This document discusses the phenomenon of the sharing economy and Airbnb. It provides background on Airbnb, describing how it was founded in 2008 and has grown significantly each year. It discusses the economics of Airbnb, including studies that found Airbnb guests tend to stay longer and spend more than traditional tourists. It also discusses how authenticity and a desire for more unique experiences are driving factors for travelers using services like Airbnb.

1. Clare Venner T00017894
The Phenomenon of the Sharing Economy and Airbnb
Clare Venner (T00017894)
TMGT 4090
Billy Collins
Thompson Rivers University
October 6, 2014

2. THE PHENOMENON OF THE SHARING ECONOMY AND AIRBNB 1
Table of Contents
Introduction to the Sharing Economy 2
History of Airbnb 3
The Economics 4
Authenticity 6
Conclusion 7
References 9

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Introduction to the Sharing Economy
Here is a typical story you hear about the sharing economy: Jane needs a ride to a music
festival but lives a fifteen minute drive from downtown, which has limited parking and
inefficient public transportation system. No cabs are available and she's about to give up on
making it to the festival when she remembers the ride sharing service called 'Lyft' that recently
established itself in her city. She decides to download the app and check it out. Five minutes
later a guy drives up her driveway in a white sedan. Jane finds out the driver had just started his
shift (driving) after working all day at his full-time job at an insurance company. He appreciates
the extra cash but also enjoys meeting new people and helping them out. He doesn't keep a
pink moustache on the front of his car like most Lyft drivers because he feels it draws too much
attention. They arrive at the music festival, Jane tips the driver, and they part ways (likely to
never see each other again) after a brief but mutually beneficial relationship.
The anecdote is likely one of the many reasons why the "sharing economy" is still
considered a hippie movement by some and a yuppie San Francisco trend by others. Why
would a Lyft ride be important for the future of global business and travel? The answer: trust.
“Trust is the core of the new sharing economy—it is the movement to be more inclusive
and less distrusting; to be more democratized and less traditional; to help each other make
better decisions and waste less, and to harness the best aspects of technology to do so” (Gilpin,
2013). In a study done at the Aalto University School of Business it was reported that those who
adopt to Airbnb practices are willing to sacrifice regulation and safety (that are inherent in
traditional services such as hotels) in exchange for increased price value and an increase in
what is perceived as authentic experiences (Satama, 2014).

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The example previously mentioned (Lyft) is just one of the many services that have
either led to the formation of the sharing economy phenomenon or have risen from its
aftermath. Possibly one of the biggest sharing economy services that exist today and one that is
particularly relevant to in the tourism industry is Airbnb. According to founders Nathan
Blecharczyk and Brian Chesky, Airbnb was founded in August 2008 in San Francisco, California
and is a “trusted community marketplace for people to list, discover, and book unique
accommodations around the world” (2012).
History of Airbnb
According to an article written by Tomio Geron and published in the business magazine
Forbes in 2013, the idea of Airbnb came to be when founder Chesky and friend Joe Gebbia,
recent Rhode Island School of Design graduates, thought they could make some extra cash by
housing attendees at an industrial design conference on air beds in their apartment. They
advertised the floor space on a website they created called Airbedandbreakfast.com and after
three people stayed with them they decided to max out their credit to build a bigger website
with more listings. They were simply trying to solve their own problems and once they did they
realized that other people wanted to partake as well (Geron, 2013).
According to the same Forbes article, the first year Airbnb was in operation it ended
with 100,000 guest nights booked, rose to 750,000 nights booked in 2010, passed two million in
2011, and in 2012 the number of nights booked fell in the range of twelve to fifteen million. The
company is profitable solely from taking a three percent cut from Airbnb hosts and a six to
twelve percent cut from travellers booking accommodations through the site (Geron, 2013).

