Hotel Tonight. It returned Hilton SF Airport Bayfront at $93 for a room with either 1 or 2 beds. In the Hilton app, I get the same hotel for the same night at $87 for a room with 1 king size bed or 2 double size beds. Then I was able to search for Hilton SF downtown in Hotel Tonight and find the Financial District one, which was available for the night of Fri Nov 27 for one night. Hotel Tonight had a price of $152 for the following room: “The hotel will assign room at check in and it will fit 2 adults” The Hilton app showed the financial district hotel available on Tue Nov 24 (which the hotel tonight app showed as not available) for $95, and for Fri nov 27, the Hilton app shows 1 king bed or 2 double size beds at $159. So it looks like you’re right for some nights for some hotels, except they don’t let you confirm a room type on Hotel Tonight. I wonder how this squares with Hilton’s best price guarantee: https://hiltonworldwide3.hilton.com/en/price-match-guarantee/overview.html https://hiltonworldwide3.hilton.com/en/price-match-guarantee... Looks like they’re trying to engage in some price discrimination. I would call the hotel front desk and tell them, I can pay the cheaper hotel tonight price, and you get 85% of that (hotel tonight pays the hotel 85% of the price you pay hotel tonight), or the hotel can sell to you directly for 10% off the hotel tonight price and end up making 5% more and see what they say. It’s also possible the franchisor is violating their franchise agreement by letting hotel tonight sell for cheaper than Hilton’s website, so you might be able to get an even bigger discount by filing a complaint with Hilton.
creddit 6y ago
Wow, PG is pushy in such a way that really shows his dedication to the team. Really interesting to see.
11thEarlOfMar 6y ago
Anyone know who '[link to an airbnb user]' was? I heard the story about a celebrity using AirBnb very early, but can't recall who it was any longer...

http://www.paulgraham.com/airbnb.html http://www.paulgraham.com/airbnb.html

by epa 6y ago

http://www.paulgraham.com/airbnb.html http://www.paulgraham.com/airbnb.html

pg is surprisingly prescient in his predictions about the potential size of the opportunity. This might just be survivorship bias though, but still, one takeaway I got from the email exchanges is that pg really evaluated founders on both the idea/market opportunity and the qualities of the founders themselves: I'd recommend having the debate after meeting them instead of before. We had big doubts about this idea, but they vanished on meeting the guys. To be fair, pg probably has more signal on the founders as individuals and VCs may not get as much signal based on a pitch meeting, but you could also argue that one of YC's edge was their focus on identifying stronger founders moreso than great ideas, whereas VCs, given their general strategy of investing more in large priced post-seed rounds care more about traction and market opportunity and less on the "intangible" traits of the founders. It's interesting that pg also believed in the eventuality of AirBnB competing with and taking a lot of market share away from hotels. Fred and the "older" guys at their firm didn't believe this.

