THE SHARING ECONOMY in EUROPE How Airbnb and Blablacar Are Changing the Future of Tourism

THE SHARING ECONOMY IN EUROPE How Airbnb and BlaBlaCar are Changing the Future of Tourism

Emily Griffis Fall 2014

Abstract

Europe’s tourism economy faces increased pressures from emerging companies that are lending their creation to the so-called ‘sharing economy’, which is challenging the notions of ownership, commerce, government regulation, wealth, and personal identity (CBC Radio, 2014). This paper explores the effect of the sharing economy on Europe’s tourism industry from two different perspectives by examining two companies that are spearheading a wave of economic disruption:

Airbnb, a website founded in the United States that allows homeowners to rent out spare lodging, and BlaBlaCar, a French ride-sharing company that connects drivers and passengers to share the costs of transportation. If the pressures posed by these innovations are not addressed in the correct manner, traditional businesses may risk losing a significant portion of the market to these modern business models, while industries and politicians are being forced to decide whether they will embrace this concept, create laws to foster integration, or try and suppress it altogether.

INTRODUCTION

The sovereign debt crisis that swept Europe and the world in 2008 prompted citizens to reconsider how they were spending money. These conditions paired with the growing concern over the environment and decline of non-renewable resources called for the innovation of ways to save and make more income, reduce waste, and increase the efficiency of personal assets. The increased capabilities of technology and global networks have enabled effortless human connection, and facilitated the emergence of a new type of economy that is altering the future of travel and tourism.

In 2014, growing peer-to-peer accommodation networks and ride-sharing communities are lending their existence and success to the ‘sharing economy’, which redefines the concept of ownership. This system is providing the average globetrotter with more options as they ask the questions of where to stay and how to get there. Tourism has become one of the leading sectors subject to growth from the sharing economy as travelers share rooms, cars, boats, and more; however, the ambiguity of this economy has brought into question whether or not such businesses can co-exist with traditional industries. As will be explored in this report, it is evident that the rise of the sharing economy is disrupting the future of travel throughout Europe and the rest of the world. The question will be if it is for better or for worse, and for whom?

THE SHARING ECONOMY

Also deemed 'collaborative consumption’, the sharing economy is based on the concept where owners rent out something that they are not using to a stranger (Forbes, n.d.). This includes the

1 social shift away from ownership and towards the granting of temporary access to goods and services (Digital Tourism Thinktank, 2014). The concept of a peer-to-peer market is not entirely new, since people have organized carpooling and vacation home rentals in the past; however, modern technology has reduced transaction costs and granted everyone access to a global market.

The emergence of online payment systems, GPS, and internet-ready smartphones has turned collaborative consumption into a feasible alternative for the average consumer (Swallow, 2012).

This concept is separating goods so that they can be consumed as services, creating a peer-to- peer market worth $26 billion (The Economist, 2013). Advantages of this model include the ability of people to make money from spare or underused assets, becoming the most recent example of the Internet’s growing value to consumers (Forbes).

In terms of the tourism industry, the sharing economy offers tourists increased options when planning their trips, most specifically where to stay and how to get there, thereby affecting accommodation and transportation sectors around the world. Companies that consider themselves to be part of the sharing economy use internet-enabled platforms to match consumers to providers, while eliminating the managers in the middle to provide services at lower prices.

Although home and car owners are not necessarily ‘sharing’ their assets as opposed to simply renting them out, it is believed that a sharing economy built on multiple uses of the same resources will allow us to live a more sustainable life (Stein, 2014). For example, fewer vehicles should need to be manufactured over time if privately owned cars can also meet the needs of passengers. This new economy has been changing how Europe’s tourism sector operates, and is placing increased pressure on conventional tourism business models.

