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Chip Conley’s Airbnb experience: 10 key lessons

Editor’s note: Chip Conley’s last day in an operational, day-to-day role at Airbnb is Monday, January 23. He will transition from head of global hospitality and strategy to a strategic advisory role. Still an owner of a dozen hotels, he has written an essay for HOTELS about his 10 biggest lessons learned at Airbnb.

 


How many chances do you get to disrupt an entire industry? I’ve been honored with the opportunity twice. In the mid-­80’s, I started a California boutique hotel company, Joie de Vivre, that created and managed 52 unique properties. After running the business for almost 25 years, I sold it – with my eye on adventures outside of hospitality. I traveled. A lot. I launched a business to share my passion for world festivals. Then, four years ago, the young founders of Airbnb disrupted my plans with an offer I couldn’t refuse. What was supposed to be a part-time consulting gig to help “democratize hospitality” turned into a full-time obsession with much more, and surprising lessons for this “retired” CEO. As I transition to strategic advisor after day­to-day leadership on this innovative rocket ship, here’s some of what I’ve learned:

1. Evaluate capacity over experience. Most of the working world judges us based upon our resume, but smart venture capitalists know that an entrepreneur with a growth mindset, passionate mission, intense focus, and complementary start-up team can move mountains.

Airbnb’s founders were in their mid-20s when they started the company, but already five years into running the business when we met. They had great capacity, a synergistic working relationship, and their home sharing idea was catching on globally (with virtually no marketing budget). It was clear they were tapping into a big idea that had universal potential. 

2. Disruption can be predicted. In the early days, the vast majority of investors thought the Airbnb model was crazy. One hotelier friend joked, “If you build it, they will laugh.” Many of my fellows did laugh at me in 2013. But, as the boutique hotel movement proved, outsiders often create the disruption and there’s a similar lifecycle for those disruptions with staying power: innovations don’t typically arrive without some foreshadowing, they usually address a human need not being met and, over time, the establishment embraces those that represent a long-term trend. The foreshadowing of Airbnb can be traced to: (a) home swapping, which started (at scale) in Europe in 1953; (b) the rise of boutique hotels in the U.S. in the ‘80s, offering a more localized experience but with a high standard deviation for quality and; (c) vacation rental websites started in the mid­90s allowed people to rent second homes nightly or a room down the hall to strangers monthly.

Airbnb’s most powerful innovation was to create a currency around trust with a magical digital experience. And, now, with global hotel chains like Hyatt, Accor, Wyndham and others investing in home sharing companies, we can see that the establishment has jumped on the bandwagon.

3. If offered a seat on a rocket ship, don’t ask what seat – just get on. While it may appear a brilliant move to have jumped on board, at the time, it was disorienting. I’d spent 24 years as CEO of my own brick and mortar business. Now I was supposed to mentor a brilliant guy (Airbnb CEO and Co-founder Brian Chesky) who would also be my boss? At 52 I’d never worked in a tech company and was almost twice the age of the average employee.

To thrive in this start-up habitat, I quickly learned how to be both mentor and intern, developing four rules for what I call the “Modern Elder”: (a) be willing to strategically forget part of your historical work identity… in my case, the organization didn’t need two CEOs; (b) develop a bartering relationship with colleagues, trading life experience and emotional intelligence for fresh eyes and digital intelligence, and always mentor privately but intern publicly; (c) use a beginner’s mind to ask a lot of “why” and “what if” questions to catalyze curiosity in the organization and, occasionally, expose a few blind spots; (d) listen intently with presence to anyone in the organization, tapping into what’s happening throughout the company and taking a chance to mentor beyond your areas of oversight. Boomers and millennials have a lot to offer, and learn from, each other. The older generation feels increasingly less relevant, as the younger generation grows more powerful. Yet, millennials often work without formal modes of support and guidance.

Boomers have had decades to learn about leadership, but millennials have to learn at warp speed in the 21st century. Enter the concept of the “Modern Elder” who serves and learns, is both mentor and intern, and relishes being both student and sage.

