SUNDAY TIMES - Airbnb sets sights on long-term rental market
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Sunday Times Business By Bloomberg, 2017-03-12 00:00:00.0

Airbnb sets sights on long-term rental market

Brian Chesky, Chief Executive Officer of Airbnb smiles during a session at the annual meeting of the World Economic Forum (WEF) in Davos January 23, 2014.
Image: DENIS BALIBOUSE REUTERS

Airbnb has quickly become a favourite destination for travellers looking for somewhere to stay on vacation. Now the home-sharing start-up is interested in doing the same for people who want to find a place to live.

Airbnb is considering expansion in the long-term rental business and has asked McKinsey to research the market, said two people familiar with the matter. The consulting firm's work involves conducting competitive analysis of Craigslist, said the sources, who asked not to be identified because the deliberations are private.

Although Craigslist dominates rental markets in many cities with its "sublets/temporary" section, Airbnb believes there may be an opportunity to offer a safer, identity-verified alternative, the sources said. McKinsey is expected to present its findings to senior management at the San Francisco company next month.

Nick Papas, a spokesman for Airbnb, declined to comment on the project. He said that at any given time, Airbnb was considering dozens of initiatives and new product categories, many of which never saw the light of day.

"Examining different parts of the market is standard operating procedure, and we don't have any announcements to make," he said.

Craigslist's giant user base is an attractive target for Airbnb, which is on a mission to add new revenue streams and justify a private market valuation of $31-billion (about R410-billion). Craigslist attracts about 60million US visitors a month, according to internet research firm ComScore.

But despite being one of most trafficked online destinations in the US, the classifieds website looks and behaves much like it did when it made its debut more than two decades ago.

In most places, users can post for free and anonymously. Craigslist doesn't police listings, which has made the site a haven for hustlers and scammers.

A March 2016 study by a team from New York University found that Craigslist fails to identify and remove more than half of scam rental listings. Early on, Airbnb used Craigslist's leniency towards spam to its advantage.

In 2009, an Airbnb founder devised a system to e-mail thousands of Craigslist users encouraging them to migrate their home and apartment listings to Airbnb, according to TheUpstarts, a book by Bloomberg's Brad Stone.

Airbnb has offered a sublet section on its site since 2011, listing houses and apartments to rent by the month. Some cities, including New York, only allow Airbnb to offer long-term rentals.

The company collects a 9%-12% fee from each booking. According to the Airbnb Sublets page, monthly rentals are available in more than 5000 cities.

However, the feature isn't advertised on the home page and lacks basic functions.

For example, it requires bookers to input an end date for their stays, something a person living month-to-month may not know. In addition to addressing that issue, the company would probably build in options for long-term renters to pay utilities and other recurring service fees, such as electricity, water and the internet, said a person familiar with the matter.

A push deeper into local subletting is in contrast to Airbnb's recently articulated strategy to become a full-service travel company.

Brian Chesky, Airbnb's CEO, said the company was building on the trip itinerary options, tours and other travel experiences it introduced in November.

The company was also developing a flight-booking tool.

Last month, Airbnb made its biggest acquisition, spending about $300-million on Luxury Retreats, a platform for high-end travel rentals and tourism services. And it's been looking at acquiring other travel-related start-ups.