Skift Take

Airbnb's global head of real estate talks about the company's side hustle, which you probably haven't heard about yet. The travel giant's rivals will listen and take notes.

Airbnb claimed growing traction for a listing service where owners of multi-family properties allow tenants to rent out their units from time to time. The real-estate program, launched in the U.S. last November with about 175 buildings in 25 markets, now has 260 properties in 40 markets.

“About 35% of the housing stock is rentals, and we haven’t scratched the surface of that,” said Jesse Stein, global head of real estate at Airbnb, during an interview on-stage on June 7 at Skift’s Short-Term Rental Conference in New York City. 

Landlords are allowing rentals on Airbnb for roughly 100,000 U.S. apartments in exchange for a share of up to 25% of the revenue, Stein said in an interview with Seth Borko, a senior research analyst at Skift. (You can watch a full video and read a transcript below.)

Interview Transcript

Seth Borko: Did you guys recognize the voice of God? It wasn’t Jane who’s been doing most of our “voice of God” [voiceover], did you recognize who it was?

Jesse Stein: I did. I did recognize it.

Borko: Who was it?

Stein: “The Terminator.”

Borko: The Terminator, yeah. It’s Brian Chesky, the Terminator as you call him, I believe.

Stein: Well, that’s the chatbot, right?

Borko: ChatGPT, yeah/ So we had an AI-generated bot. We told you we had to mention AI. It’s the last session of the day, hopefully, you’ve been keeping track. I’m going to quiz you all, to make sure you’ve got your right scorecard from that. So, all right. So Jesse, thank you so much for joining us. It’s a pleasure to have you here, have Airbnb here. So you are the global head of real estate for Airbnb. Last I checked, Airbnb doesn’t have any real estate, so…

Stein: Is anybody hiring, looking for…   I’m looking for a job. Yeah, no, I run global real estate for an asset like company. It’s an interesting question I get all the time, but I think the real question is like, “What do I do?”

Borko: Yeah, what do you do, Jesse?

Stein: What do I do? So when you take a look at the space, for the most part, the STR industry has not really partnered with the largest institutional real estate owners in the world. And my job is really to come up with products and programs to bring in partners like Greystar, like Equity Residential,… these [firms] partner with us to unlock the ability for individuals to host their primary homes.

Borko: And just so … we have a broad, diverse audience here … Greystar, Equity Residential, those are some of the largest landlords in the country, right?

Stein: They’re some of the largest landlords in the country and the world. In the world.

Borko: In the world. And so you’ve come up with programs to work with landlords to help people list Airbnb. So what is specifically things have you come up with?

Stein: Yeah, let’s take a look at the overall housing stock in the US, roughly 130 million housing units in the US. Roughly 45 million of those are rentals. For the most part, renters do not have the same ability to Airbnb their home today as people that own their home. There’s typically do not sublease clauses in their lease agreements. So we wanted to come up with a product that helps all the ships rise with the tide. So what we launched is Airbnb friendly apartments, which I believe we’re going to touch on in a second.

Borko: Yes. So Airbnb apartments, it’s a way for landlords to make it easier for their tenants to list on Airbnb. I think we have a clip if I can call for it, if we can play it. We’ll see if we have it otherwise I’ll go into my next question, but let’s see.

Stein: Well, can I touch on that real quick?

Borko: Yeah, sure.

Stein: So it’s also for consumers to find homes in which they’re allowed to host their rental. So we created a 12-month unfurnished rental marketplace on Airbnb. So consumers can now go to Airbnb and find over 260 apartment complexes in roughly 40 cities across the US where they know they’re encouraged to host their primary home part-time. And it’s been widely adopted by landlords as well as residents across the country.

Borko: So we just saw the little clip that was scrolling behind us of a search on the app looking for Airbnb… So I just want to go into the details of it. So it’s its own site. It’s a separate landing page that lists apartment buildings that are where you’ve made an agreement with the landlord in advance to put their buildings on your platform.

Stein: 100%, yes.

Borko: And so is that kind of what Sonder’s doing? You’re working with the landlords, you’re going to partner, you’re going to put short term rentals in the building.

