By Luanne Teoh on 08-01-2011

Recently we wrote a blog post on Airbnb = Death of Hotels? which highlighted its recent membership into the billion dollar valuation club, $100 million dollar round in funding and exponential growth.

A month later, Airbnb is once again a hot topic of discussion around the web. This time round, it’s about a renter who was a victim of a horrifying property crime – after renting out her apartment through Airbnb.

As one of the hottest internet startups at the moment, this could not have happened at a worse time for Airbnb. Although it’s a very popular, having booked over 2 million nights, it’s not yet mainstream — but we believe is on the brink of the tipping point. The double-edged sword to this is as more and more people learn about Airbnb, amongst those people are also criminals finding ways to take advantage of the situation and find ways around the system.

Undoubtedly, Airbnb representatives have rushed to respond to this crisis through Silicon Valley’s most prominent technology blogs when the victim started to document her Airbnb experience through her blog. According to Brian Chesky, Airbnb’s CEO, “With a single booking, one person’s malicious actions victimized our host and undermined what had been – for 2 million nights – a case study demonstrating that people are fundamentally good.”

While writing this, I discovered that another Airbnb victim with crazy photos has surfaced in the last 24 hours with a similar horror story as a meth addict took over his home and ransacked it.

According to Brian Chesky in his guest blog post, Airbnb has beefed up its security check and balances which include private messaging, transaction-based reviews, algorithms that identify suspicious behavior, doubling the customer support staff, offering insurance options to hosts and many more.

From these two horror stories presented so far, some basic issues and questions for Airbnb to consider are local short term laws and insurance issues.

According to Troy, the second victim who shared his story, ”Most rental insurance won’t cover this because you are essentially subletting. If major theft and damage is as rare as Airbnb says it is, which I believe is true, then they should be able to get a great insurance policy tailored just for their customers that they can sell for an additional fee to the renters.”

In most urban cities, it’s common to have multiple tenants in an apartment building. What if you rent your home out through Airbnb to a person who injures another tenant in your building? The potential lawsuits would be catastrophic.

If this is happening, then two things could potentially be the issue for Airbnb:

1) Putting potential renters at risk with no recourse.

2) Facilitating ill-intent and behavior.

As stated above, insurance won’t cover the cost of subletting and if ill-intent and behavior occurs during that time by renters, you can be sure no insurance company will cover that (none that I know of at the time of this writing at least).

Here is the main question? Is this a one (or two)-off PR crisis or a failure in business model?

With the amount of press this issue has received, will it make renters less likely to rent out their home until Airbnb sorts it all out? Airbnb’s marketing tagline, “your apartment will pay for itself” — is an incredibly attractive proposition especially during these economic times.

As Airbnb figures out how to overcome its loopholes, I won’t be surprised if more horror stories start creeping out of the woodwork.

About Luanne Teoh

Luanne is a senior correspondent for BizTechDay focused on Small Business Tech, Mobile and China based in San Francisco. In the last 17 years, she has helped launch start-ups and turned around failing operations. Her international work experience include both public and private corporations in Southeast Asia, Australia and North America. She has previously worked for Oracle Corporation, SonyBMG Music, Universal Music, Catcha Media and SOH Inc. Apart from a keen interest in technology, Luanne is also and avid explorer of the globe, cultures and people.

Leave a Reply