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Posted at 10:08 AM ET, 07/26/2011

Airbnb chooses the road less traveled


Baggage kit in green , yellows, and orange (Franck Boston)

The latest hot start-up with a billion-dollar valuation is Airbnb, which just landed more than $100 million in venture capital financing. The company, which got its start back in 2008 as a way to make some extra cash by renting out spare floor space to conference-goers, has blossomed into one of the most talked-about and disruptive forces in the travel industry today. Some estimate that Airbnb could surpass Hilton Hotels as the largest player in the hospitality industry — at least, based on number of rooms available — as early as mid-2012.

In many ways, Airbnb is the classic disruptive company. Harvard’s Clayton Christensen first coined the term "disruptive innovation" back during the time of the last dot-com boom to describe the types of innovations that start at the low-end of the market, rapidly gain market share, and become so overwhelmingly popular that entrenched competitors can no longer respond in time to protect the high-end of the market. In other words, back in 2008, who really cared about renting out empty floor space to people without any money? By the time the big hospitality brands woke up to the reality that the collaborative consumption model of Airbnb might appeal to higher-income travelers, Airbnb had already built up an inventory of over 100,000 rooms -- and is adding more than 1,000 new rooms each day.

The word “room” is a bit of a misnomer, however. Unlike typical hotel chains, Airbnb focuses more on unique spaces and experiences, not on rooms. These destinations might include boats, castles, or even a Boeing 727 in a lush tropical forest in Costa Rica. The “experience” part comes from being able to hang out with locals and experience a destination the way a local might, rather than as part of a generic travel experience. How about watching a Spanish football (soccer) match with a local in Barcelona or Madrid before heading out for the night?

As we kick into the high gear of the summer travel season, how many travelers will experiment with Airbnb to book their trip? The venture capitalists backing the company obviously hope that they’ve managed to tap into a new zeitgeist around travel. Now that Airbnb has a massive war chest to expand globally, the big travel brands have only themselves to blame if Airbnb manages to continue its unchecked expansion into every major tourist destination. Airbnb offers a fun, cool — some might say quirky — way to travel at a significant price savings. That’s certainly an attractive value proposition when impersonal service, cookie-cutter rooms and baroque pricing models have taken away some of the fun and allure of the typical hotel stay.

Read more in Innovation:

Airbnb responds to user horror story

Airbnb burglary victim says company tried to quiet her

Read more about technology on FasterForward

By  |  10:08 AM ET, 07/26/2011

Categories:  Dominic Basulto, Entrepreneurship, Business, Video

 
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