Stein: I get that question. So it’s a completely opposite model. The underlying-

Borko: Completely opposite.

Stein: Completely opposite model. And here’s the integrity of the model. An individual finds the home in which they are going to live in on Airbnb. We allow that consumer to get in contact with the building. That consumer then moves in, he or she hosts their primary home part-time. So they’re hosting in accordance… with whatever the local laws may be. On average it’s four to six nights a month, and they’re hosting when they’re traveling or so on and so forth. And we’ve built the interface where they can see how much rent is, they can see how much they could potentially earn by hosting one, two, seven nights a month. And then they can make a decision and we can put them in touch with the building.

Borko: So it’s not like you’re operating, it’s still a traditional Airbnb. You’re just helping to connect long-term renters with buildings that would allow them and encourage them to list on Airbnb as opposed to just a random building where maybe they wouldn’t be allowed to do that.

Stein: A hundred percent. And the beauty about our platform, and we’re very blessed with this. We have millions and millions of consumers every day on Airbnb. And a lot of these folks have reached out to us and they want to become hosts, but they’re renters. So we are just educating our consumers today that there are renters that encourage this activity and they want you to host part-time because the cost of living’s going up. And at the end of the day, incomes are not going up with the cost of living.

Borko: So I compared you to Sonder earlier. That was obviously wrong. I’m going to make another comparison probably wrong.

Stein: We love Sonder, they’re a great partner. This is different.

Borko: Probably wrong about this comparison as well. So are you kind of like Zillow then? Is that more akin or is that also wrong?

Stein: It’s interesting. It’s a combination. I think the philosophical integrity of it is you can find a home in which encourages hosting on Airbnb. So from that comparison, yes. A delta of it though is we are marketing these buildings to our partners for free. So there is no customer acquisition cost to be part of the program. So we are literally sending our consumers to live in these buildings for free. And then in return, the building owners are allowing their residents to host part-time.

Borko: And so what’s in it for the landlords? Why are the landlords talking to you, I guess?

Stein: Yeah, well, number one, they’re able to access our consumer base and our tenants are moving into their buildings for free. So it’s helping leasing velocity and it’s lowering their marketing costs. That’s number one. Number two, they have control and transparency of over all the Airbnb in their building. So we can ensure through building rules that the hosts are hosting in accordance with local laws, in accordance with building rules, so on and so forth. And third, the owners get to participate in the upside of the Airbnb. So our partners charge a rev share to oversee the program anywhere from zero to 25%, depending on the partner and how much activity they provide to the host. And they participate in the upside of the STR.

Borko: And your partners are the landlords, just to be clear.

Stein: Well, it’s interesting. Our partners are definitely the landlords, that’s new. We also are obviously partnered with all of our hosts across the world.

Borko: But in the context of rev share, it’s the landlords who would-

Stein: The landlords-

Borko: … [inaudible] sort of rev share here.

Stein: Yes.

Borko: And does that come out of Airbnb slice of the pie or the host slice of the pie?

Stein: That comes out of the host slice of the pie.

Borko: Okay. What are the results? What have you found? You launched this actually quite a bit ago, it’s not necessarily a brand new program, right?

Stein: We launched it in November.

Borko: November still. Okay, its still new.

Stein: I mean in the tech world, it’s like ages ago.

Borko: Yeah, yeah, ancient. Compared to ChatGPT, it’s ancient.

Stein: In the real estate world it’s like brand new.

Borko: Yeah, it’s a baby.

Stein: So we launched it in November with 175 properties across 25 markets. We now have 250, 260 properties live across 40 markets. And we have a backlog of a couple, a lot of properties that we’re working on now. And we’ve been very blessed. Some of the largest owners in the world’s Equity Residential, Greystar, UDR, so on and so forth, have partnered with us. And every single one has actually added more properties. So they’ve all tested it out. Everybody’s scared of the boogeyman in the closet. And once they realize that the consumers actually want this and they’re yearning for this and they have the proper controls, they’re expanding the portfolios.

