How Airbnb is reshaping our cities

Airbnb was the first major US firm to arrive in Cuba after nearly 60 years Airbnb was the first major US firm to arrive in Cuba after nearly 60 years FOTOS593
07 Jul
2016
Liberating tourism innovation, or housing menace? How a Silicon Valley startup has substantially affected communities around the world

This is a phenomenon that no city was prepared for,’ says Alan Quaglieri, a researcher at the University Rovira i Virgili in Spain. ‘Airbnb has become a vastly significant factor in the tourism arena, and as a result has become wrapped up in controversies related to the city’s policies.’ Barcelona is now the fourth most popular destination for Airbnb users. It may also be the most hostile. Protests have been staged declaring ‘my building is not a hotel’ and it has become commonplace to see banners with cap pis turistic or ‘stop tourist apartments’ strung up across balconies.

It’s not just Barcelona. Airbnb has become a controversial topic in cities around the world; in New Orleans a ‘neighbours, not tourists’ campaign argues that Airbnb rentals erode local communities; in Berlin, unlicensed Airbnb rentals were banned due to a shortage of residential housing; even in its native San Francisco the service has been disowned by some for exacerbating an affordable housing crisis.

‘The trouble with Airbnb is that it tries to merge residential housing with the tourism market,’ says Quaglieri, ‘two already contentious issues in many cities. This is the reason why public administrations around the world have been called on to take a stand on this.’ It seems the service’s easy-going and unassuming attitude belies the concrete impact it is having.

 

INTANGIBLE ASSETS

To paraphrase the old cliché, if you haven’t heard of Airbnb, you may have been living under a rock for the past decade. But what kind of rock are we talking about? Is it a converted cave house, with an alternative, retro interior? Or a repurposed shipping container in the shadow of a disused quarry? And have you considered renting it out to tourists?

With Airbnb you theoretically could. It’s an internet platform that enables hosts to rent their private assets – beds, rooms, entire households even – to guests as an alternative to hotels. Since its formation in 2008, it has grown to become the largest accommodation provider in the world though, paradoxically, the company owns no accommodation itself.

‘You could state that the world’s largest producers today have limited or no fixed assets,’ says Edward Huijbens, a geography researcher at the Icelandic Tourism Research Centre in the University of Akureyri, Iceland, ‘just as films are not owned by Netflix and no cars by Uber. No accommodation is owned by Airbnb.’ Such is the spirit of the new digital economy where the intangible has as much worth as the tangible.

That ‘home-sharing’ element, married to the ideal of travellers and locals helping each other out, person to person, is the linchpin of Airbnb’s PR strategy. Mostly, the company communicates the idea that its hosts are ‘sharing their homes and earning a little extra money to pay the bills’, contributing to the good-for-society connotations that the company thrives on. Its impression is light-hearted: the name ‘Airbnb’ rolls off the tongue, the ‘air’ part fitting for its unfixed, assetless existence. It thrives on its utopian and rootless slogan ‘belong anywhere’. Airy sharing sounds good.

However, this is in part a smokescreen to the ‘bnb’ part. The company’s business model functions through peer-to-peer renting of private assets for short amounts of time. It’s selling. Specifically, the service takes its commission by enabling secure transactions between guests and hosts. In doing so, it has become a travel monolith, generating unprecedented profits.

barcelonaBarcelona’s residents have strongly protested Airbnb’s presence (Image: Victor Serri)

 

RISE OF THE MICRO-ENTREPRENEUR

So how did Airbnb become so prolific? Reykjavík, Iceland’s capital, provides a good case study for how it has found a foothold in many cities. One that starts amid the ruins of the financial crisis.

‘The official supply of home-stay and apartments registered by Statistics Iceland has risen from 167 rooms in 2005 to 562 rooms in 2014,’ says Huijbens. ‘That’s an increase of 257 per cent.’ Those are just the registered ones. A more recent report on home-stays in the capital found that Airbnb rooms increased by 126 per cent in less than a year, to around 2,600 listings. For a small island population of around 330,000, that’s about four per cent of the total housing stock in the capital. In other words, a home-sharing revolution has occurred.

