Gharapuri island, which houses the famous Elephanta Caves, is just 10 km off Mumbai’s coast. Every year, thousands of tourists throng the seven 5th to 6th century caves adorned with intricate Hindu and Buddhist sculptures. You’d imagine the Maharashtra tourism department’s crown jewel would have the best facilities, right? Wrong. As recently as March, the island did not even have permanent electric supply, leave alone basic infrastructure to support the rush of visitors.
Yet on a wet June morning, a state minister, government officials, and executives from San Francisco-based home-sharing company Airbnb gathered to announce a joint programme to identify 35 homestays on the island for people visiting the Unesco world heritage site. It was a win-win for both: The government was interested as homestays would bring in local employment; and Airbnb was happy because it would help expand its footprint in India, its next frontier in Asia. Nathan Blecharczyk, Airbnb co-founder and chief strategy officer, says the India story has just begun: “It will certainly rank as one of our most important markets just like China.”
Airbnb entered India six years ago and has grown at a rapid pace since then. Now, it is looking to move to the next level by stepping off the beaten track and entering areas that are not so big on the tourist map. So, instead of just being in big tourist destinations such as Goa (where it has 5,000 homestays) and Rajasthan, it is looking at relatively untapped locations in the hinterland such as the villages of Kutch in Gujarat and the hills of the northeast. As part of this plan, it aims to create 50,000 “hospitality micro-entrepreneurs”—in other words, homestays—in India over the next two years, says Chris Lehane, Airbnb’s head of global policy and communications.
Airbnb already has 32,000 homestays, or 70,000 rooms, in India, all the way from the backwaters of Kerala to the mountains of Himachal Pradesh. And if it reaches its target of 50,000 homestays, it could disrupt the country’s hospitality sector, which has just 115,000 hotel rooms on offer at the moment. With increased regulatory scrutiny across the world—the latest casualty being its plan to offer two nights on the Great Wall in China—here’s a market Airbnb can’t afford to miss. Especially since India doesn’t have rules about homestays yet. No wonder, Airbnb has roped in star couple Saif Ali Khan and Kareena Kapoor Khan for its first big India-specific campaign. The actors relate their experience of booking a U.K. holiday on Airbnb in a series of videos.
As part of its expansion plans, Airbnb tied up with the Gujarat-based Self Employed Women’s Association (SEWA) last year to draft some of its members as hosts on its network— thus offering tourists a taste of rustic life. This happened shortly after Airbnb’s global CEO and co-founder, Brian Chesky, met with Prime Minister Narendra Modi in Delhi and endorsed the government’s National Skill Development Mission. The message is loud and clear: No matter where you are, Airbnb will be there to welcome you. “India’s cultural diversity lends itself as a great destination for our guests, who are increasingly seeking local experiences, and that makes it a very important market for us,” says Amanpreet Bajaj, Airbnb’s India head.
Blecharczyk lists three projections that make him think the future is bright for Airbnb in India. First, like the Chinese, Indians will start travelling and spending more on holidays as their incomes go up. Second, India’s millennials will prefer uncharted travel and experiences rather than touristy locations. And, finally, India is the biggest mobile market and there is already proof that Indians are increasingly booking their holidays on the phone.
The thrust, thus, is on “experiences”, rather than just holidays. So last year, Airbnb launched curated “experiences” in India. On offer are things ranging from the “Journey of Couture” with designers Shantanu and Nikhil to windsurfing and street walks in Goa. And while in Goa, you could also stay at the villa where Shah Rukh Khan-starrer Dear Zindagi was filmed.
There’s no dearth of hosts waiting to sign up. And there’s no shortage of guests as well, since Airbnb’s rates are generally cheaper than hotels’. Bajaj says Airbnb “would like to scale up rapidly but our global norms don’t let us sign everyone up”. Often, it has had to ask locals to refurbish their apartments/ homes to adhere to basic standards. There are several properties available for listing but few that pass Airbnb’s 100-point checklist such as independent bathrooms, arrangements for warm water, and hygiene.
Airbnb, which stands for air bed and breakfast—a reference to the air mattresses that guests slept on initially—was formally launched by Chesky, Blecharczyk, and Joe Gebbia in 2008. The germ of the idea took shape in the heads of Chesky and Gebbia in October 2007 (Harvard man Blecharczyk would join them a few months later): With no money to pay rent for their three-room apartment in San Francisco, they decided to host guests attending the Industrial Design Conference in the city. Their first guest was an Indian, Amol Surve. The formal launch coincided with the 2008 Democratic National Convention in Denver, Colorado, where Airbnb reportedly sold 800 boxes of cereal at $40 each, to raise $30,000 in seed money. Nearly 10 years later, the company was valued at $31 billion in its last round of funding in March 2017. That’s two-thirds of the $45 billion valuation of the world’s biggest hospitality chain, Marriott, and ahead of the No. 2 brand, Hilton, valued at $23 billion.