Borko: So one of the conversations that actually I’ve been having, we were having this conversation. I’ve been talking to people, networking breaks and lunch breaks. There’s a number of investors here who say that they really struggle to get the kind of investor class and capital markets to understand the short term rental markets. So is that kind of what your mission is? You’re going to spearhead Airbnb’s efforts to be the ambassador for short term rentals to capital markets and landlords?

Stein: That is definitely part of my job. I joined from private equity. I was spent most of my career in private equity in the hospitality space, investing in hard assets. And Airbnb decided to bring me on right before CPVID to kind of be that conduit between the STR space, i.e. Airbnb in this case, and the institutional real estate community. So a lot of my time is spent with the largest real estate owners as well as the capital markets folks to educate them on what the program is and what it is not.

Borko: And just between us, just us friends, no one else listening.

Stein: It’s not being recorded, fine.

Borko: What’s their impression of the short… When you talk to a new real estate person for the first time, what’s their impression of the short term rental market? Are they excited or they don’t trust it?

Stein: Well, it’s really hard to lump the short term rental market into one swim lane. There’s multiple swim lanes in the short term rental market. What we are focused on at Airbnb with Airbnb-friendly apartments is unlocking individuals primary homes to host part-time. So from a investor perspective, the collateral is really, the downside is a multifamily building. The upside is potentially incremental revenue through savings in the middle of the P&L with marketing as well as the rev share. So what’s interesting is the downside is traditional multifamily, which by the way is a phenomenal asset class. You can potentially dip into the hotel side or the STR side with the rev share. And now that swim lane has been an easier conversation because it’s just one step further for multifamily. Getting multifamily to take out 30 of their units or whatever it may be, and run dedicated SDRs, that’s a philosophical different business model. And that is not something we are focused on at Airbnb right now. And the capital markets is also a challenge there.

Borko: Okay, understood. Let’s talk about the host profile. What kind of host is going to rent, because the host in this case is the long-term renter. Does the host who signs up for a long-term rental through Airbnb apartments, does he or she look different than a traditional Airbnb host?

Stein: You know what’s interesting, because we have 4 million plus hosts around the globe. So the average Airbnb host is challenging, but I can give you some use cases. We have a host in Nashville. She was able to afford a first apartment. She works at a hotel at the front desk. She was able to afford her first apartment by moving into a building in Nashville, allows hosting. When she got a booking, she moved in back with her parents, but she was able to offset over 50% of her rent by hosting one long weekend in Nashville. We also have another host in San Diego. He’s leaving, he’s active duty military right now. He gets deployed, he’s training a lot. He hosts to pay his rent in San Diego. So the use cases are up and down the spectrum. And those are two examples. It does skew somewhat younger because the overarching multifamily industry does skew younger and it does skew more flexible, if you will.

Borko: From Airbnb’s perspective. We heard him just now, if I was Brian Chesky, how does this… I guess my point is, so you’ve got something 250 units. Oh, 250 apartments, can you tell me how many units?

Stein: It’s roughly a hundred thousand at this point.

Borko: Airbnb has a-

Stein: … hundred thousand total units.

Borko: And Airbnb has like 6 million units. So a hundred thousand out of 6 million. Is it moving the needle in incremental way or are you going to get to 10% of listings through Airbnb? What’s the vision there in terms of moving the needle at Airbnb corporate.

Stein: I mean, we just launched in November.

Borko: So it’s not pulling you to two higher standards, what you’re saying?

Stein: We are very fortunate to have an extremely high denominator. So from a percentage basis, it’s really small right now. From a strategic growth perspective, it is definitely a vehicle for growth long term. And when you see this, because what we’re seeing people, like 35% of the housing stock is rentals. We have not even scratched the surface of that yet. This is scratching the surface of that. So long term, it’s definitely a large vehicle. Short term, it’s a growth opportunity and a strategic bat by Airbnb.

Borko: And we’ve done some research and Airbnb sort of disagrees with us. But the general gist is that professional managers generate more revenue. If these are not just individual managers, but they’re only listing a couple times a month, is it going to generate enough? So are they going to generate revenue for Airbnb, I guess is part of the question.

