88m3
Fast Money & Foreign Objects
BY MARK GIMEIN | OCT. 22, 2014 3:06 PM EDT |
POSTED IN POLITICS, U.S. ECONOMY
| 11 COMMENTS
Photographer: Amy Eckert/Getty Images
Yes, you can probably rent this. Just hope it doesn’t rain.
Once upon a time a programmer named Pierre Omidyar had a collection of Pez dispensers. Looking for a way to better facilitate the exchange of Pez dispensers, started a website. And lo, that website grew into EBay, and so excellently did the Pez dispenser collection field take off that forwith the great Omidyar became a billionaire.
Wait. Stop! It wasn’t Pez collecting that took off. Or garage sales. It was online auctions that made Omidyar a billionaire because they brought into being a platform that many thousands of small, medium and, in some cases big businesses found was their best way to reach customers. That’s how it goes with online business. First comes the creation parable, then come the professionals in their virtual wagons to settle the profitable new frontier.
Remember the story of EBay when you think about the “sharing economy.” It’s important because the pattern of Ebay is one we see over and over again: something initially pitched as a platform for amateurs to make a few extra bucks becomes a serious marketing tool for pros. Uber might have started as a ride sharing service, but call an Uber car in new York now and you’re almost sure to get a professional livery driver.
That’s what makes the battle over vacation rental services like Airbnb so hard to resolve. There is a sense in New York, just as there is in London, Rome, Moscow, or Paris, that many of the most appealing parts of the city are being handed out to a class of multinational gazillionaires. The transformation of some of the city’s residential neighborhoods into short-stay hotel havens incites the same fears and resentment.
It’s very tempting to imagine a compromise that will let folks rent out their apartments without taking housing off the rental market and turning some neighborhoods into tourist ghettos. There isn’t one.
Source: New York State Office of the Attorney General
Six percent of Airbnb
hosts get 37% of revenue. Does that mean Airbnb is dominated by commercial players? Depends how you look at it.
Last week, the New York State Attorney General, released a report based on New York’s controversial subpoena of information on Airbnb hosts. You want to guess what the report concluded? Naturally that Airbnb was “dominated” by a small handful of major landlords, making bank off illegal rentals to tourists.
Read further into the report, though, and it’s not that simple at all. What the data actually showed was decidedly mixed. On one end, more than 100 “commercial users” each rented out 10 or more apartments, and together collected $59 million in revenue, or what seems to be about 13 percent of the total. But 64 percent of revenue going to hosts who rented out no more than two units.
If you are looking — as New York State regulators seem to be — for evidence that Airbnb involves much bigger operations than a few students renting out their couches, it’s in the report. On the other hand, if you prefer to see evidence that the hosts on Airbnb are still largely mom-and-pop, or mom-and-mom, or starving twentysomething, operators (see: Airbnb’s own creation narrative, detailed in
Jessica Pressler’s excellent article), you’ll find that, too.
So who’s right? Both sides want you to look at the edge cases. Airbnb tells a story of people able to afford their houses because they rent out their place when they go on vacation, or put up visitors in a spare room. Foes of the new rental industry tell a narrative of rich landlords vs. little renters who are getting pushed out of their beloved neighborhoods as landlords turn their their buildings into hostels for soccer hooligans.
Those are the easy cases. New York City just sued an Airbnb who it charges with operating two de facto hotels, one made out of two floors split into partitioned cubbies. Easy. Real hotels have sprinkler systems, extra insulation, many fire exits, and million other features governed by regulations that aren’t about to go away. That’s not changing.
In San Francisco, Airbnb and opponents worked out a compromise allowing short-term rentals of apartments and houses as long as the resident lives there for 275 days of the year. Again, easy. Unless you’re in the hotel business or a busybody intent on keeping tabs on who’s walking into your neighbors apartment, you don’t have much of a problem with that. Or if you do, you might be bothered by unmarried people having mysterious overnight guests. The rest of us have gotten used to that.
Unfortunately, if you take those out, you’re left with … well, the core of the vacation rental business. That’s where the EBay analogy comes in. Yes, there’s a market for renting space on couches or spare weeks when an apartment owners are on vacation. It’s just not a very big or efficient one. It works for backpackers, or those who can spend weeks poring over listings hoping to find a match. What makes markets work is a substantial amount of inventory that comes from people who treat them as a business.
EBay needs professional sellers. Uber needs professional drivers. Airbnb needs people who make apartments available 365 days a year. Some of those folks might be people with an empty first floor unit in their building. Some will be investors who own an apartment or two. Others may own a bunch of apartments scattered throughout a desirable neighborhood.
Photographer: Andrew Harrer/Bloomberg
Airbnb on your phone. Certainly beats sleeping in the train station.
