Airbnb’s CEO Believed the Company Was ‘Broken’ and Wanted to Lower Prices: The Business Is Too Big for That

When Airbnb was launched 16 years ago, its founders never imagined they would disrupt half the world’s real estate market. Initially, Airbnb allowed hosts to offer affordable accommodation in their own homes, often in the form of an inflatable mattress or sofa bed, and to share breakfast with guests.

In this way, the platform enabled travelers to visit other cities at a more affordable price. However, the current iteration of Airbnb has evolved into something very different, and even its founders are unhappy with its direction.

A headache for cities. Airbnb has sparked issues with tourist apartments that are causing problems for local governments, contributing to the lack of housing supply and driving up rental prices.

In a 2022 interview with Bloomberg, Airbnb’s CEO and co-founder, Brian Chesky, acknowledged that the company had strayed from its original purpose, saying it “was designed for a much smaller company which grew like crazy.” Though Chesky has encouraged hosts to lower their rates, solving this problem will take time.

Airbnb’s economic and social impact. One of the major issues of Airbnb’s approach is the lack of clear regulations to manage the impact of this new form of accommodation, which has strong ties to both the tourism and real estate industries. This has been particularly felt in the U.S. in places like New York City and New Orleans, which banned short-term rentals and tried to organize a lottery for licenses, respectively. European countries like Spain, Italy, and Portugal have also felt the impact of Airbnb.

What initially began as a way to share living spaces has transformed into a highly profitable business for many property owners, exacerbating housing shortages.

The origin of the increase in housing prices. While Airbnb isn’t the only player in the short-term rental market, many often consider it the catalyst for rising housing prices due to the attractive returns it offers property owners.

A study conducted by researchers at Spain’s University of Barcelona examined the effects of Airbnb in the Spanish city, known for its issues with massive tourism. The study’s findings revealed that Airbnb activity led to a 1.9% increase in rents, a 4.6% rise in property transaction prices, and a 3.7% hike in advertised rates. This had a significant impact on the local housing market, resulting in a 7% average increase in rental apartment availability.

An (unsuccessful) change of direction. In 2023, an Airbnb executive tried to redirect the platform back to its original collaborative roots. The goal was to make it less appealing for commercial purposes and to recapture the original spirit of home-sharing that the platform had at launch.

This initiative led to a movement called “Airbnbust” among social media users. Homeowners used X and other platforms to express their discontent over the decrease in their rental margins and fear of a possible short-term rental bubble.

Open warfare against vacation rentals. In 2024, Airbnb is facing further challenges as more cities impose restrictions on tourist accommodations in an effort to control housing prices and make them affordable for local residents. Other cities have revoked thousands of licenses for tourist housing, reflecting widespread concern about the impact of platforms like Airbnb on the availability of long-term rentals.

Competing with hotels, not rental prices. Chesky has emphasized the importance of making Airbnb accommodation prices competitive with hotels. In this respect, he proposed offering hosts tools to adjust their prices based on local hotel data, stating, “The more affordable Airbnbs are, the more bookings we get.”

Too lucrative to let the opportunity pass. Airbnb remains an attractive option due to its competitive prices, but persuading hosts to lower their rates is difficult. Many property owners find Airbnb to be a highly profitable source of income, leading to a shortage of long-term rentals.

Following the example of the city of Barcelona, a study by the country’s Complutense University of Madrid found that tourist accommodations concentrated in Barcelona’s city center give Airbnb a strategic advantage over hotels. This makes it more likely for tourists to choose an Airbnb over a hotel located further away. As a result, the desire of the platform’s founders to adjust prices seems disconnected from the reality of apartment owners.

Image | Angelica Jose (via Flickr)

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