By JIM SABATASO | STAFF
[An edited version of this story appears in the Aug. 25, 2014, edition of the Rutland Herald.]
San Francisco, 2008. Two roommates looking to make a few extra bucks, rent out space in their apartment to visitors in town for a design conference. Lacking actual beds, they procure air mattresses to accommodate their guests. Welcome to the first Air Bed & Breakfast.
Airbnb is an online room-sharing service where users can rent everything from a couch to a room to a house by the day, week, or month. Typically less expensive than traditional hotels, it has become popular among those looking to travel on a budget as well as those seeking a unique, local experience.
Now CEO, Brian Chesky speaks highly of the relationships he and current CPO Joe Gebbia forged with their guests back in 2008, and how it inspired them to share this concept with the world. There are no strangers on Airbnb; it’s all about community, and making people “feel like (they’re) home anywhere in the world.”
The timing of the company’s launch was fortuitous. In 2008, the economic crisis was nigh, and people were looking for ways to not only travel on the cheap, but also supplement their incomes. Airbnb offered both. Today, the average Airbnb host earns $5,000 annually. Some ambitious hosts have been reported to earn as much as $400,000 a year. (Though it’s worth noting that Airbnb and its peers are notoriously tight-lipped about releasing data. Any figures they provide should be taken with a grain of salt.)
Chesky, who still uses the service both as a guest and host, can’t overstate its importance and impact. “There are people who really needed this change to happen,” he said in a recent interview on The Colbert Report.
Chesky may be an obvious cheerleader, but he’s not wrong. Over six years, Airbnb has become a global phenomenon as an economic disruptor and harbinger of a new sharing economy.
On a given night 375,000 guests are staying in 160 countries. During the World Cup, 125,000 used the service in Brazil alone. Worldwide, Airbnb has 800,000 listings, and has accommodated 17 million guests since 2008.
To facilitate such a widespread operation, the company plays middleman, processing all transactions. In return, it takes a 3 percent cut from hosts and up to 13 percent from guests. Last year, those fees earned the company around $250 million in revenue. In April, Airbnb was valued at $10 billion.
All that money may have venture capital firms and Wall Street types swooning, but people in the hospitality industry aren’t nearly as enamored by Airbnb’s disruptive model.
“I’m feeling a sense of alarm for our smaller bed and breakfasts,” says Megan Smith, commissioner of the Vermont Department of Tourism and Marketing, which represents around 500 licensed inns and B&Bs in the state. (By comparison, a search for “Vermont” on Airbnb yields more than 1,000 listings.)
Smith’s concerns are many, and go beyond simply a loss of business. Safety is chief among them. While Airbnb does encourage hosts to comply with all local laws, codes, and regulations, there is no requirement beyond that suggestion. Registering to be a host is a simple (and free) process: All you need is a computer, a bank account, a few photos of your space, and you’re good to go.
Smith argues that such a low barrier of entry is “lowering the standards” of Vermont inns and B&Bs overall.
Operating a legitimate B&B “comes at a price,” Smith says. Licensing, taxes, inspections, permits — these are all expenses that must be factored in when setting rates. It’s the cost of doing business. As a result, rates are going to be higher than a typical room or house listed on Airbnb.
On the revenue side, Vermont currently has no mechanism for collecting rooms and meals taxes from Airbnb hosts. That loss of money has not gone unnoticed by the tax department, which has been aggressively collecting on private rentals to the tune of $400,000 since last year. However, lacking a formal policy, the onus of identifying renters and collecting taxes from those who choose not to report is entirely on the state.
Champions of Airbnb often dismiss critics as clinging to the status quo and entrenched business interests. The argument goes that these micro-entrepreneurs are the new mom and pop operations trying to find a new way to compete.
“We represent mom and pops,” Smith counters, noting all the small, independent businesses that have long been a hallmark of Vermont’s local-first economy.
Still, Smith cannot deny Airbnb’s significance. It’s all anyone in her world wants to talk about right now. She mentions an upcoming tourism director’s conference she’ll be attending where it looks to be a hot topic of discussion.
Smith hopes the conference can help her formulate a better strategy that she can bring back to Vermont. But at the end of the day, she asserts that B&Bs offer a superior product to Airbnb in both safety and quality of stay:
“It’s not the same,” she says.
On the front lines, innkeepers like Dan Brown at the Swift House in Middlebury, have been keeping an eye on Airbnb for some time.
“It’s not a level playing field,” Brown says, echoing Smith’s safety and quality concerns.
With 20 rooms and a full-service restaurant, the Swift House sees 4,600 room nights annually. That translates to a 61-percent occupancy rate, which Brown says is a solid number in the industry.
While he can’t say definitively that Airbnb has cut into his business — the state has no data — he believes there is enough anecdotal evidence to make the claim.
“Intuitively, it’s got to be having an impact,” he says.
Fairness issues aside, Brown doesn’t come off as bitter. Yes, Airbnb is a threat, but he also sees the model as reminiscent of early B&Bs, which started out simply, but evolved to meet the needs of guests by becoming more professional and adding amenities to better compete with hotels.
Despite that shared DNA, Brown doesn’t see the value in listing the Swift House on the site, which is something professional inn and B&Bs are welcome to do. Even Smith has openly encouraged this, but Brown contends that it’s not necessarily worth it. It may be free to register, but that 3-percent fee is none too appealing when you add it to the host of other fixed expenses traditional inns have. Consequently, the rates will always be higher, making it difficult to compete.
You can, however, find the Swallow’s Nest in Brandon on Airbnb. As a working organic farm that also offers rooms, it’s not your typical stay. Owner Lyn Des Marais says she has embraced Airbnb, though she’s finds the process frustrating.