Stein: I would take it back to why was Airbnb started and how did Airbnb get started? Airbnb got started when Brian couldn’t, or the Terminator couldn’t afford his rent. So Brian couldn’t afford his rent and he hosted, and when he was going out to raise money, people laughed at him and look what it became. And so from our perspective, 100% it can add dramatic value to the bottom line of Airbnb over time. And it is kind of just a new way of living for individuals. And providing renters the same ability as homeowners to obtain the economic benefits of Airbnb is definitely something we are keenly focused on and it will scale.

Borko: So this comes to a conversation we’ve been talking to about housing and affordability. Airbnb gets blamed a lot for lack of housing affordability. I guess you’re saying this plays in that conversation.

Stein: A hundred percent plays in the conversation. I mean, obviously we are the center of the dartboard in some of these conversations, but when you think about the integrity of this product, people live there 12 months. Our partners are putting in various night limits where hosts can only host up to 90, up to 120 nights a year. So the economics of arbitraging are just non-existent. So these individuals live there, they host part-time and it’s actually helping people stay in their homes. We surveyed all the hosts across our building and roughly two thirds of them, 70% ish are hosting really to keep up with the cost of living right now. So it’s not like they’re taking out five units and taking away housing stock. It’s actually helping people stay in their homes and be able to move into their first home, like the individual in Nashville.

Borko: So there’s this other new launch. We’ve got Airbnb apartments, we also have Airbnb rooms, the new initiative to encourage as you’re talking about Brian Chesky’s origin story and host. And he’s talked a lot about getting back to the core of his business. I think he kind of said it on stage here. During the pandemic he was afraid he’d kind of lost the core of his business. He wants to get back to it. So is this going to be a vehicle? How does this tie into the Airbnb rooms? Are people going to have a two bedroom and they can do an Airbnb rooms from this platform?

Stein: A hundred percent yes. It depends on the makeup and of the housing in which we’re working with. So most apartments are studios, ones, some twos. So we do see some of our hosts hosting private rooms. We have a gentleman named Rahul in San Francisco. Him and his wife have a two bedroom in San Francisco, and they literally host their second bedroom when they’re there and their entire home when they travel. So it’s definitely unlocking the ability for more people in rentals to do the rooms as well.

Borko: So just back to an earlier answer, and you’ve been giving good answers, but you mentioned night caps, how many days you can rent. It raises the question, when are we going to see an Airbnb apartment in New York City?

Stein: Well, you want to get to the next question?

Borko: Yeah. So there’s a night cap in New York City. So I suppose you can’t put this product in New York City right now.

Stein: Unfortunately, no. And obviously there’s some news out there about lawsuit between Airbnb and New York, but no, at the moment, renters in New York do not have the same ability as other folks in other markets to host their primary homes. And that’s one of the reasons we are actively in litigation with New York is because we firmly believe that individuals should be able to host their primary home to keep up with the cost living.

Borko: Neither you or I said, I think our founder, Rothets said it effectively amounts to a ban on short-term rentals in New York City, this new legislation. What do the landlords you’re talking to have to say about that?

Stein: I don’t want to speak for our partners except for our partners want to do this in New York and their assets. They’ve asked us to do it, but obviously there’s overall challenges.

Borko: Actually, I mean, let’s talk about that. How much interest do you think you would have in New York City if it weren’t for the regulation in New York City against short term rentals for this product?

Stein: I don’t want to overplay my hands, but I would say a dramatic amount. I mean, you live in New York, the cost of living in New York is high. You travel, would you live in one of these buildings?

Borko: I don’t know if I would trust someone in my home though. Because once it’s my primary residence, I don’t know, there’s kind of a concern there. And also, I’ll be honest with you, I’ve looked at doing exactly this at subletting a spare room once one of my roommates moved down to New York City. Put it on Airbnb, earned some cash. I didn’t ask my landlord, I just did it. So why do I need to ask my landlord? I could just do it, right?

Stein: No, you wouldn’t do that.

Borko: I would never break the law like that.