2 ACCOMMODATION SECTOR: AIRBNB

Airbnb is considered the poster child of the sharing economy (Forbes), and is the most recognized sharing company to be disrupting the accommodation sector of the tourism industry through collaborative consumption (QTIC, 2014). It is self-described as providing “a trusted community marketplace for people to list, discover, and book unique accommodations around the world ….” (Folger, 2014), with more than ten million guests having used this service since its founding in 2008 (Lawler, 2013).

Background

Brian Chesky and Joe Gebbia founded Airbnb in 2008, the idea having sprouted after realizing a simple solution to a money deficit problem. Chesky was sharing rent with Gebbia in San

Francisco, but was $150 short of paying his share of the rent. The week Chesky arrived in

October 2007, San Francisco was hosting the Industrial Designers Society of America, and all hotel rooms on the conference website were sold out. The two decided to rent out their house as a bed and breakfast, calling themselves ‘Airbed and Breakfast’ to reflect their use of air mattresses and lack of real beds (Friedman, 2013). “We didn’t want to post on Craigslist because we felt it was too impersonal. Our entrepreneur instinct said ‘build your own site.’ So we did.”

(All Entrepreneur, 2009). By charging three people $80 a night, making them breakfast, and acting as their local guides, the hosts were able to make enough money to cover the rent. This innocent solution sparked the concept for a company that may now be considered the equivalent of a major hotel chain, yet does not own a single bed.

The current model benefits both the user and the consumer, with the average Airbnb renter in

San Francisco making approximately $9,300 per year from 58 nights (The Economist, 2013),

3 while consumers are paying less than they would have otherwise through traditional providers such as hotel chains. Over 50 percent of the hosts rely on the extra income received through

Airbnb to finance their own rent or mortgages (Galliani, 2014).

Business Model

Worldwide, Airbnb has listings in 34,000 cities and 192 countries, with 24,000 rooms in Paris alone (Friedman, 2013) and 650,000 worldwide (Banas, 2014). This can be compared to the

Hilton hotel chain, which consists of 610,000 rooms in 88 countries, yet took 93 years to build as opposed to 4 years to amass like Airbnb (Banas). Types of accommodations include castles, caves, tepees, private islands, motorhomes, tree houses, and igloos, alongside the typical bedroom or apartment. In 2011, it was even possible to rent the entire principality of

Liechtenstein from Prince Hans-Adam II for a mere $70,000 a night, which included customized street signs and temporary currency (Friedman). Hosts list their properties free of charge, and decide how much to charge per selected time period. Properties are promoted through titles, descriptions, photographs, and a user profile where potential guests can get to know the host

(Folger). Travelers search the database using a number of metrics including room type, price, host language, and amenities provided.

The company generates most of its revenue in the following two ways: A commission from renters and a commission from homeowners. A traveler will pay a guest service fee of 6-12 percent depending on the reservation subtotal, and Airbnb will collect a three percent service fee from the host (Folger). These commissions are kept fairly low, as the founders understand that the two parties may easily find incentive to exchange contact information and payment privately.

To further prevent offline transactions, Airbnb scans messages sent to hosts by hopeful renters to

4 ensure there is no email address included. Alongside this revenue stream, the company raised

$200 million in a Series C venture round in 2012 (Merino, 2013).

There is significant controversy surrounding Airbnb’s business model. The company faces criticism for negatively impacting the revenue of hotels in major cities and for failure to comply with tax and zoning regulations (Grout, 2013). A major question lies around whether Airbnb is creating new business or simply cannibalizing the supply and demand of existing accommodation companies.

Growth

Despite opposition from governments and the businesses it is supposedly disrupting, Airbnb has seen incredible growth over the past few years. The company has grown 750% since 2009 to a

$10 billion valuation with over 600 employees, allowing it to overtake many well-known tech companies in valuation including Pinterest ($5 billion) and match that of cloud storage leader

Dropbox (Ferenstein, 2014). Seven years after inception, Airbnb has surpassed Hilton Hotels in nights booked, having received a total of $776.4 million from investors in a total of seven venture-funding rounds (Brown, 2014).

