Sharing homes, cars – and lawsuits
Airbnb already has made moves to build stronger relationships with local municipalities. To play defence against the Attorney General of New York, it shed more than 3,000 New York listings last week. To get bigger, it will have to first go smaller as it cuts enough illegal inventory to placate regulators. In cities like New York, it could lose more than half of its listings as it professionalises the marketplace.
Airbnb’s popularity, however, will lead to greater crackdowns by landlords and condominium boards, both of which are free to set more restrictive rules than a state or city. Many hosts will be scared off by this, and those users that are left will form the core of its future business.
Airbnb knows that these are the likely outcomes, so it has been strategic as it looks forward. “Our business isn't the house. Our business is the entire trip,” Airbnb founder and CEO Brian Chesky told the magazine Fast Company in March. Airbnb plans to expand beyond hosting: it holds patents on a wide variety of travel-related services, and this summer is likely to roll out cleaning services, verified business-friendly listings and transportation services.
The next challenge
Once the sharing companies have worked things out with regulators, they will need to think about their providers. The amount of profit – or risk – at stake is causing participants to think seriously about their roles in the industry.
On New Year's Eve, an Uber driver struck and killed a six-year-old girl in San Francisco. Uber quickly issued a statement to distance itself from the driver: "The driver in question was not providing services on the Uber system during the time of the accident. The driver was a partner of Uber and his account was immediately deactivated." Despite Uber’s tactic, it has been sued by the family of the deceased.
Not having many physical assets makes it easy for these companies to shirk responsibility. But behind the image of helping out locals by giving them new revenue streams, the brands are creating the ultimate outsourcing economy. The terms and conditions signed by each participant shift all liabilities to the providers and users, protecting the companies both legally and financially. Lyft and Uber drivers and Airbnb hosts accept all the risk of breaking laws, committing insurance fraud, violating their lease and being fined by their condo board – while at the same time making startup founders and Silicon Valley investors wealthy.
As more stories of hosts being evicted make the headlines, we'll likely see Airbnb react with a solution that makes users feel more secure, much in the same way it introduced a financial guarantee that can protect a host if a guest trashes their home. Uber has started charging riders a $1 “safe rider” that pays for background checks, and Lyft introduced a new insurance plan for drivers that covers them between fares.
The current companies won't be the only major players in the sharing economy: they'll spawn a new phase of innovation from outsiders trying to fix the problems. In San Francisco, Beyond Stays and Superhost provide property management and hospitality services for Airbnb hosts; and Pad Pipers decorates homes to make them ideal for guests. We'll see entrepreneurs create smart insurance policies for drivers and hosts, and leasing companies, such as Breeze, that provide cars for Lyft and Uber drivers.
The move from disruptor to established company is not easy. But 2014 may be the year the big players in the sharing economy either grow up – or begin to disappear.
Jason Clampet is the co-founder and head of content of Skift, the most visited travel industry news site in the US