Though Airbnb’s revenue numbers are not available, its profitability is said to be on the rise going by the increasing valuation over the years. No wonder it is considered the technology firm that’s disrupting the hospitality business. In India, along with OYO, it is changing the face of the business.
Let’s look at the reason why: The tourism department’s 2016 data (the latest available) pegs India’s annual foreign tourist arrivals at nearly 9 million. That’s not counting the millions of Indians who travel between states. But the country doesn’t have enough hotel rooms to cater to these vast numbers— even when one includes everything from glitzy five-star hotels to humble bed-and breakfasts. Until last year, the right kind of property, at the right price, was not available at the right location. “The market was so fragmented that no startup wanted to spend time and money aggregating the business like they did in the airline ticketing business,” says Mudit Khosla, chief operating officer of healthcare marketplace Healthians and ex-founding member of Yatra Online, India’s second-largest travel portal.
That’s what OYO, and increasingly Airbnb, are changing. Gurugram-based OYO, the five-year-old budget hotel network founded by Ritesh Agarwal, started as an online marketplace for room inventory. But the business started gaining traction only after three years, when OYO started branding its inventory and inculcating quality norms for the rooms. In its last round of funding, OYO was valued at $850 million, a third of India’s oldest and biggest hospitality firm, Mumbai-based Indian Hotels, which runs the Taj hotels. “There is a fear that Airbnb may take away travellers to locations of their choice and further disrupt the market,” says Khosla.
The concept of homestays in India has been around for over a decade. Different governments and state tourism bodies enrolled local households in their homestay schemes and granted them licences to operate. The database was put up on state tourism portals. But these were just listings, not booking portals. The overall experience, therefore, was poor for both the host and the guest.
That’s what Airbnb is looking to change. It brings a decade of experience in operating in over 100 countries, to its database of properties listed on its website. The homestays are recruited by a team of employees who survey the property, train the hosts on using the mobile interface of their website and, of course, turn the spotlight on them through the portal.
Vivi George, an Airbnb host, is happy with the way her Kochi villa has been featured. She says a few executives first visited her property to check if the description matched what was on the ground. Then they took pictures and posted them on the site. “I make good money after paying for the caretaker and other running costs,” she says.
Airbnb wants to be seen as a communitybased business without a gatekeeper, where stakeholders align their interests to further business. In essence, it wants to conduct its business with minimal intervention from authorities: But it has had its fair share of run-ins. In Mexico, it faced a tax issue; in Japan, a new rental law was passed, asking hosts to acquire a registration number and adhere to several conditions, forcing Airbnb to take several hosts off the list this June; and Australia has imposed a cap on the number of days an empty apartment can be given on short-term rent.
Critics accuse Airbnb of increasing property value and rentals at popular destinations worldwide as owners prefer to have guests than long-term renters. But Maharashtra’s tourism minister, Jaykumar Rawal, believes otherwise. He says that “letting out apartments to tourists will increase the usage of vacant apartments in Mumbai and can have a softening effect on property prices”.
An Airbnb executive, who declined to be named, said things like rules were teething issues. However, there’s a bigger challenge in India—getting housing societies in big cities to let people rent out vacant flats on Airbnb. Also, some Indians seem to be averse to letting strangers into their homes.
That hasn’t stopped a new category from opening up: Business travellers discovering the joys of Airbnb, especially for extended stays. And Airbnb’s “super hosts” are making the most of it, offering high-speed Wi-Fi and airconditioning at rates cheaper than hotels. Bajaj says in the past two years, Airbnb has grown its listings by 100%. More hosts have signed up because of increased knowledge of the benefits of home-sharing, local partnerships, the government’s push, and word-of-mouth.
As Airbnb does not disclose its financials, it is tough to ascertain its success so far. And it is too early to say if it will succeed in India. For now, it has forced the hand of its competitors to invest in building a homestay business. Though local travel portals such as MakeMyTrip and Yatra don’t compete directly with Airbnb, both have since expanded their hospitality businesses to include homestay rentals. The Indian market is still so huge, there’s more than enough room for more.
(This article was originally published in the September 2018 issue of the magazine.)