“We used to live in a world where there were people, private citizens, a world where there are businesses, and now we’re living in a world where people can become businesses in 60 seconds.”
Brian Chesky, Founder, Airbnb

The Rise of the Sharing Economy in the Travel Industry

This blog was written before the COVID Pandemic. The COVID epidemics played havoc on the travel business. In 2022, Fifty Plus Nomad decided to focus on traveling and living in Mexico and language learning posts. We will only update these long-term travel-related posts on a time-permitting basis. We would appreciate your comments and updates on these posts.

What is the Sharing Economy?

One of the new buzzwords that Fifty Plus Nomads should know is sharing economy.

According to the Oxford Dictionary, the sharing economy is: 

¨an economic system in which assets or services are shared between private individuals, either free or for a fee, typically using the internet. Thanks to the sharing economy, you can easily rent out your car, your apartment or house, your bike, even your wi-fi network when you don’t need it.”

¨Sharing economy” has become hot over the last few years. However, it is not new. Historically, sharing possessions, skills, and ideas were the basis of most economies.

Within the travel industry’s sharing economy, people share or exchange a room, a house, or a car for money (or other services). Like the internet, the sharing economy is more common in the travel industry than in most other economic segments.

Despite all the recent publicity, the sharing economy has been part of the travel industry for many years. People have been exchanging houses for over fifty years and have also been renting rooms, homes, and apartments for their vacations from private parties for centuries.

The Top Businesses in the Sharing Economy in the Travel Industry

Some of the best-known sharing economy travel players include:

• Couchsurfing – Originally founded as a non-profit organization. Hospitality exchanges started just after World War II with Servas. Today, Couchsurfing International operates as a for-profit hospitality exchange. In hospitality exchanges, hosts offer to let people stay in their homes for free. Guests reciprocate by sharing their lives and cultures with their hosts. Couchsurfing has nearly 14 million travelers and 400,000 hosts around the world.
• Airbnb – Airbnb connects homeowners with renters. The renters spend their vacations in a private room or a house offered by individual homeowners through Airbnb. Airbnb charges a fee for connecting the owners and renters. Airbnb began with the idea of promoting cultural exchange. However, it has morphed into a $13 billion company with an estimated 300 million customers worldwide. 16.9% of all Americans stayed in an Airbnb at least once in 2017.
• Uber and Lyft – Uber and Lyft developed highly successful computer apps that match customers with a privately owned taxi service. Each Uber and Lyft driver owns his car and is a freelance contractor for the company. Uber and Lyft receive a share of the taxi revenue to run their businesses. Nearly one-fifth of the US population hailed an Uber vehicle in 2017. In 2017, Uber value was $18.2 billion; Lyft $2.5 billion.
  

Why Have Travel-Related Shared Economy Business Become So Popular?

The following factors have made the sharing economy so chic, successful, and pervasive in the last few years:

• Sharing economy companies (notably Uber and Airbnb) have used very effective marketing strategies. Both parties (the driver and passenger; the homeowner and renter) rate each other. The higher the overall rating, the more likely the driver and homeowner will get repeat business. Uber and Airbnb use these ratings to overcome consumer reluctance toward the idea of staying in a stranger’s home or getting into a stranger’s car. (In my opinion, the ratings have become fairly useless since you are expected to give a 5-star rating unless the service is notably poor and everyone has close to 5 stars).
• Internet sites and mobile phone apps have made it cost-effective and secure for customers to post and respond to listings for private homes, taxis, etc. It has also enabled companies to make good money by taking a small cut from each transaction.
  

A Final Note

The sharing economy is no longer limited to rentals and taxis; private parties also share available workspaces, hotel rooms, and cars.

In addition, the sharing economy has generated, usually with some justification, quite a few critics. Here is a discussion of the societal upsides and downsides of Airbnb and Uber (and other ridesharing apps)

Long Term Travel Posts from Fifty Plus Nomad