Many high-flying technology startups, including a number of multibillion-dollar “unicorns,” are struggling to break even, let alone make money. But Airbnb miraculously turned a profit in the second half of last year, according to a report by Bloomberg—and expects to remain profitable (excluding certain expenses) for the rest of this year.
It sounds like a fairy-tale ending to a hopeful tale of disruption done right. The company started as a kooky idea for renting out blow-up mattresses to college students and became an industry-crushing titan, with a market cap equal to that of the Marriott hotel chain.
Millions of people who have used Airbnb sing its praises and say staying in someone’s home is a lot more inviting than renting a hotel room—and often cheaper too. But cities in which Airbnb has become popular aren’t nearly as welcoming, and more than a few have passed laws designed to crack down on short-term rentals, including New York and London.
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Airbnb has been trying to find a middle ground, offering to collect tax revenue and place caps on the number of properties that hosts can rent. But it’s not clear if any of these offers will be accepted. And there will be costs regardless, in the form of lost bookings: The Financial Times says new rules could cost Airbnb to $400 million in London alone.
In a nutshell, it feels as though the freewheeling days of low-cost Airbnb growth could be coming to an end, to be replaced by a higher-cost future of dealing with unfriendly regulators and laws in multiple jurisdictions across the country and around the world. And that could put a cap on the company’s profits for the foreseeable future.