Written by Jay Sanders (July 2017)
Also known as the Peer Economy, and as epitomized by such digital platforms as Uber and Airbnb, it has rapidly become a major economic driver throughout much of Western North Carolina.
Carnival time is always an exciting season in New Orleans. Like the Appalachian mountains of Western North Carolina, the city is one of America’s greatest cultural treasures—a place that lives and breathes music, food, and life. When traveling to Mardi Gras, one must always seek an authentic experience, the core of which is meeting locals and finding your way off the well-trodden tourist path. Fortunately, this is a golden age of accessibility made possible by the Sharing Economy.
Before flying out of Asheville, we dropped the dog off at a local farm outside of Hendersonville that we discovered on DogVacay. The local family was thrilled to keep her for the week, even allowing our tail-wagger to sleep on their daughter’s bed. Upon landing in the Crescent City, we opened the Uber app on our phones and found a ride with a local driver who knew exactly how to navigate the parade route street closures that cut us off from the Lower Garden district. We were greeted at the door of our traditional shotgun house by our Airbnb host. She was full of valuable tips and information about the neighborhood. She told us about the best places to watch the parades, which tiny corner store sold the spiciest crawfish, and the best bar to enjoy a late-night cocktail without witnessing “the other side” of Mardi Gras. She even made sure that we had appropriate costumes and provided extra supplies of glitter.
In all of these experiences, everyone was a winner. Our spending made it directly into the pockets of local residents, while we enjoyed personalized service with very little effort. This is what the Sharing Economy is all about.
Making Friends While Also Making The Rent
You may rent a room on your next vacation from a someone using Airbnb. You may catch a ride the next time you go out for cocktails with your friends using one of the popular ride-sharing services like Uber or Lyft.
Do you have an important overnight trip coming up, but don’t want to leave your family pet in a kennel? You might try Rover to find a neighbor who is willing to keep them overnight. Touted as “the nation’s largest network of five‑star pet sitters and dog walkers,” Rover is a network of dog people who are willing to board your dog, take them for a walk, stop by for daily canine check-ins while you’re at work, or even house sit with them while you are away.
Need a handyman to hang your fancy new television on the wall? Head over to Thumbtack where you can hire an experienced, vetted professional to help accomplish your personal projects. Founded in 2009, Thumbtack is an online network of qualified contractors. “From house painting to personal training, we bring you the right pros for every project on your list,” they advertise.
Feeling like doing some outdoors adventuring, but don’t own the appropriate gear? (Or, if you’re a visitor to the area, don’t want to lug it along with you during the vacation?) Check out Adrenture, a peer-to-peer style company that connects owners of gear not currently in use with the folks who need to use it temporarily—the company was profiled in 2016 by Capital at Play, in fact.
These are just some of the services currently available in Western North Carolina, and in all cases you will meet someone local who can help you out.
According to the World Economic Forum: “The Sharing Economy refers to economic activity centered around online platforms, based on sharing underused assets or services, for free or for a fee, on a peer-to-peer basis. Cars and bedrooms are the most cited examples, but the Sharing Economy includes everything from household appliances to land use. Typically, rates are set by the technology platform—the software that links supply to demand—as with ride-sharing services, for example. In some instances, providers can set their own prices, such as with holiday rentals or contract work. In the vast majority of cases, the platform takes a cut of the fee. The seller takes home the rest.”
Also known as the Peer Economy, this new economic system operates on a person-to-person basis without an intermediary. The only “middlemen” are the technology platforms through which the connections are made and the transactions occur. This allows people with assets or unused capacity to generate revenue, while providing a less expensive and frequently friendlier alternative to the consumer. In a 2016 TED Talk, Airbnb’s co-founder and chief product officer, Joe Gebbia,
described it as a way to “make friends while also making the rent.” A supplier works whenever they want, earning money on their own schedule, often as on-demand part-time work. Anyone with an extra room in their home, extra time to drive people around in their car, or a handy skill for maintenance and repair, can either supplement their income or use it as their entire livelihood. The consumer is rewarded by what most people consider a more personal experience.
