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More than just a bed: The Internet gives us accommodation choices. Regulators are wrong to try to shut down Airbnb.

· February 11, 2015

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Airbnb has turned homes into hotels. Hosts deliver an experience – full of local knowledge, free WiFi, and stocked kitchens – not merely a place to sleep. It’s a similar story with European-based competitors Wimdu, HouseTrip and Waytostay; and niche operators from the upmarket onefinestay to gay-friendly Misterbnb.

The revolutionary power of these platforms comes from the fact that it is about sharing and trusting, in a world where those sentiments can be sadly lacking. It is simply nice to stay in someone’s carefully tended home. Nicer than passing time in a soulless chain hotel, sleeping in the accommodation equivalent of a Filet-O-Fish burger.

The digital revolution has shifted people’s perceptions of ownership. People own less and experience more, and want to do different things with what they own. These tides meet in the Airbnb experience, and this alignment with Millennials is what will doom hotels that don’t flow with the tide.

So it’s a pity that hotel owners are fighting back by leaning on regulators instead of innovating. While they fight for the right to keep charging us $30 a day for WiFi, Airbnb innovates with nifty features likes Airbnb Neighborhoods and Local Lounges. Smarter hotels are learning from Airbnb but perhaps the rest have been numbed by the speed of Airbnb’s scale: four years to reach 600,000 beds compared to 93 years for Hilton.

Most amazing is the willingness of governments to crack down on innovations like Airbnb without first gathering evidence of consumer or social harm. The New York Attorney General demanded massive data sets and Amsterdam hired 22 inspectors to crackdown on what exactly? Even non-users are benefiting from lower hotel prices. These cities would be better off following the British example, of confirming in law that it’s OK for individuals to let rooms out on a short-term basis.

When it comes to a city like New York, I can’t afford it unless I have a friend’s spare room or Airbnb as an option (Airbnb is consistently cheaper than hotels.) I didn’t steal money from hotels by choosing Airbnb, but I did put money into pharmacies, cafes, Shake Shack, theatres, transit, museums and bars because cheaper accommodation makes my trips financially plausible. Then there’s the Airbnb sub-economy spawning in your city, for guest-screening, key hand-offs and cleaning.

My choices have grown and my costs have fallen thanks to the Internet. Before, cheap was synonymous with nasty. Luxuries came bundled with me subsidizing car spaces and crappy lounge bars.

I would be open to hotels again if they offered me more of what I want, but it’s not my problem if they prefer their scale, their influence and their comfort zone to my money. And regulators shouldn’t make it my problem or yours.

Let’s imagine the New York Attorney General is right that most of Airbnb’s rooms in the city are illegal. What does that tell us except that the law has failed to keep up to date with market realities? Businesses exist within a legal framework that allows them to meet consumer and citizen needs, not the other way around.

When a business works both sides of the market – giving a platform for households to stay financially secure, and enabling travellers to have the affordable experiences they desire – that should be celebrated.

There is no issue raised by Airbnb’s hosts that cannot be covered by tax and insurance law. Micro-businesses do not have the same impact as a hotel, so it is reasonable for them to face a different, lower, administrative burden. There are no parking dramas and traffic jams outside a rented spare bedroom; offering a spare couch to a stranger does not create a potential fire hazard for 500 people.

Tax avoidance has existed from time immemorial from cash-in-hand cleaners to illegal sublets. The lesson isn’t to ban cleaning but that compliance should be made simple and achieved co-operatively. Do that and city revenue problems will turn into new parks and schools and buses.

The alternative is letting large hotel chains take advantage of the increasingly professionalized policy discussions that set today’s policy agendas. A perennial problem for start-ups and small businesses, let alone people seeking a supplementary income, is lack of effective representation. They are too busy keeping their heads above water to spend time and money on lobbying. It’s not right to ignore their needs just because a few vested interests shout louder. 

The best criticism of Airbnb is its impact on affordable housing in certain locations. But that’s also the worst criticism: Paris and Manhattan and their ilk were affordability disasters long before the Internet. The problem is supply. Short of pointing a gun and forcing people to live in groups, the only thing that can increase supply is more building permits. Shutting down a thousand spare rooms is not going to fix affordability issues in cities of 10 million or more.

Local and national policy-makers should be looking at what policy mix creates a stable, diverse, prosperous economy. The hotel sector is notorious for putting workers at risk of poverty on the minimum wage. In the UK hotel workers are the sector most at risk of low pay – and this week the Irish Government hit out at the hotel sector for taking tax breaks while leaving workers on the minimum wage. I am not sure that’s the business model I want my disposable income propping up. Like many others, I prefer a mix of accommodation that attracts a bigger group of people, keeps money circulating locally, and ensures housing resources are optimized.

In the absence of hard data that individual hosts are either crushing hotels unfairly or conducting tax evasion worthy of dictators, the duty of regulators is to first do no harm.

Competition

Some, if not all of society’s most useful innovations are the byproduct of competition. In fact, although it may sound counterintuitive, innovation often flourishes when an incumbent is threatened by a new entrant because the threat of losing users to the competition drives product improvement. The Internet and the products and companies it has enabled are no exception; companies need to constantly stay on their toes, as the next startup is ready to knock them down with a better product.