Short term rental platform Domio has been suspended by Airbnb pending investigation into its alleged fraudulent practices, including flouting local rental laws. Domio can not accept new reservations until Airbnb concludes its investigation and determines their “long-term” status.
The suspension is based on an investigation by The Information which found “through court records and interviews with nearly two dozen current and former employees that 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.”
According to internal company data it reviewed, The Information reported that “Domio used more than 20 Airbnb accounts to covertly operate at least a dozen short-term rentals in New York, which generated at least $2.2 million in revenue from guest reservations at those listings between September 2016 and February 2020.” In New York, Airbnb limits hosts to one listing.
On Tuesday evening, an Airbnb spokesperson said, “We have indefinitely suspended all of Domio’s associated host accounts and listings as we expand our investigation into their activity dating back to 2016. We will not hesitate to take aggressive action to remove suspicious content from our platform and, depending on the outcome of our investigation, we will determine the appropriate long-term action to take against these accounts.”
Airbnb has been called out for not taking swift action on fraudulent accounts in the past. The company will need to take stronger action toward screening and deleting fake listings and reviews as it plans to go public. Airbnb filed confidential IPO paperwork with the SEC on Wednesday, according to a CNBC report.
The rise of Airbnb has produced a cottage industry of individual homeowners to ventured-backed start-ups who profit from the rental arbitrage of leasing a property long-term and then re-renting them out as short term rentals or “quasi hotels” on Airbnb, HomeAway, or other distribution platforms.
Domio raised $100 million in a Series B round of funding in December 2019, evenly split between equity and debt. GGV Capital led the equity funding, with participation from SBNY, Tribeca Venture Partners, among others, while Upper90 led the debt financing. Prior, the company had raised $17 million according to data from Pitchbook.
Domio was in 12 markets late last year and the funding would help them expand to 25 markets globally.
This mass suspension of Domio-controlled accounts will cripple the start-up as Airbnb is likely its largest distribution platform. The company is not large enough to generate enough direct bookings.
photo credit: domio