Businesses based on 'collaborative consumption' are a boom sector - AirBnB grew by 800 per cent last year and was valued at $1.3bn

Its a karmic arrangement that should bestow good fortune upon everyone involved. A website gives you the chance to let spare rooms in your home for a few days at a time; if you're out of town, guests can keep an eye on the property while saving money on their accommodation.

In theory it's a win-win – but not in the case of a woman known as EJ, whose recent experience of using a popular service called AirBnB to let her San Francisco apartment has caused an online furore. Her emotional blog post at the end of June detailed the ransacking and vandalising that took place in her home over the course of a week; AirBnB guests stole her passport, trashed her furniture, burned her possessions and used her credit card.

Now the huge interest arising from her warning to the site's other users has taken substantial gloss off the company's reputation. Launched in 2008 by charismatic entrepreneur Brian Chesky, the initial growth of AirBnB was slow, with investors wary of a venture that depended on the public's willingness to allow strangers to stay in their homes. But in the past 18 months that has all changed. Businesses based on "collaborative consumption" – sharing, swapping, bartering and trading everything from guitar lessons to running errands – are a boom sector. AirBnB in turn grew by 800 per cent last year, and it was valued at $1.3bn (£800m).

From small beginnings in the USA it now showcases properties globally, including more than 1,500 in the UK – in London, Edinburgh, Brighton, Bristol and Belfast.

Two million night stays have so far been arranged via the site, and it's perhaps not surprising that a horror story would eventually emerge. But greater concern has surrounded AirBnB's response to the incident, and whether it can cope in the face of rapidly increasing use.

Much of AirBnB's success is down to the website's friendly, informal interface. One of the "frequently asked questions" is "Will someone steal my grand piano?" to which the answer is "Highly unlikely... [they] weigh thousands of pounds and do not fit through doors." But that question ignores an underlying problem – more manageable feats of theft and damage to properties.

Following EJ's experience a company spokesperson confirmed no damages would be paid, and no insurance was available. In the past couple of days, however, with the bad publicity mounting, there's been a heartfelt apology from Mr Chesky – "we really screwed things up", he said – the company has promised financial assistance to EJ, and offered a $50,000 guarantee against damage to hosts. A further complaint that emerged last week from another AirBnB user in Oakland, California, detailing the "bizarre damage" caused by his guests (including shredded clothing and discarded meth pipes) will be retrospectively covered by the guarantee.

These stories should cause only a blip in AirBnB's upward trajectory, but there is also resistance from the hotel industry. A new law in New York City has made the use of residential spaces as transient hotel rooms illegal – although the law is largely designed to target unscrupulous landlords cramming apartments with bunk beds.

"I've had my fill of faceless hotels, and this is cheaper than most other options," says Susie Weaser, an online video producer and recent customer. "The customer service is pretty dreadful – at least until you reach a human – but the experience is fine, once you've got over the strangeness of living in someone else's apartment."