4. Create a rallying cry that unites the team. The sharing economy was new to me. I was app-less and had never taken an Uber or stayed in an Airbnb. Part of my role was external statesman to a variety of constituencies we were disrupting: hotels, commercial and business travel, destination marketing organizations, and residential landlords and real estate developers.

Psychologist Elisabeth Kubler­-Ross’ five stages of grief (denial, anger, bargaining, depression and acceptance) resonated given the wide range of emotions I encountered from these constituencies. Early on I quoted Gandhi on the British resistance to India’s independence, “First they ignore you, then they ridicule you, then they fight you, then you win.” This became one of our internal mantras and by my second anniversary aptly described changing conditions wherein the industry started to accept home sharing as more than a passing fad.

5. Investors love a business built on a strong “network effect.” I’d never heard of a “network effect” (when more usage of a product or service by any user increases the product or service’s value for other users). Think Facebook. As a global lodging marketplace, Airbnb had a daunting task, which was to become the market leader in a new lodging category (urban home sharing) in all regions of the world – virtually overnight. (A company like Uber selectively chooses its markets since it has a local network effect; Airbnb’s is global.) This meant a little cognitive dissonance, as we needed to win major markets quickly – as many listings in markets as we could obtain – while I was preaching quality control for our hosts (which could mean reducing the size of our marketplace).

The good news was a strong recognition by the co-founders that, in the long run, an emphasis on quality (through hospitality standards and host education) would lead to more consumer demand, which would lead to more hosts joining our site once we were the established global leader. The value of this company has gone up quite a bit in the past four years.

"Global hotel chains need to spend less attention on standard enforcement at the franchisee level and more on innovation enhancement – incentivize your best franchisees to develop best practices that can be incubated by local hoteliers and then spread throughout your franchise system." -- Chip Conley
“Global hotel chains need to spend less attention on standard enforcement at the franchisee level and more on innovation enhancement – incentivize your best franchisees to develop best practices that can be incubated by local hoteliers and then spread throughout your franchise system.” — Chip Conley

6. An effective feedback loop creates huge service improvement. The hotel industry’s feedback loop is broken. A tiny percentage of guests fill out customer satisfaction surveys, while many more go to TripAdvisor online to express their opinions. Most hotel companies do a performance review on an employee’s annual anniversary, but the average front desk clerk or room attendant typically doesn’t get personal feedback from these surveys. And, given that about half of all hotel employees never make it to their first year anniversary, it’s no wonder the industry service scores (and employee satisfaction) haven’t improved much over the past few decades.

Airbnb’s review system is built on a sense of community amongst its nearly 100 million members. Fully, 70% to 75% of all hosts and guests get a review after a stay. This instant feedback allows hosts to learn and act upon their guests’ feedback and, as micro­entrepreneurs, it’s in their best interests to do so. This is why Airbnb’s Net Promoter Score, which is also the primary measuring tool for global hotel chains, has now grown to 50% higher than the average for the hotel industry (71 for Airbnb versus 48 for hotels).

7. Culture is king, queen, and court jester. Lots of smart business experts have proclaimed, “culture beats strategy” and Peter Thiel, after investing in Airbnb in 2012, famously told Brian Chesky, “Don’t fuck up the culture.”

Before we met, Brian had read my book PEAK: How Great Companies Get Their Mojo from Maslow, which highlights the importance of understanding both the transactional desires at the base of the human hierarchy of needs and the transformational needs of employees and customers at the peak of the pyramid. The leadership team distilled our company purpose and culture down to two powerful words, “Belong Anywhere,” which helped instill a sense of meaning not just for our employees, but also for our hosts and guests.

We make big, fun bets on building our culture and brand whether it’s bringing more than 2,500 employees together regularly – from 22 offices around the globe – for our “One Airbnb” retreats, or the major investment in our “Airbnb Open,” the festival I founded that brought 20,000 hosts and guests from more than 100 countries to Los Angeles last November (Paris and San Francisco the two years prior).