Airbnb’s current expansion strategy involves offering more than simple home and room rentals, and branching out into new areas of travel. This includes creating comprehensive travel planning guides for each community it currently serves with rental listings (Montini, 2014), and forming an online marketplace allowing locals to sell tours and other experiences in their city (Williams,

2014). These new additions are based off the company’s advantage of allowing tourists and travelers to ‘live like a local’, comprising a strategy to turn Airbnb into a hospitality brand as

5 opposed to a source of affordable rooms. Co-founder Chesky believes “there [are] huge opportunities for other services on top of accommodation” to enhance the traveler’s experience

(Williams).

Competition

Airbnb is threatened to some degree by imitation models, yet its significant expansion and growth makes it a serious competitor for the traditional hotel industry; the two ultimately share the same goal of persuading travelers to prefer their offered accommodation. “The growth of peer-to-peer inventory sources could affect the demand for our services in facilitating reservations at hotels,” says a Trip Advisor representative (Schaal, 2014). Many hotel chains are quick to dismiss the threat of Airbnb, with Hilton and Marriott hotel chains all having said that these sharing economy services do not compete for their core market of accommodating high- end business travelers. Airbnb agrees by claiming that it is creating new demand, and is

“optimistic that there isn’t going to be a war [with hotels]”, says Chesky (The Economist, 2014).

This being said, Airbnb still continues to dip into the revenue of hotels as it further builds its reputation and variety of listings.

TRANSPORTATION SECTOR: BLABLACAR Background

BlaBlaCar is to car hire what Airbnb is to the hotel industry (Hickey): It is a French start-up that arranges rides between cities and allows passengers to pay significantly less than the public transport fare. In 2003, co-founder Frédéric Mazzella was searching for a way to make it home for Christmas, but with three days until December 25th, all of the trains from Paris were full. He ended up getting a lift from his sister, and during the trip noticed that most of the cars on the road

6 were empty except for the driver, which was the very inefficiency that sparked the idea for

BlaBlaCar:

The idea was to organise all the available seats in cars just like we organise all the available seats in planes and trains, with a real search engine, and this did not exist. There was only demand and no offer and organised in a very weird way in that you would have neighbours who would share a ride but you did not know where they were going and when. - Frédéric Mazzella, co-founder of BlaBlaCar (Hickey, 2013)

BlaBlaCar now consists of 8 million members in 12 European countries, recently having signed up 250,000 members in Russia (The Economist, 2014). The company’s size and worth can be put into perspective by the fact that the president of SNCF, the French national railway, identified it as a competitor in 2013 (Hickey). “[Their] ambition ultimately is to have tens of millions of members,” says co-founder Nicolas Brusson (Carnegy, 2013).

During the first years of operation, BlaBlaCar saw frustration as it struggled to gather a number of drivers significant enough to meet the needs of passengers, and vice versa. In 2007, a series of strikes took a toll on the French transportation system, and a press release promoting the availability of BlaBlaCar attracted a large amount of attention. Having experienced continuous growth in the following years, when the volcano Eyjafjallajökull erupted in Iceland, the amount of ash in the air disrupted air travel, and BlaBlaCar prices became so high that the owners made the decision to cap prices in order to retain the meaning of the sharing economy (Hickey).

Business Model

One of the million people who use the website each month (Hickey) may simply key in details of where he or she would like to go and when, and is presented with a list of drivers with the same destination along with their prices. Users also post details about themselves, as BlaBlaCar places a lot of emphasis on how it is promoting social interaction. The company’s monetization

7 strategy includes charging an approximately 10 percent commission from passengers, with only customers in France and Spain paying as of November 2014 (Degeler). When drivers offer a ride, an online calculator shows a suggested price with an upper price limit – drivers are supposed to simply share the cost of the trip with their passengers, and not receive a profit. BlaBlaCar will deny access to drivers they suspect are using the system to make personal monetary gains, with

35 percent of its staff in France working on customer service and detection of irregular behaviour

(Gualtieri, 2014).