In many ways, this can be viewed as a more efficient use of resources; available space can be monetized without the need to maintain fleets of cars, hotel rooms, dog kennels, or even rental equipment. The consumer is paying for access rather than bearing the cost of ownership, while the supplier is capitalizing unused capacity. A November 2016 report from the Pew Research Center noted that “24 percent of Americans report earning money from the digital ‘platform economy’ in the past year. The extra income they make is a luxury for some, but a necessity for others.”
Defining The Sharing Economy
The core business idea involves unlocking the value of unused or under-utilized assets (“idling capacity”), whether it is for monetary or non-monetary benefits.
The company should have a clear values-driven mission and be built on meaningful principles, including transparency, humanness, and authenticity that inform short- and long-term strategic decisions.
The customers on the demand side of the platforms should benefit from the ability to get goods and services in more efficient ways that mean they pay for access instead of ownership.
The business should be built on distributed marketplaces or decentralized networks that create a sense of belonging, collective accountability, and mutual benefit through the community they build.
A More Authentic Experience
Since the early 20th century, when many people transitioned from agricultural occupations to in-town jobs in factories and retail, folks have been coming to vacation in Western North Carolina. Whether it be scaling the peaks of Mt. Mitchell, winding along the Blue Ridge Parkway, gazing at the majesty of the Biltmore, or listening to the sounds of the region’s many waterfalls, the cooler climate and breathtaking scenery have always been a draw to the “Land of The Sky.”
With tourists come tourism dollars, and the Sharing Economy has introduced an entirely new way for visitors to explore and experience the region. The affordable options provided by Airbnb and VRBO actually increase the appeal of tourism by making the market more affordable for travelers on a budget, opening the area to many people who may not otherwise visit. In a similar sense, many guests who stay in Western North Carolina are looking for a more authentic experience. Staying in someone’s home, or catching a ride with a local driver, can expand the wealth of information and reveal secret “locals only” tips to the savvy traveler.
For all of these reasons and many more, the Sharing Economy, and short-term rentals specifically, are booming in Western North Carolina.
In a recent press release, Airbnb revealed that revenues in the Asheville market, which includes all rentals with an Asheville zip code, totaled $13 million in 2016. This amount is more than Charlotte, Raleigh, Wilmington, Durham, Boone, and Chapel Hill combined. The release further noted that the Asheville area hosted 104,500 guests in 2016. According to the Asheville Citizen-Times, Buncombe County reported that between July 1, 2015, and June 30, 2016, short-term rentals comprised about six percent of the $312 million in total tourist lodging sales. These rentals were second to hotels, which made up 83 percent.
Current Asheville statistics as of May 2017 on Airdna, a website that tracks statistics and insights about the vacation rental market, and Airbnb specifically, lists 780 active hosts, 144 multiple listing hosts, and 498 “superhosts.” The Asheville area is home to 1,034 active Airbnb rentals, 782 of which have ten or more reviews, and 717 with five-star ratings. Regionally, Airdna lists 247 active listings in Banner Elk, 210 in Boone, and 228 in Lake Lure, which, along with Highlands, is listed as one of the most expensive rental markets in the state, with average prices hovering around $220 per night.
Airbnb strives to be supportive of local tax requirements. In June 2015 the company officially went “on the books” when it began remitting tax payments to Buncombe County on behalf of its hosts. Sales numbers went from $344,177 in May 2015, to $1.4 million in June 2015, according to the county tax department and the Asheville Citizen-Times. While these revenues were likely not new money, they demonstrate the popularity and appeal of short-term rentals in the county.
As is often the case with large evolutions in economics, the short-term rental market has spawned an entire service industry, creating real cottage industry jobs in the process. Airbnb travelers tend to divert funds away from traditional tourism businesses and contribute their resources directly to the local economy through the service provider—but this also has the effect of redirecting funds away from more traditional service jobs. Home cleaners, photographers, marketing professionals, and writers have all found a place supporting the vast and growing inventory of short-term rentals by doing something akin to “selling pickaxes during the gold rush.” Some locals have even built fully hosted Airbnb management services that will build your profile, answer your reservation requests, secure cleaning services, and handle the post-rental reviews—turning your short-term rental into a passive income machine.