In a paper co-authored with Örn Jónsson, a professor from the University of Iceland, Huijbens notes how Airbnb’s success has its roots in the banking disaster of 2008. ‘In the wake of the financial meltdown of 2008, trust and confidence in Icelandic institutions diminished considerably,’ says Huijbens. At one point, just three of Iceland’s main banks had accumulated assets worth ten times the population’s annual GDP and when the comedown hit it crippled the economy. ‘However, visitors to the island don’t seem to suffer from the lack of trust,’ he notes. Tourism has since become the crutch for the island’s wealth, which leans increasingly on its micro-entrepreneurs. Or, more specifically, its Airbnb hosts. ‘All people need is a house in order to participate in the growing tourism economy,’ Huijbens says.

Iceland is geographically placed to appeal to westerners (the principle users of Airbnb). Literally between Europe and North America, the island straddles the Eurasian and North American tectonic plates, to which it also owes its spectacular volcanic topography. It’s a popular stopover for transatlantic flights, a hub for international conferences and an outdoor tourism hotspot. ‘Icelandic tourism, both domestic and international, has emerged to sustain employment levels in the country,’ claims Huijbens. Foreign visitors have doubled since the crash, exceeding one million last year and are predicted to soar to 1.6 million during 2016, a 29 per cent rise. Of that number, around a fifth will be accommodated by Airbnb hosts.

There is a catch, however. ‘Despite the massive influx of visitors, public sector revenues are falling,’ says Huijbens, ‘and tax evasions are pegged as the key challenge to development.’ Licensing Airbnbs with the government is possible, though the process is expensive. In 2014, the newspaper The Reykjavík Grapevine reported that 60 per cent of rentals were unlicensed. As Airbnb accommodation has more than doubled since then, untaxed and unlicensed properties may have doubled too. ‘The key questions are on whose terms does the sharing economy disrupt Iceland and what becomes of civil society in the process,’ says Huijbens, ‘especially a society that is rooted in a traditionally strong Nordic welfare system.’ Will falling taxed tourism revenues in Iceland be able to sustain the ‘risk-free’ welfare system that nourished the country?

The solution for now seems to be to crack down on ‘illegal’ rentals. Over the past two years the Icelandic authorities have been wading through this black market, combing through adverts in papers, social media and on Airbnb itself to check for unlicensed properties. Tax records are also scrutinised. Similar crackdowns have taken place in London, Paris, Berlin and New York as authorities struggle to determine just what is legal and what is not in the ever-evolving digital landscape.

 

CHANGING SPACES

‘We want to be regulated,’ Airbnb CEO Brian Chesky has been repeating since launch, ‘because to regulate us would be to recognise us.’ City authorities, however, are slow to catch up, nowhere more so than in Barcelona where the issue of regulation has reached a peak, sparking a tinderbox of existing woes with tourism and housing affordability.

Much criticism has been directed at the disconnect between Airbnb’s helpful narrative and its reality. There are three types of Airbnb rentals on offer within the service: beds, rooms and entire properties. However, ‘listings for beds in peoples’ homes are very rare,’ says the University Rovira i Virgili’s Quaglieri, ‘even though it is around the idea of partial lettings that the sharing rhetoric has been developed.’

In Barcelona, the majority of lettings are entire homes and apartments. Further to that, in two of the most tourist-friendly communities – El Raval and Vila de Gracia – 55 per cent of hosts advertise more than one unit. ‘In fact, the average listing per host is 5.21 units each,’ says Quaglieri. For Barcelona, simply sharing spaces is far removed from the reality.

‘The controversial thing about Airbnb is how it uses a human, helpful face – of a service aiding ordinary families to share their residential spaces in order to make ends meet,’ says Quaglieri. ‘Meanwhile real residents are angry that their buildings are being turned into hotels and that their rents are climbing.’