Driver profiles show their experience with the service, and although a bit silly, the name itself

(pronounced “blah blah” in English) has significance when helping match users. A driver will rate himself or herself as “Bla”, for not very talkative, “Bla Bla” for willing to carry casual conversation during the trip, or even “Bla Bla Bla” for someone who is downright chatty. This is one of the metrics upon which passengers can select their driver, while other criteria include the experience level of the driver and the comfort level of the car (Lagoria-Chafkin, 2014).

Growth

In its latest venture round, BlaBlaCar raised $100 million, and intends to use this to expand its business globally, by taking “what’s proven successful in the countries [it is in], and go to the next level” (Russell, 2014), namely reaching the markets of Turkey, India, and Brazil. When assessing new expansions, the company takes into consideration the price of gas, current state of transport overall, and how people are connected (either using portable technology or not) to make an ultimate decision on how appealing a new market is (Russell).

8 The big question is whether BlaBlaCar will enter the United States. A main deterrent for this is that there is no incentive for drivers, according to Brusson. He continues to explain that the

“cost of petrol in the US is pretty low, especially compared to people’s earnings. Driving is still pretty cheap in the US comparing to Spain, Italy, or Russia, so the incentive for the driver [to take passengers and cut driving costs] is barely there” (Degeler, 2014). Other factors, including the lack of regulatory roadblocks in the European Union and the extensiveness of public transport in European cities to define pick-up and drop-off places suggests that this business model is better suited for Europe than America.

Competition

BlaBlaCar’s main competitor is Carpooling.com, a German ride sharing company. Both of these companies were started over ten years ago, yet the fact that they have made the bulk of their progress in the past three years demonstrates how the sharing economy is becoming a significant aspect of the modern world. For both of these companies, a significant competitor is public transport. The main goal for BlaBlaCar is to promote awareness among drivers and passengers, since many car owners are not conscious of the opportunity to offer empty seats. As stated by co- founder Brusson, “the challenge today is education, how you make people aware of your service, how you explain that it works” (Degeler). This implies that success in the market will therefore be dependant on the target market’s learning curve, as opposed to any direct competition.

THE SHARING ECONOMY’S COMPETITIVE ADVANTAGE

What drives the growth of companies like Airbnb and BlaBlaCar is the evolution of trust in the sharing economy, and the network effect that ensues:

9 We used to live in a world where there were private citizens, and a world where there are businesses. Now we’re living in a world where people can become businesses in 60 seconds… I think our core invention, the thing that we have brought back, is trust…We used to trust big corporations; now for the first time we can trust complete strangers…Think of this as the internet moving into your neighbourhood. – Brian Chesky, founder & CEO of Airbnb (Lay, 2014)

Airbnb and BlaBlaCar depend on the notion of trust to make them more than simply a large-scale rental agent for rooms and cars. They use simple yet reliable mechanisms to verify renter identities, and encourage guests and hosts to leave reviews for one another. Airbnb addresses the issue of trust by forcing users to log in with their social network accounts, and by providing insurance in case something were to happen. It is worth noting that these platforms can easily be replicated, but what the companies hold as barriers to potential entrants is the positive feedback loop associated with the network effects that they have created and maintained (Galliani). Both companies can attribute the majority of their competitive advantage to the network effect, which is where a good or service becomes more valuable when more people use it (Investopedia, n.d.).

Taking Airbnb as an example, the more hosts who list their apartment or rooms, the more guests will be able to book through its service, and vice versa.

A secondary competitive advantage is the unique value that these companies are able to create.

The experience of living ‘like a local’ and escaping from the mainstream hotel corridor, or sharing a ride with a local can provide a unique and memorable experience. These companies fulfill the same customer needs as would a hotel, staffing agency, or rail service, yet retain this value in a significantly different way. For starters, a person in any location can add value to either company by offering a spare mattress, room, or vehicle seat; however, the companies themselves are incapable of monitoring quality and rely on a peer-to-peer mechanism to ensure reliability (Choudray, 2014), circling back to the notion of trust that leverages the companies’

10 success. Airbnb and BlaBlaCar have significant power over their suppliers because their rooms or vehicle seats would otherwise go unoccupied.

