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You are partially right, but the main value of AirBnB is that opens up a larger supply of rooms. Hotel prices often fluctuate wildly -- a room may cost $59 one

You are partially right, but the main value of AirBnB is that opens up a larger supply of rooms. Hotel prices often fluctuate wildly -- a room may cost $59 one week and then a few weeks later cost $299 because a trade show is in town, etc. Cities like New York have an insufficient supply of hotel rooms to meet demand. There are often no hotel rooms in NYC available for last-minute booking for under $400/night. With AirBnB, even if everyone paid all the taxes, there would still be thousands of extra rooms available in NYC, many of which would be cheaper than $400 per night. Hotels are a nice idea if you need the sheets changed every day, the room cleaned every day, porters to bring up the luggage, a pool, a front-desk to call to ask how late the pool is open, etc. AirBnB also ads value by offering lots of other permutations. I stayed at an AirBnB in DC and was asked to put my own sheets on the bed (there were freshly laundered sheets in the closet). Upon leaving, I was asked to remove the sheets I used and put them in a basket. The 10 minutes it took me to do those things effectively saved me $100 on the stay, and yes I probably avoided $10 in taxes too.

JonFish85 12y ago
"Hotel prices often fluctuate wildly -- a room may cost $59 one week and then a few weeks later cost $299 because a trade show is in town, etc." You don't think this will happen with AirBnb, similar to "surge pricing" with Uber? Continuing with supply & demand, at times of great demand, prices will rise no matter if it's a hotel or AirBnb, even if there is a great deal more supply, there will always be huge bursts of demand (trade shows, what-have-you). AirBnb would seem to flesh out the low-to-mid-range end of the market. If money isn't an object, there are places to stay in NYC (I think--I'm not at that level, myself!). But if you're looking to stay in NYC comfortably for fairly cheap, AirBnb exists with offerings that fit that, albeit they may be illegal (right now). I just question whether that market is "worth" more than the major chains (based on valuations, which I know is a shaky number to use).
- netcan 12y ago
  Regarding low-mid range, This isn't my experience at all. My experience is that for certain types of travel (eg, meeting friends for a weekend in some fun city) and AirBnB apartment is more fun, IE higher quality than any normal hotel option. Obviously if you compare a midrange apartment to a rockstar suite in a 5 star hotel AirBnB doesn't win but for most fair comparison I value the apartment more than the hotel. Which is better is a matter of taste, I suppose. A lot of people love hotels. I don't. But, for the price ranges that cover 80% of rooms in most cities, I think it's hard to claim that AirBnB is only better value at the lower tiers. There are some awesome places at the 'sold my company to google' price ranges.
  - grandalf 12y ago
    Excellent point. I too prefer staying in someone's comfortable home over a hotel room. Other than at very high end hotels, there are frequently little annoyances (air conditioning cranked up, noisy fans, noisy housekeeping in the morning, excessive use of insecticides, low quality mattresses, small or nonexistent refrigerator, no kitchen, etc.) that detract from the experience.
- grandalf 12y ago
  I think you misunderstand the mechanics going on with surge pricing. In SF on new year's eve, getting a yellow cab can take up to an hour (or more). One year it took me nearly two hours to get a cab to go home. There is way more demand than supply so there is a huge queue. With Uber's surge pricing, the price simply goes up to help supply meet demand. You can book an uber at 2x or 5x surge pricing and count on it showing up a few minutes later, and count on getting home at a reasonable time. The best part, however, is that it's in Uber's best interest to have surge pricing happen rarely. Nonetheless, it's a great way to attract new drivers. Want to make $500 on New Year's eve, sign up to be an uber driver and drive from 12:30 to 3am and benefit from surge pricing. This opens up a larger pool of drivers, which in turn increases supply and reduces the price. There are certainly price fluctuations with AirBnB too, however increased supply makes the spike less pronounced.