Stein: But to answer your question, we’ve already had significant interest from partners to unlock New York if we can come to an agreement with New York that’s fair for everyone. And what we’re really focused on is giving primary home individuals the ability to host. We agree illegal hotels should not be part of the equation, but we are philosophically siding with our hosts to provide them the ability.

Borko: And outside of New York City, how do you feel about regulation outside of New York City?

Stein: We’re in a good place with a lot of cities. We’re in almost every city except for a couple countries in the world. And we’ve created regulations and structures with these cities that really help all parties. And so we’re in a really, really good place globally. Obviously there’s fires here and there, but for the most part we feel like we’re in a really, really good place. And New York is one of the outliers unfortunately.

Borko: So in your past career, you were working in hotels at Kimpton, I believe you’re now here doing kind of supply acquisition in the short term rental space. What’s it like coming over from the dark side? How do you like short term rentals?

Stein: All right, let me think about that.

Borko: Yeah, yeah.

Stein: So they’re the dark side now?

Borko: I’m just joking, it was from an earlier joke I made. We all love hotels too.

Stein: No, no. It was always interesting. I would fly around the country. I was running investments for Kimpton Hotels, and I’d fly around the country and I’d see cranes everywhere. And it was just crane, crane, crane, crane. And I’d look at the stock and it was all multifamily. There were some hotels and all I would think to myself around the investment, and I’ve had this around the investment committee, is like, “Wow. If Airbnb could ever figure out a way to partner with multifamily landlords, it would really unlock and potentially be some of a struggle.” But what’s interesting and what I’ve learned is the use case for Airbnb is different. Roughly 50% of our nights are for over seven nights at a time, like zero of our nights at Kimpton or for seven nights at a time. So it’s an interesting experience. And what I love about the STR space and the tech space is the ability to iterate. And when you build a hotel and the bathroom’s wrong, oops.

Borko: Oops, yeah.

Stein: We launched a product, we found some things that are struggling, we’re improving them and we’re iterating. And it’s really, really an interesting space. And we have all been very fortunate with the tailwinds of this flexible living.

Borko: Can you give an example of where you’ve been iterated in the apartment stuff?

Stein: Yeah. One thing is we’re building, we have this contact form and a lot of these owners want to ensure the people that are in these buildings are living in these buildings. And so we’re putting some more language in, some more education modules on the PDPs and we go…

Borko: What’s a PDP?

Stein: Property page. So you go to what we showed earlier, you go to the property page, it’s more education to basically say, “If you’re going to live here, please contact us. Please move in. If you’re looking to rent seven units, you’re not going to get a lease.” So just education like that that we’ve seen and we’ve changed. And then some other areas in the capital markets we didn’t expect. Just what do lenders think about it? How do we educate lenders? And that wasn’t really top of mind going in.

Borko: There’s a couple really interesting points that I want to pick, and I want to go to some audience questions first. I like this one, “Long term, what is the plan for Airbnb working with institutional apartment owners? Will this program evolve?” In your wildest dreams, what’s this going to look like?

Stein: I’m going to bring it back to my sports career, which was very brief. You get better or worse every day. So if you’re not evolving and you’re not improving and you’re not iterating, you’re getting worse. So of course it’s going to evolve. And of course we’re going to try to scale it and we’re going to do everything we can. We’re on our own one yard line right now. We have a long way to go. So 100% it’s going to evolve. 100% we’re going to launch new features that are really cool and we’re going to continue to scale partners. And I think Brian mentioned this in the earnings call, it’s definitely a product that can scale globally. It’s not just a domestic product. And we’re working on how do we do it in the right way.

Borko: So you’re in the one yard line, what’s the two yard line? What’s it going to be next?

Stein: I think quick. I can’t disclose too much as a public company, but scaling-

Borko: You can tell us.

Stein: … nobody’s listening. Scaling the supply is-

Borko: Scaling supply…

Stein: … Scaling supply is number two. And providing better access for Airbnb consumers to find Airbnb friendly on-

Borko: And what about globally? What about international expansion? Is that on the docket?

