“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.”
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 with each other for over fifty years. They have also been renting rooms, homes, and apartments for their vacations from private parties for centuries.
The Top Travel Sharing Economy Businesses
Some of the best-known sharing economy travel players include:
- Couchsurfing – Originally founded as a non-profit organization. Today, Couchsurfing International operates as a for-profit hospitality exchange. Hospitality exchanges started just after World War II with Servas. 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 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 are to get repeat business. Uber and Airbnb use these ratings to successfully overcome consumer reluctance to the idea of staying in a stranger’s home or getting into a strangers’ car.
- Internet sites and mobile phone apps have made it cost-effective and secure for customers to post and respond to listings for private homes, taxi, 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 just to rentals and taxis. Private parties are also sharing 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)
The Travel Economics 101 Posts
Here are several posts designed to give Fifty-Plus Nomads a basic idea of how Travel Economics works. Being armed with a better economics education should make you a better travel consumer. (You can read the posts in any order) .
- Why Alliances are Essential to Travel Providers. Are they Good or Bad for Consumers?Travel industry alliances are essential to the business´s survival. However, alliances have both good and bad implications for consumers
- Extra Fees: What are Ancillary (Extra) Fees and Why Are They Increasingly Becoming A Travel Industry Lifeline?More and more the travel industry depends on the sale of other products to expand and maintain its profitability. Expect to be bombarded with hints to buy other things (ancillaries) on your next cruise, flight, etc.
- The Internet Has Changed the Face of the Travel Industry More than Any Other Major IndustryThe internet has changed the travel industry probably more than another industry. This article discusses how these changes affect the consumer.
- Travel Industry Cost Saving Techniques: The Good, the Bad, and the UglyThe travel industry has made several changes to save costs in recent times. Some like using more fuel-efficient planes do not affect consumers that much. Others like reducing staff have made the experience worse for consumers.
- Business Travelers Versus Leisure TravelersThe travel industry gets most of its clients from leisure travelers. However, it makes more money from business than leisure passengers. The airlines put up with us leisure travelers because they couldn’t survive without us. However, they don’t hide their preference for business travelers.