treis 6y ago
It's interesting that they both missed the real killer edge here. Fred said it was Etsy, Paul said it would move up into hotels. Neither are really what happened. Turns out in most places it's profitable to arbitrage long term property cost and AirBnB income. So you have a bunch of small time operators buying or leasing property and putting them on AirBnB. AFAICT that seems to be the bulk of AirBnB business. Not Etsy (person to person) nor Hotels. But a new kind of "hotel" that consists of one person running a handful to a couple dozen apartments.
- agustif 6y ago
  Reality and organic matters are much more messy than predictive simple abstract models.
- deleted 6y ago
  [deleted]
- lotsofpulp 6y ago
  >But a new kind of "hotel" that consists of one person running a handful to a couple dozen apartments. The most important part of Airbnb is creating a hotel "chain" or "brand" without having to deal with things like zoning or licensing or insurance for hotels. While Hilton/Marriott/IHG/Hyatt/Accor/Choice/Wyndham/etc collect 10% to 20% in exchange for putting their brand on the line, Airbnb also was able to create a business where they can take 18% without putting their brand on the line, and keeping the ability to dump all the liability on the hosts. However, I think this is a weakness for Airbnb long term, but they may be able to take advantage in the short term. Quality control for real world products, especially volatile ones such as abodes rented night after night, are costly and I'm willing to pay a premium to make sure there are some double or triple checks going on.
  - JohnJamesRambo 6y ago
    I kind of despise Airbnbs for this reason. It's usually some clean on the surface mess that was mostly cleaned up by the previous guests. I got sick of having to wash all the dishes, take off sheets, etc when I check out (usually having to check out at 11 am or earlier, so it can be as easy as possible on the host to rent it out again!). When I vacation I want a hotel room that someone else professionally cleaned, not more chores and what feels like staying in someone's dirty house. And we stay in some of the nicest Airbnbs, my brother is a doctor.
  - treis 6y ago
    Those chains don't really deal with zoning or licenses. The actual hotels are almost all franchises. The real difference, as you allude to, is centralized reputation. If you stay at a crappy Marriott you blame Marriott. If you stay at a crappy Airbnb you blame the host. It will be interesting what happens in the long run. There's now a proven market for apartment style hotel options. I could see a reputable brand move into the space.
    - lotsofpulp 6y ago
      My point was that the above mentioned brands only offer their product in a properly licensed and insured hotel. They couldn't have came onto the scene and enabled small time owners to flaunt local laws like Airbnb did without great reputational risk.
- agentdrtran 6y ago
  Who knew it's cheap to create hotels when you don't have to pay any of the fees/taxes hotels do?
  - pochamago 6y ago
    I feel like what a lot of the gig economy experiment has shown is that we have created too high of a entrance floor for new businesses. A lot of the taxes and expensive regulations are certainly well intentioned, but making them mandatory prevents a lot of people with entrepreneurial drive but low resources from getting into the game. It also creates a higher cost for people who would be glad to get a cheaper option with some risk of discomfort. It's so hard to roll back regulations once they've been put in place, though, that the only way you can create these options is to build entirely new models that skirt the entire structure.
- tonyhb 6y ago
  Airbnb own and operate HotelTonight, which is a foray into hotels. It can (and I think certainly will) get there. Anecdotally, HotelTonight is my go-to for booking any hotel, any time.
  - lotsofpulp 6y ago
    If it's Hilton/Hyatt/Marriott/IHG/Choice/Wyndham, you can go to the hotel brand's website, you will get the same room for cheaper if you are part of the free hotel rewards program. You're also more valuable to the hotel since you'll be paying netting the hotel more income than someone coming from HotelTonight (since the hotel doesn't have to pay HotelTonight commission), therefore more eligible for perks or upgrades.
    - jashmatthews 6y ago
      Due to rate parity clauses member rates on OTAs like Expedia basically match the franchise reward rates. They’re often the same rate plans in the software hotels use for managing their rates. I checked Hilton SF downtown for next week and it’s $91 on HT and $95 on Hilton Honors rewards pricing.
      - lotsofpulp 6y ago
        In my hotel tonight app, I searched Hilton San Francisco for a 1 night stay in Hotel Tonight. It returned Hilton SF Airport Bayfront at $93 for a room with either 1 or 2 beds. In the Hilton app, I get the same hotel for the same night at $87 for a room with 1 king size bed or 2 double size beds. Then I was able to search for Hilton SF downtown in Hotel Tonight and find the Financial District one, which was available for the night of Fri Nov 27 for one night. Hotel Tonight had a price of $152 for the following room: “The hotel will assign room at check in and it will fit 2 adults” The Hilton app showed the financial district hotel available on Tue Nov 24 (which the hotel tonight app showed as not available) for $95, and for Fri nov 27, the Hilton app shows 1 king bed or 2 double size beds at $159. So it looks like you’re right for some nights for some hotels, except they don’t let you confirm a room type on Hotel Tonight. I wonder how this squares with Hilton’s best price guarantee: https://hiltonworldwide3.hilton.com/en/price-match-guarantee/overview.html https://hiltonworldwide3.hilton.com/en/price-match-guarantee... Looks like they’re trying to engage in some price discrimination. I would call the hotel front desk and tell them, I can pay the cheaper hotel tonight price, and you get 85% of that (hotel tonight pays the hotel 85% of the price you pay hotel tonight), or the hotel can sell to you directly for 10% off the hotel tonight price and end up making 5% more and see what they say. It’s also possible the franchisor is violating their franchise agreement by letting hotel tonight sell for cheaper than Hilton’s website, so you might be able to get an even bigger discount by filing a complaint with Hilton.

creddit 6y ago

Wow, PG is pushy in such a way that really shows his dedication to the team. Really interesting to see.

11thEarlOfMar 6y ago

Anyone know who '[link to an airbnb user]' was? I heard the story about a celebrity using AirBnb very early, but can't recall who it was any longer...