Airbnb cracking the Cuban market

Airbnb cracking the Cuban market
BY MIMI WHITEFIELD
mwhitefield@MiamiHerald.com


HAVANA
Nathan Blecharczyk, a co-founder of Airbnb, leafed through the guest
book at one bed and breakfast that had joined the lodging company's
network, tried a Cuba Libre in the roof-top bar of one of the city's
most fashionable private restaurants and climbed a spiral staircase to
view the roof terrace at another Central Havana listing.

Cuba is the new frontier for the company, which was founded on a
decision to rent out a few air mattresses in a San Francisco apartment
in 2007 and in five years has become an online force for booking in-home
stays in 191 countries.

Blecharczyk's June 23-26 trip was the first visit to Cuba by one of the
San Francisco-based company's three co-founders since Airbnb launched
its Cuba booking service in April and his first time on the island.

Airbnb morphed from its humble beginning to a company that now has more
than 1.2 million listings worldwide. It's in the process of raising $1.5
billion from investors, which, according to some estimates, could boost
the value of the company to more than $25 billion.

Airbnb encourages interaction between guests and hosts around the globe.
"We like to say, it's the U.N. at the kitchen table," Blecharczyk said.
At the end of each stay, guests and hosts rate each other, and hosts
with high ratings and lots of reservations move to the highest positions
in Airbnb's listings.

Since the Cuban booking service went live on the island three months
ago, Airbnb has accumulated more than 2,000 listings, making it the
fastest-growing launch in Airbnb history. It helped that Cubans have
been offering extra rooms in their homes for some three decades to
supplement their incomes. Airbnb piggybacked on that trend.

Listings range from simple rooms with shared bathrooms to accommodations
such as La Rosa de Ortega in suburban La Vibora where owners Julia de la
Rosa and Silvio Ortega have been renovating a 1938 mansion for the past
20 years. Their B&B has a swimming pool, large sun deck and nine stylish
rooms that have their own bathrooms. Renovation of a 10th room is just
about finished.

"Overall, it's been a remarkably successful launch. I think the
potential is quite huge," Blecharczyk said. "Frankly, this is unlike any
other country — that there was already such an industry of home-sharing."

But Airbnb wants an even bigger share of the Cuban pie. Currently, only
American travelers are allowed to use the booking service to make
reservations for in-home stays on the island. But during his Havana
trip, Blecharczyk, Airbnb's chief technical officer, said the company
was seeking a license that would allow travelers from outside the United
States to also use the Airbnb website to book stays.

If the proposal is approved, he said, non-American travelers using the
site would still have to "qualify for the same reasons" as American
travelers to Cuba. While U.S. law still prohibits tourist trips to Cuba,
"purposeful travel" in 12 broad categories is allowed.

NEW FRONTIER

Although Airbnb scaled up quickly, it plateaued when it reached 190
countries. Blecharczyk said Cuba was always in the back of his mind as a
new market, but the company really kicked into action on Dec. 17 when
President Barack Obama and Cuban leader Raúl Castro announced that after
more than a half-century of frosty relations, the two countries would
renew diplomatic ties and open respective embassies.

The rapprochement brought with it not only U.S. permission for more
Americans to travel to the island but also new regulations that made an
Airbnb expansion to the island feasible.

"I think a couple of things are very important," said Augusto Maxwell, a
Miami lawyer who accompanied Airbnb executives to the island in February
and helped them navigate the new legal realities.

Before Dec. 17, any company that wanted to provide travel services to
Cuba had to get a specific license from Treasury's Office of Foreign
Assets Control, and it required reams of paperwork. "The application was
very detailed, rigorous," Maxwell said. Under the new rules, "all the
paperwork is gone," he said.

The old rules also required a bricks-and-mortar location to sell
tickets, making it difficult for any company to operate in virtual
space. Plus, the burden "to sell travel services only to a properly
licensed traveler fell on the company and they were always subject to
audits," Maxwell said.

The shift in liability from the company to the traveler was key in
Airbnb's decision to enter Cuba, Blecharczyk said.

During his trip to Havana, Blecharczyk not only met with operators of
casas particulares, the Cuban version of a bed and breakfast, but talked
with private restaurant owners, young tech entrepreneurs and the owners
of other small businesses.

