Airbnb Is Fundamentally Broken?

I read an article this week about Airbnb. My experience with marketplaces makes them an area of interest for me. I enjoy reading how publicly traded marketplace companies navigate the complexities of the business model at massive scale. In the article, Brian Chesky, CEO and cofounder of Airbnb, was very candid about his company. 

Chesky said the company isn’t on a solid foundation. In fact, he claims the company never built a solid foundation. The Airbnb system was intended to serve a much smaller company, but Airbnb ended up growing “like crazy.”

Chesky outlined a few things they need to do to get their house in order. The one that really caught my attention was a focus on reducing prices. Chesky said attractive pricing was what drew people to the service. It sounds like he wants to return the company to being known for affordability.

That makes sense, in a way. Lower price points usually lead to an increase in demand. On the other hand, there could be a limit to how low some hosts can go. Especially when you consider that some of them have leverage (i.e., debt) on their properties.

Those are just two of the many things I thought about after reading this article.

Marketplaces are hard. Keeping the customers (the demand side) and the merchants (the supply side) happy is no easy task. In my experience, when changes are made that materially affect how much revenue the supply side receives, a period of uneasiness and “adjustment” usually occurs.

Airbnb is massive, so I’m curious to see how this all unfolds and what the impact will be on Airbnb’s financials and on the entrepreneurs who make a living as hosts on the platform.