“Our happiest moments as tourists always seem to come when we stumble upon one thing while in pursuit of something else.” — Lawrence Block
Airbnb was founded in August of 2008, a month before the Lehman Brothers’ collapse threatened to plunge the world into financial gridlock. I remember landing in Hong Kong in October of 2008 as Asia’s financial hub was on the brink of a bank run which prompted Hong Kong’s Chief Executive to guarantee the safety of all cash deposits for the next 5 years. This emergency assurance by the Hong Kong government helped to calm the nerves of Hong Kong citizens.
This financial maelstrom was part of a perfect storm that breathed life into Airbnb and ushered in the new era of the sharing economy. With the world facing financial uncertainty and a contracting economy, Airbnb offered a platform for people to earn extra money by renting out their homes benefiting travellers with accommodations often cheaper than a hotel with greater value. Airbnb currently has over 800,000 listings offered in 192 countries and 35,000 cities.
Friendship, Travel and Entrepreneurship
While living much of this past year in Thailand, I caught up with an old friend in Bangkok whom I hadn’t seen in over 3 years. I met Ed almost 10 years ago while living in Vancouver and we became quick friends as we both shared a love for travel. With most of my friends, we’d meet for coffee at a cafe or restaurant. However, with Ed, we’d often meet at YVR (Vancouver International Airport) for a coffee. The airport always seemed to soothe our nerves. Conversation usually consisted of our entrepreneurial war stories and our desire to one day live in Thailand.
Ed was approaching his mid-twenties when we met. He had that fearless confidence that came with youth, sprinting into life’s headwind with his hair on fire. He made and lost small fortunes providing tours to Korean tourists, importing exotic cars from Japan, importing goods from China and dabbling in home renovations. As a young entrepreneur, Ed’s main goal was to maximize profit at all costs. Business was a zero sum game to him; somebody wins and somebody loses on every transaction. Every decision was aimed at landing him on the winning side of the profit equation.
Being around Ed reminded me that at one time, I too had that fearless confidence and entrepreneurial ingenuity. I was reminded of how I paid for my university education at UBC by scalping entrance tickets to Vancouver’s world expo, Expo 86 as well as tickets to Vancouver’s professional hockey and football teams. However, somewhere along the line, I grew up. I got scared. I was afraid of making mistakes. I was afraid of failing. And then I was simply afraid.
The Bangkok Shuffle
Nearly 5 years ago, Ed cut ties with Vancouver and left to pursue his dream of living in Thailand. As the money emptied from Ed’s pockets, so did the idyllic dreams of living in the Land of Smiles. His days of partying and lying on the beach were replaced with figuring out how to feed himself and earn a living. His pride removed the option of returning home. His pride also kept him from accepting low paying work. The stress kept him up late at nights. His nerves soon resembled a crumbling Jenga tower. The only solace he could find was exploring the streets of Bangkok on his motorbike late at night while the city slept.
Swallowing his pride, he decided to teach English despite not having any teaching experience. The first hurdle he’d have to deal with is that in Asia, English teachers of Asian descent are less likely to be hired because they don’t “look” like they’re native English speakers. In other words, schools will generally hire someone who is Caucasian over someone who is Asian. Like it or not, that’s how the perceptions work over here. Secondly, with no teaching experience or credentials such as a TEFL certification, Ed taught himself how to teach and make lesson plans by watching YouTube instructional videos. Moreover, without any teaching credentials he was offered a salary below the industry minimum. Overtime, Ed actually became an effective teacher, earned the praise of his students and earned a few small raises along the way.
Despite having some income now, Ed still had to watch his Bahts (1 Thai Baht is about 3-4 cents CAD). He’d endure 12 hour bus rides for visa renewals in order to save 30 dollars. Eventually, Ed got some breathing room finding a contract position with the UN (United Nations) developing programs to help refugees and human trafficking victims from neighbouring Myanmar (Burma). It was an experience that profoundly changed him and that’s made him passionate about the plight of refugees. Despite his contract ending with the UN almost 2 years ago, he still volunteers regularly, visiting Myanmar to help with the work that he started. The work was very dangerous requiring him to wear a bulletproof vest when crossing the Burmese border. This safety precaution saved his life on one occasion when he was shot by a Burmese soldier for refusing to pay a bribe.
The Perfect Storm
With money quickly dwindling again, his last resort was to sell a condominium that he bought in Shenzhen, China years prior during his China importing ventures. He avoided this option for the longest time as he would incur a significant loss with the sale. Without more attractive options, he made the sale and took the loss.
With the proceeds from the sale, he now faced the same dilemma that many lottery winners face. How to use the money? Invest the money or live off the money and let life’s current take him down stream? Ed’s entrepreneurial instincts awoke from a deep slumber. As an avid traveller, Ed had already been using Airbnb’s platform to book his travel accommodations. Up until then, he always viewed Airbnb through the eyes of a traveller and never as a host.
Three years ago, Bangkok real estate was soft enough that Ed could buy two small condos within Bangkok’s CBD (Central Business District). The decision to cross this Rubicon would change his life forever. These two units would be the seedlings of his new life.
With Bangkok situated as the main entry point and travel hub for Thailand, Ed’s condo units were near full occupancy every month. In Thailand, condo owners rent primarily on long term leases: usually 6 months or a year. With Airbnb’s model, Ed was able to earn four to six times the normal rental income. Incoming revenue was immediately reinvested into ways that would add value for his guests during their stay. On top of maid and cleaning services, Ed bought motorbikes (scooters) for his guests to rent. He took the extra step of installing brackets on the bikes’ handlebars so that his guests could mount their smartphones to use of their phone’s GPS navigation system. For a reasonable fee, he also offered his guest airport pick-up service. In most of the units, he’s furnished them with sofa beds and bunk beds to accommodate a family or groups travelling.
