Airbnb's Achilles Heel. What Every Airbnb Host Need To Know.

Welcome to today's Monday update for Airbnb. Today I want to talk a little bit about where we are in the process. We've got any number of arbitrations that are proceeding into the arbitration process. Arbitrators have been assigned. Hearings have been conducted, and I'm happy to report that thus far we have not lost a single issue. Airbnb is working hard to put up as many procedural roadblocks as they can to stop the arbitrations from going forward, and so far they've been 100% unsuccessful. What I think is really important is to, to really take a big step back and help you understand exactly what the theories are in the case as we've developed them, and to be able to share with other hosts what we're doing, why we're doing it, and how we're going to win. So let me give you my elevator pitch on why it is that hosts are going to win these cases and why it is that this is so important for Airbnb hosts that these arbitrations are much bigger and more important than simply COVID-19 refunds. So one thing you need to understand is that Airbnb is just a platform, and those words could not be more important because Airbnb is trying to be more than a platform. It wants to be God. It wants to on the one hand say it's, it's not a party to the rental agreement, but on the other hand have complete control over the rental agreement, retain the power to reform the rental agreement between you and your guests, to play God with refunds, all for its own benefit, not for the benefit of hosts or guests, just for its own benefit. This is not the way platforms Platforms are places, they're software where you can go to do specific jobs, and in this case, the job is to match hosts with guests to allow them to find each other online using the Airbnb platform. Airbnb is just a platform. It's not— doesn't perform any hosting, it doesn't perform any management, and it is not a party to the contract between you and your guests. So important. If Airbnb is not a party to your contract between hosts and guests, then how does it reserve complete control over the payouts irrespective of your contract with guests, which govern when or not there's gonna be a payout and whether or not there's gonna be a refund? So let's break this down a little bit, this notion that Airbnb is just a platform, and we need to relegate Airbnb back to its purpose. So under the Terms of Service, under paragraph 1.2, Airbnb goes through great pains to make sure that you and the guest agree with Airbnb that in using the platform, that it is not a party to your rental agreement. So the rental contract is between hosts and guests. Airbnb makes both sides agree that it is not a party to that contract. They make you agree to that because they want to, on the one hand, make sure they could never get sued for what happens with regards to your rental, right? But on the other hand, they can't then have control of the terms of that contract or retain the ability to reform that contract if they're not a party to the contract. They have literally no role, no seat at the table with regards to your rental contract, which makes perfect sense, right? They're just a platform. They're a place for travelers to find hosts. That's it. They have been able to achieve this super godlike power over your relationship with your guests, not because that is legal, not because it is appropriate, not because contract principles allow for that to happen. The reason they've been able to retain all this power is for much more practical reasons, which we'll get to in a minute. The law is on your side as a host, and the terms of service that they drafted, that Airbnb drafted, are against Airbnb on this issue. All right, so Airbnb is just a platform. The rental contract is between hosts and guests only. The implications of that are phenomenal and important in these arbitration cases. So what does this notion of being just a platform mean? Airbnb is just a platform. It's software where people can find each other online, no different than Amazon, no different than eBay or Etsy, right? Could you imagine if Amazon stepped in and said, yeah, we're not only going to be this platform where sellers and buyers, right, can interact, where buyers can buy things from sellers, but after the seller ships the product, we're going to determine whether or not the seller gets paid. After the buyer receives the product, we're going to determine whether or not they get paid, that what the agreement that's formed to purchase a good on Amazon, that we're going to retain the ability to reform that contract between buyer and seller whenever we want, for whatever reason we want, and then we'll never have to tell anyone why we did what we did. Of course, we would think that was absurd. It'd be ridiculous for Amazon to ever put such a system into place. Yet that's exactly what Airbnb has gotten away with for all these years. So what is Airbnb? It's a platform where they can match hosts and guests. The other function that they perform through a separate company that is a wholly owned subsidiary, Airbnb Payments, is they act as an escrow. So they hold the money, right? They're an escrow agent to hold the money to do 2 things. One is to apply your host cancellation policy. So if there's a cancellation within 24 hours, your contract with the guest allows the guest to get a full refund if you have a strict cancellation policy. So they— the guest has 48 hours to get a full refund. So if within 48 hours the guest decides they want a refund, Airbnb asks, acting as an escrow agent, Executes your rental contract, which says 48 hours they can get a full refund, right? And then of course, within 7 days of the reservation, if there's a cancellation under your strict cancellation policy, if that's what you have in place, then the host and the guests have agreed in the rental contract to split the risk 50/50. That if the guest needs to cancel, They only get a 50% refund. And this helps hosts with cash flow, to manage their