netcan 12y ago
AirBnB also does something that I'm not sure how to generalize in a term. It allows operating at a different scale. Replacing 5 500 person businesses with 2500 1 person businesses can unlock all sorts of efficiencies (the same is true of the reverse). AirBnB can allow individuals to do the work of providing accommodation part time, after work, as students, working mothers, retired people. We often mention disruptive businesses making new markets displacing non-consumption rather than substituting competition. AirBnB does something similar on the supply side. Also, since AirBnB basically unlocks the productive potential of real estate, there's an interesting financing angle. Individuals have the ability to finance the purchase of a house or apartment with mortgages on pretty good terms. There is no other financing product available to the common man en masse comparable to home mortgages, certainly not business loans. AirBnB can help turn that into a business. Owner-operator setups have all sorts of other little efficiencies over more hierarchical monolithic setups. Hotels have huge overheads. A lot of those are like airline or airport overheads in the sense that they're inherited from a world where hotels were originally designed for the rich (the gentry in the case of hotels) and then redesigned for the "discerning business traveler".
- johnnybazooka 12y ago
  There is a fundamental problem with your argument. The condos and apartments people rent out on Airbnb are built by developers. So as Airbnb becomes more popular, developers will recognize the ability for tenants to profit from renting out units. In response, they will try to capture that profit on the front end by raising the selling point of the unit. Practically, the increases in property value Airbnb generates will ultimately flow back to developers, and make housing less affordable. It's a double whammy for the people that are buying units and not renting them out, because they now have to more for units that don't want to rent out. Edit: Also, the U.S. real estate stock depreciates by 3% annually, so it ultimately will have to be replaced with new units.
  - grandalf 12y ago
    You are correct that AirBnB increases the value (and thus the price) of housing units. However this does not refute his argument. Since AirBnB allows the rental of full units, individual rooms, and even shared rooms, it makes housing more affordable. Now, someone can afford a 2BR and plan on renting out one of the rooms a few nights a month to help afford the rent. If there were massive competition, the price of renting a room on AirBnB for one night would approach 1 30th of the monthly rent price. Right now people typically rent a flat for one year. Why is that? Why not rent an AirBnB for 3 months and then try living in a different neighborhood? All these options are enabled by AirBnB and all of this extracts more value from existing infrastructure.
glenra 12y ago
Airbnb seems like a terrible choice for last-minute booking because it's based on the notion of hosts responding via email in their spare time. When you book a room in a hotel you have reserved a room and don't need to do anything more except show up but when you book a room via airbnd you have merely made an inquiry and won't know whether you've reserved a room until you possibly get an email back after some non-deterministic amount of time. Selection bias says the most responsive hosts will get booked early so the bookings that still show as available at the last minute tend to be less responsive hosts. A room that's still showing up as available at the last minute might be doing so because the host went on a hiking trip and forgot to update the calendar rather than because it's actually available.
- prostoalex 12y ago
  They do have instant booking https://www.airbnb.com/help/article/187 https://www.airbnb.com/help/article/187
  - glenra 12y ago
    Empirically, the rooms that offer last minute instant booking tend to cost about the same as a hotel. Although I didn't realize you could use "has instant booking" as a search parameter - thanks! Now if only I could get hipmunk to honor that restriction too...
prostoalex 12y ago
I noticed lately that mid-range hotels (Hamptons and Holiday Inns) generally turn out to be quite competitive price-wise. Those guys live by dynamic pricing, so a new entrant lowers the prices, but not completely disrupts the industry.

