The Cost of Fear and the Promise of One Standard

Of COVID-19, antifreeze and Austrian Wine: a blueprint for short-term rentals

An existential threat

Our industry in general, and Airbnb specifically, have a reputation for inconsistent quality. This may not be fair, but it’s unfortunately a fact. What was a fly in the ointment of our industry’s rapid growth, is becoming an existential threat, not just to Airbnb, but to the industry in general. 

In a gloomy article on Airbnb last week, The Wall Street Journal aptly commented: “Whether Airbnb can rebound fully from the coronavirus catastrophe—and how quickly—will depend in part on how consumers feel about traveling and staying in other people’s homes once the pandemic eases. Some analysts say Airbnb might benefit if more people decide to avoid more crowded hotels. Others say hotels might gain an advantage if people think they are cleaner.” This latter comment goes to the heart of the matter, and it doesn’t just apply to Airbnb, it applies to our entire industry. 

I can think of many a host and established vacation rental manager with rigorous cleaning, training and inspection protocols that will understandably bristle at the premise that hotels are cleaner. But the fact that they are right is besides the point: perception is reality, and as much as we wish it to be otherwise, consistency and quality are the achilles heel of our beloved industry. Every time I hear Brian Chesky present (well-founded) arguments that 94% of guests are happy with the cleanliness of their rentals, it reinforces the underlying point: like a boomerang, this question keeps on coming back. This time, the boomerang can kill.

Some 5 years ago, a skeptical investor asked me this question: “What happens to Airbnb if a serial killer targets a few Airbnbs?” The question sounded preposterous at the time, but today that serial killer has a name: COVID-19. Of course, the silent killer didn't just target Airbnb, it attacked the entire travel industry with it.

It’s not hard to imagine the headline. “Family of 5 Contracts COVID-19 After Attempted Quarantine Stay in Vacation Rental.” The article would describe the family who had been tested and found negative for COVID-19, and who decided to quarantine in the country. Despite bringing all their own food and supplies, they came down with COVID-19. The only possible culprit? The rental itself. Farfetched? Not exactly, as Britain’s first “super-spreader” returned to Britain via a ski chalet rental in the French Alps. And the risks are real: multiple studies suggests that the virus may remain infectious for up to six days on typical high-touch surfaces present in most of our rentals, including plastic lightswitches, stainless steel door handles and drinking glasses.

Would one headline do it? It might take two. Maybe three. But once it starts, short-term rentals will be synonymous with danger, and traveler trust will be utterly destroyed. 

And as we’ve all found from similar headlines featuring hidden cameras or bed bug infestations, guests tend to tar all short-term rentals from a single platform, and even across platforms, with the same brush. And this time, the stakes are much higher.

If the headlines start, the reputation of short-term rentals will crash. But even if we dodge this bullet, we have to fundamentally change the way we do things: we have to counter fear in the most forceful way we can, and deliver Peace of Mind, by setting, enforcing, communicating and certifying the most stringent cleaning standards. The alternative is possibly a decade of pain. In the meantime, many property managers and hosts will lose their livelihoods. And plenty of rentals will be taken off the market entirely, never to return. 

How do I know? Because it’s happened before - in the Austrian wine industry. 

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Of wine and antifreeze

Let me start by stating that I do not wish to trivialize this current pandemic, which has already killed well over 100,000 people, and is ravaging all of our economies, and causing unspeakable pain, with a local scandal and scare in a small European country. The Austrian wine scandal of 1985 holds some interesting lessons on the cost of fear, but that’s where the similarities end.

The wines of Austria are among the best in the world. The vintage and vintner hardly matter anymore, because the entirety of Austria is obsessed with the quality of the wines they export. And there’s a reason for that: in 1985, a highly-publicized scandal burned the reputation of Austrian wines to the ground.

After a series of bad growing seasons in the early 1980s, the quality of Austrian grapes grown was lower than average. Austrian wineries had contracts to deliver wine of a certain quality to their German customers, and the thin, sour wine they’d produced simply wouldn’t do. Out of fear of losing their livelihoods, a few people took matters into their own hands and tried to sweeten their wine with diethylene glycol - otherwise known as antifreeze. 

Diethylene glycol can be lethal, and at any dose, it causes brain and kidney damage. Newspapers started blasting headlines about tainted Austrian and German wines. People were terrified, and wines were pulled off the shelves everywhere in the world. West German authorities destroyed 27 million liters of Austrian wine, wiping out 7 months of sales. Older vintners retired in droves, the scandal too much for them to navigate. 

There were only a handful of tainted bottles. But it didn’t matter. Austrian wines were anathema. 

It took 15 years for Austrian wine exports to recover. The short-term rental industry can’t afford 15 years of lost trust - many well-established managers are struggling to stay afloat with the prospect of a mere six months of lost bookings. 

So what can we do? We can learn from what the Austrian wine industry did after their scandal - and implement it before it’s too late. 

Trust, reviews and growth

Trust has long been a serious issue in our industry. Guest reviews are pretty much the only way that a traveler can determine the quality of a listing - and as we’ve all seen, an RV with a jerry-rigged trash can shower can achieve a 5-star guest rating, as long as the guests are happy. 

