The New Bed and Breakfasts: Low-Cost Lodging for the Price-Conscious Traveler

Say you’re a tourist from outside the United States planning to visit New York City. You may be aware that the city is made up of five counties (in New York they're called “boroughs”), but you feel Manhattan is the place to be — the home of Broadway, Central Park, the hottest restaurants and clubs, etc.

But there’s one problem: Manhattan also has some of the most expensive hotels in Western civilization, with nightly rates sometimes reaching four figures. Even cheaper hotel rooms (and “hotel” in this case could mean a converted townhouse or apartment building) can go for as much as $300 a night. Less pricey motels can be found near the city’s three airports and elsewhere in the outer boroughs — but, of course, being farther away also means enduring a lengthy and often crowded commute to get to Manhattan.

In the past few years, however, some innovative entrepreneurs — combining the do-it-yourself esthetic with the growing “frugal traveler” movement — have introduced new lodging options to put the traveler near the heart of the city without busting his budget.

The most well-established of these is San Francisco-based Airbnb, which enables “hosts” — apartment owners or renters — to offer their homes as low-cost tourist accommodations. Travelers can browse listings, which include photos as well as reviews from previous guests, in over 19,000 cities in 190 countries. Travelers can also contact hosts with any questions before booking a space, with stays ranging from as short as one day to as long as a month or more.

It’s a new twist on the bed and breakfast concept, though unlike traditional B&Bs, the host is rarely on the premises and guests often have to buy their own food. But on the upside, travelers get clean, safe, conveniently located places to stay at nightly rates ranging from $80 to less than $150.

Airbnb is the brainchild of three young entrepreneurs, Brian Chesky, Nathan Blecharczyk, and Joe Gebbia. Chesky and Gebbia, who met as students at the Rhode Island School of Design, were sharing an apartment in San Francisco in 2007 when they had their “A-ha!” moment. Hearing that many attendees at an upcoming design conference had no place to stay — all the local hotels were completely booked — they offered their apartment up as an informal bed and breakfast.

The experience worked out so well that after taking on Blecharczyk as a partner, they decided to expand their one-time act of kindness into an ongoing business operation — both to make money and, in Chesky’s words, “to disrupt the [hospitality] industry” with their new approach. (Chesky, the CEO, is so dedicated to the concept that he gave up his apartment last year and has since been staying in renters’ homes “to grasp the full impact and experience of Airbnb.”)

Not surprisingly, the success of Airbnb has inspired several imitators, includingiStopOver, which is based in Canada, and Italy-based Wimdu. There are also other sites offering different alternatives to traditional hotel booking. HostelWorld enables users to book stays at hostels in New York and 112 other U.S. cities (as well as in 180 different countries), while CouchSurfingis a kind of exchange program where members can stay in the homes of locals in other countries and open their own homes to visitors from abroad.

But Airbnb has the greatest number of listings for New York City — more than 6,000 as of this writing — and Chesky professes to be unfazed by the competition. “They may borrow our concept or copy our designs, but the keystone of Airbnb is the community behind it, and the relationships our community fosters can’t be replicated,” he said.

There is one major drawback to the Airbnb system for New York City hosts, however: Officially, the business is operating in a legal limbo.

A bill passed by the New York State Legislature in 2010 (though it did not go into effect until May of this year) makes it illegal for a paying guest to stay in another person’s apartment for less than 31 consecutive days if their host is not also living in the apartment. The bill was intended to stop owners of so-called single room occupancy buildings from evicting their low-income tenants so that they could instead use the buildings as tourist lodging. But there is no way for law enforcement to distinguish between those landlords and the small renters of Airbnb.

To date, however, there have been no arrests or prosecutions under the law, and local Airbnb hosts aren’t worried. Rachel, a renter in Chelsea (for personal reasons she prefers not to use her last name), believes that “[New York Gov. Andrew] Cuomo has way too much to do to spend any time on this." 

"Besides,” she added, “it's not like the city or the state has the money to hire ‘real estate cops.’”

Airbnb also is dealing with the fallout from an incident in June, in which a San Francisco host returned from a trip to find that her guests had ransacked and looted her apartment. It was the first such occurrence in the company’s history, and while Airbnb worked with the police to catch the offenders, it was a wake-up call to Chesky and his partners. “For two million nights, we’d seen this as a case study demonstrating that people are fundamentally good,” said Chesky. “We were devastated.”

But the company took steps to tighten security, including designing enhanced tools to verify user profiles and creating an "education center” to provide hosts with safety tips. They also began offering a guarantee of $50,000 to reimburse hosts in cases of theft or vandalism.

According to Chesky, their business has not suffered. “In fact, we have received thousands of e-mails from users who told me that they still believed in our service,” he said.

A rare success story in the current period of economic gloom, Airbnb anticipates continued growth for the foreseeable future. Chesky points to eBay as a model. “They created value out of people’s unused goods," he said. "We are creating value out of people’s extra space.”

“I don't think we’re cutting into the large mass of people who want maid service every day and don't care if they have a kitchen,” said Rachel. “But if you want a kitchen and don’t need a maid, then why would you reserve for $375 per night at the Times Square Residence Inn instead of $125 at my apartment?"