Furthermore, as the European Union is recovering from its debt crisis, citizens are becoming more conscious about consumption and leveraging existing resources, since it is likely that no country has the funds or is willing to begin construction of new roads or railways. BlaBlaCar’s

Brusson believes that “we are entering an era of more efficiency” and that we will “consume in a new way” (Hickey), specifically by expanding the boundaries of what it means to own a car.

Furthermore, BlaBlaCar takes advantage of the fact that the supply of non-renewable resources such as petrol and oil are in decline, and this awareness has prompted humanity to seek alternative modes of transportation.

A Sustainable Competitive Advantage?

It can be argued that the competitive advantage of these companies is not sustainable, largely due to the fact that the sharing economy is not a defined market and can easily be transformed. Both

Airbnb and BlaBlaCar place a large amount of trust in their hosts/drivers and guests/passengers, since incidents including vandalism, theft, or violence can easily hinder their reputations once the general public becomes aware. For example, BlaBlaCar’s biggest challenge is convincing passengers to spend hours locked in car with a stranger, and therefore relies heavily on the validity driver and passenger rating systems. The companies also face legal issues in Europe, since there is continued ambiguity regarding the regulation of these services, and enforcement has varied from country to country. International expansion will have to be wary of any potential law violations, as well as different cultural norms for establishing and building trust.

11 Alternatively, this competitive advantage can be considered somewhat infinite, because these businesses are ‘asset light’ as opposed to ‘asset heavy’ (Botsman, 2014). Airbnb does not own or build any inventory, but facilitates endless access to existing assets including entire islands and igloos, while BlaBlaCar provides access to a unique selection of journeys. The way in which these businesses create value is immune to change, because their range of options is so diverse.

IMPACTS ON EUROPE’S TOURISM ECONOMY

The sharing economy has developed and grown so rapidly that economists, business owners, and regulators have yet to realize its full impact. The sharing economy has many values in common with responsible tourism, as it encourages the re-using of assets, and allows people to travel with minimal financial resources; however, companies emerging from the sharing economy are committed to creating new value and innovative solutions, whereas established and traditional enterprises are focused on protecting their market sectors and overthrowing competition.

Accommodation Sector

In 2013, Airbnb released the results of a study evaluating the economic impact of the company’s existence in Paris, France (Airbnb.com, 2013).

- Over the period of one year, Airbnb generated €185 million (approximately US$240

million) of economic activity in Paris, and supported 1,100 jobs.

- Between 2012 and 2013, 10,000 locals were host to over 223,000 guests, with almost half

of the hosts relying on Airbnb income to pay for household expenses.

- When compared to hotel guests, Airbnb guests in Paris would stay an average of 2.9

nights longer and spend €426 more over the duration of their trip.

12 - Between 2012 and 2013, 611 hosts in the 20th Arrondissement of Paris welcomed 9,119

guests. €2.3 million of the €3.5 million spent by guests in that neighbourhood was spent

at local businesses.

These facts reveal that the existence of Airbnb’s options for tourists contributes to supporting a sustainable community. One interesting revelation is that Airbnb in Paris operates complementarily to the existing tourism industry, and most properties are located outside the central hotel corridor. However, it is safe to assume that the millions of travelers who have booked accommodations through Airbnb in the past six years would have otherwise chosen hotels, implying that the threat posed by the sharing economy should not be so quickly overlooked by hotels.

