The gap between an Airbnb and a hotel is shrinking

What does it look like when the 'sharing economy' admits the old way of doing things has some merit?

The ostensible social value added by companies in the "sharing economy" has always been relatively straightforward: People have resources, like their homes or their cars, that sometimes sit idle and that could be making them money if they were linked up with the right opportunities. Airbnb's self-description, for instance, is that it provides homeowners a platform to rent out their properties to travelers and so forth and make an extra buck.

Of course, we already have an industry that specializes in providing short-term rentals to travelers: the hotel industry, which also includes motels and bed and breakfasts and that sort of thing. But the hotel industry also operates under extensive laws and regulations and bureaucratic procedures. By skipping past all that and linking people up directly, Airbnb was supposed to be more nimble and efficient.

Which is ironic, because this week Airbnb took a big step towards operating more like the traditional hotel business.

Basically, Airbnb has committed to a top-to-bottom review of all the properties listed on its platform, verifying the accuracy of photos and addresses and listers' identities, and making sure the properties meet some basic safety standards. The company will also ban using listings on its platform for "party houses," and set up a hotline so that neighbors of Airbnb listings can call in with complaints. All of this was prompted by a tragic incident at the start of this month, where someone opened fire at Halloween party occurring in an Airbnb rental, killing five people. On the same day, Vice had published an investigation exposing a massive bait-and-switch scam on the platform involving fake and inaccurate listings.

"Many of us in this industry over the last 10 years are going from a hands-off model where the internet is an immune system to realizing that's not really enough,” Brian Chesky, Airbnb's co-founder and CEO, said. "We have to take more responsibility for the stuff on our platform. This has been a gradual, maybe too gradual, transition for our industry."

This is striking, because the "hands-off model" is precisely what was supposed to make sharing economy companies like Airbnb and Uber new, and — more importantly — better. By their nature, these tech platform companies have avoided the same regulations that apply to the traditional industries they've displaced, because it's debatable what exactly they are: Airbnb isn't a normal hotel chain renting out its own properties, but it's also not just a bunch of friends on an internet listserv offering up their couches for people to crash on. So what is it?

Airbnb raises "issues of safety for its customers and nuisance for hosts' neighbors," economist Dean Baker wrote in 2014. "Hotels are regularly inspected to ensure that they are not fire traps and that they don't pose other risks for visitors. Airbnb hosts face no such inspections — and their neighbors in condo, co-ops or apartment buildings may think they have the right not to be living next door to a hotel (which is one reason that cities have zoning restrictions)."

Of course, whether you think Airbnb's ability to operate in this gray zone is a good thing or a bad thing depends on whether you think the regulations and requirements imposed on traditional hotels, and the zoning restrictions that keep them out of certain neighborhoods, are good and necessary or not. If you think they are good, then Airbnb's business model "is simply facilitating a bunch of rip-offs," as Baker put it. But if you think they're bad, then Airbnb looks like a virtuous disruptor: a new and more efficient way of doing things that comes in and sweeps away an old and sclerotic order. Which is exactly the case that champions of the sharing economy have made.

But you could also consider the last 10 years of Airbnb's existence as a kind of social experiment to test whether cities and communities actually buy the champions' argument, after they're exposed to its concrete consequences on a day-in, day-out basis. So far the results have not been glowing.

New York City, for instance, passed legislation in the last few years to require all Airbnb hosts in the city to register with the Office of Special Enforcement. New York has been cracking down on illegal short-term listings, and Mayor Bill de Blasio's administration is working on requirements demanding more detailed disclosure. Washington, D.C. imposed a ban on people listing second homes on platforms like Airbnb, and limits them to 90-day rentals for primary homes. Jersey City limited what properties can be used for short-term rentals, made permits more stringent, and limited them to 60 days a year. San Francisco, Los Angeles, Amsterdam, Paris, Vancouver, and Barcelona, among others, have all stepped in to more tightly regulate short-term rentals on these sorts of platforms.

Nor are the concerns purely about safety and permits. Tourism and hotels are generally an important source of tax revenue for local governments, which they lose out on if Airbnb and other short-term rental platforms displace the industry. When properties are removed from the traditional housing market, and used in the short-term rental market instead, that can drive up housing prices for permanent residents. Not surprisingly, a lot of owners who lease on Airbnb are essentially running de facto hotel chains — they buy up multiple properties, and convert them to maximize the units that can be rented on the platforms. This can create an upward ratchet that increases gentrification; Barcelona, among other cities, has been dealing with a particularly nasty version of this problem.

Now, here's Airbnb, voluntarily taking on more of these burdensome obligations. It remains to be seen how serious they are about this — apparently a lot of the verification will continue to rely on reports from customers after-the-fact. But the trend is telling.

Obviously, jumping through the hoops of permits and safety inspections is costly and prohibitive for individual owners. Big corporate bureaucracies are much better at handling that sort of thing, which is why the hotel chains love the new regulations being imposed on Airbnb and the like. Unquestionably, the regulations protect them from competition.

But these regulations also essentially socialize the work of providing people peace of mind. In the freewheeling ideal that Airbnb represents, word-of-mouth between customers would lead people to avoid bad listings, and the "natural" market efficiency would punish bad actors. That's the "immune system" idea Chesky referred to.

This puts all the work of gathering information and making decisions on the individual customers — and make no mistake, being the "immune system" is a lot of work. One thing we seem to be learning is that most people actually would prefer it if some big government or company bureaucracy did that work for them.

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