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The Sharing Economy Series – Part 2

By Jonathan Bingham | February 24, 2015

In my last post I talked about how companies like Uber are contributing to the explosive growth of the sharing economy – and some of the hurdles it faces. As I mentioned, Uber isn’t the only one making waves.

Airbnb, a site that allows hosts to offer up anything from a couch to their home for short-term rental, has also taken off. With more inventory than the largest hotel companies of the world by a factor of 50%, they are not a fad but a major player in the hotel world. In fact, Airbnb has more than 1.1 million listings while the biggest hotel chains have less than 700,000 rooms. Within the next 24-36 months, the company will likely surpass the largest hotel companies in the world with respect to annual room nights accommodated at Airbnb listings.

Even with this rich inventory and slew of options for customers, there is also resistance here on many levels. States are fighting back for a bunch of different reasons. The most obvious one is a desire to collect taxes that hotels are charged every time a hotel room is rented. Easy enough: If the states are truly representing the interests of all parties, they will find an amicable solution. The bigger issue is with condo boards. We felt this backlash personally when a group of owners changed the bylaws of the condo association banning short-term rentals. Why? And how can that not infringe on my rights?

In the cases of both Uber and Airbnb, their customers are well educated in how to use the services, what the costs associated with the services are and what the risks are with each.

Airbnb pairs hosts with guests around the world. If you haven’t been to the site, I highly recommend it – even just to look at things like tree-house forts and multi-million-dollar brownstones available for rent. People who travel or spend time away from home are able to rent their private spaces for a fee. Excess and previously unknown supply meets massive demand for those seeking a different type of hotel experience.

Hotels have had total control over costs. Busy weekend in Boston? Prices can rise well over $500 a night for a tiny hotel room. Got four kids like my wife and I do? One room?? Ouch. No thank you. I’ll stay at home.

We rented out our place in Brookline, MA for a while until the condo board shut it down. It is our primary residence. We took great care in selecting whom we opened our doors to. It turns out our proximity to the local Boston hospitals and the fact that we had a nursery and a kid’s room with bunk beds was extremely appealing to families with children that were visiting from out of town to receive treatment. Similar to Uber, the ability to rate our guests and have our guests rate us in turn served as a tremendous moral guide to behavior expectations. In fact, our longtime cleaner actually dropped her price because the guests we hosted were so respectful and tidy. Public rating of your experience is a powerful thing on both sides of the coin.

So why would condo associations react so negatively? And why do certain people like me become such advocates? How can the sentiment be so polarized?

In the Airbnb example you can point to the politics around big hotel groups seeing a decline in demand. I’m not buying that, because disruption to your revenue model is not a valid reason for saying something is corrupt. However, I do see and understand the local and federal governments’ perspective on lost revenue. Easy fix: Tax it. In fact, Airbnb really wants to pay occupancy taxes and are doing so in all kinds of communities. But, in some places such as NYC, the government isn’t allowing them to pay the $65 million annually that would go to New York City Hall. Yes, you read that right; NYC is denying a free check for $65M. To understand the why not, we should look at the why.

From a personal perspective, my family loves both traveling and spending time at our home in Vermont. We also don’t want to work 70 hours a week to make those a reality. The ability to rent out one home while we’re at the other creates a revenue stream for us that allows the dream to be a reality. Want to go on vacation? We’d rent out both places through Airbnb and cover our airfare and hotel costs. We got our vacation, and the economy got the benefit of our additional income. Win—win. Then we got a letter from the condo board saying there would be a vote on short-term rentals and it was swiftly banned. To me that’s a big infringement of rights. To those who don’t ever leave their home, it’s easy to see their perspective and opposition. They have nothing to gain. Or do they?

As the 20-somethings out there battle huge student loans and a job market that is just now heating up, the cost of housing is a massive investment. Vacations aren’t even in the cards. Think any 20- or 30-something in the market for a new condo isn’t going to ask if short-term rentals are allowed by the condo board when looking for a new home? Guess again. That’s a big no-go when making a purchase with that demographic. Being house poor isn’t fun. So how can people just getting into the home-buying market afford a $600k, 1100-square-foot apartment? They can’t. Airbnb doesn’t solve the real estate issue, but it certainly helps. Even my mother looked at Airbnb as an option once she retired to allow her to travel and not blow her retirement. MY MOM!

The companies that are leading the way in this movement have done a remarkable job of partnering technology and consumers into solutions that just make sense. Embrace it.

Next week I’ll share a Q and A with a gent that knows a thing or two about the hospitality business. Airbnb’s Chip Conley, Head of Global Hospitality and Strategy and all around awesome guy, shared his time and insights on the evolving sharing economy, how consumers feel about it and what hotels are doing to combat or embrace it.

P.S. check out his TedTalk on what makes life worthwhile. Chip’s TedTalk caught our eyes and ears and has led to a project we’ll be discussing later that leverages technology to better understand the impact news has on happiness.

Jonathan Bingham


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