Options for hotels include ignoring the threat and hoping it goes away, fighting it with policy or lobbying, sponsoring the start-ups, acquiring the start-ups, or building their own market place and platform. Companies like Airbnb have discovered the advantage of avoiding the same regulations as typical hotel chains. Katherine Lugar, President and CEO of The American Hotel and Lodging Association states that “these laws were put into effect for the safety and security of our guests and must be equally applied in the sharing economy as well” (Lodging Magazine,

2014). Some believe that traditional tourism as represented by hotels is becoming less and less attractive for travelers (Sicot, 2013), implying that hotels will need to adapt to this changing trend. Airbnb has an upper edge by offering more affordable accommodation, flexible check-in and checkout rules, and an array of amenities not constant in the average hotel room.

13 Transportation Sector

In Europe, there was a series of taxi driver strikes against Uber, an alternative taxi company originating in the United States. Cab drivers and train workers walked off the job in protest of changes to the travel industry that could “endanger passengers and give untested upstarts an unfair advantage” (Hinnant, 2014). Uber has a similar model to BlaBlaCar in some respects; however, the fact that BlaBlaCar has avoided such opposition draws attention to the detail that it is simply a platform that helps individuals share travel expenses (Gualtieri). BlaBlaCar is being praised for “disrupting transportation politely” and making few enemies along the way

(Chambers, 2014). Both Uber and BlaBlaCar take a cut of the fare, but the latter is persistent on preventing drivers from turning their participation into a job by setting a cap on the fare, making it impossible for drivers to classify themselves as “professionals” and therefore compete with taxi drivers. The company’s economic model is designed for long distances as opposed to operating within cities, as would a taxi, and car sharing helps travelers save up to 40 percent on their journey (Banas). From this respect, it seems that Europeans feel threatened by businesses of the sharing economy that are replicating their existing transportation infrastructure.

There is uncertainty about whether ride-sharing companies should be regulated like taxis. When comparing this business model to the taxi industry, to become a taxi driver in France, an applicant can pay up to tens of thousands of euros for his or her medallion (Hinnant), as well as undergo a number of tests and extensive background checks to ensure proficiency for the job.

On the other end of the spectrum, a person does not have to be approved by the government to be a driver for BlaBlaCar.

14 HOW HAS EUROPE EMBRACED THE SHARING ECONOMY? The European Sharing Economy Coalition

For the most part, the sharing economy has fallen below the radar of European Union lawmakers when it comes to government regulation. The absence of a clear regulatory measure creates uncertainty, but rule enforcers are now beginning to realize how big this new economy is becoming. In September 2013, the European Sharing Economy Coalition (EURO-SHE) was launched by an advisory body of the European Commission (an institution of the European

Union that is heavily involved with the legislation process) (Euro Freelancers, 2014). It is recognized that the European Union and the sharing economy both have the goals of increasing resource efficiency, creating jobs and prosperity, and advancing social innovation. The coalition sees this as an opportunity to combine efforts and mainstream a stronger Europe, and its main objective is to create a unified voice around the sharing economy to ease the process with which policies are created and applied for related businesses. The coalition hopes to mainstream, sustain, scale up, and finance the sharing economy, and explore how decision makers can work together to allow member states, businesses, consumers, and local communities to benefit from the sharing economy. This seeks to provide European policy makers with available solutions and vision for successful adoption of the sharing economy across all of its sectors and markets (Euro

Freelancers).

Europe’s Mixed Responses

Even with the development of this coalition, a year later the European Union has had widely varied responses to the impact of the sharing economy on its tourism sector. On one hand, companies like Airbnb and BlaBlaCar have come across regulatory barriers when it comes to promoting their businesses, attributing this to the “patchwork of rules and regulations” (Minder

15 & Scott, 2014) in Europe. “It would be paradise for us if we only had one regulator, not thousands of different authorities, that we had to deal with” says Arnaud Bertrand, co-founder of

French innovation and Airbnb rival, HouseTrip (Minder & Scott). Certain cities such as

Barcelona are showing no mercy for the growth of Airbnb by fining the company for breaching regional property rental rules. Conversely, politicians in Amsterdam have passed legislation to help jump-start the local sharing economy (Minder & Scott), and Paris is allowing homeowners to rent out their accommodations so long as they fulfill certain safety requirements (Peri, 2014).

