In order to get a real perspective on the challenges that a sharing economy leader faces day in and out, I reached out to Chip Conley, head of global hospitality at Airbnb. Here is his take on the friction between those that are embracing and those that are fighting the sharing economy.
Jonathan Bingham (JB): What do you believe are the major hurdles facing the sharing economy model in the next 2-3 years?
Chip Conley (CC): The sharing economy entrepreneurs who started their companies were passionate about offering the marketplace something new that didn’t exist. We now call this form of innovation “disruption,” but not only did this disrupt the existing competitors, but it also surprised regulators. One of the primary hurdles for the next couple years is helping regulators understand the business models of companies like Lyft, Airbnb, or TaskRabbit. The US has moved more slowly in this regard than other countries. For example, the whole country of France has legalized homesharing and many of the state governments of Brazil, in anticipation of World Cup, reached out to Airbnb to grow our supply of local hosts who could open their homes as the Brazilian government didn’t want to build expensive hotels for the spike in demand. Generally speaking, the more legislators get to know us, the more they like us.
JB: What role do you think consumers can play in ensuring local legislation doesn’t hinder their ability to take advantage of the sharing economy model?
CC: For Airbnb, we’ve needed to engage our hosts and guests to have a voice in how legislators look at regulating short-term rentals. In many places including San Jose and San Francisco, this type of citizen advocacy has led to new laws that allow homesharing. The key is to be vocal with your local elected representatives as many of these legislators have no idea how much support there is for the sharing economy.
JB: Which city do you believe has been the most successful in finding a balance between keeping constituents happy by allowing sharing economy operators (Uber, Lyft, AirBnB), yet satisfying government officials/local business interests?
CC: Portland is a model city for the sharing economy. They’ve taken a very thoughtful, long-term perspective on this subject and truly see the sharing economy as an effective way to create a more sustainable city. But, at the same time, the Mayor of Portland hasn’t been a pushover as he’s been pretty aggressive in assuring Uber lives by the rules they’re constructing. The key is for both parties – the sharing economy companies and legislators – to take a collaborative approach.
JB: In what ways will the sharing economy model continue to evolve and innovate? In what areas/industries will it flourish (current or unexpected)?
CC: At first, I was amused by companies proclaiming they’re “the Airbnb of ______” or “the Uber of _______,” but I’m actually getting worried that many of these half-baked ideas are watering down the effectiveness of how people view the sharing economy. For a sharing economy company to have a chance of succeeding, there needs to be the potential for a sizable marketplace utilizing slack resources that people previously hadn’t valued and the existing set of competitors need to be ripe for disruption by the fact that they’re not providing a great value proposition. I can’t divulge some of the new things we’re considering, but I will tell you there aren’t that many sharing economy business plans that have the characteristics I’ve just outlined.
JB: What are hotel groups doing to combat Airbnb’s success? Do they even compete?
CC: One of my chief roles here at Airbnb has been to create a more collaborative relationship with the global hotel industry. I’m proud of the fact that some of these hotel global chain CEOs have spoken in a more neutral or even a positive way when asked about Airbnb. There’s been two studies – one we commissioned in New York City and one performed independently in Texas by a Boston University professor – that have shown that Airbnb’s impact on hotels is relatively negligible. For example, for every $1 spent with Airbnb, only 5 cents of it is coming from what would have gone to hotels. Why are we not more directly competitive? First off, a large percentage of Airbnb guests would have stayed with family, friends or wouldn’t have made the trip if Airbnb didn’t exist. Secondly, the average length of stay for an Airbnb guest is typically more than double the length of the average traveler within that geographic market which means that many of our guests are staying for weeks or months at a time and this kind of business doesn’t usually stay in a hotel. Lastly, the core customer for most global hotel chains is the midweek road warrior who is looking for proximity to a convention center or downtown and is looking for a variety of services in a hotel. That’s not our typical offering since our homesharing is usually happening in residential neighborhoods. In sum, as hoteliers have gotten to understand the Airbnb model, they are less concerned about us as a competitor. Plus, let’s recognize that cities like New York and San Francisco are experiencing record occupancy rates for their hotels so Airbnb’s emergence and huge growth hasn’t eclipsed the hotel industry’s ability to grow.