FROM THE ARCHIVE: If you listen to its disciples, the rise of the sharing economy seems all but inevitable. Technology has liberated vast, unexploited resources - in the form of our cars, homes etc - that could go some way towards making us less wasteful as a society.
In the case of Airbnb, it also seems to have unlocked a latent desire from consumers, particularly millennial ones, for a more authentic experience than traditional hotel firms can offer.
But neither business nor technology exist in a vacuum. Politics has a way of getting in the way. Airbnb and Uber have been battling regulators, legislators, unions and courts throughout the world as incumbents cry foul.
In New York state, Airbnb faces an existential threat, now that governor Andrew Cuomo has signed a bill designed to 'kill' short term lets on home-sharing platforms. Anyone advertising such a letting now faces a fine of up to $7,500 - enough to make even the most zealous sharing-economy devotee think twice.
In this feature originally published in May 2015, MT explores the San Francisco start-up's battle against the hotel industry, and how likely it is to come out on top.
Hark - what's that trundling sound? It's a wheelie suitcase: the sound of the summer and, perchance, another Airbnb guest on your block. Since it began in 2008, the San Francisco-based company has become the soaring brand leader of the homestay wing of the 'sharing economy'; the Google of the guest room, if you will.
You'll have seen its dazzling website with its friendly Millennials surrounded by mid-century modern flea- market finds. These guys like it hip, personal and neighbourhood-based - like instant friends. Airbnb's European HQ in Dublin echoes the prevailing aesthetic with vintage computer games and green bean bags for meetings, while business folk hyperventilate about its model - 'hyperlocal' and 'disruptor', they gush.
The UK government has passed encouraging new home-sharing laws, inaugurated the new SEUK sharing-economy trade body and last year published its 'Unlocking the sharing economy' report by Debbie Wosskow. The cheerleader-in-chief has been Matthew Hancock, now minister for the Cabinet Office, who wants to 'drive innovation', as you do. And why not? The sharing economy and peer-to-peer (P2P) sector is used by a quarter of UK adults, global revenues are around £9bn and estimated to reach £230bn per year by 2025. And Airbnb's cheerleaders include Jony Ive, Apple's sanctified head of design, who has called its site 'as beautiful as it is functional'.
So Airbnb is riding high, with 40,000 active listings in the UK. It soared 73% between 2013 and 2014. Accountancy firm PwC has forecast that the P2P accommodation sector will grow 31% this year, compared with 4% for B&Bs and hotels. By 2025 '50% of holiday accommodation' could be P2P.
'More than 35 million people have now had safe, positive experiences on Airbnb,' says an Airbnb spokesperson. 'In 2014 we averaged over one million guests per month.' Figures from UBS bank reckon that Airbnb had over 3% of the accommodation market in London last year, with 8% in Paris and 11% in Barcelona. A recent valuation of the company puts it at $20bn.
Good for Airbnb. But hoteliers and B&B owners are unhappy. Airbnb and other P2P sites are leeching their clients, making hotels look old hat. 'Hotels emerged when people expected to be served,' says Greg Marsh of upmarket P2P provider onefinestay, adding: 'P2P suits the new mood of independence, autonomy and self-reliance.'
Hotels are so 20th century and P2P is fresh and exciting - but it has had a baleful influence, says David Weston, chief executive of the Bed and Breakfast Association. 'Airbnb is the global "ad in the window" and seems fluffy,' he says. 'But with breakneck growth it's trying to be the only player in the market. It has huge cash and marketing resources and is now lobbying politicians.'
Airbnb reps went to Downing Street in January to talk 'sharing economy' and Weston followed through to put his case. 'Our issue is fair competition,' he says. 'Our members put in fire doors, emergency lighting, public liability insurance, food allergens, music licensing - a host of regulations. We jump through hoops. Airbnb hosts don't.' So it's doubly irritating that the government promotes P2P and has, dubiously in his view, even recommended that ministers stay in Airbnb. It all adds up to bad news for the hotel business, adds Weston, citing a decrease in quarterly hotel revenues in Texas and an Economist report suggesting that by 2016, Airbnb will snaffle a 10% share from hotels.
Noel Josephides, chairman of Abta and tour operator Sunvil, is similarly downbeat. 'When easyJet and Ryanair started they said they wouldn't affect the legacy carriers,' he says. 'Now they're the centre of the holiday business. The same will happen with Airbnb. It's already changing the way people holiday.' The government's response, adds Josephides, is 'a joke', while Peter Hancock of the Pride of Britain Hotels consortium reckons that hotels are in danger. 'It could drive down prices, especially at the budget end.'