The sharing economy is based on using technology to replace expensive intermediaries, yet many of these middlemen are large multinational corporations with a large amount of political influence, thereby creating further barriers.

Call For Regulation

“We cannot address these challenges by ignoring them, by going on strike or by trying to ban these innovations out of existence,” says Neelie Croes, Former Vice-President of the European

Commission (Hinnant). Is it possible for regulation and innovation to co-exist? The mixed responses of European countries and cities are a result of discrepancy on whether politicians see the companies as a threat or an opportunity for economic growth. Some are afraid of the bad consequences that these businesses might have for the regulated market, as demonstrated by the recent ban of Uber in Germany (Rossi, 2014). In America, Airbnb is being condemned for advertising listings that violate zoning and other laws in New York City (Knowledge at Warton,

2014). The success or condemnation of the businesses brought on by the sharing economy ultimately depends on the willingness of governments to support the initiatives. Governments must decide whether to tend to the needs of angry businesses feeling threatened by modern value

16 chains, or explore the opportunities that the sharing economy has to offer for their region’s economy.

Innovators seem to be moving faster than regulators can keep up, by creating businesses that are redefining typical supply chains and models of commerce (Harpaz, 2014). Regulators are forced with the task of developing a legal infrastructure that applies wholly to new business models like

Airbnb and BlaBlaCar, yet does not stifle the creativity of future innovations. Some councils around the world are encouraging this phenomenon, with the Seoul Municipal Government in

South Korea declaring itself a ‘Sharing City’ (Anderson, 2014). To ensure the rapid adoption of collaborative consumption in Europe, local governments will need to commit to incorporating its principles into planning and strategy. The challenge facing regulators is that businesses of the sharing economy have managed to find legal loopholes that governments did not anticipate being exploited (Knowledge at Warton). Airbnb and BlaBlaCar do not technically employ the hosts or drivers, and therefore can work around providing worker protection, and avoid the taxation systems that bind typical hotel or car services.

It seems almost impossible to completely ban the sharing economy, since people will continue to rent out their rooms and spare vehicle seats through other unregulated channels. This does not appear to be the correct solution to what only certain people see as a ‘problem’ created by the sharing economy. Therefore, it seems that the choice is between moderate regulation or none at all.

17 It may be argued that the sharing economy does not require external regulation because it is capable of regulating itself. The economy exists on the basis of technology enabling low transaction costs, and this very technology permits the reputation systems and monitoring tools that increase the reliability of peer-to-peer markets without requiring human intervention. This implies that reputation is serving as the regulation for these very companies – it protects buyers and prevents market failure, and serves as type of digital governing institution. Overly persistent regulators may hinder the effectiveness of the mechanisms that their intervention aims to facilitate. Insistent regulation for the development of traditional businesses in the past was considered as acceptable to ensure safe growth, but these digital innovations are making these obsolete and affecting the conventional regulatory infrastructure.

On the other hand, if absolutely no regulation is put into place, it is possible that the transport and accommodation sectors will become unsafe and unhealthy, if the majority of the people providing rooms and rides avoid safety inspections and do not pay taxes. Airbnb rooms and

BlaBlaCar vehicles are not monitored for fire safety or cleanliness, but a more pressing motivation for regulation is for protecting other businesses and collecting lost tax dollars, which could add up to a lot of money for city governments. To effectively implement any regulation on the sharing economy, governments will need to fully understand its technology and economic impact.

RECOMMENDATIONS

In order to further analyze the impact of the sharing economy on the tourism industry, a short questionnaire (see Appendix B) was conducted and completed by a random sample of 21 anonymous individuals aged 20-25 at NEOMA Business School in Rouen, France. The

18 participants come from different parts of the world, including Brazil, Hungary, the United States,

Canada, Germany, and France, implying that these individuals are pro-travel. The intention of the survey was to discover whether businesses like Airbnb and BlaBlaCar are developing awareness for a suitable market, and what this might indicate for future success.

