By: Fernando Saenz, Javier Ortega
The sharing economy, also described as collaborative consumption, refers to a new economic system: a model that is reinventing society itself by changing and diversifying the traditional marketplace. This model resurged and proliferated from the great recession in 2008 and has now evolved into a strong community of millions of people that has become worth billions of dollars and could be worth much more in the upcoming years.
In fact, the sharing economy structure offers a wide array of services or products and incursions in many industries ranging from mobility, real estate, food, clothes and financial services, presenting itself in different business models and scopes. Today, people are sharing everything mainly helped by the development of technology through the Internet and the rise in the usage of Smartphones, which are creating the growth of huge online marketplaces where these shared assets are available with the energies of millions of everyday entrepreneurs. Entire sectors are being opened using sharing economy platforms. As Alex Stephany notes “This strong community believes that this new economy will add value in the world beyond the classic corporation and stock exchanges in the global cities, as for them sharing can turn cities of individuals into networks of communities.” The sharing economy can reduce the unsustainable consumption of natural resources and is a considerable solution for any economic crisis, reasons for which it has found an enormous potential on the tourism sector through apps like Airbnb, Vayable, Couchsurfing and Uber, startups related to mobility and accommodation, which together reach a collective value over $75 billion dollars.
The short-rental American company Airbnb is present in more than 190 countries, has hosted more than 40,000,000 guests in their more than 1,500,000 listings worldwide, becoming the world’s biggest “Hotelier” by beds surpassing Hilton and even Marriott and Starwood combined (recalling the recent merger), and its offers can vary from apartments and rooms to castles and villas. Rather than taking the customers of the big chain hotels, Airbnb is disrupting the industry mainly by amplifying the ratio of tourist accommodations available in the marketplace, leading tourism and its benefits to new areas of the city, bringing a perfect solution for diverse cities across the globe that struggle with the effects of excessive tourism and helping these cities to diversify urban attractions. According to Airbnb CEO Brian Chesky, while responding diverse accusations from the local government involving tax evasion, he declared that his company contributed with $623 millions to New York City during 2013 alone, and had helped to create 950 jobs, while also building a huge impact in the Harlem and Astoria Queens neighbourhoods which previously had zero contact with the tourism industry. The British national daily newspaper The Guardian also manifested its posture in favour of the sharing economy start-up as they described it as a solution for the high renting prices in some areas of New York and San Francisco, which hit $3,000 a month and have been posting a 10% increasing trend in the recent years. In addition, The Guardian described Airbnb as a correction to one of the most depressing things about these cities. “Airbnb isn’t eroding the city’s stock of housing. It is helping residents cope with the inflationary effects and price fluctuations of the city’s existing housing market. It may be technologically disruptive-but it’s economically stabilizing.”
Within the same accommodation realm, Couchsurfing is a free online hospitality network in which members can offer fellow travelers accommodation in their homes. This idea has grown into a community of over 5 million members and is present in more than 200 countries. Couchsurfing interface it’s similar to a social network, where each member has its own profile that includes, hometown, biography, age, interest and philosophy in other to promote and increase the best possible experience for both host and guest. Crowdsourcing is also crucial for a successful experience in the platform, as it is so for every sharing economy startup, since each member has the possibility to leave a reference, with these references helping establish an individual’s reputation and trustworthiness within the community. Couchsurfing and its unique working system can be considered as a social movement, mainly adopted by young travelers that share the beliefs of inclusion and diversity. This movement has been able to overcome cultural and sociological barriers, for example, in countries with high regulatory laws such as Iran, which registered 50,000 local hosts on Couchsurfing.com according to the World Travel Market, despite a lack of government enthusiasm for the service. The portal is driven primarily by its huge community creating its own type/style of tourism that moves travellers away from the simple consumption and traditional hotel – landmark experience. The “couchsurfers” look for an engaging experience and interactions with the locals and their environment, considering the social interactions as their main interest, while the iconic tourist attractions are taken as secondary.
Following within the tourism industry, sites such as Vayable.com are also helping their trusted community by covering a particular demand. The San Francisco based startup relies on over 5,000 locals or insiders who serve as a global network of local guides, offering tourists unique cultural experiences in specific city districts, often delivered by local residents to provide authenticity. The World Travel Market defined it as “Hipster Holidays”, namely individuals that like to involve themselves in a no-mainstream experience and destinations.
Many analysts agree that one of the primary forces of the sharing economy sector is mobility, including Uber as the biggest company in the sharing economy. According to Entrepreneur magazine, the company founded in California has a current value of $51 billion and is one of the fastest-growing companies worldwide, growing even faster than Facebook, which reached a $50 billion value after 8 years, while Uber took five years to reach the same amount.
Thriving in the mobility arena in the long distance RideSharing category, BlaBlaCar is disrupting the way people travel. It boasts a trusted community that connect drivers with empty seats to people travelling in the same direction. The French company currently has more than 20 million members and is present in 19 countries. BlaBlaCar operation is based on people making car journeys list their route and time of departure on their website or mobile app, after which the website calculates a recommended price per seat based on the distance and cost of petrol. Then, the company takes an 11% commission on the booked seats. Passengers in need of a lift simply browse the upcoming journeys and book themselves into a spare seat. By facilitating mobility, BlaBlaCar has built a transport network on top of an existing one that moves over 2 million people a month, a number which is higher than the amount of people that travel by train operator Eurostar. BlaBlaCar has become a common alternative to traveling by train and therefore a major competitor to the rail companies. In fact, BlaBlaCar offers a win – win formula, where the driver can save petrol and have an economic incentive that wouldn’t be possible without the platform, while passengers find a cheaper solution to travel. Comparing prices for a ride from Paris Airport to Champs Elysees, the price from the ride sharing app is $3 dollars, while using the local bus transportation the price starts from $6 dollars, representing a 50% of savings. On a longer ride, Paris to Rome BlaBla average price is $113, while the regular train cost is $156. Besides, as most of the sharing economy platforms, BlaBlaCar can also have important sustainability effects, with the company claiming to have saved an estimated 1,000,000 tons of C02.
Food industry has also been “infected” by the sharing economy wave, with startups like Eatwith forming a trusted online community that unites travelers by sharing meals cooked by locals in the intimacy of their own kitchen, creating a unique experience for host and guest.
There is no doubt that sharing economy is transforming the whole tourism sector. Nevertheless, as these startups keep growing and new companies in the sector keep emerging, they are also facing a chain of challenges to consolidate in the marketplace, with billions of dollars and interest in stake. In the tourism sector, traditional travel providers are opposing the movement, claiming the sharing economy startups as an unfair competition. Governments are entering in a new know-how pursue to help them regulate the sharing economy companies, while in the meantime the competition continues dominating the industry. Again, the sharing economy main force is not the economic value generated by their activities, but the active community inside them, the we-economy that gives the opportunity to “Mario” to create his own job as a Uber driver, to rent his extra room on Airbnb, to open his restaurant in his own kitchen with Eatwith or to save fuel with BlaBlaCar and above all gives the power to ordinary people to access to assets just when they need them, allowing them to enjoy a better quality of life.