The financially strapped Cuban government began emphasizing
self-employment in 2010 in an effort to cut bloated state payrolls. Now,
nearly 500,000 Cubans have joined the ranks of cuentapropistas, or the
self-employed.

But the practice of renting out rooms or even entire apartments to
visitors was already well-established by then.

"It began well before the special period [after the collapse of the
Soviet Union when Cuba went through a prolonged economic crisis during
the 1990s] when people were looking for economic solutions," said Marta
Vitorte, who has been in the casa business for the past 20 years.

"Now people in the business have evolved," she said. "Now the mentality
is more that we do this to live better than we must do this to satisfy
the basic needs of a family."

Over mojitos at Havana's fashionable Café Madrigal, whose bare brick
walls are studded with eclectic art and vintage posters, Blecharczyk
discussed the lodging business with several hosts in Airbnb's Cuba network.

Vitorte, who has two antique-filled Vedado apartments in the
peer-to-peer rental network, is in the process of buying a third that
will be used as a guest house. "Now is the time to act before the prices
go crazy," she said.

Since Airbnb's Cuba launch, Cuban hosts have earned an average of $650 —
far more than they could earn at most state jobs in three months. Airbnb
collects 3 percent of each transaction from its hosts. On average, the
hosts take in $200 per booking, Blechcharczyk said.

The average room price in Havana is $41, according to Airbnb.

VISITING CASAS

Blecharczyk, who stayed at an Airbnb listing, toured various casa
particulares.

At 67 Tenth Street, he visited Armando Unsáin's guest house, an 1861
colonial where a nine-month renovation was nearing completion. When it's
done, he plans to raise prices and officially launch on the Airbnb network.

The Madrid native, who has become a permanent resident of Cuba, rents
out six rooms. For prices ranging from $35 for a double to $70 for a
large suite, guests get an accommodation that boasts stained glass
windows, vintage tiles and an ornate chandelier. For Unsáin, being part
of the Airbnb network is like a stamp of approval. It's a place where
all serious casas need to be, he said.

As a dozen workers rushed to put the finishing touches on the reno,
Blecharczyk sat in the living room with Unsáin leafing through his guest
book.

"I think it's so amazing to see how beautiful the architecture is in
some of these homes," he said. "The second piece of this is that there's
kind of an optimism in the air. There's a lot of excitement about new
opportunities among Cubans — and among Airbnb hosts in particular about
how more exposure will allow them to reinvest and make improvements both
for their benefit and the benefit of their guests."

Even though Airbnb only launched in Cuba on April 2, being part of the
Airbnb community has already begun to pay dividends for some hosts.

Yosvany Coca, who runs the Casa Blanca guest house that is so-named
because of its all-white theme — white walls, white bedding, white
towels — on the seaside Malecon, said that so far he's had 10 Airbnb
guests and has another 30 forward bookings.

Before Airbnb, Dany Hernández said he and his sister-in-law advertised
their two properties by word of mouth or by handing out business cards.
"We're really happy with the way things have gone" since signing up with
Airbnb, he said. They've had four Airbnb reservations so far.

Beyond offering a one-bedroom apartment with an updated kitchen and
bath, TV and stereo for around $50 a night, Hernández, a former baseball
player and now a youth baseball coach, said he likes to offer his guests
something "special" if they want. He shares his life with them, taking
them to his home and explaining how Cubans really live, or he might take
them fishing along the Malecon or to the ball park.

More and more Cubans are thinking about converting any extra space they
have into a room for visitors. Some families even squeeze into a single
room so they'll have more rooms to rent to guests.

When a bartender at the Hotel Nacional struck up a conversation with
Airbnb executives during Blecharczyk's visit, within minutes he was on
the phone to his sister-in-law in Miami asking her to sign up the
family's two Cuban properties with Airbnb.

Although some hosts have Internet at their homes, it is of the
snail-like dial-up variety. Those who don't have Internet service go to
hotels or state-run cyber cafés or pay around $5 to "hosting partners"
with Internet who can manage their inquiries and bookings.

ROUGH PATCHES

There have been a few glitches as Cuban hosts and Airbnb adjust to each
other.

Airbnb says it wants payment to reach hosts within 24 hours of a guest's
arrival, but some hosts complain it is taking longer. "We do try to pay
them as soon as possible but our capacity does differ by country,"
Blecharczyk said.