Is Bangkok The Goose That Lays Golden Eggs?
With a steady flow of revenue, Ed would reinvest and buy additional condo units whenever possible. More condo units meant more revenue. As Ed’s business continued to grow, local Thai people started hiring Ed to manage their own condo units. Ed has gotten so busy that he has a team of maids to manage the cleaning and maintenance of all the units he manages.
Despite Ed’s business acumen and entrepreneurial spirit, it’s his work ethic that is really at the heart of his success. I spent a few days with Ed to see what he actually does in a day. Initially, not a smart move on my part as Ed gets up at 5 am to start his day. The early start is in part due to him overseeing renovations done at a few of his units. He even put me to work sanding down floors and cutting tile. Renovations also meant regular trips to IKEA buy furnishings for the condos. And yes, the IKEA in Bangkok is the same as back in Canada. Same look, same floor plan and even the same bargain hot dog and drink promo from their restaurant.
As we walked through the display floor bouncing from the Lack end table to the Ektorp couch, I mentally started doing the math on Ed’s business. Based on the purchase price of the condos and what he is able to get in rental income from them, he’s able to pay off a condo in about three years; in some cases, a little less. Now that’s one heck of an ROI (Return On Investment)!
To further put that in perspective, in my home city of Vancouver, Canada, the average price per square feet for a condo in Vancouver’s CBD in 2014 was $904 CAD per square foot. In Vancouver’s current runaway real estate market, that number is now well north of $1000 CAD per square foot. The equivalent unit in Bangkok’s CBD is about $300 CAD; two thirds less in a city that holds almost 7 times the population.
For this reason foreign investors now consult with Ed to help them invest in Bangkok condominiums and implement the Airbnb model that has been so successful for him over the last three years.
Connecting The Dots
In my BS existential angst regarding my life’s direction, I often contemplate what my next move should be without conceding my life to the brink of check-mate. Besides, who was I playing against anyway? I compared Ed’s path and my own for some insight.
I recently watched Steve Jobs’ commencement speech that he gave at Stanford University in 2005. Previously, I had only watched portions and sound bites from that speech but I decided to watch the whole speech in its entirety this time.
One key theme of his speech was that life should be lived in faith that the dots of one’s life experiences, both good and bad will somehow connect in the future. In Jobs’ case, dropping out of college and only attending courses that genuinely interested him led to take a calligraphy class which later inspired the creation of fonts. Moreover, his ousting at Apple forced him to start over again and see the world with a new and fresh pair of eyes. This reset eventually led him to the creation and success of Pixar, the ipod and iphone. The confluence of seemingly unrelated events later in his life would be crucial in the kind of work and life path that he’d eventually walk.
With Ed’s case, his experience as a world traveller, entrepreneur, and home renovations all contributed to his current Airbnb business. Moreover, the aimless motorbike rides through the city that Ed used to take during his difficult times allowed him to really understand the layout and hidden value of Bangkok’s real estate.
The one point that Ed re-iterates often is the need to always keep moving forward. The inertia created from forward action seemed to open opportunities for him which allowed for the dots of his life to eventually connect. It’s a chapter in Ed’s story that I would dog ear since the Achilles heel of my life is excessive thinking. My results were always paralysis and inaction. Like a creek where the water doesn’t flow, the water becomes stale.
Final Thoughts on the sharing economy
The internet through peer-to-peer businesses such as Ebay has turned the fortunes around of many people willing to take advantage of its platform. These platforms allow for lower transaction costs and ability to scale. While Ebay originated as a simple peer-to-peer sales and marketplace platform, its landscape is now dominated with professional “Power Sellers”.
The peer-to-peer share and rental marketplace alone is worth in excess of 26 billion dollars. Virtually anything that you can think of renting, there seems to be an online platform and market to accommodate it. Anything from housing (Airbnb) to office space, camping space, office equipment, industrial machinery, cars, or bikes can be rented for a price. This sharing based economy allows unused assets to be utilized to greater capacity. Both the renter and user benefit from this relationship.
In Ed’s case, this win-win type of outcome extends way beyond the renter and user. Touched by his work with refugees, much of his maid staff are Myanmar refugees where they are paid a 30 percent premium to the average Thai wage and also includes the benefits of health insurance. Furthermore, Ed donates a percentage of his monthly earnings back to the Myanmar refugee camps to help with housing and education.
While in days past, profit used to be a bull’s-eye target for Ed, but now profit is merely a springboard to building something better. I can only assume taking a bullet and witnessing human suffering first hand will change one’s world outlook. When asked, how much is enough? Ed’s answer:
It’s not about the money. It’s about building something.
And build something is what he’s doing. As the dots continue to connect, Ed recently opened up a new hostel (Oh Bangkok Hostel) in Bangkok’s iconic Khaosan Road district, ground zero for Bangkok’s backpacker community. Ed’s life had come full circle; from seeking adventure to being lost to ultimately finding himself again in the company of fellow travellers.
Airbnb has created a mutually beneficial environment that has benefited hundreds of thousands of hosts and travellers with extra income and value accommodations, respectively. However, for one traveller and thousands of marginalized people of a third world country, Airbnb means a whole lot more than just money.
“Stop worrying about the potholes in the road and enjoy the journey.” – Babs Hoffman
Have you ever been an Airbnb host or renter? What are your thoughts and experience with the sharing economy?