JonFish85 12y ago

"Hotel prices often fluctuate wildly -- a room may cost $59 one week and then a few weeks later cost $299 because a trade show is in town, etc." You don't think this will happen with AirBnb, similar to "surge pricing" with Uber? Continuing with supply & demand, at times of great demand, prices will rise no matter if it's a hotel or AirBnb, even if there is a great deal more supply, there will always be huge bursts of demand (trade shows, what-have-you). AirBnb would seem to flesh out the low-to-mid-range end of the market. If money isn't an object, there are places to stay in NYC (I think--I'm not at that level, myself!). But if you're looking to stay in NYC comfortably for fairly cheap, AirBnb exists with offerings that fit that, albeit they may be illegal (right now). I just question whether that market is "worth" more than the major chains (based on valuations, which I know is a shaky number to use).

netcan 12y ago
Regarding low-mid range, This isn't my experience at all. My experience is that for certain types of travel (eg, meeting friends for a weekend in some fun city) and AirBnB apartment is more fun, IE higher quality than any normal hotel option. Obviously if you compare a midrange apartment to a rockstar suite in a 5 star hotel AirBnB doesn't win but for most fair comparison I value the apartment more than the hotel. Which is better is a matter of taste, I suppose. A lot of people love hotels. I don't. But, for the price ranges that cover 80% of rooms in most cities, I think it's hard to claim that AirBnB is only better value at the lower tiers. There are some awesome places at the 'sold my company to google' price ranges.
- grandalf 12y ago
  Excellent point. I too prefer staying in someone's comfortable home over a hotel room. Other than at very high end hotels, there are frequently little annoyances (air conditioning cranked up, noisy fans, noisy housekeeping in the morning, excessive use of insecticides, low quality mattresses, small or nonexistent refrigerator, no kitchen, etc.) that detract from the experience.
grandalf 12y ago
I think you misunderstand the mechanics going on with surge pricing. In SF on new year's eve, getting a yellow cab can take up to an hour (or more). One year it took me nearly two hours to get a cab to go home. There is way more demand than supply so there is a huge queue. With Uber's surge pricing, the price simply goes up to help supply meet demand. You can book an uber at 2x or 5x surge pricing and count on it showing up a few minutes later, and count on getting home at a reasonable time. The best part, however, is that it's in Uber's best interest to have surge pricing happen rarely. Nonetheless, it's a great way to attract new drivers. Want to make $500 on New Year's eve, sign up to be an uber driver and drive from 12:30 to 3am and benefit from surge pricing. This opens up a larger pool of drivers, which in turn increases supply and reduces the price. There are certainly price fluctuations with AirBnB too, however increased supply makes the spike less pronounced.

netcan 12y ago

AirBnB also does something that I'm not sure how to generalize in a term. It allows operating at a different scale. Replacing 5 500 person businesses with 2500 1 person businesses can unlock all sorts of efficiencies (the same is true of the reverse). AirBnB can allow individuals to do the work of providing accommodation part time, after work, as students, working mothers, retired people. We often mention disruptive businesses making new markets displacing non-consumption rather than substituting competition. AirBnB does something similar on the supply side. Also, since AirBnB basically unlocks the productive potential of real estate, there's an interesting financing angle. Individuals have the ability to finance the purchase of a house or apartment with mortgages on pretty good terms. There is no other financing product available to the common man en masse comparable to home mortgages, certainly not business loans. AirBnB can help turn that into a business. Owner-operator setups have all sorts of other little efficiencies over more hierarchical monolithic setups. Hotels have huge overheads. A lot of those are like airline or airport overheads in the sense that they're inherited from a world where hotels were originally designed for the rich (the gentry in the case of hotels) and then redesigned for the "discerning business traveler".

johnnybazooka 12y ago
There is a fundamental problem with your argument. The condos and apartments people rent out on Airbnb are built by developers. So as Airbnb becomes more popular, developers will recognize the ability for tenants to profit from renting out units. In response, they will try to capture that profit on the front end by raising the selling point of the unit. Practically, the increases in property value Airbnb generates will ultimately flow back to developers, and make housing less affordable. It's a double whammy for the people that are buying units and not renting them out, because they now have to more for units that don't want to rent out. Edit: Also, the U.S. real estate stock depreciates by 3% annually, so it ultimately will have to be replaced with new units.
- grandalf 12y ago
  You are correct that AirBnB increases the value (and thus the price) of housing units. However this does not refute his argument. Since AirBnB allows the rental of full units, individual rooms, and even shared rooms, it makes housing more affordable. Now, someone can afford a 2BR and plan on renting out one of the rooms a few nights a month to help afford the rent. If there were massive competition, the price of renting a room on AirBnB for one night would approach 1 30th of the monthly rent price. Right now people typically rent a flat for one year. Why is that? Why not rent an AirBnB for 3 months and then try living in a different neighborhood? All these options are enabled by AirBnB and all of this extracts more value from existing infrastructure.

glenra 12y ago

Airbnb seems like a terrible choice for last-minute booking because it's based on the notion of hosts responding via email in their spare time. When you book a room in a hotel you have reserved a room and don't need to do anything more except show up but when you book a room via airbnd you have merely made an inquiry and won't know whether you've reserved a room until you possibly get an email back after some non-deterministic amount of time. Selection bias says the most responsive hosts will get booked early so the bookings that still show as available at the last minute tend to be less responsive hosts. A room that's still showing up as available at the last minute might be doing so because the host went on a hiking trip and forgot to update the calendar rather than because it's actually available.

prostoalex 12y ago
They do have instant booking https://www.airbnb.com/help/article/187 https://www.airbnb.com/help/article/187
- glenra 12y ago
  Empirically, the rooms that offer last minute instant booking tend to cost about the same as a hotel. Although I didn't realize you could use "has instant booking" as a search parameter - thanks! Now if only I could get hipmunk to honor that restriction too...

prostoalex 12y ago

I noticed lately that mid-range hotels (Hamptons and Holiday Inns) generally turn out to be quite competitive price-wise. Those guys live by dynamic pricing, so a new entrant lowers the prices, but not completely disrupts the industry.