A History Of Airbnb Shared In Sag Harbor

As an editor at Fortune magazine, Leigh Gallagher has a ringside seat to some of the most intriguing business ideas to come down the pike. Asked if that close exposure to the exciting world of entrepreneurship feeds some secret longing of her own to launch the next great business idea, she laughs.

“I have never once thought that. I just love journalism too much,” she said. “I’d rather discover the next hot story and write about it than create it and profit from it. And maybe the joke’s going to be on me, but what can I say? I can’t help it. I love discovering the stories and the people, and I love interviewing the people; they’re all so interesting. Maybe that will change someday, but I’ve been doing this a long time and it hasn’t yet.”

Ms. Gallagher’s instinct for a good story most recently found her digging deep into the evolution of Airbnb, an online marketplace that connects people looking to rent their homes with people who are looking for a place to stay. In less than a decade, the San Francisco startup has grown into a $31 billion business and become one of the largest providers of accommodations in the world.

The author visited Canio’s Books in Sag Harbor last Saturday to talk about her latest book, “The Airbnb Story: How Three Ordinary Guys Disrupted an Industry, Made Billions … and Created Plenty of Controversy.”

Ms. Gallagher admits that when she was first approached to write about Airbnb for Fortune, she was uninspired. “I was dubious,” she said. “Every year we get pitched by these start-ups that emerge out of nowhere, and there’s a lot of breathless hype about them. In 2009, someone said, ‘We’ve got to write about this Airbnb.’ I rolled my eyes and said, ‘That’s an old idea.’ I had been using HomeAway.com and VRBO, and I just thought it was more of the same, so I dismissed it.

“A few years later, in 2012, I was asked to interview their CEO, Brian Chesky, at one of our live events, and by that time they were really growing. Once I started digging into it, I thought there was an interesting story there around how Brian had no business experience and was suddenly running this huge company and having all of these challenges. He was a graduate of the Rhode Island School of Design (RISD); he didn’t know anything about business.

Joe Gebbia, a friend from RISD, convinced him to quit his job in Los Angeles and move to San Francisco so they could launch a business together, although the exact parameters of that business had yet to be defined.

“It was 2008, and there was a lot of excitement around startups,” Ms. Gallagher said. “So Brian moved into his apartment with him, but they couldn’t make their rent, and they weren’t making any money, and out of desperation they came up with this idea.

“They have this philosophy that you can design your way out of any problem. So they designed this idea. They had a couple of air mattresses, and they decided to rent out space in their apartment because there was this big design conference coming to town that week and all the hotels were really overpriced. They did that, and it was a huge success. They thought it was going to be a side project, but within a couple of months decided to make a go of it.”

Recognizing the need for a web-savvy partner, a few months later they brought their engineer friend Nathan Blecharczyk on board as the third co-founder.

“It took a long time for it to get off the ground, like a year, and in the meantime they had no business and no money, and they ran up $30,000 in credit card debt each, and nobody would invest in them. Brian’s parents were like, ‘What are you doing? Just get a job with health insurance.’”

Ms. Gallagher kept up with the company’s growth and wrote an in-depth story on Airbnb’s beginnings for Fortune in 2015. “Every year the company became more and more relevant. It became bigger than a business story. It transformed the way we travel, the way we view space, all that stuff, and no one had done a book about it.”

Despite the company’s roaring success, Airbnb’s business model is controversial. Very vocal opposition comes from the established hotel industry as well as local governments uneasy with the idea of short-term rentals in residential communities. That opposition hasn’t slowed things down at all, and on the East End alone, the company’s website lists hundreds of available rentals, ranging from a single bedroom to a complete house.

“Its full-out illegal in New York City to rent out your whole apartment for less than a month, and there are 40,000 listings,” said the author. “The enforcement thing is very difficult, and it’s the kind of thing where people say, ‘Oh, it’s illegal but everybody’s doing it.’”

She says her research, as well as her own experiences with the site, have helped her understand why Airbnb has taken off as it has. “It didn’t just sort of do well, it struck a chord in the zeitgeist and exploded, in a way that goes way beyond just being a good business product. People like to stay somewhere where they feel like they’re in a neighborhood, where they can live like a local.”

Unlike VRBO and HomeAway.com, where most of the properties listed were designed to be second homes, Airbnb’s offerings are largely urban and very much the owners’ primary residence.

“Airbnb pioneered the idea of sharing the space while you’re there—that’s what was so different about it. That made it cheaper and they made it urban, and both of those things really spoke to millennials,” Ms. Gallagher explained. “It’s a great example of something that wasn’t a new idea, but an old idea just twisted a little bit differently. It unlocked a completely different market, and became something way bigger.

“For the people renting out their spaces, it’s a way for them to monetize their house, to turn an asset they have into an income stream. Airbnb will tell you they’re helping the middle class stay in their homes. It’s also helping millennials and artists stay in their homes and not have to get a corporate job, it’s helping people fund a trip abroad; people use it for all kinds of things.”

For travelers, Airbnb offers something for everyone. “I’ve tried everything,” Ms. Gallagher said. “I stayed in the spare bedroom of a guy in San Francisco. I didn’t love the shared bathroom, but he was lovely; he made me a spaghetti dinner. Another time I stayed in a carriage house in Georgetown that was totally separate from the main house. The owner was there in case I needed anything, but it was totally private.

“There’s a reason why the consumer has latched onto it with such fervor,” Ms. Gallagher said. “There’s been a change in what the consumer wants. They don’t really want the commoditized, sterile, cookie-cutter hotel room—they want things that are unique, or artisanal. They want to stay someplace that represents the flavor of where they are.

“One of the people I spoke to for the book, a baby boomer who lives in suburban Atlanta, said ‘I would so much rather, at the end of a day of sightseeing, come home and have a drink in the back garden with the owner and just talk, rather than coming back to some air-conditioned Hilton.’”

For Ms. Gallagher, speaking at Canio’s was a coming home of her own in a way. A regular visitor to Sag Harbor since 2003, she rented a house in the village for two months when she was writing her first book, “The End of the Suburbs: Where the American Dream Is Moving.”

“Sag Harbor is a place that really means a lot to me, so I took two months off of my job and lived there while I was working on that book. It was the winter of 2012, and it was a very mild winter. It was just beautiful—it was a really wonderful place to write. I loved it, loved it.”

A longtime friend, Hank De Cillia, arranged for her to hold a talk about that first book at Canio’s. “The audience was amazing. There was just question after question, and the room was packed, and that space has such great energy. Nothing is a greater honor or privilege than standing up in front of people and answering their questions about the book you’ve just written. It’s such a great dynamic dialogue.”

Ms. Gallagher’s return visit to Canio’s lived up to the standard set at that earlier discussion. The room was full, and just about every member of the audience had a question or experience to share. And although the author stayed with a friend on this visit, she is shopping for an Airbnb rental for a longer stay later in the summer.