While all of these earnings, tax revenues, and supportive jobs look great on paper, there’s a fundamental problem with it all, at least in one city in Western North Carolina—Asheville. It’s illegal to rent a property in the city limits for less than 30 days. (Outside Asheville, however, Buncombe County allows short-term rentals.) Asheville’s hot and contentious debate around short-term rentals, and its effect on the housing market and property rights, is not unique. This is a battle that is being played out in hot tourist destinations all over the world. (See sidebar, p. 40) Short-term rental advocates say that platforms like Airbnb and VRBO enable local homeowners to bring tourism revenues closer to the community, and into the city-wide tax base, while supplementing their income. Affordable housing proponents suggest that these activities affect local renters and potential homebuyers by artificially driving up prices and consuming available, and potentially affordable, long-term rental inventory.
“Technology Based Logistics Platforms”
The Sharing Economy emerged as a natural and innovative evolution from the modern technology and entrepreneurship environments. Websites and mobile platforms have become powerful tools that drive this new economy by creating a means of connection between supply and demand, reducing friction and transaction costs, and empowering users to rent or share things with other people over the internet. Companies like Uber and Airbnb see themselves as much more than car services or travel agencies. They are the future of logistics and are positioning themselves to become the infrastructure of a bigger and more flexible business model.
In many ways these new logistics platforms are using technology to realize their maximum potential using the same foresight as some of history’s most successful companies. In the early 20th century, Sears leveraged the new rail and road systems and its comprehensive catalog of goods to become the country’s most dominant marketplace. In the late 20th century, Amazon, which started out as an online bookstore, followed a conscious evolution to become one of the world’s most prominent retailers and web hosting services.
In a recent article for New York magazine, author Kevin Roose observed that one day Uber may become more valuable than Facebook. “Eventually, like Amazon, [Uber] can become something akin to an all-purpose utility—it’ll just be a way you get things and go places. There’s a reason the company recently changed its tagline from ‘Everyone’s private driver’ to the much broader ‘Where lifestyle meets logistics.’” In February of 2016, Uber changed its logo from the classic U based icon, to an image that more closely resembles a wheel or a node, representing its intention to create connection between people, places, and things.
Overcoming Stranger Danger
In this new global paradigm, trust has become a commodity. Think about it… would you go stay in a stranger’s home or catch a ride with someone you did not know? Would you leave your precious pet with a neighbor who you just met or let “some guy” into your kitchen to fix the sink? That is exactly what all of these companies are asking you to do.
In a recent post on Airbnb’s design blog, Experience Design Lead, Charlie Aufmann, noted, “Airbnb hosts in over 190 countries around the world open their homes to provide [authentic] hospitality to over two million guests per month, who, when they walk through the front door, aren’t family, friends, or even acquaintances. And what helps make this all possible? Trust.” Airbnb has been extraordinarily successful at using design as a tool to help establish and cultivate trust between a host and a guest, especially if they have never met and may come from varied and different backgrounds. In his post Charlie describes the role of the platform as being “the mutual friend who invites you to the party,” also noting that first impressions are important and trust takes time to establish. But we’re talking about economic technology platforms, not therapists and support groups, so how do you take the time to create a quality first impression with a website?
The online markets created by these companies are self-regulated by user reviews. Both sides of the transaction are held accountable in a public forum, establishing the foundation of trust. Your rating is your net worth, and all of these platforms design their user experience in a way that encourages users to participate in the review process, while keeping reviewers honest and preventing abuse. According to a survey by 2016 BrightLocal, 84 percent of consumers trust online reviews as much as a personal recommendation, and seven out of ten consumers will leave a review for a business if they’re asked to. What is most impressive is that online reviews are typically posted by total strangers.
Most Sharing Economy platforms implement an internal payment system to handle the transaction. This alleviates the need for cash to change hands, increasing the sense of trust and security, although many hosts and drivers encourage tipping if the consumer feels they have enjoyed exemplary service. In April of 2013, Airbnb added identity verification to its platform, adding more transparency. Uber requires drivers to be over 21 and have a valid insurance policy, and it conducts driving record and criminal background checks before allowing drivers to join their service.