A culture based upon a resonant purpose can withstand just about anything. Our culture, given the business’ controversial disruptive nature, has been quite a test case. I stand by my early declaration to Brian when he asked what audacious goal we should strive for in 10 years. I told him I’d love to see our global host community win the Nobel Peace Prize because our “kitchen table diplomacy” – with more than half of our guests being international travelers – means we can promote peace through travel with open homes and open hearts.

8. A more mobile populace leads to changes in lodging needs. There’s a growing number of mostly millennials choosing to be “digital nomads,” living parts of the year in places like Bali or Baja, and the rest of the year in cities such as Boston or Austin. These folks are less interested in being upwardly mobile and are, instead, outwardly mobile. Equipped with a laptop and a smartphone, a WiFi connection and a co-working space, these freelancers, entrepreneurs and other modern merchants are not typically weighed down by home or car ownership. Whereas my baby boomer generation saw work and leisure as an “either/or” proposition with an occasional sabbatical to moderate workaholism, the global nomad phenomenon is “both/and” – enjoy a great life while doing work on the road. Add in the “bleisure” trend, where business travelers tack on a few extra days of leisure to an interesting destination and you see an upward trajectory in the extended stay lodging market.

Nearly 60% of Airbnb’s New York room night demand is staying a week or longer, and 1 out of 6 room nights in many major metro market sees guests staying a month or longer. Airbnb dominates the one week­to­three month segment globally because most people prefer the comfort of a home for a longer stay over the hotel industry’s extended-stay solution of two bland rooms (rather than one in the typical hotel) in an innocuous corporate campus location far from the soul of the city.

9. Hoteliers can learn something from Airbnb. Wearing the dual hats of a veteran hotelier (who still owns a dozen hotels) and a senior Airbnb executive hasn’t been easy. But it does mean that I understand the mindset and needs of most hoteliers.

Here are my top tips for my colleagues hoping to adapt to the new lodging world that includes home sharing: (a) think beyond your four walls and imagine your hotel is an ambassador to your city or neighborhood so your guests can live “like a local” – you’ll have a built­in advantage to do this if you create a local’s favorite restaurant or bar that your guests can enjoy; (b) optimize all your design for mobile, even though web designers typically want to present to you in a larger laptop format, as most of your customers will view it on a much smaller screen; (c) customize what you offer your guests based on data so that you can become a “lifestyle curator” (a collateral benefit of our new Trips platform that allows guests to choose unique local experiences and helps us determine tastes and preferences) – to do this well, hotel companies will need to hire many more data engineers just like they did a generation ago by hiring a new class of employees called revenue managers when employing the airline industry’s approach to dynamic yield management and; (d) global hotel chains need to spend less attention on standard enforcement at the franchisee level and more on innovation enhancement – incentivize your best franchisees to develop best practices that can be incubated by local hoteliers and then spread throughout your franchise system. We’ve done the same with our global host community.

10. Hotels and Homes are not a zero-sum game. In the early years of Southwest Airlines, CEO Herb Kelleher commented that his biggest competition as a low-price, short-haul carrier might be Greyhound, not the other airlines. Southwest created new “secondary demand” that didn’t exist before. Airbnb could say the same thing, as surveys have consistently shown that more than 30% of Airbnb guests would not have made the trip, stayed for free with family or friends, or taken a much shorter trip if home sharing didn’t exist. The global lodging demand pieture has grown rather than stayed statically sized as home sharing goes mainstream. Smith Travel Research, the hotel industry’s most respected data source, has verified that, to date, Airbnb has had little effect on major U.S. urban market lodging demand. How else can you explain that during a time when Airbnb has doubled in size for multiple years in a row that the U.S. hotel industry has experienced record growth in revenue?

It’s been an exhilarating and humbling journey. As Mark Twain says, “Age is an issue of mind over matter. If you don’t mind, it doesn’t matter.” Sometimes you have to make space in your life to see what emerges. I thought I’d run my company for the rest of my life. But at 50, after surviving two once­in­a-lifetime downturns in a decade, I was burned out. I had no idea what would come after I sold Joie de Vivre. Then, Airbnb’s co­founders came calling. I’ve been very fortunate to be able to bring my experience to their vision and to continue my education as a Modern Elder exploring the wild world of technology and whatever comes next.

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