How the worlds largest hotel chain validated their business with air mattresses

How the worlds largest hotel chain validated their business with air mattresses

That's right - air mattresses, and I'm sure you can guess whom I'm talking about already.....

In 2007 cash strapped students Brian Chesky and Joe Gebbia had recently moved to San Francisco and needed to find a way to supplement their rent.

The annual tech conferences in the city would hike the hotel prices up and accommodation would be scarce. So they decided to use a spare room in their flat, buy some air mattresses and rent them out to conference delegates through sites like Craigslist.

They initially focused on targeting just one demographic - 'tech conference attendees' at a single sold-out conference. They didn’t need to provide other options to prove this simple assumption. They didn’t need to account for every use case. They only needed to confirm that a sufficient number of people were willing to rent what they were offering.

Brian and Joe needed to initially validate two core areas of the business - Firstly, they needed to demonstrate there was a market for paid room rentals in someone's house (Demand). Secondly, they needed to attract enough hosts to their site so there were enough rooms available to rent (Supply).

To validate the supply side they first used their own apartment and air mattresses and managed to secure 3 paid guests. They then asked for feedback from each guest and began iterating their offering.

Flash forward and after some promising early signs of interest they built a very basic website called 'Airbed and Breakfast'. This Minimum Viable Product (MVP) was incredibly basic to today's standard - limited filtering options, no ability to select multiple dates, no beautiful images or multiple locations to select from.

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Next the founders had to validate the supply side. To do this they added a new feature on their website that provided the ability for hosts to post their own apartments. This was the early beginnings of creating the Airbnb marketplace. Now the two sides of the marketplace could work somewhat independently, the founders continued to work on growth and keep a consistent balance of supply and demand.

One great example of doing things that don't scale which I use a lot during Spark is how the Airbnb founders looked to improve the quality of listings from hosts on the platform. In the early days, camera phones didn't have the pixels we are all accustomed to today, therefore some of the host's pictures lacked quality and creativity - same goes for their property descriptions as most people aren't experienced in writing good product descriptions. To combat this issue the Airbnb founders went to each of the hosts properties and offered their free photography skills with a reasonable DSLR camera and also some input on their descriptions. This quickly improved the quality of supply on the platform and encouraged more bookings.

By building a simple and lean MVP and learning at the earliest stages, they avoided what could have been a costly and potentially a feature-rich failure. Better to fail fast and readjust, than to learn the same lesson after spending a ton of time and money.

Business
Customer Development
Growth
Product Strategy