Airbnb or how to rejuvenate the rent economy

Photo Monique Dagnaud / Emerita Research Director, Institut Marcel Mauss (CNRS-EHESS) / September 12th, 2016

The Airbnb community reflects very interesting socio-cultural aspects. Almost 73% of Americans are unaware of collaborative economy, and this consumption pattern appeals primarily to under-45s, university graduates and people with a good level of income. This form of consumption is popular among the upper stratum of society because of the Romantic image it conjures, the ecological label and the art of living together. Simultaneously, it federates the support of young people because of the economic benefits it provides. Collaborative economy is the warhorse of a sort of cultural avant-garde; but this group will grow.

Airbnb bears all the hallmarks of a disruptive innovation: it disrupts the market of tourist, and even professional, accommodation. It offers cheaper services, far more personalized value in use and easier access than the standard hotel offer. In our post-materialist era, accommodation with locals, far from appearing as a low-end product reserved for broke students, has turned into a pleasant travel trend. Its growth has been exponential: from its creation in mid-2008 to February 2011, the site has reached its first million of overnight stays; then another million from February to June 2011; 5 million from June 2011 to January 2012; 10 million from January 2012 to June 2012. This exponential overnight score is supposed to have reached 80 million by the end of 2015, while the San Francisco based company claims 2 million houses posted in 190 countries.

By the time the hotel industry understood what was going on, it was too late to react. According to a study by Boston University researchers on cities of Texas, for a 10% increase in the Airbnb market, hotel revenues decreased by 0.39%. In Austin, a city where the Californian unicorn is well established, it is estimated that the hotel industry has lost between 8 and 10% of its customers, with a particularly marked effect on independent and average-sized institutions. Luxury hotels of international chains seemed less affected. However, a comparison conducted in 2013 in six cities around the world between the price of a room of a 4 or 5 stars hotel and that of a high-level accommodation offered by Airbnb always turns to the advantage of the collaborative site. If one adds that accommodation with the locals also offers some symbolic benefits (immersion in a local atmosphere, “friendly” meetings with locals, imagining oneself as a traveler and not as a tourist) and offers material benefits (household equipment, documents to explore a neighborhood), one can finally understand the dizzying rise of Airbnb.

Inside Airbnb, a data site run by independent researchers, provides some insight. Paris has become the top Airbnb destination. In July 2016, the city offered 52,000 ads, with a clear concentration on the districts of Montmartre and Popincourt. London (42,000 ads) and New York (39,000) lag behind. On the other hand, while the platform offers the possibility of a shared room, a single room in a home or an independent housing, the latter is the most prevalent offer in Paris: it represents 86% of total ads, a rating close to that of Amsterdam, but much higher than London (52%) or Barcelona (53%). The project advertised by the site of sharing and being warmly received within a family is clearly flouted by a much more trivial reality: a renting business led by individuals marketing one or more housings – sometimes as much as 50 to 70 units. The Paris city council estimates that approximately half of these ads does not fall inside the category of owner-occupiers and only a tiny fraction is registered with a commercial brand. In New York, a little over a quarter of ads depositors manage several housings, while in London, the figure is higher (43%), suggesting a situation close to that of Paris.

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A cultural avant-garde
The Airbnb community reflects very interesting socio-cultural aspects. Who practices this type of tourism? In a 2016 study, the Pew Research Center revealed that 11% of Americans have experienced collaborative hosting, which may seem modest, but these services are emerging and involve a targeted fraction of the population. Almost 73% of Americans are still unaware of collaborative economy, and this consumption pattern appeals primarily to under-45s, university graduates and people with a good level of income. Data are the same for France. This form of consumption is popular among the upper stratum of society because of the Romantic image it conjures, the ecological label and the art of living together. Simultaneously, it federates the support of young people because of the economic benefits it provides. Collaborative economy is the warhorse of a sort of cultural avant-garde; but this group will grow.