A recent report by Idealista.com, a Spanish property listings website, showed rental prices rose 11 per cent in Barcelona last year, compared to a 2.6 per cent national average. ‘In the meantime, 30,000 families are stuck on waiting lists for affordable housing,’ says Quaglieri. In a forthcoming book on global tourism, he scrutinises some of the major claims the company has used to socially justify its presence there. ‘In light of its worsening reputation in Barcelona, Airbnb produced a report that claimed its service decentralised tourism, allowed tourists to live like a local and supported families.’ However, Quaglieri found this to be only a very certain type of family.

Firstly, the average host tends to be more highly educated, has no children and lives in a less crowded household than the local average. Secondly, Quaglieri found that Airbnb listings are mostly found in traditional and new tourist areas – typically middle-class areas – while the poorest and peripheral neighbourhoods of Barcelona host only 1.55 per cent of the total supply – about 108 flats, a drop in the ocean of 30,000 places on offer in the city. ‘Hence it might be claimed that Airbnb solves the economic concerns of a few thousand people living in central, upper-middle class neighbourhoods, or offers interesting returns on capital for foreign, small-to-medium real estate investors,’ says Quaglieri. ‘But it cannot be considered a potential resource for the whole city, especially not for average families and certainly not for those in the poorest neighbourhoods.’

icelandIceland expects 1.6 million visitors during 2016. Around a fifth will be accommodated by Airbnb hosts (Image: Alexey Stiop)

 

FINAL FRONTIERS

There is a problem with pinning all the blame for these issues on Airbnb – tourism and housing conflicts existed long before Airbnb arrived and would certainly continue to exist without it. Nowhere is this more apparent than in one of its most recently opened markets – Cuba. When Airbnb launched on the communist island with 1,000 listings last year, it was the most significant development of US business in the region for half a century. That number has shot up to 4,000 listings during its first year. Is it a flood of unlicensed listings? Not quite.

‘Airbnb allows us to attract the new US market,’ says Orlando Rodriguez, an Airbnb host in Santa Clara, central Cuba. ‘It allows us to communicate directly with customers.’ For years Rodriguez’s property has been hosting foreign travellers from all corners of the globe, who congregate for breakfast in its leafy courtyard. It is a casa particulaire (or bed and breakfast), part of a well-regulated hospitality network that goes back two decades. As Airbnb has arrived alongside the loosening of trade and travel embargoes between the US and Cuba, it has tapped into this already existing network. Casa particulaires via Airbnb are expected to be a large part of the subsequent tourism explosion following US and Cuba normalisation.

‘Success is dependent largely on the availability of the internet,’ says Rodriguez. ‘To maintain a good position you have to respond quickly to guests.’ For now, only five per cent of the island has web access, so most hosts communicate via government cyber cafes and through friends with internet. This effort is partly reflected in the price: one night at a casa particulaire through Airbnb will set you back £25 – twice the amount it would just by walking in off the street. ‘International guests appreciate the safety and reliability of using Airbnb,’ says Rodriguez, and the increased number of bookings he’s seen indicate that they are willing to pay extra for it.

£25 – the cost for one night – is also the average wage a Cuban makes in a month. This makes Quaglieri uneasy. ‘If hosts can make significantly more money sub-letting rooms or flats to tourists instead of through long-term tenants, the desirability of the tourism market is spectacularly higher.’

The fear is that without careful regulation, increased internet access could bring a flood of rentals to the Cuban market – such as those seen in Spain and Iceland – in the years to come. Quaglieri worries that, as happened in other cities, it could have an impact on Cuba’s capital by dramatically exacerbating the situation of housing stock shortages and boosting inequality. Housing is already a major issue in Cuba’s cities, as a mixture of storms and neglect have deteriorated existing buildings.

With a limited housing stock and a huge gap between tourist purchasing power and average residents, Airbnb may have unprecedented impact on Cuba’s socio-economic future. Undoubtedly, the Cuban government will have to move quickly if it is to keep up with the fast-moving developments of the sharing economy. Whether or not micro-entrepreneurship will be a help or a hindrance to its local communities remains to be seen.

This was published in the May 2016 edition of Geographical magazine.

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  • Zhe good Wednesday, 12 October 2016 20:43 posted by Zhe

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