calendars, because when that guest takes up a spot on your calendar, no other guest can book, right? So the strict cancellation policy makes perfect sense for both the host, which needs to run a short-term rental business, and the guest who's taking some risk that if they decide they're going to cancel or they can't make the reservation for any reason, that there's going to be a 50/50 split. on the refund. And then of course within 7 days, Airbnb acting as an escrow would provide the host the full payout. So if there's a cancellation within those 7 days, the guest has agreed in the rental contract that they lose 100% of the, of the reservation fee and that, that payment will go to the host. So Airbnb is a software platform for allowing guests to find hosts online. To the rental contract. So very easy, very objective. It's easy to know when they should pay and when they don't have to pay, and that is a key aspect of contract law. Any term which basically says the escrow can do whatever they want, that's an invalid term under contract law from our point of view, as supported by the case law. If the escrow needs to calculate a date in order to determine whether or not a payment's going to be triggered, That is the appropriate function of an escrow. So let's just take a big step back here. What is the agreement that you have with your guests? You agree, if you have a strict cancellation policy, to split the risk of cancellation 50/50, and that's in your rental contract, to which Airbnb is not a party. It is our position that you agreed to split the pandemic risk 50/50 under the rental contract that was made at the time of the reservation. The rest of the analysis depends on, on what the arbitrator decides. Our position that the ECP is completely invalid as illusory. It's, it's so willy-nilly, so wide open, so much discretion, so lacking in transparency that it violates fundamental basics of contract law, which allow the arbitrator to invalidate it, okay? So, one point of view is that the ECP is simply invalid if your reservation's available at the time and date that you promised and the property is as represented, then they have to perform their fiduciary function and provide you the payout. That's it, right? And the extenuating circumstances policy doesn't need to apply or need to be in existence at all, right? Now, let's just try another scenario. Let's say that the ECP policy does apply. Well, there are portions of the ECP policy that say essentially what I just said, that an extenuating circumstances could be where the host doesn't make the property available, in which case, I don't know that they need the ECP. It's clear under the rental terms that the guest gets their money back. There is the— there are these other provisions in the ECP though which are not capable of being analyzed objectively or implemented objectively. They're not capable of being understood by a host and a guest because there's no structure to them. There's no objective standard to them. From Airbnb's point of view, they can just do whatever they want with regards to the host payouts. Those versions are the most subject to attack as illusory under law and as a violation of other basic contract terms such as the duty of good faith and fair dealing. But even if the ECP applied at the time of the reservation, the reservations at issue with all of these COVID-19 claims, or virtually all of them, The ECP policy excluded pandemics as a reason for a refund. That's right, and you heard me. The extenuating circumstances policy that applied at the time of your reservation excluded pandemics as a reason for refund. On or about March 13th, Airbnb secretly changed the word endemic, which is the opposite of a pandemic, to epidemic within the extenuating circumstances policy. They didn't tell anyone about that. They didn't provide you the 30 days notice that they're required to provide under the contract. They didn't attempt to apply that prospectively. They instead, by hiding it, pretending that the word pandemic had always been there, tried to apply it retroactively, do an end around their obligation to provide notice and to never change existing contract terms. Under their own terms of service, it says they can't do that. So even if the ECP policy applied, pandemic was not included, and it's really important for you to understand that the attorneys for Airbnb, in drafting the original ECP, the pre-March 13th ECP, had made the decision that pandemics would not be a reason for a refund. For whatever reason, on or about March 13th, they changed their mind and they wanted to change those contracts and change the policy retroactively. Again, probably to gain competitive advantage on VRBO and Booking.com, probably to increase their IPO valuation, but they can't do it. They can't change the terms, right? So why would Airbnb secretly try and change the words on the ECP provide no notice, hide that change from the world in order to try and force these refunds in violation of the terms of service in the ECP. We plan on finding that out in these arbitrations in discovery. It's a critical issue that has to be subject to discovery because it goes to the very core of the issues at hand. Okay, so again, the ECP as applied by Airbnb, as drafted by Airbnb, unenforceable as illusory, it's not definite, it's not plain, it's not clear, if it's not subject to offer and acceptance because both parties know exactly what they're agreeing to, right, then it is subject to attack as being invalid. Keep in mind that Airbnb plays both sides of the fence. They, on one hand, they want to have their policies and their terms in place, and so they You know, they want to enforce those as drafted, but then once the attorneys get involved, then they want to change all the terms and the meaning of all the terms and the policies. They want to manipulate the language, turn it into something that I'll guarantee you Airbnb never intended when they draft them in the first instance, right? So their drafting and implementation of the extenuating