In the wine industry, there’s the concept of a “top shelf” wine. Lower-priced, lower-quality wines are on the bottom shelf, while higher-priced, higher-quality wines occupy the top shelves. 

Page ranking is more or less the listing sites’ answer to “shelving.” Top shelf properties are on page one, and bottom-shelf properties languish on page 7 or 8. But while some platforms have successfully convinced users that their algorithms are delivering the quality they expect in the top-ranked properties, at least one well-known platform has struggled to convince its users that its “top shelf” choices are really top quality. 

Of course, it’s a winners’ curse: the faster a platform grows, the more bottles of “wine” end up on the virtual shelf; and the less we know about each bottle, and the vintner who made it, the higher the risk. Marketplaces are in the business of creating liquidity, and that means new listings need to get encouraged, and get bookings early - possibly well before they figured out the ropes, and well before reviews tell us their wine wasn't that great. 

And critically, a review might be ok to differentiate between good wines, ok wines and great wines. But a review is not sufficient to weed out wines that kill. For that, we need a stringent, trusted system that controls which wines make it to the shelf. The vacation rental industry as a whole, and Airbnb in particular, have relied too much on reviews to manage quality.

Booking.com does quality management

Booking.com has made a serious attempt to implement something like a shelving system for its rentals by creating global quality ratings. The immediate objective is to ensure guest expectations are met. A byproduct of this ongoing project was the recognition that cleaning scores are very strong predictors of overall guest reviews. Managing cleaning processes through a tight quality management system is the equivalent of catching the bad wines before they hit the shelf. Beyond just grouping properties into quality tiers, there was a recognition that a (small) group of properties consistently performed very poorly on cleaning, and that these properties led to very poor guest experiences. Booking.com made the bold choice to offer those low performers a stark choice: adopt a Booking.com minimum cleaning standard, and submit to a rigorous quality management system, coupled with (remote) inspections, or face a high risk of getting removed from the platform.

Disclaimer: I know this program well because Booking.com is working with Properly, a company I founded. Started in November, we started with a small sample of properties with very significant quality challenges. The program is ambitious as it has a series of bold objectives: one, to enforce a common set of minimum standards across a highly disparate set of partners: from individual hosts to small property managers to large managers, who may clean themselves, use a neighbor, a local cleaning company, or have sophisticated housekeeping departments with supervisors, inspectors and training programs, across dozens of countries in multiple languages. Two, there is a serious attempt at behavior change, which is very difficult to accomplish. We added an (optional) high-touch element to the pilot, whereby Properly’s in-house Remote Inspection team can review cleanings in real time, and provide immediate feedback to cleaners while on site, to help them pass. Three, for Booking.com to embrace this, there has to be a clear path to scaling - with millions of listings around the world, I suspect Booking.com wouldn’t embark on a project unless they believed it has a chance to be meaningful at a global scale. As a company, we have upgraded our engineering team with machine learning and artificial intelligence skills, and executives from companies like Google and Microsoft that have experience in operation at scale. 

It’s early days, but I’d think early results are very encouraging. With the industry shut down around the world, the pilot will have to pause until markets open up again - but I’d venture to guess that when we resume, the importance of quality management, consistent, enforceable processes and certification will grow exponentially.

Of brands and supermarkets

Booking.com’s quality management pilot with Properly sets a common minimum standard, and standards like these should eventually mean that travelers are learning to trust that if they rent a property on Booking.com, they’ll get something of a certain, guaranteed quality. They’ve decided Booking.com is their local wine shop - well curated, with no bad choices, only differing quality levels. 

Our current crisis raises the stakes dramatically. In an industry still dominated by three “supermarkets”, there isn't sufficient brand differentiation to protect meaningfully large pockets of our category from a lack of trust tainting much of the industry. To use our metaphor, when antifreeze is discovered in the wine, customers can’t simply avoid the one with the Austrian label. No one knows which is the “bad” wine and which is the “good” wine. It’s all mixed together on the same shelf. Craft vintners and hobby chemists flying by the seats of their pants are all jumbled together - who knows which is the wine that might kill you? 

Better to just avoid wine altogether. To stick with our boozy analogy, forego the risk of the (possibly) amazing vintners and microbrewers, and stick with the tried and true Budweiser and Heineken - they might be boring and uninspiring, but they should be safe.

Unless, of course, we start putting labels on our wine. Labels that say “this wine has met high common standards, been inspected by a qualified professional, and deemed safe to consume.” 

