From Berlin to Barcelona; will Airbnb

ruin our most loved cities?

The accommodation website has become so successful that hotels are losing business and tourist
sites face being ruined

Jamie Doward

Sunday 26 June 2016 00.05

To use the industry jargon, it is the ultimate disruptor. Airbnb, the website that allows
homeowners around the world to rent out their spare rooms, has had a seismic impact on the
travel market.
Hotel chains are reportedly feeling the squeeze as the US upstart which has attracted $2bn in
funding in less than a decade eats into their business model by offering travellers the
opportunity to live like a local and belong anywhere in one of the two million rooms and
properties that are listed on its site.
The savvy exhortations, which feature in slick adverts on bus stops and billboards across the
worlds cities, have helped Airbnb expand at a seemingly relentless pace. Already operating in
191 countries and 34,000 cities, analysts at financial services company Cowen & Co predict that,
by 2020, Airbnb hosts will be taking 500 million bookings a night, rising to a staggering one
billion by 2025.
It is a truly global phenomenon. Yet, just as Ubers attempts to shake up the taxi market has met
resistance, Airbnb finds itself a victim of its own success as cities and countries wake up to the
fact that the cute new kid on the block has been transformed into an 800lb gorilla.
The latest salvo was fired last week when Mark Tanzer, chief executive of the Association of
British Travel Agents, warned that the popularity of companies such as Airbnb was leading to
such an influx of visitors that there was a danger that some of Europes most attractive historic
cities would be ruined. If they cant get around the city you are going to lose value from
tourism, even if the numbers are going up, he said. Overcrowding in key destinations is
becoming a pressing issue. Without controls, we know tourism can kill tourism.
In the UK, more than three million people have used the site, while 52,500 people have opened
their homes to strangers. A typical host can expect to earn 2,000 in return for renting out a
room for 46 nights a year.
Until recently, Airbnbs rise has been largely embraced by politicians and governments, who
were quick to hail it as an exemplar of the sharing economy. George Osborne unveiled plans in
his last budget that will allow hosts on sites such as Airbnb to earn 1,000 in additional untaxed
income by sharing their homes. In March, in a sign that it has truly come of age, Airbnb won a
contract to provide a reported 20,000 rooms for this years Olympic Games in Rio de Janeiro.
Its not bad for a company that started life in 2008, when its three founders rented out air
mattresses in their San Francisco flat as a way of making money. It is now one of the largest
online global travel brands and only Priceline, Expedia, Ctrip, and Marriott drive more online
room bookings, according to Cowen & Co.
Luca Florio, an enthusiastic Airbnb host, began using the service three years ago to rent out a
spare room in the flat he shares with his wife in the centre of Florence. He said: We saw it as a
chance for cultural exchanges, a chance to talk to people from different countries. It was only
after three months that we appreciated it could also be a way to make money.
Florio said he and his wife could rent out their spare room every night if they wished, but he
tries to limit it to 20 nights a month during peak season because it is not just a business, we
want to be free. Guests come from all over the world: in addition to Spain, France, Austria and
Switzerland, Florio regularly hosts visitors from the UK, the US, Australia, India, South America
and China. Its a kind of alternative tourism, a new opportunity for tourists to gain a different
view of Florence, he said.
Florio appears to be a typical Airbnb host, someone using a valuable resource a spare room in
one of the worlds most loved cities to make a little money, while learning more about people
from other countries and cultures. This is certainly how the company likes to portray itself a
platform that allows the little guy to build up a complementary industry, one that increases the
size of the hospitality pie rather than takes a slice from existing businesses.
Airbnb points out that almost 900,000 guests used it to visit Barcelona last year, spending some
740m nearly six times higher than in 2013. Three quarters of the citys hosts have incomes
below the national average evidence, the company says, that its business model can expand
the economic benefits of tourism to more people and more areas.
When Airbnb arrived in Barcelona in 2009, almost 80% of bookings were in the Old Town.
Today, in contrast, almost 70% of bookings are for listings outside the Old Town.
Tanzers comments about Airbnbs expansion having a negative impact on tourism were fiercely
rejected by the company. In a statement to the Observer, it said: It is disappointing but not
surprising to see attacks on new forms of travel that put money in the pockets of local
residents and support small businesses outside hotel districts. Airbnb spreads guests and
benefits to more families, communities and local businesses many that havent previously
benefited from tourism.
But the Airbnb phenomenon that is driving record numbers of tourists to certain destinations is
not just irking the more traditional holiday operators, it is also inviting closer analysis of the
companys business model.
A report examining Airbnbs operations in the US, published this year by Penn State University,
identified the rise of the mega-operator people who rent out three or more Airbnb units. The
report found that a growing number of hosts were using the Airbnb platform to operate an
unregulated, full-time business. Nearly 30% of Airbnb revenue is derived from this group of
full-time hosts. They are becoming bigger and more prominent.
Other organisations have expressed similar concerns. There is strong evidence that far from
simply facilitating the use of empty spare rooms, Airbnb actually enables landlords to bypass
government regulation and in effect run illegal hostels, Julian Ledger, chief executive of YHA
Australia, told a parliamentary inquiry.
Airbnb vigorously rejects these fears, pointing out that it is quick to take action against any hosts
who are suspected of breaking the law and trying to avoid the taxman.
Earlier this month, it released data showing that since it began it has collected $85m in tax
revenue for cities worldwide. Late last year, it unveiled its Community Compact, a series of
pledges to treat cities individually, help our community pay its fair share of tourist and hotel
taxes, build an open and transparent home sharing community and promote responsible home
sharing to help make cities stronger.
The initiative came ahead of a sensitive time: Wall Street expects Airbnb to float on the stock
market this year, a move that could see it valued at almost $26bn.
But not all governments and authorities buy into the home-sharing concept. San Francisco has
passed a law that permits hosts to rent out properties for only up to 90 days a year. Berlin
prohibits users from renting out entire properties, while Iceland has proposed rules that will
force some home sharers to register as businesses.

Now, in what could prove the most significant threat to Airbnbs business model to date, the
New York state senate and assembly has just unveiled laws that would bar New Yorkers from
advertising their homes on its platform.
If it becomes law, this legislation would threaten thousands of low- and middle-income New
Yorkers with fines of up to $7,500 simply for listing that they would like to share their homes,
Airbnb fumed.
Given that it is a fledgling company yet to establish its bona fides, analysts suggest resistance is
only to be expected. But, some day soon, Airbnb may have to face up to who is benefiting from
its seemingly relentless expansion.
There are people who do it just for business, said Florio. They buy three or four flats in the
city and its too much. Such people, he suggested, were damaging the complexion of historic
city centres. These people dont care about Florentians, just about tourists.