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With the exception of a cleaning fee that some renters tack onto their listings, the six to twelve
percent charge is the only type of tax or service fee that users get charged. The three percent
charge for hosts is also the only sort of fee they pay—no tourist operation licensees of any sort
or lodging taxes are involved. This is one of the reasons Airbnb has become controversial in the
tourism industry. While many hotels charge hotel or resort taxes that go back into the upkeep
and cost of a hotel’s amenities or to the local destination marketing organization, Airbnb does
not identify itself as being under any one nation and so up until recent years has gotten away
with not charging government regulated taxes.
The Economics
According to Geron many critics deride that AirBnb and the like as short-term fads for
slow economic times based on an AirBnb report that found 42% of hosts use the income they
receive from renting out part of or entire properties to pay for everyday expenses rather than
using it as supplementary income for the extras. Economists seem to be baffled as to how they
can measure the activity of the sharing economy and sites like AirBnb. Arun Sundaraarjan is a
professor at the Stern School of Business at New York University who studies the phenomenon
and claims they will have to invent new economics to capture the impact of the sharing
economy. The largest question being asked by academics regarding the topic is whether this all
creates new value or just replaces existing businesses; furthermore, whether it positively
impacts a destination’s economy or takes away from key tourists dollars being spent. The
answer is both and presents itself as a classic case of creative destruction (Geron, 2013).
According to a UC Berkeley study, for every vehicle used by companies like Zipcar, nine to

6. THE PHENOMENON OF THE SHARING ECONOMY AND AIRBNB 5
thirteen cars are being discarded by car owners. There may be a short-term negative impact on
the economy as a result of a person not buying a car but long-term economic efficiencies result
and that is ultimately good for everyone involved (Shaheen and Cohen, 2013). In 2012 Airbnb
began commissioning studies to be done to measure the economic impact of its business in
cities around the globe. San Francisco was the first city Airbnb evaluated and found that it
generates approximately $56 million in local spending and supports 430 jobs. Of the total
spending, $12.7 million goes directly to local host households (the rest is through other
spending such as attractions, transportation, food and beverage, travel trade, etc.). The average
San Francisco hotel guest visits for 3.5 days and spends $840 while the average San Francisco
Airbnb guest visits for 5.5 days and spends $1,045. In the same report it was also stated that
travellers tend to stay longer in a city because Airbnb rentals are typically cheaper than hotel
stays which means more money being spent in other areas. Airbnb also reported that fourteen
percent of their customers responded they would not have visited the city at all had it not been
for the listings found on Airbnb for unique accommodations at more economical rates. The
company also produced reports on New York City, Paris, Amsterdam, Berlin, London,
Edinburgh, Sydney, and Barcelona and found similar results. In Paris Airbnb complemented the
existing tourism industry in that 70 percent of Airbnb’s properties are located outside the
central hotel corridor and hotel occupancy and average daily rates have grown to record highs
since Airbnb flourished in the city. In Barcelona 4,000 hosts created special experiences for
170,000 travellers and these experiences resulted in 70% of those travellers reporting that
Airbnb made them more likely to return to Catalonia. Overall, it found that based on travellers
seeking “live like locals” experiences and many hosts being located away from typical tourism

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hubs, Airbnb guests tended to stay longer and spend more money than traditional tourists and
brought in more economic benefit to neighbourhoods and small businesses not typically visited
by tourists (Airbnb, 2012).
The economics surrounding Airbnb and the sharing economy are the reason it has
become such a controversial topic—everyone wants to benefit from it and the government (as
always) gets upset when they feel they should be profiting.
Authenticity
The phenomenon of Airbnb and the sharing economy goes back to trust and
authenticity being a primary motivation for travellers and how it is changing the way people
choose to travel. Travellers are forcing themselves to relearn how to trust strangers in order to
fulfill their travel needs and financially end up better off. When the benefits of allowing a
stranger to rent your home for a week outweigh the risks of it, many people are realizing a
social need to change how they act. Recent studies found that authenticity-seeking behaviour is
a primary motivation for turning to networks such as Airbnb instead of booking a standard
hotel room (Lang, 2011). Authenticity is an interesting term that has been a hot topic in tourism
for more than forty years. MacCannell (1976) argues that tourists are involved in a serious
pursuit of meaning and authenticity and that they are so dissatisfied with their own culture that
they seek authentic experiences in other places while Cohen (1988) wonders if authenticity is
even a relevant matter—if so, Wang (1999) argues there are many different types of
authenticity that travellers seek. Lang (2011) found in his study that users of Airbnb indicate
having had more “authentic” or “real” experiences (in Lang’s context authenticity being a “code

