Crisis:

1. In July 2011, a host’s trashed home (by an Airbnb user) was on the front page of the business section of the New York Times, Wall Street Journal, and Financial Times.

2. Bookings started to materially decline… Within a few weeks their business could get killed.

Solution:

1. The founders decided to find insurance for their hosts.

2. A bunch of board members from the largest insurance companies didn’t want to underwrite their risk.

3. So they decided to take a risk with their own money and on August 15, 2011 they offered the $50,000 Host Guarantee, as the risk of offering nothing as well as too little was greater than the risk of offering too much.

Result:

1. The announcement had put out the fire.

2. The media started to work for Airbnb.

3. Airbnb had restored the trust of the community.

4. Listing growth accelerated faster than ever.