So let’s talk about compromise. One doesn’t come to mind. For all the talk of “sharing,” the business model of sharing economy companies doesn’t work until you have plenty of people who make their living by sharing things. And as more and more people — large and small landlords who choose to rent apartments by the day instead of the year — make a living as Airbnb hosts, the harder it is to keep up the fiction that Airbnb and similar services don’t take apartments off the regular rental market.
To see what’s coming, looking at the experience of other cities helps. In Paris it’s hard not to see the transformative effect of short-term rentals on some of the city’s neighborhoods. TMNonce walked out of a studio apartment in Paris (rented through another online service) to see three other groups of tourists, all catching early morning flights, spilling into the same courtyard out of adjoining buildings. The transformation of some central neighborhoods in the city into short-term rental havens has incited vigorous condemnation and occasional crackdowns.
If Airbnb wins this battle, then you can expect New York to go in the same direction. Is that troubling? Probably to many New Yorkers it is. Does that mean Airbnb and its competitors shouldn’t be allowed to exist? That depends on how highly you value property rights versus neighborhood preservation. And how much you are willing to distort ordinary market rules to keep more housing available for residents (traditionally, New York has distorted them a lot, with uneven results).
The bad news here is that you can’t weasel out of the problem by saying, as San Francisco does, “Well, you can rent out your own apartment a small part of the time.” If the limits aren’t actually enforced — and enforcing them may be almost impossible (Techcrunch‘s Kim-Mai Cutler has a good discussion of that) — then you’ve opened the floodgates. If they are enforced, you’ve killed the business model that has brought Airbnb to a $10 billion valuation. And finally, if they’re enforced in a haphazard, random way you’ve basically done the same as not enforcing them, but added random penalties for those unlucky enough to be caught. Those are the only choices here. None of them are really a satisfactory compromise.
Bonus Round: One argument for Airbnb is that ordinary people travel, too. The owner of a house on my block rents out two beautifully restored apartments, advertising them on Homeaway and Airbnb. She charges about $135 a night, which my wife and I can afford to pay when my family visits. Brooklyn has a severe shortage of hotels; we recently had to put up a neighbor at a hotel for a night because of plumbing work on our house. It cost more than $400 a night. There is no way we could regularly afford that for visiting relatives. Without Airbnb we would be piling into the car and driving to visit my mother-in-law in Albany for the weekend, sleeping in her guest room. And, yes, we’d probably stay in places less nice when we go to other places, like Paris.
http://go.bloomberg.com/market-now/2014/10/22/sorry-theres-no-good-compromise-airbnb/
POSTED IN POLITICS, U.S. ECONOMY
| 11 COMMENTS
Photographer: Amy Eckert/Getty Images
Yes, you can probably rent this. Just hope it doesn’t rain.
Once upon a time a programmer named Pierre Omidyar had a collection of Pez dispensers. Looking for a way to better facilitate the exchange of Pez dispensers, started a website. And lo, that website grew into EBay, and so excellently did the Pez dispenser collection field take off that forwith the great Omidyar became a billionaire.
Wait. Stop! It wasn’t Pez collecting that took off. Or garage sales. It was online auctions that made Omidyar a billionaire because they brought into being a platform that many thousands of small, medium and, in some cases big businesses found was their best way to reach customers. That’s how it goes with online business. First comes the creation parable, then come the professionals in their virtual wagons to settle the profitable new frontier.
Remember the story of EBay when you think about the “sharing economy.” It’s important because the pattern of Ebay is one we see over and over again: something initially pitched as a platform for amateurs to make a few extra bucks becomes a serious marketing tool for pros. Uber might have started as a ride sharing service, but call an Uber car in new York now and you’re almost sure to get a professional livery driver.
That’s what makes the battle over vacation rental services like Airbnb so hard to resolve. There is a sense in New York, just as there is in London, Rome, Moscow, or Paris, that many of the most appealing parts of the city are being handed out to a class of multinational gazillionaires. The transformation of some of the city’s residential neighborhoods into short-stay hotel havens incites the same fears and resentment.
It’s very tempting to imagine a compromise that will let folks rent out their apartments without taking housing off the rental market and turning some neighborhoods into tourist ghettos. There isn’t one.
Source: New York State Office of the Attorney General
Six percent of Airbnb
hosts get 37% of revenue. Does that mean Airbnb is dominated by commercial players? Depends how you look at it.
Last week, the New York State Attorney General, released a report based on New York’s controversial subpoena of information on Airbnb hosts. You want to guess what the report concluded? Naturally that Airbnb was “dominated” by a small handful of major landlords, making bank off illegal rentals to tourists.
Read further into the report, though, and it’s not that simple at all. What the data actually showed was decidedly mixed. On one end, more than 100 “commercial users” each rented out 10 or more apartments, and together collected $59 million in revenue, or what seems to be about 13 percent of the total. But 64 percent of revenue going to hosts who rented out no more than two units.