“I find Airbnb quite difficult as it doesn’t allow us to contact each other before booking,” she says of the service’s fairly strict parameters that limit the ways in which guest and hosts can communicate. It can be a hassle, but it makes sense from a business standpoint: If guests and hosts connect outside the service, Airbnb loses its cut.
Still, when booking with a potential guest who may have multiple questions about Des Marais’ unique location, she would prefer a phone call to texts and emails. “(It’s) much friendlier by phone,” she says, adding, “Airbnb could be more user-friendly.”
At the Antique Mansion in Rutland, owner Sally Gill isn’t going to be listing her three rooms anytime soon. “I’m not convinced I want to support that model,” she says, adding, however, that she would need to “give it more thought” before she ruled it out entirely.
While she admits it’s a clever idea, she shares Brown and Smith’s concerns. “Regulations are there for a reason,” she says, acknowledging, “It takes time for (them) to catch up.”
‘Live like a local’
The anxieties expressed by Smith and her constituents are not unfounded. As much as Airbnb and sharing economy champions paint a rosy picture, there are horror stories. Accounts of cockroaches, squatters, even orgies have made headlines in the last year alone. Though less severe quibbles over rudeness, misrepresentation, or booking conflicts are more common.
Reviews are given a lot of weight on the site; guests and hosts review each other, and Airbnb is very keen on prompting you to do so within a few days of your stay. It’s a way of building trust and filtering out the riffraff on both sides. Still, “caveat emptor” is the name of the game.
In most cases, Airbnb has been responsive, and resolved issues agreeably. The New York City man who came home to find an orgy in his apartment received almost $24,000 to cover damages, cleaning, and other expenses.
But those stories are outliers, and most hosts are as professional as the guests are respectful. Barbara Venezia owns properties in Poultney, Waitsfield, and Warren, which she lists on Airbnb, as well as home sharing sites like VRBO and HomeAway.
Venezia, who operates more like a landlord than roommate, says she has very little personal interaction with her guests since she does not live at the properties she rents.
Her experience thus far has been positive. “Guests have been thoughtful and have left the houses in good shape,” she says.
Venezia also notes that she is compliant with all local and state regulations. “I pay my taxes to the state of Vermont,” she says.
As far as competing with inns and B&Bs, Venezia says she is mindful of what she is doing. “I don’t price to compete with (them) … They’re trying to make a living, too.”
While property owners like Venezia see Airbnb as another outlet where they can list, many others have bought into the company’s “live like a local” ethos. The tagline is both declarative and aspirational. In response to the isolating tendencies of modern society, many are seeking more authentic experiences and a sense of community.
It’s that attitude that has made Chris Rose such an enthusiastic host. For a little over a year, Rose has been offering up one half of his Rutland Town duplex to travelers from around the globe. He praises the company for its responsiveness, and says that after nearly 100 guests, he’s yet to have a negative experience.
“The people are really, really nice,” he says.
On the phone, Rose’s buoyant personality is evident as he describes the friendships he’s made. “I’ve been invited to Shanghai, South America, all over,” he says.
Such connections are made through Rose’s eagerness to play tour guide, which he says he’s “more than happy” to do, even going the extra mile taking guests on hikes or out for a beer.
Rose admits that the extra income has been a boon — “it pays the mortgage” — but for him it’s the personal connections that make it worthwhile.
A fair share?
Called the sharing economy, the movement has been slowly gaining ground since the economic crisis of 2008 forced many people to get more creative with how they make a living. At its most basic level, it’s an economic system where human and physical resources are shared — think time banking or car sharing.
Along the way, Silicon Valley has jumped on the idea with a host of sites, apps, and services. The result: peer-to-peer companies like Airbnb, Uber, and TaskRabbit. The vision here is to create a new, community-driven economy that puts humanity back in capitalism.
On the homepage of Peers.org, “a member-driven organization that supports the sharing economy movement,” the message is expectedly uplifting:
“The sharing economy is helping us pay the bills, work flexible hours, meet new people or spend more time with our families. We think it’s how the 21st-century economy should work, so we’re coming together to grow, mainstream and protect the sharing economy.”
That’s all well and good, but this model has drawn criticism from some, including technology and economics writer Tom Slee. Slee, in his essay “Why the Sharing Economy Isn’t,” is not buying the Silicon Valley rhetoric. He writes:
“The sharing economy is not an alternative to capitalism, it’s the ultimate end point of capitalism in which we are all reduced to temporary labourers (sic) and expected to smile about it because we are interested in the experience not the money.”
It’s worth noting that Peers.org is not as grassroots as its site would have you believe. The organization is backed by Silicon Valley capital, its co-founder is a current Airbnb executive, and it counts among its partners Airbnb, Lyft, TaskRabbit, and other for-profit peer-to-peer companies. Astroturf might be a more appropriate label.
On the ways these companies have sidestepped local regulations, Slee is equally critical:
“The laws … are licensing laws and other laws put in place to protect employees, customers, and neighbourhoods (sic). These laws are not all perfect. But the sharing economy has nothing to replace them beyond magical thinking about ‘trust’ (with little accountability).”
Perhaps a better name would be feel-good capitalism. Or as Ryan Chittum put it, in a story in the Columbia Journalism Review, the “sublet economy.” He argues that a more complicated term like “sublet” might help to draw out the necessary regulatory questions this model raises.
While cities like San Francisco and New York address Aibnb and the like head on, the rest of the country is still discovering just what sort of impact the sharing economy will have. To be sure, this is still the Wild West period of this movement — and with any disruptor anxiety is natural. But, at the end of the day, regulation in some form or another seems inevitable.