UNTIL recently “Uber envy” afflicted many top executives at Airbnb, a platform for booking overnight stays in other people’s homes. So admits a big investor in the firm. The two companies often raised money at the same time, and the ride-hailing giant reliably received more cash and closer attention. Uber is America’s most valuable private technology firm, with a valuation of close to $70bn at last count; Airbnb is still in second place with a value of around $30bn. But with Uber facing a series of setbacks, including allegations of intellectual-property theft, departures by senior executives and a consumer boycott, jealousy in Airbnb’s hallways has largely evaporated.

It helps that the firm is on a tear. Last year 80m people booked stays on Airbnb, double the number in 2015 (see chart). It now plans to expand into other bits of the market for accommodation, including luxury trips and business travel. New products, such as bespoke city tours, are in the works.

The firm’s ultimate aim is to evolve from being a platform for overnight stays into a comprehensive travel company, capturing an ever-greater share of tourists’ spending. In 2017 it may notch up as much as $2.8bn in sales, up by around 65% from a year earlier; forecasts suggest it could reach $8.5bn in revenues by 2020. An IPO may be in the offing, yet pitfalls also lie in wait. Chief among these is regulation, ensuring guests’ safety and, increasingly, the need to fend off rivals such as Priceline, a fearsomely efficient online travel-booking company.

Airbnb’s founders started as complete outsiders to the hospitality business and indeed, to commerce. Brian Chesky, its 35-year-old chief executive, had no previous business experience or technical expertise. Instead, he and one of his co-founders, Joe Gebbia, had studied design at Rhode Island School of Design before teaming up with a software engineer, Nathan Blecharczyk, to launch what was then called AirBed and Breakfast, with the aim of renting out air mattresses in apartments. They were so untutored in investing that when an early adviser suggested raising money from small investors known as “angels”, Mr Chesky thought people in Silicon Valley believed in celestial beings.

Both Airbnb and Uber—America’s two most valuable “unicorns”, private startups worth over $1bn—operate platforms without owning the underlying rooms and cars that are being used; both take a cut from every transaction. Airbnb charges both guests (6-12% of total rental fees) and hosts (around 3% of their total earnings from the site). A particular feature of Airbnb’s model is that its rental listings are usually not available on the websites of any of its competitors, because hosts tend to be loyal. So while Uber is locked in a fierce competition with rivals in most markets for customers and drivers, and has chosen to subsidise journeys to avoid losing market share, Airbnb has no need to pay up to keep hosts and users.

An attention to costs that is uncommon in the startup world is also paying off handsomely. In 2015 Airbnb hired as its chief financial officer Laurence Tosi, who had previously done the same job at Blackstone, a private-equity firm. He is regarded as the adult supervision. Airbnb reportedly achieved profitability for the first time in the second half of 2016 and will make money in 2017. It has raised $3bn and spent only around $300m of it (Uber is said to have lost $2.8bn in 2016 alone).

Rental health

Airbnb’s founders were early to recognise the importance of a strong, benign culture. (Uber, meanwhile, is under fire for its hard-charging practices.) Until 2013 the founders interviewed every job applicant, and today anyone who is hired still has to pass a “core values” interview, where they are judged not on their CV but on how they fit into the firm’s sensibility. This ensures that people have a sense of mission, even if some of the firm’s peppy idealism sounds naive to jaded journalists. Asked whether Airbnb is a technology or a travel company, Vlad Loktev, its director of product, looks cautious. “We’re more of a community company,” he says.

What of the future? Given its financial results, Mr Chesky maintains that “we don’t need to raise any more money ever again.” But the hiring of Mr Tosi and the push for financial discipline suggests the firm does want to go public, perhaps as soon as 2018. If so, Airbnb would come under scrutiny as never before.

Investors note that, although at first the website attracted cost-conscious millennials looking for a more authentic travel experience, growth now depends on broadening its base. Business travellers are one target. Airbnb has made it easier for firms to place roving employees in hosts’ rooms instead of in hotels. It has set up partnerships with companies, such as Hyundai, a carmaker, and Domino’s Pizza, a food chain, to make it easier to find rooms that are suitable for their employees, whose chief needs are wireless internet, a desk and 24-hour check-in. Employees from 250,000 companies now regularly book travel on Airbnb.