circumstances policy are subject to attack. The third prong is the way their attorneys are now trying to interpret and apply the ECP, which is yet now a third version of the policies. Again, subject to attack because this kind of retroactive, here's what it meant, right? Oh, now we're saying it means something completely different. Well, that means there was no offer and acceptance. It has to be clear and definite in order for those terms to be enforceable. Right? So they sought to modify your existing and finalized rental contracts, to which Airbnb is not a party, and they converted those payouts that they held in escrow as a fiduciary for you. They converted them— converted is just a legal word for stole, right? They stole those payouts from you, and they converted those, in most cases according to Airbnb, into travel credits. Travel credits for guests. Travel credits were pushed on to guests both through the process of the way that they pushed guests through the refund part of the platform, and they pushed those travel credits. So travel credits are really interesting because we know that most travel credits never get used. And so your payouts get converted into travel credits, which get converted into revenue to Airbnb. Money to which they have no claim to, to which they have no interest in, that they held as a bank or as a fiduciary for you, they simply took for themselves. It would be like your bank reaching into your savings account and unilaterally deciding for reasons that it didn't have to disclose to you that it was going to take your money. Of course that is ridiculous. Of course that's ridiculous, and yet that's what Airbnb has done here. We do not believe in our arbitrations that the decision to do refunds, to change the policy, to secretly change the word from endemic to pandemic— we don't believe that was made in good faith. We don't believe it was a decision made taking the legitimate interests of both parties into account. We believe that it is, you know, it was not made to avoid harm to members, third parties, or property. It was a calculated business decision on the cusp of an IPO to improve Airbnb's valuation and to purchase, essentially using $2 billion worth of payouts belonging to hosts, to purchase goodwill with guests and improve its competitive position with VRBO and Booking.com. All right, big breath. Airbnb is just a platform where hosts and guests can find each other and enter into a rental contract with each other, a contract to which Airbnb is not a party. Airbnb's role as an escrow agent is extremely limited, and it's extremely limited to apply the objective cancellation policy And ensure the property is available on the dates and as presented. Airbnb's arguments that it can change the rental agreement between you and your guests are beyond what is allowed by established contract principles. It is a violation of contract law. The power of a platform is limited by contract law. And we obviously, we see these kinds of issues across lots of platforms. Airbnb just happens to be so far extreme And its own interpretation of what it can and cannot do as a place for people to find each other, right? And so how did we get to that point? How has Airbnb gotten away with its position of ultimate authority and godlike power and discretion for rental contracts to which it's not a party, to interfere with the relationship between you and your guests who happen to just find each other through Airbnb? My view is there's 3 reasons why Airbnb has been able to get away with this today. One, the terms of service and the policies are nearly impossible to understand as we now know Airbnb is interpreting them in these arbitrations, as their lawyers are saying these policies apply. Of all the things we would have guessed as to what Airbnb would say as to what its policies mean, the things that their attorneys are saying now are not things that anyone would have guessed, right? By a plain reading of the terms of service, a reasonable person would never have guessed that Airbnb's attorneys would now be saying the things that they're saying. Well, by making the, the terms of service essentially and practically impossible to understand, they're undermining their own position that the terms of service are enforceable. Without objective transparency and accountability in the terms such that a reasonable person can read them and know what it is they are agreeing to, they've created tremendous leverage for hosts and quite honestly guests to attack the terms of service. All right, so why hasn't that happened? Why have— I don't think it is that hosts haven't stood up to Airbnb. I just think that they've drafted these terms of service that are such a train wreck, right, to allow them to argue whatever it is that they want to argue depending on the issue at whatever time, that they've just made it impossible. The agreement under Airbnb's point of view is whatever Airbnb decides at that particular moment and circumstances it wants it to be, but yet no one has stood up to Airbnb in any sort of significant way and And the reason is because of reason number 2 as to how they've gotten away with this, which is the class action waiver, the preclusion of collective action by hosts or by guests. So by precluding class actions or collective actions, they really just force every host to stand in their own little silo so that no host knows what any other host is doing and there's no coordination. And that's where, of course, we come in, and that's how the game is changing right now is hosts are banding together, hosts are acting collectively, hosts are standing up and forcing Airbnb to be accountable to its terms of service, or if its terms of service are so incomprehensible that no one could ever figure out what they mean, then to simply apply the cancellation policy that you and your guest agreed to. So the third thing that Airbnb has done, and which we see in these cases, is it gives It gives everyone the, what I call, the arbitration runaround. On one hand, they