Lesson learned: How (not) to expand internationally

Context

Back in 2017, I had been working at Luckey (an Airbnb property management company) for about 1 year. We were experiencing significant growth in France, where we had launched our service in 20 new cities over the previous 6 months, managed a portfolio of more than 1,000 properties, and, above all, our acquisition cost was lower than ever, at under €30 per qualified lead.


We wanted to prove that our model could be applied anywhere, in other countries and languages, so we decided to try our luck in the second largest market in Europe: the UK, starting with London.


Spoiler alert: it didn’t work. Here’s why. 


What we thought

The model was working so well in France that it didn’t seem like an issue to launch in the UK. The operations were essentially the same: a local manager to handle offline operations (cleaning, check-ins, maintenance, etc.) and an online team based in France, already composed of English-speaking individuals with tailored tools. It seemed like we just had to translate our communications from French to English, and we’d start generating revenue.


The challenge was to acquire our first properties. Again, it didn’t seem to be a problem: we had built a proven lead generation machine based on a funnel of ads, SEO, SEA, an optimized website, and a trained sales team. We were prepared to invest more if needed to gain a head start.


There were as many Airbnb listings in London as in Paris. We thought we could at least generate half as many leads (which we believed was a pessimistic estimate, considering we needed to grow brand awareness). Half as many leads as Paris was more than enough to get started.


I was Head of Customer Acquisition, and although I was informed shortly before the launch that we were expanding to London without much preparation, I was confident we could pull it off.

What went wrong

It soon became apparent that instead of generating half the number of leads as Paris, we managed only a fifth. More concerning was the cost—it was far too expensive. The advertising costs were significantly higher, and our conversion rate was lower than expected at every step of the flow.


The market was very mature. Too mature. Established players had significantly more funds than us (their recent funding rounds were 10 times higher than ours), increasing the barrier to entry to a level we couldn’t afford to invest in.


Let’s dive into each stage to understand:


Moreover, the listings generated less revenue. There was a rule in London that people could only rent their primary residence, and only for a maximum of 90 days, compared to 120 days in Paris.


Bottom line, a new customer would cost almost €2,000. In France, it was €100.


And the LTV (Life-Time Value) didn’t cover even a quarter of it. We might have accepted such an effort as part of expansion, betting on the fact that long-term acquisition costs would decrease with SEO and greater brand awareness, but we simply didn't have the budget.


Marketing cost only €10,000 per month across all of France. We had planned €10,000 per month for London alone, but it was absolutely insufficient. That meant acquiring five new properties per month, which was not satisfactory given the local staff we had to pay, not to mention that those properties were already unprofitable, and that’s an understatement.


Even if we had the budget, it would not have been worth it.

And we should have known it.


What we explored



What we should/could have done differently



Lessons learned 


Epilogue: what happened in the end?

We ended up closing our operations after six months; it was too costly. We said that we would come back to London someday, which we did under a different business model and a different name, five years later. But that’s another story. ■