After analyzing the results, it was apparent that 95% of individuals were aware of the options provided by Airbnb and BlaBlaCar for travel planning, yet only 57% had actually used either service. When inquired as to why not, the general consensus around accommodation was that youth hostels provided the ‘community’ experience among young people that cannot be achieved when one secludes himself or herself with a few friends in an Airbnb lodging, while public transportation was more convenient for trips with big groups, which was the dynamic of most trips done while on academic exchange. All participants that used one or more of the services had positive experiences, and their awareness was brought on from word-of-mouth publicity.

This reveals that these services are successfully obtaining their goal of creating awareness, and reputation is heavily dependant on personal experiences, which signals the importance of the reputation systems when building trust.

When asked to describe some benefits of these sharing economy services, responses revolved around the idea that they enable and encourage people to afford travel when they might not otherwise be able to, and provide a unique experience ‘off the beaten path’ when staying or driving with locals to deepen insight into a country’s culture and way of life, which is something that young people tend to seek. An inexpensive alternative to a crowded youth hostel room is also greatly appreciated from time to time. Considering the age group surveyed, the general

19 results reveal that the entrepreneurs of tomorrow and graduates into the business world view the the sharing economy as a positive addition to the traditional economy, and that governments should be facilitating its integration into the mainstream economy.

For conventional hotels and transportation businesses, this reveals that in order to retain the business of younger adults, they must both increase their competitiveness and work to mitigate the impacts of emerging business models, or adopt their strategy to fit the growing dependence and utilization of technology.

CONCLUSION

It is expected that the revenue from major sharing economy sectors will increase to $335 billion globally by 2025, and will likely expand to include other sectors such as energy, telecommunications, and retailing (Knowledge at Warton). The sharing economy can be seen as an indicator of shifting norms, with an increased focus against overconsumption and an emphasis on digitization and sharing, building a more sustainable way a of life. Even in cities such as

Paris where regulators have a long history of protecting unions, the sharing economy is growing and beginning to cover the globe.

In terms of the tourism industry, collaborative consumption is a phenomenon that reflects the convergence of entrepreneurship and technological connectivity, providing travelers with more freedom as they set their own prices and write their own reviews. Although it is difficult to gather exact figures of revenue shifted away from traditional businesses in Europe, the rapid growth and increasing popularity of Airbnb and BlaBlaCar reveal that how travelers get around today is significantly different than ten years ago. The sharing economy is here to stay, but

20 requires some level of regulation to ensure amicable existence and growth alongside traditional enterprises so that everyone is able to reap the positive benefits it is creating. Governments, existing enterprises, and new business will need to work together on sensible regulations to keep up with technology as it continues to redefine the way we travel the world.

21 APPENDIX A: REFERENCES

Airbnb.com (2014). www.airbnb.ca Accessed November 20, 2014.

Airbnb.com. (2013). Airbnb Economic Impact. http://blog.airbnb.com/airbnb-economic-impact/ Accessed November 25, 2014.

AllEntrepreneur. (2009). Travel Like A Human With Joe Gebbia, Co-founder of AirBnB! https://allentrepreneur.wordpress.com/2009/08/26/travel-like-a-human-with-joe-gebbia-co- founder-of-airbnb/ Accessed November 29, 2014.

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Banas, A. (2014). How the Sharing Economy Opens New Doors for Travelers. Smarter Travel. http://www.smartertravel.com/blogs/today-in-travel/how-the-sharing-economy-opens-new- doors-for-travelers.html?id=17950800 Accessed November 26, 2014.

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APPENDIX B: SURVEY

How old are you?

What country do you come from?

Are you aware of the alternative services offered by ‘sharing economy’ businesses like Airbnb and BlaBlaCar?

How did you hear about these companies?

Have you used either of these services? If so, which one(s)?

If not, please explain why.

If yes, has your experience been positive?