say you must arbitrate your claims, but once the attorneys get a hold of it, they've got 1,000 reasons and roadblocks why arbitration should not be allowed. So, isn't that ironic? You have no right to a class action, you can't do anything as a collective action, right? There's language that says you must arbitrate with AAA arbitration, but yet, as soon as it gets to the attorneys, Every possible legal argument, roadblock, or interpretation or misinterpretation of the terms, or exploiting of ambiguities, or exploiting of inconsistent terms, because these terms of service are a train wreck. They say one thing one minute, another thing another minute. There's no clarity. There's no— what they had the ability to draft these so that it was easy to see exactly what you were agreeing to. Did they consciously decide to make the terms of service incomprehensible so they could Their attorneys could argue whatever they want. I don't not that Machiavellian. I don't think that's what happened. I just think that because they have never really had to pay attention to the terms of service, they've never really been held accountable. And it's this piecemeal terms of service that that even Airbnb never really considered as to whether or not it would be meaningful or interpretable or could be objectively applied. They just simply have never had to deal with these issues that they're dealing with now. And so you've got these. Terms of service which are incomprehensible, at least as we're now hearing their attorneys present, right? And so how do hosts and guests navigate such a system? They've created a system, intentionally or not, that simply gives them all of the power. That gives them all the power because, yes, you must arbitrate, but if you try and arbitrate, they're going to put up roadblocks at every possible juncture. Right? They're gonna exploit all the inconsistencies in the, in the terms of service. They're gonna, they're gonna say that, oh, you had to click 4 or 5 levels in, in order to see this thing that you still wouldn't understand what it would mean and what you were agreeing to. Okay, so 3 things: incomprehensible terms of service, class action collective action waiver, and the arbitration runaround. That's how they've been able to get away with this for so long. All right, hopeless? No. What has changed? What has changed? Why is the situation— why is the game changing? And the answer is me. I am acting as an advocate for hosts, and I don't know anyone that has ever done that in the history of the Airbnb platform. In order to bring hosts together collectively in order to fight back, in order to hold Airbnb accountable, in order to have terms of service declared unenforceable, in order to fight for your rental contract between you and your guests, to relegate Airbnb to its proper role as a platform where hosts and guests can find each other, and then you guys can enter into a rental contract under the structure that Airbnb's put in place. Strict cancellation, moderate cancellation, flexible cancellation, right? But that's it. So otherwise, it's your rental contract. They don't— they can't reserve discretion to then do whatever they want. It's a breach of contract principles. So you now have this advocate who happens to be an Airbnb host who's arguing on your behalf, who's pushing these issues for the very first time and creating this opportunity. For you and for fellow hosts to actually get the platform that you want and you deserve and you helped build, to get the platform that's going to work really, really well for your short-term rental business. That's what this is about, right? We want to preserve your right to contract with guests, the integrity of those rental contracts with guests, allow you to engage in property management and all the hosting activities. And from Airbnb's point of view, they're not a part of the contract. They don't do hosting. They don't do property management. Get the heck out of those areas, Airbnb. You are a platform where people find each other. You're an escrow to make— to apply the cancellation policy as drafted on the objective basis of how— when does cancellation occur, how many days within. The, the, the reservation date. That's it. So what if hosts were able to achieve these things? What if we were actually able to achieve these things with Airbnb? Well, my theory is actually be the best thing that ever happened to Airbnb, and here's why. I think that Airbnb got lost along the way, especially with regard to its relationship with hosts. I think I see it every day. Hosts are abandoning Airbnb, and yes, new hosts are coming in, but there's Such a difference between the professional hosts, the hosts who are really committed, who buy multiple properties, who bring teams of people to provide that 5-star customer support. And those are the ones that have had enough. Those are the ones that are leaving the platform. So what's going to bring those folks back? And it's going to be accountability and transparency, which are the things we're arguing for here in these arbitrations. So work with me and other hosts To continue moving forward with these arbitrations. We know we've got their attention. They hear us loud and clear. Their attorneys are watching these videos and they're complaining about the leverage that we're exerting to arbitrators. They're complaining that the hosts are ganging up on them, that I'm instigating hosts to exert their rights as though that's somehow a bad thing. Right? So I would simply say this: you can't see it every day because you're not on the ground like I am fighting the fight every day. Okay. But we are making a huge difference. We are making a huge difference in accountability and transparency. We have got their every attention and we are making it happen. And even Cooper back here knows that we finally got their attention. All right, we'll see you next day— next time. This is the Monday update for, where are we, August 3rd. Can you believe how long we've been at it? We will see you next time. Bye.