If you haven’t used Airbnb yet, you probably know someone who has—or at least you will soon, if the San Francisco-based startup and “sharing economy” paragon, which matches up hosts and travelers online, has its way. Now Airbnb is focusing its attention on Asia, where a newly-prosperous middle class is traveling like never before.
Quartz talked with co-founder and chief technology officer Nathan Blecharczyk on the sidelines of the World Economic Forum in the Chinese city of Dalian about how Airbnb plans to create a virtuous cycle of supply and demand in Asia, propelled by socially networked word of mouth and a belief that in China, “foreigners are cool.”
Quartz: How far along is Airbnb in Asia?
Blecharczyk: Relative to Europe and America, our penetration in Asia is relatively young. We have about 50,000 properties in Asia, but that’s not a lot in comparison to about 100,000 in the US and 250,000 in Europe. We’re a marketplace, and you need critical mass of supply and demand to make the thing work.
The thing about Asia is four out of five trips are within the region. And so there’s a lot fewer travelers going between the US and Asia or Europe and Asia. It’s taken a while for awareness to spread for this region. That said, over the last year we’ve basically established a critical mass of properties in the top destinations, and now we’re seeing sustained growth. As a result we’re going to be put added effort into promoting here and specifically going after the Chinese travelers, the younger generation that are doing their own independent research on the Internet.
Seoul, Tokyo, Bali, Singapore, Hong Kong, Taipei—all these cities have really come into their own and will probably be prime destinations for Chinese travelers. The cities in (mainland) China are still quite nascent—we do have 1,000 in Shanghai and 500 in Beijing but there’s just less folks coming into China than there are going out. [There are only about 20 Airbnb properties in Dalian; Blecharczyk stayed in a hotel.]
Q: How are people becoming Airbnb users in Asia—is it a different dynamic than in your other markets?
B: There are early adopters out there that will be the brave ones and try something new. Those people exist anywhere but there are relatively few of them. From there on it’s all word of mouth, and honestly that works in every culture. Even in China or the Asian markets, the power of an endorsement from someone you trust can overcome anything else.
Every country I go to people tell me, “That sounds interesting but it won’t work here in my country.” I hear that in Turkey, I hear it in Spain, I hear that everywhere. But it’s not true.
You do see some patterns. You’ll see that the rate of growth is a little faster in countries that are undergoing financial stress, like southern Europe—Italy, Spain, Portugal, Greece, these places—there’s a little bit of added incentive, right? They kind of need it. Northern Europe, where the economy’s strong, there’s a little more friction. But honestly, we’re talking about the difference between 200% and 300% growth.
Q: So supply is driving demand?
B: Let me give you an example of how it started off in the beginning and still plays out today.
We started by focusing on New York, making sure we had high-quality product in New York—I’m talking just 40 properties, making sure they were professionally photographed, reasonable prices, etc. Before you know it, people from around the world start wanting to stay there. The owners start making money, and they tell their friends. The friends see the quality of the product and they emulate it: good photos, good prices. Now you have more supply, now you can support more demand, and people who were going to New York go to back where they came from—Paris, Berlin, Moscow, wherever—and either they themselves become hosts or they tell their friends who would become hosts.
So the number one source of supply is guests—people who have already traveled becoming hosts. But when you have a positive pressure of people wanting to go to the market, that will also force the market to expand more quickly, because those hosts are having positive experiences, making income. The worst thing that can happen to a host is to sign up and have no one who wants to stay with you. You’re dead in the water. So you see market dynamics playing out.
Q: It sounds like you can track those dynamics pretty closely.
B: We’re sitting on a mountain of data, because no other travel company is so end-to-end: from discovery, to browsing different properties, the actual booking, handling payment and collecting the review afterwards. People have very rich profiles, they’re often Facebook connected, so you have kind of a treasure trove.
You can even see the overlap for any given customer, how many of their Facebook friends are already on Airbnb, and figure out the word of mouth that way. A lot of this stuff is cool but it’s also our secret sauce, it’s how it all works.
Q: What can you do specifically to get critical mass in Asia, especially China?
B: We’re thinking about making a concerted marketing effort in Asia, specifically China, and thinking about what is the messaging that would resonate. There’s a great allure here of having an international friend. Foreigners are cool, folks want to get their picture taken with westerners, and the idea of being able to call people your friends is pretty powerful. I taught English here (in China) several years back and others from their travels have told me the same thing.
Using Airbnb, you can not only go abroad, but you can meet someone who afterwards you can call a friend and stay in contact with, is incredibly appealing. That gets you over all the other hurdles you might face. Historically the way of traveling has been through tour groups … that’s not currently what we’re about. The added benefit is you’re going to meet somebody, get the real authentic experience, and have a friendship that could last a lifetime.
Q: Have you engaged at all with any regulators or government officials about your business here?
B: There haven’t been any interactions in China.