A key quibble is that Airbnb isn't responsible for its hosts. 'They say: "We're a platform and the hosts are responsible,"' says Weston. 'But the public doesn't know they're not inspected. Airbnb is doing the minimum and there's a growing problem with nuisance, noise and public safety. And when there's a problem they settle things quietly and put people up in posh hotels. Councils across London are trying to limit it.'
Also, who ensures that Airbnb hosts don't discriminate racially or sexually, or flout mortgage regulations? Some kind of test case is inevitable, he says. 'They may be doing well now but some problem will ensue.' Chris Bowen of Carlson Wagonlit Travel, the biggest business travel provider in the world, goes along with Weston. 'Right now Airbnb's in a sweet spot but something will give,' he says. Airbnb's response is that it complements the traditional hospitality industry. 'It spreads the economic benefits of tourism to new communities and small businesses,' says its spokesperson. 'Hotel occupancy rates are higher than ever. We believe we're helping more people travel.' Also, when hosts register on Airbnb, they certify that they'll comply with local rules, 'so a single room Airbnb listing is subject to the same fire safety rules as a single room B&B'. And there's its 'responsible hosting page'. But is it widely read?
Traditional hospitality providers are also exercised by tax. 'The "sharing" economy sounds lovely but nasty big corporate hotels actually pay tax in the UK,' says Abta's Josephides. Airbnb's European operation is domiciled in Ireland (where the normal corporate tax rate is 12.5%) and runs with a favourable UK regime. 'A big hotel pays 20% VAT per stay while Airbnb's VAT regime is levied on service fees rather than the full amount - potentially about 3% in total,' reckons Weston, who adds that Margaret Hodge, chairman of the Public Accounts Committee, is looking into the tax implications for the sharing economy. Worse, there may be active avoidance by hosts and some believe that about 70% of people on Airbnb don't pay tax. 'Some territories collect tax, notably the Greeks,' says Josephides, 'but the Spanish, Italians and Portuguese think it's too big to control.'
In some places, Airbnb has paid back tax or has begun collecting it. 'Our community wants to pay its fair share,' says Airbnb's spokesperson. 'We already help our hosts pay taxes on the income they earn through hosting. In the UK there is no tourism tax, but we are working with processes for paying taxes that are easy for hosts to follow.' The trouble is that tax regimes were designed for traditional hospitality. 'We don't think you should have to hire a tax lawyer to rent out your spare bedroom and have been working to collect and remit taxes on behalf of our hosts and guests,' says the spokesperson. 'We want to lead our industry on this matter.' Thus, the city of Amsterdam has agreed that Airbnb will collect tourist tax from hosts and it has also started collecting hotel taxes in parts of the US: Portland, San Francisco, San Jose and elsewhere. 'Different tax rules can be a challenge, so we're moving forward quickly, but carefully,' says the spokesperson. 'It takes time, but we're committed to expanding this programme.'
Surely hotels are safe in the business world? Not necessarily. Business Travel Direct has one IT client that predominantly uses Airbnb for accommodation. 'The client's very happy,' says a spokesperson, 'and it's saving money.' Airbnb is itself supporting business travel via Concur's TripLink service, whereby travellers book Airbnb directly and have expense reports automatically rung up, a pathway used by Julie Oliver of Business Travel Direct. 'The Airbnb option is chosen by younger travellers, especially recent graduates, who find business travel lonely and want more of a home-from-home atmosphere,' she says.
But Chris Bowen of Carlson Wagonlit says that most business travellers still prefer to stay in hotels. 'It's critical for our clients to be able to ring the hotels, and to guarantee security.' But you can bet Airbnb will crack such vulnerabilities.
The company is helped hugely by the fact that many cities - London included - just don't have enough hotel capacity. Airbnb has signed a contract with Rio de Janeiro for 20,000 rooms for the 2016 Olympics - a great co-branding job that brings the brand's emotional pull to the fore. 'Airbnb allows regular people to share the city they love,' says its spokesperson. 'Travellers rent unique places beyond the tourist hot spots, get to live like a local and make communities better places to live, work and visit.' It's spreading the benefits of tourism to new communities, she says. 'For the very first time, you can belong anywhere.'