The firm also wants to appeal to wealthy globe-trotters. In February Airbnb bought a holiday rental site, Luxury Retreats, for around $300m. This brings it a portfolio of expensive properties, many of which are rented for thousands of dollars a night. Bringing in more of the mass market will meanwhile require regular additions of new, mid-range inventory. Airbnb must decide how much to favour quantity of listings, which will help it become an automatic place for people to look for accommodation, over quality.

Either way, the rivalry between Airbnb and hotels will surely intensify. An analysis by Morgan Stanley, a bank, suggests that the number of overnight stays in Airbnb accommodation will reach 6% of all hotel nights in America and Europe by 2018, up from 4% in 2016. The chief impact upon hotels so far has been to stop them raising rates. Airbnb brings a supply of available rooms to market whenever there is demand, a blow to hotels that used to be able to charge dizzying prices at peak times.

You can’t handle the roof

Lobbying by the hotel industry has contributed to Airbnb’s most obvious challenge, which is regulation. Opposition to the firm is fierce in many big cities, especially those with limited affordable housing, where residents blame Airbnb for taking apartments off the market. Several cities that could supply large profits, including Berlin, Barcelona and New York, have imposed rules that make offering short-term rentals difficult. New York, which is Airbnb’s third-largest market, has banned short-term rentals in apartment buildings for less than 30 days, unless a host is present. Berlin has passed a de facto ban, by requiring a permit if someone wants to rent more than half of their apartment on a short-term basis and levying hefty fines for violations.

Airbnb has now opted for a new, more conciliatory approach, notes Leigh Gallagher, author of a book, “The Airbnb Story”. In Amsterdam and London it has agreed to police its listings to ensure they comply with local laws on the number of days a year each unit can be rented. Yet many investors worry that more restrictive laws will dampen its prospects.

A second, ever-present risk is safety. The platform functions because people trust that user photos and blind reviews will help root out bad actors. It faced a crisis in 2011 when Airbnb guests trashed a host’s apartment and she blogged about the experience. Airbnb responded by offering insurance to all hosts of up to $1m in damages. There remains the possibility of a dramatic breach in personal security, which could spook hosts and users.

The third threat is growing competition. Airbnb was not the first firm to pursue the concept of alternatives to hotels, but it was the first to become a global success. That has drawn the attention of others. In many markets, including China and Europe, Airbnb faces competition from local firms, as well as from established global players. In 2015 Expedia, an online-travel website, bought HomeAway, an Airbnb rival, for a hefty $3.9bn.

But Airbnb’s most fearsome competitor is Priceline, which owns Booking.com and is considered one of the best-managed internet companies in the world. Priceline has been speedily adding alternative accommodation. Mr Chesky insists that “there is fundamentally not a lot of overlap between what they’re offering and what we’re offering”, because Priceline is working mostly with property-management companies that “look more like hotels”. But this will be less true over time. Priceline is too astute to let Airbnb win a category worth owning without a challenge.

The travel industry is a large prize to share. Globally, people spend around $700bn a year on travel accommodation, according to Euromonitor International, a research firm. With rising incomes and smaller families globally, travel is ever more popular. Many more people than first thought have been willing to forgo hotel luxuries such as gyms and concierges to get the proper feel of a place. That suggests that alternative accommodation will not be a fringe activity for the young, but a mainstream part of the travel business.

In any case, Airbnb’s aspirations do not end there. It has created an innovation and design lab, called Samara, with the ambition of creating a new kind of travel offering. Last autumn Airbnb started selling “experiences”, which are customised activities that travellers can book, including special meals, tours and exercise programmes, typically arranged by Airbnb hosts. Your correspondent booked a bicycle tour of San Francisco’s Mission neighbourhood. The tour was enjoyable and included a visit to a secret bookstore, Bolerium Books, where works are arranged not by author but by social movement. But for $100, excluding lunch, the price seems even steeper than San Francisco’s hills. There are plenty of other firms offering tours and things to do.

There have also been murmurs that Airbnb will move into flights. Finding online flight options for travellers is a painfully low-margin business. Companies like Priceline and Expedia make the bulk of their revenue from hotels. But that is not the model Airbnb wants to embrace anyway, says Mr Blecharczyk, who declines to share more details on what Airbnb’s approach to air travel might look like. “If we’re going to do something, we should try to do it differently,” he says.

It is possible that Airbnb’s best idea will be its first one. It will be up to the firm and one day, perhaps, to its public shareholders to decide whether it is worth pursuing new, ancillary opportunities, when there is still so much to win in the market for travel accommodation. In chasing after a new dream before the first one is realised, Airbnb does bear one resemblance to its Silicon Valley peers.