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for the unique and the singular, as opposed to the rational and the standardized”) than those of
the typical mass tourists they compare themselves to. MacCannell argues that tourist space is
divided into “front” and “back” regions and that what might be perceived as a “back” region is
actually a front that is staged. When it comes to booking a stay with Airbnb and staying in
someone’s private home the lines between front and back regions are blurred (Lang, 2011).
Tourism is a way to step outside of the structured, everyday life in attempt to experience
something both freer and truer to oneself (Wang, 1999). In this view, tourists engage in
activities like camping, hiking, and mountaineering but a key part is the ability to interact with
locals and have experiences that are true to those locals (Lang, 2011).
Conclusion
In a world where tourism experiences have become more important than the tourism
product themselves, it seems like the founders of Airbnb have created a gold mine that will
endure despite the hurdles they will soon have to jump through with governments and
regulations being imposed on them. Geron (2013) reports that Shervin Pishevar, a venture
capitalist at Menlo Ventures and an investor in Getaround, TaskRabbit, Uber and other startups
in the sharing economy space, believes these services will have a major impact on the
economics of cities. “This is much bigger than any specific app. This is a movement as important
as when the web browser came out” says Pishevar. It has already had a significant effect on
how many people book their travel plans in an attempt to gain higher price value, the
opportunity to have more authentic experiences, and will ultimately be forced to learn to trust
complete strangers in the process. Conventional ways of booking hotel rooms where security

9. THE PHENOMENON OF THE SHARING ECONOMY AND AIRBNB 8
and standardization have in the past had high priorities are being let go of in a changing
economy that allows for a much more cost-efficient exchange of resources. Governments,
whether they like it or not, will in time be forced to change how they regulate companies
operating in the shared economy because the movement is already happening and it is here to
stay.

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References
Airbnb. (2012). Airbnb economic impact. Airbnb. Retrieved from https://www.airbnb.com/economic-
impact/
Cohen, Erik. 1988. “Authenticity and Commoditization in Tourism.” Annals of Tourism Research 15(1):
371-86.
Blecharcxyk, N. and Chesky, B. (2014). About us. Airbnb. Retrieved from
https://www.airbnb.ca/about/about-us
Geron, T. (2013, January 23). Airbnb and the unstoppable rise of the share economy. Forbes Magazine.
Retrieved from http://www.forbes.com/sites/tomiogeron/2013/01/23/airbnb-and-the-
unstoppable-rise-of-the-share-economy/
Gilpin, L. (2013). We-commerce: The sharing economy’s uncertain path to changing the world.
TechRepublic. Retrieved from http://www.techrepublic.com/article/we-commerce-the-sharing-
economys-uncertain-path-to-changing-the-world/
MacCannell Dean. 1976. The Tourist: A New Theory of the Leisure Class. New York: Shocken Books.
Satama, S. (2014). Consumer adoption of access-based consumption services – Case Airbnb. Aalto
University, School of Business. Retrieved from
https://aaltodoc.aalto.fi/bitstream/handle/123456789/13723/hse_ethesis_13682.pdf?sequenc
e=1
Shaheen, S. and Cohen, A. (2013). Innovative mobility carsharing outlook: Carsharing market overview,
analysis, and trends. Transportation and Sustainability Research Center – University of
California, Berkeley. Retrieved from
http://tsrc.berkeley.edu/sites/tsrc.berkeley.edu/files/Innovative%20Mobility%20Industry%20O
utlook_Carsharing_Spring%202013%20FINAL.pdf
Wang, Ning. 1999. “Rethinking Authenticity in Tourism Experience.” Annals of Tourism Research
26(2): 349-70.