Pando

Circumstances align for Airbnb as Cuba becomes the company's fastest growing market

By Dennis Keohane , written on May 12, 2015

From The News Desk

A little over a month ago, Airbnb started operations in Cuba by adding 1,000 homes to its rental platform on the island, one of the largest operations by a U.S. technology business in the country since President Obama announced plans to lift restrictions on U.S. business and travel to the island. Today, chief executive Brian Chesky announced that the company now has 2,000 properties listed in Cuba which, according to the CEO in an interview with Bloomberg Television, is the startup's fastest-growing market yet.

Part of the reason is that the country has an existing bed and breakfast infrastructure — which uses booking middlemen — that made it simple to migrate to a platform like Airbnb. "Casas particulares" as they are called, are bed and breakfasts that came into existence once Cubans were allowed to become self-employed in the 1990s. Once Airbnb started operating in Cuba, the casas particuluares were a perfect way for the site to quickly add listings in the communist enclave.

During the interview, Chesky said that its presence on the island is allowing Cubans to become "micro-entrepreneurs."

"In a couple minutes they can actually be able to earn an income," he said. "This is not something we invented. Casas Particulares already existed in Cuba where people were renting their homes, but we now make it I think a lot easier."

However, as one would imagine, it's not that easy to integrate into the existing system. The reliance on the go-betweens is due to the limited Internet access that average citizens have. As pointed out in a recent Fast Company article, only about 5 percent of the population has Internet access that is not controlled by the government. And that's where the middlemen, who were already booking the casas particulares for the owners through the web, play a role. Because of the challenges that arise when individuals in Cuba are paid for a service, Airbnb also uses middlemen to make sure the owners are paid correctly.

"On the host side, we are sometimes able to use our usual payout methods to pay Cuban hosts," said Jakob Kerr, a spokesman for Airbnb in an email. "For hosts who aren’t able to accept funds in these ways, we are working with third parties to remit payments in the manner that our Cuban hosts select, including door-to-door delivery of payments. As banking infrastructure in Cuba evolves, we will reevaluate our payment procedures to suit the needs of our Cuban host community."

According to Kerr, Airbnb's usual fee structure is in place in Cuba, wherein the company charges a booking service fee and takes a small percentage of the amount paid for the rental.

But for Chesky, allowing Americans to stay in Cuba is also a significant aspect of its operations on the once closed-to-Americans island. "I think the idea is that if you want to travel to Cuba like an insider and be in a home in a very intimate experience, be at the heart of a local community, this is I think the best way to travel to Cuba," Chesky said. "And the thing I'm very, very I'm excited about is President Obama has a desire to bring these two communities together, Americans and Cubans. What better way to bring them together than actually in their homes? That's a really important thing to do."

Julia E. Sweig the author of Cuba: What Everyone Needs to Know, said in an interview today that the increase in American travel is 30 percent higher than it was at this point last year. "It's part of the bilateral diplomatic opening, and it's created legal places for Americans to travel there without having to ask permission of their government," Sweig said.

She also said that Airbnb working with the casas particulares could be really important because the money is going to Cubans and not the government. It seems that Airbnb has the right product for the right moment in the Cuba-America relationship.

"This is very specific" Swieg said. "There aren't other tech companies who have the stars align this well, where you can see them taking advantage of something that has already existed, wrap their arms around it, and say, 'Ta da!'"

"In terms of broad foreign policy and broad opportunities for travel for people who want to stay in an Airbnb and explore Cuba, this is great," said Swieg. "But Airbnb hasn't replaced hotels and its not going to do that in Cuba, but for now, it's going to absorb the increase in demand."

And, there seems to be quite a lot of demand. According to Chesky, the 2,000 listings in 40 days makes Cuba Airbnb's fastest growing market.

"It took us three years to get 1,000 homes in San Francisco, New York and many of our big cities," Chesky said.

While the the growth in Cuba will be interesting to watch, the reason that the Airbnb CEO went on Bloomberg Television, and also visited the White House today, was due to the news that Chesky was named the presidential ambassador for global entrepreneurship. With how the company is both expanding its business and serving as a potential model for businesses to integrate into Cuba's existing business infrastructure, it was a wise choice.