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A blueprint for success

I’m convinced that we need to radically transform our industry, and I’m hopeful that we can. A framework for setting standards, and monitoring, enforcing and certifying those standards will be key to restore trust that our listings will be as safe, and quite likely safer, than the alternative. There is no reason we shouldn’t be able to leapfrog the quality standards of traditional hospitality providers, and set a shared, common standard. Here’s some observations, and some thoughts on a blueprint for quality in our industry:

One Standard

Thinking of our own early experience at Properly, one obstacle to scaling much faster has been our attempt to provide a flexible tool so everyone can implement their own standard. This was a major mistake. The very idea of a standard is that there is one, not many. Every host and property manager doesn’t have to, nor should, come up with their own cleaning standard. Sure, we might have more than one - say, a three star standard and a five star standard; and platforms and PMs might well introduce different flavors - say a Business Standard or a Family Standard or Airbnb Plus or Booking.com’s 5 Stars - but all of these should be built on one common minimum requirements framework that guarantees safety. There are simple ways to do things right, and those should be encapsulated in common industry standards.

Many adaptations

The heartbeat of our industry is its diversity. Each location is unique, and every accommodation is different. A ski chalet has different requirements from an urban loft or a treehouse or a houseboat in Florida. But that simply means that different aspects of a common standard come into play. A cleaner should disinfect every lightswitch and every remote control, whether that’s in the houseboat, the treehouse or the urban loft. Property attributes can then act as filters for which aspects of a standard get applied.

Work within our industry structure

Our industry is characterized by its fragmentation. The lifeblood of our industry are the small and midsized providers, as well as owners and hosts. Enterprise-scale players cover a tiny percentage of the inventory. To be meaningful, a standard needs to meet the requirements of the many, not the few.

Cleaner first, mobile first

For any industry system to be adopted, we have to start from the cleaner. Whether they themselves are hosts, work for an owner, are an independent contractor to a vacation rental manager or an employee of a larger manager or a commercial cleaning company, they need to embrace and adopt a solution first. This means any solution needs to be easy to use, not create excessive overhead, and allow cleaners to bring their own device. We have a historic opportunity, as I have never seen less resistance from cleaners to quality management tools - everyone is all too eager to get this industry restarted, and to restore peace of mind.

One system of record

To restore peace of mind, there needs to be a common system of record. Every stakeholder - owner, property manager, listing platform and possibly, even regulators - should be able to see some elements of a job record - up to which process was run, where, by whom and with what outcome. The CEO of a leading ecosystem company recently told me about his wife being on the phone with a receptionist at a hotel to understand what cleaning processes they employed - to decide if they’d book a room there for an emergency trip to help an elderly relative. Our industry could provide a standard checklist, as well as cleaning and completion score for each turnover, to all stakeholders, at minimal overhead.

Open systems

Our industry has to be built on open integrations, between listing platforms, PMS’ and a certification platform, on an open API structure. 

Training and certification of people

As the workplace continues to gravitate towards independent contractor relationships and flexible work, a compliance platform also needs to constantly train and test its service providers. It’s not just important what tasks got done, but also how they got done, and that those working on site are safe - and even more so in a world where cleaning and hygiene tasks are increasingly complex, and high stakes. But this ongoing training has to be delivered in an effective and compliant fashion, so as to not jeopardize the classification of contractor relationships. 

The above should provide for a flexible, yet highly effective certification framework, that allows for every cleaning job to be tied to a standards checklist, and have a complete job record, as well as a job score, and property scores and service provider scores. Third party certifiers (e.g. Industry associations) can provide certification, or large property managers can build their own, as can the listing platforms. This will allow for brands to construct their own criteria and brand standards, and for smaller managers or hosts to choose a certifier. Our industry should win as the underlying minimum standards are stringent and transparent, and restore peace of mind to the category in a world ruled by fear. And this, in turn, benefits the entire ecosystem.

Guests benefit as they know that what they’re receiving is of high quality. They know what the process by which those properties are certified is. And they know that they’re not going to receive a mouthful of antifreeze - or a kitchen counter infected with novel coronavirus. 

Take the Red Pill, Neo!

I opened this article with Airbnb, so here are some closing thoughts on the company. Airbnb has transformed our industry, mostly for the better. But with growth have come challenges, and it’s only to be expected that controlling the quality of millions of listings, acquired over a relatively short period of time on a two-sided marketplace is a challenging task. Unfortunately, the environment is hostile now, and managing quality has become an existential threat.

Airbnb isn’t the industry, but it has had an outsized influence on the industry; and it would be naive to think that this will change. Going back to its roots is an interesting approach, but it comes with challenges - those roots are millions of hosts, and the quality of their offering needs to be managed carefully. Recent responses by hosts have shown that they cannot be dealt with in a heavy-handed way; so the role of platforms is to provide frameworks for certification, and maximize their value and visibility, not to impose them. Also, I hope that all listing platforms, in an age of collective belt-tightening, will look for collective industry solutions. 

After all, we have a common enemy: our enemy is fear. 

So buckle up, Neo, and take the Red Pill: self-awareness - and quality, consistency, and certification - will be the winning ingredients for those listing platforms, managers and hosts that survive the storm, and might well thrive. As an industry, we have a differentiated product with many strengths to weather this storm, and we can come out stronger on the other side. Those that opt for the Blue Pill - blissful ignorance - do so at their own peril. Just ask a generation of Austrian vintners. This is our collective wake-up call: if we play this right, I’m convinced we’ll come out stronger on the other side.