Airbnb is Facing an Existential Expansion Problem
Harvard Business Review | Tom Slee
July 11, 2016
Surprisingly, the new Airbnb ad campaign exhorts you not to be a tourist: “Don’t go to Paris, don’t tour Paris, and please don’t do Paris.” But then the punchline: “Live in Paris…even if it’s just for a night.” Airbnb executive Jonathan Mildenhall told Adweek that the campaign reflects a growing “demand for experiences that are not like the typical tourist experiences, that actually more reflect what it’s like to live in local places.”
But how many travelers can “live there” before Airbnb accepts that it has become a vehicle for mass tourism, and that its users are tourists, no more and no less? Like other parts of the tourist industry, Airbnb has become a double-edged sword. Visitors get new experiences and bring in money, but as their numbers grow, they erode the very atmosphere in which they bask and threaten the livability of the city for residents.
Two years ago, there were 20,000 Airbnb listings in Paris. A year later the number had climbed to 40,000 and a housing inspector told The Wall Street Journal, “The center of our city is becoming deserted. More and more, it’s just tourists.” Since then, yet another 20,000 listings have appeared, so it’s no surprise that the company with the tagline “Belong Anywhere” has experienced a frosty welcome from city governments around the world struggling to deal with this explosion of tourist accommodations.
Airbnb continues to present its business as low-impact, made up of everyday hosts occasionally renting out their own home. A recent Airbnb report on its business in Lisbon shows that “many listings on Airbnb in Lisbon are local residents’ homes,” reassuring readers that “72 percent of hosts in Airbnb in Lisbon have only one listing.” But this is being economical with the truth: My independently collected data set shows that the 28% of hosts with more than one listing (who can be considered “commercial” hosts) account for two-thirds of the company’s business in Lisbon. And while Airbnb claims that “70 percent of Airbnb guests in Lisbon stay outside the typical tourist hotspots,” my data shows that the majority of visits take place inside the two central districts of Misericórdia and Santa Maria Maior, an area of only about six square kilometers. With the number of listings in this small city of half a million people growing from 5,500 in May 2015 to over 10,000 today, a significant impact is inevitable. João Seixas, a geography professor at the New University of Lisbon, and his colleagues are “very much concerned with what is rapidly happening to the historical center of our beautiful city. Our estimate is that in the last three years, around one-quarter or even one-third of the housing stock has changed function, mainly toward financial investments and short rentals.”
What is the endgame for cities where Airbnb continues to expand? Some cities say they don’t want to be “the next Venice,” turning into a theme park for tourists, with locals pushed out. It’s not an unreasonable concern. Kristen V. Brown of Fusion visited Reykjavik (yes, as a tourist). It’s a small city, with a population of only 120,000 people and a flood of tourists. Drawing on data I supplied, Brown wrote, “The city’s only apartment rental website, leigulistinn.is, listed just nine apartments for rent in downtown Reykjavik. There were 22 in the entire city….In Reykjavik there are roughly 50,000 apartments; 2,551 of them, or 5 percent, are Airbnb units.”
Even smaller communities are experiencing problems of scale when it comes to Airbnb. Joshua Tree is a tiny town of 7,000 people on the edge of the Joshua Tree National Park in California. It has over 200 available Airbnb rentals. Resident Christine Pfranger observes that “locals are having difficulty finding homes to rent, and are being pushed out of their homes to make way for more vacation rentals.” Another resident adds, “Airbnb and vacation rentals are changing our community….House prices are going up because people now buy houses to rent out as vacation rentals, making it close to impossible for people working in the area to buy a house.”
Airbnb professes to be open to partnering with cities, but it has shown little interest in these problems; the company forcefully opposes any measures that would limit the scale of its business.
Airbnb’s rocky relationship with its hometown of San Francisco recently took a turn for the worse. In February 2015 a new rule required Airbnb hosts to register with the city, but over a year later only about a fifth have done so. Now the city is holding Airbnb responsible for its hosts and will impose a fine on the company of $1,000 per day for each unregistered listing that the city can discover. It’s a new level of seriousness, following similar actions in New York state and Chicago.
Airbnb’s response is to take San Francisco to federal court, arguing that the city is violating three laws. Section 230 of the 1996 Communications Decency Act (CDA) provides that website owners are not responsible for (by virtue of not being the publishers of) content provided by users on their sites. It’s a law that protects bloggers, newspapers, and social media sites like Craigslist, Yelp, and YouTube. The 1986 Stored Communications Act (SCA) says that governments must have a specific subpoena before they are entitled to information about users of a web service. And finally, Airbnb is claiming protection under the First Amendment, arguing that the new rule is a “content-based restriction.”
Airbnb presents its business as a matter of speech. Much as it promotes the idea of “living like a local” in the cities where it makes its money, the company says it ultimately has no responsibility for what happens on the ground, just like a website with comments.
If Airbnb is successful, and some experts believe it has a good chance, the CDA will free the company of responsibility for the impact of its business, and the SCA will prevent cities from finding hosts, and thus Airbnb, responsible. City governments throughout the U.S. would be helpless to curb the number of Airbnb listings or the intensity of the tourist business that they bring. It’s a potent mix of bad incentives.
But all would not be smooth sailing for Airbnb. The majority of its business is now in Europe, where Berlin, Barcelona, and, to a lesser extent, Paris are finding a new assertiveness in dealing with the explosion of vacation rentals. Meanwhile, the mayors of 10 major markets around the globe are starting a task force to construct a common response to the problems that Airbnb brings. Such developments are timely. Without them, authentic tourist experiences may be bought at the price of those who matter most: actual residents.