Companies like Uber and Lyft have been quick to employ the features on the now ubiquitous cell phone to enhance communication and accountability. Location services allow the passenger to know exactly when and where their ride will arrive, while also allowing the driver to quickly locate their passenger. Once on board, GPS applications help the driver find the quickest or most efficient route to the rider’s destination. It quickly becomes easy to see these companies as logistics platforms cleverly disguised as a taxi service.
Of course, everything is not always roses. Implicit trust also means implied mistrust; as with any form of transaction, the potential always exists for someone to try to game the system. For example, currently, most of these online services have been successful at avoiding regulation, creating the opportunity for discrimination. The more information that is shared on an online platform, the greater the likelihood of racial or gender bias. Companies that participate in the Sharing Economy put great importance on combatting discrimination by continually improving the algorithms that match suppliers to consumers, and utilizing design techniques to discourage bias.
Customers can also manipulate the systems of trust for their own financial advantage. There are several documented cases of Airbnb customers leaving bad ratings of a host in pursuit of a refund. This has caused the company to create an Extortion Policy that specifically prohibits “guests threatening to use reviews or ratings in an attempt to force a host to provide refunds, additional compensation, or a reciprocal positive review” and “hosts requiring a guest to leave a positive review or rating, or to revise a review in exchange for a partial or full refund, or reciprocal review.”
Collaborative Consumption by Democratizing Capitalism
Is the Sharing Economy the future of American employment? Collaborative Consumption is the idea that sharing is being re-envisioned through technology. Democratizing Capitalism is the idea that you take the economy into your own hands and make of it what you will. The Sharing Economy is where these two economic philosophies meet: distributing under-utilized assets in a way that generates income, while providing a valuable, more personal service. It’s a form of leveling the playing field and loosening up the “free” market. Both of these concepts are at the core of the Sharing Economy, where one is given the power to control one’s life and reward those who do the same.
Most Sharing Economy employees are not W-2 employees with benefits, but rather 1099-MISC employees who carry a greater tax burden and must provide their own retirement savings and health insurance. “To succeed in the Gig Economy, we need to create a financially flexible life of lower fixed costs, higher savings, and much less debt,” Diane Mulacahy, a senior analyst at the Kauffman foundation writes in her book The Gig Economy. This requires a more acute employee. One who is familiar with the traditional practices of freelance work, and is capable of self-managing their income and expenses in a way that can sustain their livelihood.
For consumers, it is rapidly becoming an indispensable aspect of their daily lives. There are many parallels to the growth patterns of eCommerce. Was it scary the first time you put your credit card information into an online form to make a purchase? Did it get easier with each successful transaction? By the time Alibaba and Amazon rose to become the world’s largest online retailers, were you extremely comfortable with the idea of online commerce and did you have faith in cyber security? eBay initiated the concept of peer-to-peer sales online in the late ‘90s, but then came the run of Power Sellers who established cottage industries and created new companies.
Then there’s Craigslist, the behemoth classified advertising website founded in 1995 by Craig Newmark. Craigslist started the transition away from traditional advertising methods such as the Yellow Pages or the local newspaper, and became many people’s first experience looking online for jobs, housing, personal ads, items for sale, want ads, professional services, community activities, gigs, résumés, and just about anything else you can think of.
As is often the case with disruptive innovation, what may have seemed strange and exotic at first, has rapidly become an accepted norm in daily life. Airbnb is now a preferred alternative for many travelers who seek value and an authentic experience. Uber is now favored as a transportation option because the company’s app makes hailing a ride much easier and more transparent. Many people are supplementing their income or building a full-time job by leveraging their home or car.
This peer-to-peer economy represents the evolution from people swapping things between themselves, to commercial enterprises stepping in to make the transactions a little more straightforward, and with fewer risks and downsides—it is here to stay. When Airbnb’s co-founder, Joe Gebbia, first blew up an air mattress in 2008 and invited strangers to come and stay at his “air bed and breakfast,” he created something much larger than a place to spend the night. The Sharing Economy has become a tool to reunite us as a city, a country, and an economy. It is a new way to meet your neighbors; something that is desperately needed in these rapidly changing times.