A survey conducted by researchers in Barcelona on the profile of Airbnb hosts shows this kind of social signature. In the central districts of the Catalan capital, with a strong socio-cultural mix due to the presence of Asians and Moroccans, housing providers are essentially native-born Spaniards or other Europeans. This is shown by the languages they use: mainly English and French, in addition to Spanish. 85% have a university degree; they have fewer children than the average of these districts; for a majority, their income level matches that of the middle and upper class. 55% offer more than one housing, confirming the professional dimension of an income declared only by 7%. In conclusion, the authors argue that far from offering the thrill of local authenticity, this platform appears as a space for globetrotters, sensitive to a cosmopolitan approach of “local” life.

Outside the heart of the metropolis, the Airbnb economy differs. An exploration of offers in Montreuil (where over 300 offers were posted in August 2016), a Parisian suburb in process of “gentrification,” provides a different perspective. Posts almost exclusively reveal “real” sitting owners or tenants, young people (predominantly in their thirties), who occasionally propose to rent their housing, most of the time during their absence (comments attest this fact: keys are often handed by another person); and for far more modest rates than in Paris. And even if the information provided by these housing providers are limited, they are still enlightening about the local Airbnb community. Thus, protagonists all insist on their travel experiences and taste for cultural exchange, there are also many expatriates and dual nationals. All speak one or several foreign languages, mostly English and European languages. It is a universe of graduates, including many precarious independents and intellectuals: consultants, artists, teachers, engineers, architects, webmasters, hotel managers, dance teachers, translators, graphic designers, air traffic controllers, photographers, journalists, researchers, actors, social workers, planners, students, executives, osteopaths, psychologists, filmmakers – not to mention a handful of young retirees.

Ultimately, the way Airbnb operates in tourist megacities is well documented: cross-links between the rental market of people for short stays and that of “false” or genuine estate agents; valuation of an enriching human experience; unification of the creative class, whether host or client. This category of people is often composed of real estate owners who find in this activity an opportunity to receive annuity and/or additional income. Outside big cities, Airbnb hosts the booming market of private rental, under all its possible forms: entire housings, independent rooms or shared rooms. You can even rent a caravan in a garden corner. The concerned environment (“host” or “guest”) targets absolutely everybody, prices ranging from 11 euros, for a shared room for example, to more expensive rates, for an entire luxury home. Making the most out of the existing capital is the creed of the collaborative economy and an increasing number of people seem to join the platform.

Beyond the rise of an original form of economy, its implementation at the heart of labor market is also striking. For individuals, this gainful activity based on opening their home to others is creating porous boundaries between professional and private life, between full-time and part-time employment, between work and leisure, between private sphere and public space. Renting their apartment also means developing an ad hoc expertise: taking care of decoration, fitting to the standards of modernity applauded by magazines, enhancing it with artistic photos, and, last but not least, acquiring the know-how of the hotel room personnel. In luxury rentals, this aspect is outsourced with an additional cost that is carefully indicated in the ads.

Public authorities try to regulate the development of tourist accommodation, fraught with criticism. Hostility emanates from hoteliers who protest against the unfair competition inflicted by a sector that largely escapes the taxation and health and safety standards that apply to commercial activities. Community residents next to Airbnb apartments also complain about the nuisance generated by these weekly rentals (in all Airbnb ads “celebrations, parties … and animals” are clearly banned). Finally, local officials are concerned about the transformation of the purposes of the housing stock and the loss of housing that would be useful to people working on site. The city of Paris, like other cities, adopted a whole array of measures: introduction of a local tax collected and donated by Airbnb, limitation of the possibility of subletting one’s housing for over four months per year, obligation of reporting these subleases and the income received, blitz controls with fines – the digital economy legislation provides for fines of up to 25,000 EUR for the tenant and 80,000 EUR for the platform that didn’t double-check the information.

Are these measures effective? The activity of Airbnb is undergoing drastic transformations. Individuals are organizing a private hotel industry that provides support to income, a bulwark against precariousness and a job, when it comes to managing a small housing stock. In this context of economic sluggishness, this activity operates as a social shock absorber and participates to the resourcefulness of younger generations in their struggle against public administration and bureaucracy that don’t have a good image. Collaborative economy offers a response to political disenchantment and unemployment. This guerrilla between illegal renters and public authorities is unlikely to end anytime soon.

The first version of this article was originally published in French by our syndication partner Telos-eu.com.

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