World-conquering stuff. So how are hotels taking on this visionary P2P promise? Partly by appealing to Airbnb's market. 'Hotels are starting sub-brands to target Millennials, like Radisson's Radisson Blu and Park Inns,' says Josephides. 'They have strong visual branding. They're relaxed and unstuffy.'
A roof terrace at a property in Paris is typical of the quirky accommodation loved by Airbnb punters
Tom Otley, editor of Business Traveller magazine, has noticed two key lures. 'One is localisation: bringing the locale into the hotel,' he says. 'The other is personalisation.' Hotels should focus on human touchpoints and design out rigid systems like 3pm check-ins and 10am check-outs. Marriott's check-in app, Starwood's smartphone entry and the Peninsula's 24-hour stays are addressing this, while some add value, such as butlers in Rosewood; others, such as citizenM, come on like hipster bars. There's a re-energising of lobbies as spaces that bring people in rather than exclude them. Community is the thing.
Others are taking stock. 'Airbnb has made everyone consider the guest experience closely, adding emotion and personality to the booking journey,' says Christine Jones, director of hotel development at Best Western. Noel Josephides suggests that technology and personalisation is key, but reminds us that some Airbnb 'is bloody awful'. And there are other issues. I've been stuck in the Parisian doorway of an Airbnb because I didn't know how to use the tricky key fob and my host didn't answer for two hours. I would have paid the extra £100 for a hotel room, right then.
Now, hotels and P2P providers are challenging each other. 'Some corners of the hotel market needed to change,' says Toby Sawday of hotel and B&B guide Sawdays. 'But I think the likes of Airbnb could well become victims of their own success with pressure exerted on them to grow by large investors. It now has huge numbers of bog-standard places that don't offer the "live like a local" experience at all.' People are renting flats in hot spots, he says, filling them with flat-pack furniture and putting them on Airbnb.
Then there are local, pop-up challenges. In New York hosts cannot legally rent for less than 30 days unless they also live in the property. In Berlin, and in NY, Airbnb has been partly blamed for increasing rents, even for reducing available housing stock, which Airbnb refutes. 'We are helping local residents afford rising living costs in some of the most expensive cities in the world,' says the spokesperson, adding that in Barcelona, 75% of its hosts have incomes below the national average. Progressive cities embrace home sharing, she says, citing London, Paris and Amsterdam. At the same time, she is aware of inconsistencies. 'The regulations in the 34,000 cities where we have listings vary,' says the spokesperson. 'Sometimes, city regulators don't even agree on what the rules are, so we require hosts to certify that they will follow local rules and look forward to working with everyone on fair rules for home sharing.'
There's bound to be consolidation over the next year or two, says Josephides. 'Perhaps in time Airbnb will be an Abta member.' Everyone's keeping their options open, but it's time for a bit of a fightback. 'The hotel and traditional hospitality industry is always portrayed as the big guys against the small guys,' he says. 'Trouble is, we're becoming the small guys.'
WHY AIRBNB IS BEST, EVEN FOR BUSINESS
Airbnb fans Teresa (left) and Wendy in Amsterdam
'We've used Airbnb for both business and leisure travel for years. We prefer a home-from-home atmosphere - and it's better fun. The last one we used on business was in Amsterdam. The guy letting it was young and sweet, and he'd been up all night partying. He wasn't quite ready for us but that wasn't a problem: and it was a house on one of the main canals: an incredible location that, had it been in a hotel, would have cost masses. Another time, we went to an Airbnb place in Edinburgh that was so nice we both wanted to move there immediately.
Of course, there are variations in Airbnb. There was one we went to in Le Mans that wasn't so great, but it was cheap, and that's a big lure as well. But when we stayed at the Hilton at the NEC recently (the Hilton Birmingham Metropole) we were charged for Wi-Fi. We were really peeved. Indeed, provided you rent a whole apartment an Airbnb place is often better for business. You don't have that situation where all your team are in their rooms and you have to make arrangements to meet in the lobby.
I suspect men like the hotel experience more than women, as they can be alone, but for us, Airbnb is the choice. Everything's there. Unlike in rental places you even find things in the fridges you're able to use, like coffee.
You can bring a take-away back without odd looks; even cook your own food. And you can have a snoop around, which is a bit of a plus. My one gripe is that there usually isn't any wardrobe space to hang clothes for meetings. But that's hardly a deal-breaker.'
Wendy Stonebridge and Teresa Palmano, event managers at Haymarket Publishing.