Pirates, Pierogies, & Primanti’s
Time to hit the road again. This time we’re heading to Heinz country, Pittsburgh, Pennsylvania. It’s getting to be summer and we’re ready for some Iron City beer, pierogies, and Pirates baseball. We’ve already located an Airbnb convenient to the ballpark, and the host says he knows all the best spots. The dog has a reservation back at the farm, and the daughter is already making room on her bed to share with our best friend. I’m confident that the Uber driver will know the best way to get to our spot, even if we ask him to first stop by Primanti Bros. for a quick bite. It’s going to be a great trip.
Maybe we’ll also rent our house while we’re gone… it would help cover the cost of the trip, and we just might be able to help a new friend discover everything that is wonderful about Western North Carolina.
SUBVERT & DISRUPT:
Regulating the Sharing Economy
Airbnb opened for business in 2008, and for many years was under the radar of state and local governments. Recently, regulators and administrators are starting to realize the implications on local tax revenues. This has led to a constant battle of systemic control and regulation. The online platforms are smart and employ legions of lawyers and lobbyists who are pointed both at the government and the public in a massive marketing campaign to protect the public trust. Uber and Lyft avoid taxi rules that fix rates and cap supply. Uber and Handy, an online cleaning and maid service, classify their workers as independent contractors, thereby avoiding all employment liabilities.
Perhaps the biggest challenge that Sharing Economy companies face are from the very industry groups they are trying to subvert and disrupt. In 2016, according to the New York Times, Airbnb became a target of the Federal Trade Commission. Three senators sought an investigation to discover how companies like Airbnb are affecting housing costs. In October New York Governor Andrew Cuomo signed a bill that would levy steep fines on hosts who broke local housing rules. According to the Times, both actions were triggered by the hotel industry, and that is no small significance. The hotel industry takes the future threat of Airbnb very seriously. Their strategy includes enforcement on the state and federal level, as well as “advancing a national narrative” focused on reining in commercial operators.
Cities specifically have taken notice and started making an effort to impose local regulation on Airbnb and Uber. Two very high-profile battles have taken shape in New York and San Francisco, where Airbnb has come under high scrutiny from both lawmakers and affordable housing groups. Airbnb recently settled lawsuits in both cities. In New York the company agreed to drop a lawsuit pushing back against the newly passed state law, and in San Francisco the company agreed to be more transparent about its hosts and to help enforce existing laws. Other cities such as Amsterdam, Miami Beach, and New Orleans have been paying very close attention.
In a recent New York Times article, Arun Sundararajan, a professor at New York University’s Stern School of Business, said, “As Airbnb gears up to go public over the next couple of years, creating a stable environment with less regulatory uncertainty is good for them.” He added, “While it is well past the point where regulations pose an existential threat to the company, regulatory issues are still the biggest source of uncertainty about its future revenue streams.”
According to CNBC, 34 states and more than 69 cities have passed legislation regulating ride-sharing services such as Uber and Lyft. Some of the techniques to reign in the services have included driver fingerprinting, extra vehicle inspections, higher insurance requirements, fees, and limits on where drivers can meet their passengers. (For example, some municipalities restrict Uber and Lyft in their ability to pick up and drop off at area airports.) With both companies investing heavily in research and partnerships around autonomous, or self-driving vehicles, the regulatory battle is sure to get heated.
The threat is real. According to the research firm CB Insights, Airbnb has raised more than $3 billion and secured a $1 billion line of credit, with an eye towards going public. Investors estimate Airbnb’s value at around $30 billion, a valuation that is congruent with rival Hilton’s market cap of $19 billion and Marriott’s $35 billion. Uber is a behemoth. Even though they are losing $100 million per quarter according to Reuters, the company is valued in some private markets at around $70 billion. Lyft recently received a $500 million investment from GM for the development of driverless cars, raising the company’s valuation to $7 billion.
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