Airbnb has been using a Miami company, Va Cuba, to deliver the
remittances, which can be sent directly to a host's doorstep or
deposited in a bank account.

One host also complained that the reservation of a guest who also booked
for two of her friends was canceled because they didn't have the correct
paperwork. To travel to Cuba, each traveler must fill out paperwork
certifying that they fall within one of the dozen authorized travel
categories.

"In an abundance of caution, you need each traveler to certify that
they're an authorized traveler — not just the booker," Maxwell said.

Airbnb said it's working with its hosts to resolve such problems. "All
of this is being worked out for the first time," Blecharczyk said.
"We're working through all these issues. We're trying to understand what
isn't working and smooth those parts out."

Ezio Romolo said the first day that Airbnb launched he had 129 inquiries
about accommodations at his stylish Casa Densil guest house, which has
two rooftop terraces and an ebullient host who frequently entertains
Cuban musicians. But then he did something that deactivated his listing.
Airbnb helped him get back online but the upshot is that he still hasn't
booked an Airbnb traveler in any of his three bedrooms.

He has booked through mid-August anyway but after that he's looking
forward to welcoming Airbnb guests. "I make the best sangria," he said.
For a price, Romolo also offers guests everything from their choice of
Cuban cigars to car service, laundry, salsa and folkloric dance classes,
beer, mojitos, Cuba Libres and meals.

"What's great to get first-hand is how the hosts have fixed their places
up," Blecharczyk. At Casa Densil, he climbed to the highest of Romolo's
roof-top terraces where guests can relax in a bed surrounded by flowing
white curtains.

Around Havana, the mark of a casa particular is often a freshly painted
facade in a row of crumbling dwellings. Running a guest house appears to
be one of the healthiest of the self-employment segments.

In some U.S. cities, there has been criticism of short-term rentals
because they cut into the tax revenue hotels would pay and may
exacerbate the housing crunch in cities where rentals are in short
supply. But in Cuba, casa operators are required to pay taxes and so far
they aren't considered competition to state-owned hotels because there's
still a shortage of hotel rooms in Cuba.

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HOW DID AIRBNB GET ITS NAME?
In 2007, Brian Chesky, Joe Gebbia and Nate Blecharczyk were sharing a
San Francisco apartment when the landlord raised the rent 25 percent.
Blecharczyk moved out. The two remaining roommates, both designers,
didn't have the money to make the rent, but when they found out a big
international design conference, IDSA, was coming to town and all the
hotel rooms in the city were sold out, they had an idea.

They decided to rent out their extra room to designers who didn't have a
place to stay. "There was no furniture, no bed. But they opened up the
closet, pulled out two air mattresses and set them up," Blecharczyk
said. They offered the space to conference delegates as the Air Bed &
Breakfast. Surprise: They had takers at $80 a pop.

"They hosted three designers and made over $1,000," Blecharczyk said.
"Joe and Brian showed them around San Francisco and really gave them the
local experience."

Chesky, Gebbia and Blecharczyk had been thinking about starting a
company together, and they did just that in 2008. "We thought why don't
we make it just as easy to book a person's home as it is a hotel,"
Blecharczyk said. Air Bed & Breakfast was born.

To raise money during the 2008 election year, they bought a load of
cereal and designed candidate-themed boxes of Obama O's and Cap'n
McCain's. Selling them for $40 each, they managed to raise around
$30,000 for their new venture.

In the spring of 2009, the name was shortened to Airbnb, and since then,
the company has been on a growth spurt. "I remember very early every
week we would add another country to the site. We were growing very
quickly but then it stopped — it stopped at 190 countries," Blecharczyk
said. That is until Cuba was added.

Airbnb now has more than 1.2 million listings, including more than 600
castles, in 191 countries around the world.

At one point, a few years ago before the U.S. travel regulations
changed, some operators of Cuban guest houses were trying to sign up
with the Airbnb network. "We had to put an end to that, make sure the
proper restrictions were in effect," Blecharczyk said. "We had to add
code [to the website] to make sure that nobody could pay for something
from Cuba."

But since Dec. 17, it has been a whole new ballgame in Cuba.

Mimi Whitefield

Source: Airbnb cracking the Cuban market | Miami Herald Miami Herald -
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