Airbnb is very successful. Does this success come from a disruptive innovative business model or is it only unfair competition?
History of Airbnb
In 2007, two men from San Francisco who struggled to pay their rent decided to buy a spare mattress and rent it to people visiting the city. They easily found guests through the Internet and thought that they could turn it into a serious business. This is how Airbnb started. Today Airbnb is one of the most promising companies on the Internet with a valuation over $20 billion.
This online platform allows to establish contact between people who have some space to rent (a bed, a room or even an entire flat) and people travelling and looking for accommodation for a short period of time. Airbnb gets a commission over the value of the transaction.
Sharing economy valid model or unfair competition?
The emergence of Airbnb as a strong competitor in the short-term rental market, in particular in the vacation rental market, has provoked different reactions. Some admire the innovative character of this business model that takes advantage of excess capacity in terms of space and new technologies.The common premise of sharing economy is that information about goods or services is made openly available through an online marketplace, in this case Airbnb, and that users agree on a common or collaborative consumption. This model has also triggered some criticisms and some cities, such as New York, have regulated and considered illegal this kind of short-term rental platforms.
Arguments in favor of Airbnb
Those defending the sharing economy model suggest a series of pros to Airnb:
- The platform allows users to take advantage of any unused asset of their property (a bed, a room, an empty apartment), allowing them to earn an extra income that can be helpful.
- For travellers, the system may be a cheaper alternative compared to traditional accommodation, especially hotels.
- By making use of existing untapped resources, such as unused rooms or empty apartments, Airbnb could have a positive impact on the environment.
- Hotels and other types of holiday accommodation can be seen to have failed to adapt to the new economy, something that has also happened in other sectors, for example record companies.
- Airbnb allows travellers to be in closer contact with other cultures and engage in a more "authentic" type of tourism, especially when renting a bed or room.
Cons of Airbnb: what its critics point out about the platform
- In most cases, a large amount of the income generated by Airbnb business transactions is not taxed, as only commissions are charged with VAT. Therefore Airbnb promotes the underground economy.
- Many cities in the world get an important part of their income by taxing overnight stays. The success of Airbnb harms their local budgets.
- The biggest criticism of Airbnb is that it promotes unfair competition between individuals who do not have to comply with the same norms, licences and taxes as the traditional industry players such as hotels, hostels and bed and breakfasts who are strictly regulated.
- As the Airbnb website has become the main reference point for renting and letting private accommodation, it is becoming a monopoly in the sharing economy, concentrating the wealth and spending very little. Airbnb charges a commission of between 10 and 15% on every transaction and despite its high revenue it employs very little staff. Big businesses such as this do not add too much value to the larger economy as they do not create as many jobs as the businesses they are replacing.
- Some observers warn of the price increases in some touristic areas as some individuals prefer to let their properties for short-term but more expensive rentals than to find long-term tenants.
- In cities where hotels could only be established in defined areas to avoid tourism-related inconveniences to the local population, Airbnb is making these regulations ineffective as tourists can find accommodation in other areas.
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Airbnb pros and cons. Is sharing economy a valid business model or simply unfair competition?
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