Do Homestay Networks Like Airbnb Have What It Takes to Survive
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Of late, the world is invaded by a rapidly-emerging, high-flexibility economic model, known as the â€˜shareconomy' (sharing economy) concept. Also known as â€˜peer-to-peer', â€˜collaborative consumption', â€˜peer economy' and so on, this business model is basically a decentralised model wherein two individuals (the buyer and seller) interact to buy and sell goods and services directly with each other. This economic model eliminates the roles of the intermediary third party, company or business.
This hybrid market model is essentially facilitated by community-based online services, in which participants mutualize access to products or services, as opposed to having individual ownership of the product or service. Excellent examples of thriving peer-to-peer model companies are Alibaba.com, Mudah.my and Uber. For property rentals, Airbnb and HomeAway are two of the most successful peer-to-peer online marketplace and homestay networks out there.
Founded in 2008 and headquartered in San Francisco, California, Airbnb is a privately-owned and operated homestay network that caters to people who are interested in listing their short-term lodging in residential properties -- with the rate being set by the property owners -- as well as people interested in looking for short-term properties to rent. The company will then receive a certain percentage of service fees from both the guest and the host with every successful booking made. To date, Airbnb has over two million listings in 34,000 cities in over 191 countries.
Somewhat similar to Airbnb, HomeAway, Inc. is a vacation rental marketplace that offers the most comprehensive selection of rentals for holidaymakers, ranging from cabins, condos, castles, villas, barns and farmhouses. Founded in 2005 with its headquarters in Austin, Texas, HomeAway has more than one million vacation rental listings in over 190 countries and operating through 40 websites in 22 languages.
SHARECONOMY AND ITS ROARING SUCCESS
The success of the shareconomy model undoubtedly lies in its flexibility. By making it easier to share resources on demand, this economic model increases its efficiency. The peer-to-peer economic model allows participation without necessarily possessing properties and it creates boundless opportunities for others to extract wealth and create value from idle properties and/or talents.
Nonetheless, the shareconomy model relies heavily on technology for its very existence. Therefore, in some parts of the world where internet access is still quite limited, the peer-to-peer economy model may still be inapplicable.
One of the most obvious appeals of the shareconomy model is its cost-effectiveness.
Online marketplaces and vacation rental hubs like Airbnb and HomeAway provides travellers with cheaper accommodation options that are personalised according to their budget, amenity needs, and personal preferences.
For some participants, this also means making potential new contacts through the property owners and vacationers. Sometimes, vacationers are offered free tours around the neighbourhood by their hosts, and for an outsider, having a local to show them around is definitely an added bonus to any vacation.
In addition to cost-efficiency, the peer-to-peer marketplace also provides opportunities for hosts to make extra income by letting out an idle property or an extra room for rent. Best of all, unlike letting out a property to a long-term tenant which requires a lot of thorough research and a more detailed contract, short-term rental means fewer-fuss and more straightforward business dealings.
At the same time, many peer-to-peer platforms have built-in ratings and reviews that help keep providers on their toes and consumers honest about the quality of service they've received. Other aspects of the sharing economy model also help build stronger communities. For instance, Airbnb has coordinated free accommodations for people who are affected by natural disasters, which helps build constructive relationships in the most unique way possible.
THEN AGAIN, THE DOWNSIDEâ€¦
Whilst Airbnb has been great in offering budget travellers more options and flexibility in regards to their chosen accommodations, the rest of the story is not so peachy.
The biggest problem with Airbnb is that it allows some hosts or landlords to take advantage of the cushier short-term rent by taking whole units off the rental market altogether and turning them into de-facto hotel rooms, sans paying the necessary hotel tax.
In some cases, the multi-unit buildings are allocated for short-term rentals for up to six months, making it unavailable for long-term tenants.
In Berlin, Airbnb has been blamed for the ever-increasing rent. Such is also the case in Los Angeles where unscrupulous landlords indirectly contribute to the city's rising housing crisis. This has urged city officials to create a new housing law, which bans regular short-term room letting without prior permission from the authorities.
The flexibility and simplicity of Airbnb have also made it so much easier for certain people to make large amounts of profits by illegally renting out their space for the short-term permanently. A 2015 research by the Los Angeles Alliance for a New Economy (LAANE) has shown that some of the people who use Airbnb are landlords renting out their units for the short-term, instead of as regular apartments.
According to LAANE, although only six percent of the property owners on Airbnb are renting out two or more units -- they still make 35 percent of the total revenue as the market monopolisers. Out of this number, 42 percent of the people renting a single unit are making 54 percent of the revenue, whilst the 52 percent who are renting out an extra room make just 11 per cent of all the Airbnb revenue in Los Angeles. In addition to this, other issues such as security and credibility are also legitimate causes of concern.
BUSINESS MODEL OF THE FUTURE
Like any economic model, the peer-to-peer economic model is a promising model with huge potential.
For travellers on a shoestring budget, the services offered by Airbnb and HomeAway may seem to be a godsend, making travelling a lot more affordable, accessible and practical; whilst giving hosts alike the winsome opportunity to host travellers and build friendships. Unfortunately, the same is also true for opportunistic property owners, to whom, the money-making prospects of these platforms are just impossible to resist. Here is where lawmakers play a significant role to maintain a healthy balance.
In the end, the overall success of a sharing economic model is reflected by its effectiveness in upholding a community.