Airbnb is fighting a critical war in its own back yard this week
Biz Carson
Nathan Blecharczyk, Brian Chesky, Joe Gebbia, airbnb, sv100 2015
(Airbnb) Airbnb founders Joe Gebbia, Nathan Blecharczyk, and Brian Chesky.
Airbnb is on an "inexorable march towards history," says its head of global policy, Chris Lehane.
It's an understated title for a man nicknamed the "Master of Disaster" who's the general of Airbnb's relentless march into every city on the globe.
The home-sharing site is in all but three countries: Syria, Iran, and North Korea. But Airbnb didn't need to hire a political heavyweight like Lehane if it was being celebrated for rolling into each city.
For the most part, Airbnb has grappled with the city regulation while fighting a side war with the hotel industry.
Some cities, like Paris and Amsterdam, have welcomed Airbnb with open arms. Paris, its largest market, will be home to its Airbnb Open conference in two weeks.
Contrast that to San Francisco, the company's home town.
Ballot initiative could cost Airbnb about $6 million a year
Airbnb is on trial in San Francisco, and the decision from the jury of voters will come on election day, Tuesday November 3.
The ballot initiative, Prop F, threatens to curb the number of days a host can rent on the platform to a total of 75. It's a legislative cap on Airbnb's growth, and it's a dangerous piece of legislation unlike any other the company has faced because it can only be reversed by another public vote.
It's a solution, its proponents argue, to the city's failed attempts at regulation thus far. San Francisco's government created a law in 2014 to regulate short term rentals. Under its current terms, hosts are capped at 90 days for un-hosted rentals, but can host an unlimited amount if they're present during the stay. This spring, the law underwent several revisions after it was deemed unenforceable while the board of supervisors also considered entirely new frameworks.
(Craig Barritt/Getty Images) Chris Lehane, Airbnb's head of global public policy, was former spokesperson for Al Gore and a lawyer at the White House during the Clinton/Monica Lewinsky scandal.
Meanwhile, the Prop F measure ended up on the the ballot in the November election.
"There’s an existing law in the city that I think would reflect a commonsense approach. I think Prop F is really an end-run that is, at the end of the day, a twin-headed attack leaded by NIMBYs and the hotel industry, that is actually directly focused on taking away that lifeline for the middle class and make it harder to stay in the city," Lehane said.
Lehane characterizes the Prop F debate as an attack on the middle class, the same rhetoric its opponents use to describe Airbnb's intrusion into homes and neighborhoods.
But for Airbnb, it's also a fight for the business and its perception.
An Airbnb tax memo shows the city would lose $58 million in taxes from the company in the next 10 years. The same calculation can be reverse-engineered to figure what Airbnb approximately stands to lose.
Airbnb currently pays $12 million a year in taxes, so the city losing $5.8 million of it would means the ballot measure cuts out 48% of Airbnb's gross listing value. Taking into account what it collects from hosts and guests, Prop F would cost Airbnb about $6 million in revenue a year, Business Insider calculated.
San Francisco is not its largest market or close to it. Airbnb derives 50 percent of its revenue from Europe now — just thank those favorable Parisian laws.
But the company has spent more than $8 million in campaign donations alone to fight the ballot initiative. As of October 30, Airbnb's campaign has outspent the opposition 8.5 to 1.
"When you look at a case like this and realize this a potentially business changing experience if this passes, and who knows how many other cities would follow in its wake, you’re going to put everything you’ve got into it," said Edward Walker, a professor specializing in grassroots campaigning at UCLA.
"Given the amount of money that’s on the line, I wouldn’t be surprised if it’s much higher. I think $8 million is a surprisingly low number in some respects."
No stranger to the fight
This is certainly not Airbnb's first dance or a shock to its system.
"I think these companies realize that their very existence is not just a market battle but a political battle. The way that our regulatory systems are set up they’re just not designed to handle them well," Walker said.
To Walker, Airbnb's political maneuvering is very well choreographed. In one ad campaign for Airbnb, the TV spots rotated through charming stories. Older San Francisco residents and small businesses talked about how they rely on Airbnb income to stay in the city, which has the highest rent in the nation.
Bar owners in the Mission neighborhood, which is ground zero for a lot of San Francisco's housing trouble, praised Airbnb for giving tourists a place to stay since the area doesn't have any hotels.
"They have a really well-oiled machine of grassroots campaigning. They know how to get the people out there speaking for them that have sympathetic stories. They know to play up that a certain part of their home-share base is people who are living on that income, and they know how to highlight that issue of disadvantage," Walker said.
In comparison to Uber, whose entry into markets has sparked protests in streets around the globe, Airbnb has kept a lower profile.
For one, it's harder for cities to tell what rules they're breaking or if new ones just need to be created.
"I think that Uber is easier to define through the traditional regulatory lens for the regulator. Uber is like taxi. There’s an immediate connection," said Arun Sundararajan, an NYU professor and expert in the sharing economy. "With Airbnb, it’s different. It’s sort of serving the needs that these hotels serve, but no one thinks of this room in their apartment being equivalent to a 100-room hotel."
The struggle to "belong" in San Francisco
No matter how many ways you ask Lehane (I tried at least five) he will answer the "What happens if Prop F passes?" question the same: "There will be more people home-sharing tomorrow than there are today."
Airbnb ad
(Airbnb)
He's right, but it doesn't stop the feeling of hostility outside its headquarters.
An Airbnb ad campaign launched two weeks before the election was taken down 24 hours after being posted. The ads, which were in theory supposed to remind San Franciscans that the company also pays taxes, struck a nerve.
San Francisco residents turned to Twitter and Facebook with their outrage against the startup that prides itself in "belonging."
It was a troubling moment for employees too.
At a dinner with members of Airbnb's product team and journalists, head of product Joe "Joebot" Zadeh described how CEO Brian Chesky called an all-hands and brought in some local hosts to headquarters to apologize. The ads didn't mesh with the positive, friendly, sharing image that the startup has made its mission.
San Francisco's tech companies are creating jobs at a pace that the housing supply can't keep up with. It boasts the highest rents in the nation. For a startup that uses those precious extra rooms for tourists, it's inspired a backlash.
On a headquarters for the "No on Prop F" campaign, someone graffitied "F*** Airbnb."
The company hasn't gone out of its way to help San Francisco with its problem of registering units. As of October 26,728 registrations had been approved while 19 units had been issued violations. Those penalties add up to approximately $163,000 in fines, according to a city spokeswoman.
During the dinner, Zadeh said repeatedly that it would be too hard to add regulation into the product because each city's rules are so different and constantly changing. When I asked him why Airbnb couldn't restrict sign-ups to San Francisco residents who have a short term registration number — after all, Barcelona's mayor is asking for the same thing—the answer was the same: each city is different.
(Then its public relations team put an end to that line of questioning.)
"San Francisco is a complicated city. Part of this has to do with the fact that this is home to Airbnb," Sundararajan said.
Rather than blame Airbnb for a housing shortage, Sundararajan thinks the market should work itself out before we blame a company for listing a fraction of the city's housing on a website.
"It’s easy to point your finger at Airbnb as the source of this shortage. I’m not saying that there aren’t some sort of genuine issues that some buildings face with Airbnb. People might not like strangers walking through their buildings, but these are things I think buildings can deal with on building-to-building basis."
The Prop F vote is threat to its overall growth, but not its survival. In a fight of neighbors voting against neighbors, Airbnb and its employees are caught in a terrible tension in their own back yard.
"Regulations will shape what it becomes, but at this point, I find it very very unlikely it faces any threat to its actual survival. Three years ago maybe, but not now," Sundararajan said.