If you are looking — as New York State regulators seem to be — for evidence that Airbnb involves much bigger operations than a few students renting out their couches, it’s in the report. On the other hand, if you prefer to see evidence that the hosts on Airbnb are still largely mom-and-pop, or mom-and-mom, or starving twentysomething, operators (see: Airbnb’s own creation narrative, detailed in
Jessica Pressler’s excellent article), you’ll find that, too.
So who’s right? Both sides want you to look at the edge cases. Airbnb tells a story of people able to afford their houses because they rent out their place when they go on vacation, or put up visitors in a spare room. Foes of the new rental industry tell a narrative of rich landlords vs. little renters who are getting pushed out of their beloved neighborhoods as landlords turn their their buildings into hostels for soccer hooligans.
Those are the easy cases. New York City just sued an Airbnb who it charges with operating two de facto hotels, one made out of two floors split into partitioned cubbies. Easy. Real hotels have sprinkler systems, extra insulation, many fire exits, and million other features governed by regulations that aren’t about to go away. That’s not changing.
In San Francisco, Airbnb and opponents worked out a compromise allowing short-term rentals of apartments and houses as long as the resident lives there for 275 days of the year. Again, easy. Unless you’re in the hotel business or a busybody intent on keeping tabs on who’s walking into your neighbors apartment, you don’t have much of a problem with that. Or if you do, you might be bothered by unmarried people having mysterious overnight guests. The rest of us have gotten used to that.
Unfortunately, if you take those out, you’re left with … well, the core of the vacation rental business. That’s where the EBay analogy comes in. Yes, there’s a market for renting space on couches or spare weeks when an apartment owners are on vacation. It’s just not a very big or efficient one. It works for backpackers, or those who can spend weeks poring over listings hoping to find a match. What makes markets work is a substantial amount of inventory that comes from people who treat them as a business.
EBay needs professional sellers. Uber needs professional drivers. Airbnb needs people who make apartments available 365 days a year. Some of those folks might be people with an empty first floor unit in their building. Some will be investors who own an apartment or two. Others may own a bunch of apartments scattered throughout a desirable neighborhood.
Photographer: Andrew Harrer/Bloomberg
Airbnb on your phone. Certainly beats sleeping in the train station.
So let’s talk about compromise. One doesn’t come to mind. For all the talk of “sharing,” the business model of sharing economy companies doesn’t work until you have plenty of people who make their living by sharing things. And as more and more people — large and small landlords who choose to rent apartments by the day instead of the year — make a living as Airbnb hosts, the harder it is to keep up the fiction that Airbnb and similar services don’t take apartments off the regular rental market.
To see what’s coming, looking at the experience of other cities helps. In Paris it’s hard not to see the transformative effect of short-term rentals on some of the city’s neighborhoods. TMNonce walked out of a studio apartment in Paris (rented through another online service) to see three other groups of tourists, all catching early morning flights, spilling into the same courtyard out of adjoining buildings. The transformation of some central neighborhoods in the city into short-term rental havens has incited vigorous condemnation and occasional crackdowns.
If Airbnb wins this battle, then you can expect New York to go in the same direction. Is that troubling? Probably to many New Yorkers it is. Does that mean Airbnb and its competitors shouldn’t be allowed to exist? That depends on how highly you value property rights versus neighborhood preservation. And how much you are willing to distort ordinary market rules to keep more housing available for residents (traditionally, New York has distorted them a lot, with uneven results).
The bad news here is that you can’t weasel out of the problem by saying, as San Francisco does, “Well, you can rent out your own apartment a small part of the time.” If the limits aren’t actually enforced — and enforcing them may be almost impossible (Techcrunch‘s Kim-Mai Cutler has a good discussion of that) — then you’ve opened the floodgates. If they are enforced, you’ve killed the business model that has brought Airbnb to a $10 billion valuation. And finally, if they’re enforced in a haphazard, random way you’ve basically done the same as not enforcing them, but added random penalties for those unlucky enough to be caught. Those are the only choices here. None of them are really a satisfactory compromise.
Bonus Round: One argument for Airbnb is that ordinary people travel, too. The owner of a house on my block rents out two beautifully restored apartments, advertising them on Homeaway and Airbnb. She charges about $135 a night, which my wife and I can afford to pay when my family visits. Brooklyn has a severe shortage of hotels; we recently had to put up a neighbor at a hotel for a night because of plumbing work on our house. It cost more than $400 a night. There is no way we could regularly afford that for visiting relatives. Without Airbnb we would be piling into the car and driving to visit my mother-in-law in Albany for the weekend, sleeping in her guest room. And, yes, we’d probably stay in places less nice when we go to other places, like Paris.
http://go.bloomberg.com/market-now/2014/10/22/sorry-theres-no-good-compromise-airbnb/