Concerns are growing that the supposedly benign philosophy behind the new wave of internet star names such as Airbnb and Uber simply disguises a rapacious business model
You can not only find someone online willing to rent you a room in their house, but someone who will share their car, their desk, their power tools, their child’s toys. You can find someone to walk your dog, deliver your dinner, assemble your furniture, lend you clothes or hold your place in a queue for the latest iPhone.
This is the “sharing economy”, hailed by the government for creating “micro-entrepreneurs” and by economists for putting “excess capacity” to use. Traditional businesses and workers – from hotel owners to taxi drivers – have been less welcoming.
The sector is growing fast. Airbnb claims to have more than 1m rooms available, compared with the 13m rooms provided by formal hotel chains (not including bed and breakfast rooms). Uber can claim thousands of drivers – some poached from other lift services, or working for more than one. Not all companies are doing so well: TaskRabbit , which puts you in touch with vetted “taskers” to take whatever chore you want off your hands, has struggled to grow beyond its current 19 cities, which include London.
As poster children for the sharing economy (even if Uber shrugs off the title), both Uber and Airbnb have been accused of riding roughshod over the regulations other companies have to play by. The list of places where Uber has been banned now runs to Berlin (and later Germany), the state of Virginia, New Delhi, Belgium, the state of New South Wales in Australia, Spain, Portland in Oregon (it went ahead anyway), Thailand and Seoul in South Korea. A number of those bans were later lifted.
The ride-hailing service, started by Travis Kalanick after he found he couldn’t use his smartphone to hail a cab in Paris, has been the lightning rod for much of the anger at the disruption being caused by these new companies. In a number of cities, including London and Paris, taxi drivers have protested at the presence of the firm, claiming its avoidance of many regulations enables it to undercut them on price; in other cities, Uber “drivers” – the company insists they are not its employees – have protested too.
Meanwhile Airbnb, started by two designers who in 2008 hosted three people looking for a temporary place to stay, has had a series of run-ins with US regulators. New York state in particular has taken the company to task over whether its activity constitutes sub-letting, thus breaking the leases of many residents who offered rooms or homes. In April 2014, New York state authorities found that two-thirds of the apartments being offered there broke the law in that way.
In Amsterdam last week the company agreed to collect potentially millions of euros in tourist taxes after complaints from hoteliers.
But for Patrick Robinson, Airbnb’s public policy director in Europe, there’s no question its users should enjoy lighter regulation than some other businesses. “It’s manifestly obvious to me that somebody renting out their flat shouldn’t have to obey the same rules as a Park Lane hotel,” he says.
His views were echoed by a government-commissioned report in November that recommended “[existing] regulations must be examined to ensure they are still fit for purpose and meet peoples’ expectations – particularly for accommodation and task-sharing platforms”.
The recommendation was that regulations should change, but only for those small groups – and the government seems broadly sympathetic: in a foreword to the report, the Tory business minister Matthew Hancock said that new services such as Airbnb and PeoplePerHour “are unlocking a new generation of micro-entrepreneurs”.
The report itself was written by Debbie Wosskow, who runs Love Home Swap , described as a “peer-to-peer travel club”. That fact itself irked the British Hospitality Association, whose members view many “sharing economy” participants as enjoying a free ride, with no oversight apart from the cumulative reviews on the site itself. By contrast, hotels and B&Bs, the BHA’s members, face constant scrutiny.
The court cases hoteliers have faced in recent years over whether they can turn away would-be clients are in stark contrast to the laissez-faire approach of internet-based rivals which are free to reject anyone, risking nothing worse than damaging their online reputation, which may affect future bookings.
The key that has enabled all this is the internet and smartphones: as commerce moves online and the internet pervades so many areas of life, it has become easier to create businesses linking people who want to be on either side of a deal. In effect, it seems every transaction can be managed by a sort of dating site.
A classical economist would argue that these systems are releasing surplus capacity into the economy: there are car seats going begging on various journeys that could be more efficiently shared, and the exchange of value (read: payment) between participants would be good for all. It should increase efficiency and lower the price of those goods; so you might expect that the arrival of ride-sharing services would drive down prices for existing, regulated services.
There are signs that this is happening in some areas. In New York the cost of a “medallion” for an official yellow cab has fallen from its million-dollar peak recently. But both Robinson and the BHA say there’s no sign that Airbnb is pushing down the price of hotels, or official bed and breakfast accommodation.
Tony Greenham, head of finance and business at the New Economics Foundation, cautions that in many cases the label of the “sharing economy” is a fig leaf for companies that are just as rapacious as any around now.
“The starting point has to be realising that the label has been used to describe wildly different things. At one end there’s Uber, which is trying to dress a traditionally capitalist business model in the cuddly clothes of ‘sharing’. But that doesn’t mean the whole area is just marketing.”
There are also potential downsides, or what economists call “externalities”. Greenham says: “Driving down the cost of taxis encourages people off buses and into taxis. That means you’re actually using more resources, at an overall higher cost to everyone because you have all these people owning and running cars.”
He also points to the fact that every driver (and every passenger) is rated by each other; if a driver’s rating falls too far below 5/5, they are liable to be dropped.
“It’s really important to question whether these services make the relationship between people more or less uneven,” Greenham cautions. “Uber has all the power in this relationship. It reminds me of nothing so much as longshoremen turning up at docks a century ago hoping to be hired by the foreman – the sort of situation that led to the formation of unions.”
With accommodation services, there are other immediate concerns: Jackie Grech, legal and policy director at the British Hospitality Association, cites loud parties disturbing neighbours, even premises being used as brothels.
For Airbnb, Robinson argues the company has brought benefits through the hiring of cleaners for accommodation. And he argues that “a two-bedroom bed and breakfast has the same requirements placed on it as a two-bedroom Airbnbhost”. There are no compulsory safety inspections on either.
He also says that the expectation placed on the company is far higher: “Inviting somebody into your home is a big step.”
But what would happen if an Airbnb guest was harmed by fire, or a carbon monoxide leak – a constant concern for hotels. Airbnb’s site says owners “should” make sure they have a functioning CO detector and are following gas safety regulations. But although the money for any stay is paid via Airbnb, Robinson says he doesn’t know who would be responsible if someone were injured that way.
“I’m not a lawyer,” says Robinson. It seems surprising that the eventuality hasn’t come up in business meetings, but Robinson declines to discuss it.
It’s a scenario that has exercised insurance companies, which are wrestling with the question of who is liable in a collision involving a car being driven on an Uber journey, or one of the other car rental services, or a complaint involving Airbnb clients. Premiums might rise, or need extra tweaking.
Everyone involved agrees that these businesses look unstoppable. The question is how far regulations will shape them to behave more like the traditional businesses that they’re trying to supplant.
“What I would be impressed by is the ‘sharing economy’ companies trying to get social justice,” says Greenham. “The whole concept of sharing isn’t very compatible with the accumulation of private capital, after all.
“What’s irreversible is the technological element. But maybe some of these platforms would be more socially responsible if they were owned by the users, rather than venture capitalists in Silicon Valley.”
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