US: Apartment-hotel hospitality brand Domio delivered a bombshell on Friday night as it emerged that co-founders Jay Roberts [CEO] and Adrian Lam [chief strategy officer] had resigned from their roles at the company with immediate effect, following an investigation by Airbnb over alleged malpractice and violation of its trust and safety standards.
As a result, CFO Jim Mrha will step up to replace Roberts as interim CEO and take over his role on Domio’s board of directors. Mrha, who only joined the company in March at the beginning of the Covid-19 pandemic, has previously been employed at Marriott International, MGM Hospitality and Hilton Worldwide.
New York-based Domio was accused of malpractice in a report by digital media company The Information last month, which claimed to have uncovered a sequence of possible shoddy business practices, such as fake host names and misleading Airbnb accounts, following interviews with more than 20 current and former members of staff, as well as a review of court records.
The article read: “Domio has a history of questionable business practices, which helped it flout short-term rental laws in cities around the country. Those practices include the listing of rental properties using a network of misleading Airbnb host accounts—some featuring fake names and stock photographs—which made it harder to tie them to Domio.”
The company, which designs then rents out aparthotels and furnished apartments on a short-term basis, saw its host accounts and listings delisted immediately from Airbnb following a review of Domio’s practices, although the listings will return as of today [26 September].
In an emailed statement to Business Travel News, Airbnb wrote: “Airbnb’s thorough examination uncovered certain past practices by Domio from a number of years ago in violation of Airbnb’s Community Standards regarding authentic reviews. As a result, we communicated to Domio our decision to remove their accounts.
“Domio requested reinstatement after its board removed all members of its leadership team present at the time of the unacceptable activity, and therefore Airbnb made the decision to reinstate Domio’s accounts, in addition to removing all prior suspicious reviews from Domio’s listings. We will not hesitate to permanently remove their associated accounts if there are future violations of our standards and policies,” it added.
There is no suggestion that Roberts or Lam carried out any illegal activity themselves, with Domio issuing a statement referring to any illegal activity as not having taken place for a number of years. Airbnb’s statement supported this claim by saying that the incumbent Domio leadership team had joined the company back in 2018, after the “unacceptable activity” had stopped and the hospitality brand had agreed to comply with Airbnb’s standards.
The report added that Airbnb had given Domio a “final warning” and any further breaches of its set standards would likely result in and end to the companies’ collaboration.
Domio has progressively pivoted away from a master lease model towards franchising. In October, it was expected to open the first brand managed project that it is not directly leasing, in Tulum, which would also be its first international property,
Speaking about the pivot in an interview with Forbes in June, Roberts, said: “It’s very capital intensive to lease ourselves. This is more asset light and we collect a fee. You get higher valuation doing management franchising and it’s a higher return on investment.”
Prior to that, Domio raised $100 million in December to expand its business in the United States and into 25 global markets by the end of 2020.
The Series B funding included $50 million in equity and $50 million in debt and was led by GGV Capital, with participation from Eldridge Industries, 3L Capital, Tribeca Venture Partners, SoftBank NY, Tenaya Capital and Upper90.
The rescinding of the ban on Domio accounts on its platform suggests Airbnb is intent on promoting professionally-managed listings alongside the rest of its inventory, even if it generates some negative publicity in the build up to its much-anticipated initial public offering [IPO].
Despite a pledge by CEO Brian Chesky to reconnect Airbnb with its local roots, the share of professional hosts generating bookings on the platform has increasingly closed the gap on so-called “amateur hosts”, who initially helped the company take off in the late 200s and early 2010s.
According to an article in The Information from the start of this year, the number of Airbnb listings likely to be operated by hospitality professionals grew by 36 per cent in 2019, more than three times the increase in listings for rentals of spare rooms, according to short-term rental data provider AirDNA.
The news is also a sizeable boost to Domio as the loss of Airbnb as a distribution platform for its urban inventory could have seriously jeopardised the company’s future, given it relies heavily on indirect as well as direct bookings that way.