Stein: 100%. It’s a matter of when, not a matter of if.

Borko: And we also talked about the kind of for sale market as you would call it. Is that also on the table? Am I allowed to mention that?

Stein: Yeah, it’s public. So when you think about the, do not sublet clause and apartments, once a condominium is built, there’s condominium docks, and the only way to change the condominium docks is to get super majority vote in most existing condos. My wife and I barely agree on much, let alone my wife and I and like 700 other couples. So that’s very, very challenging. So we’ve worked with the related group in Florida and we did our first purpose-built condominium that was marketed to consumers as Airbnb friendly. So it was the fastest sellout that the related group in Florida has ever had, and we’re actively expanding that as well.

Borko: So I’ve got a question, I’ll jump back here. You mentioned capital markets a little bit. How does the interest rate environment factor in this? You’re dealing with these big multifamily tenants, they’re hyper focused on where their finance and environment is at. Is it going to put a damper on things or is it actually going to make your product more attractive or how does that work?

Stein: I think it drives incremental income to our partners. So it makes it more attractive. I think the challenge is more just the education to the capital markets on what it is and what it isn’t. Like the underlying collateral is still a 12-month tenant. And just saying that over and over and over again is the education side. So we’re actually seeing a larger pickup than I expected on the partner supply side because it does drive incremental revenue. And even though multifamily supply right now is at the peak it’s been since like 1987, now there’s a dearth of new construction given the industry environment. But everything that’s getting built is getting delivered soon. And there’s significant amount of supply in some of these markets. And people want to differentiate their assets. And if they’re allowed to Airbnb, it’s an amenity and it provides something interesting.

Borko: Instead of building a pool or a basketball court for my tenants, I can just offer them Airbnb ability.

Stein: I mean, I do think NMHC put out a survey and it was one of the top three, NMHC is the National Multi-Housing Council, one of the largest groups in the multi-housing space. And the ability to Airbnb was one of their top three amenities that consumers were looking for. So it was really, really interesting.

Borko: And you said there’s upside to developers. We have an audience question from Dan. “How is the amount of rev share determined? Is it based on what services the build-in provides for the hosts, i.e. housekeeping, concierge, if it’s a more lux building, do they get a better split or something like that?”

Stein: Yeah, it’s really determined… We do not determine it. The owners of the buildings, the landlords determine it and they determine it based on the services they provide and what they do not provide. And so it’s really different amongst each partner and kind of asset class. But to your point about class A, we have some partners that literally have front desk that check guests in and their fitness centers are nicer than the Equinox, so it’s a little bit different.

Borko: Let’s talk about the supply equation, I think Jamie, AirDNA, was up here earlier. He was talking about how supply growth is kind of slowing or not slow, but stalling a little bit in the industry. There’s been these supply awards, Vrvo was trying to bid for some of your hosts, get them to convert. Is this your response to putting more hosts and more supply into the platform? Do you see yourself in competition?

Stein: I think all ships rise with the tide. So I think the normalization of the STR space is beneficial for all. So I don’t feel like it’s us versus them. I feel like we’re all working together to educate more people because even though we have a large denominator with 4 million hosts across the world, there’s a lot of people in the world and the world’s changing. So I wouldn’t look at this as our response to that. I would look at it as more of an education to the institutional real estate community on how we add supply.

Borko: And is there exclusivity? Can I also Airbnb my host, can I also Vrbo my home? Or is it only Airbnb?

Stein: It is dependent on the building manager, but most building managers want that control. And so given these folks are only hosting four to six nights a month, they are predominantly exclusive to Airbnb.

Borko: Okay. And final most important question, are the Jaguars going to make the playoffs again this year? What do you think?

Stein: No, they cut me 20 years ago.

Borko: It’s been downhill for them since, uphill for Airbnb. Thank you so much.

Stein: Thank you so much for having me.

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Tags: airbnb, short-term rentals, skift live, skift short-term rental summit

Photo credit: Jesse Stein, global head of real estate at Airbnb, at the Skift Short Term Rental Summit 2023 in June 2023. Source: Skift. Ryan Bourque / Skift

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