Many economists believe that the economy as we have come to know it will seamlessly merge with the modern-day sharing economy at some point in the near future. At the center of this transition is Airbnb. Started by two roommates in San Francisco. They put out an airbed mattress and offered free breakfast to travelers.
Considering how expensive SF was (and still is today), the two roommates got themselves bookings in a flurry. They brought on another mate of theirs to code a platform and allow anyone to list their room or home to earn extra income. This is the power of sharing economy.
Where are we headed?
The world will look different in the future. There are already companies working to disrupt the real estate industry as we come to know it today – both residential and commercial real estate. Instead of buying or leasing office spaces or residences, we all will just become members of a large platform – which will allow us access to any office or residence across the city, state, country or even the world. This is the future, and it looks darn interesting.
In a perfect sharing economy, people will make effective utilization of resources. In a perfect sharing economy, it will be platforms who will own most real estate and we the people will end up subscribing for spaces. Seems bleak? Not at all. We will still be able to own properties, but imagine changing office spaces and moving anywhere seamlessly. The sharing economy won’t mean that people move aimlessly, but it means, we don’t have to be bogged down by expensive leases or pathetic real estate choices. At present, change is taking place at a rapid pace. The question we need to ask is this – what will the future look like?
It is futile to try and fight.” Rajeev Menon, Marriott’s COO for Asia Pacific (excluding Greater China), agrees: “This is a business model that’s here to stay.”
What does the transition look like?
The transition – sharing economy – will gather pace and will impact major economies first. Today, categorizing the world in to developed and developing world seems to be too old school. Economists say that Asia will be the recipient of cutting edge innovation in the sharing economy. Besides, business and millennial travel will change forever. Hotels will start to operate as lean bed and breakfasts and equip themselves to change in a much better way. And a lot of new business – such as sharing cars, parking spaces, storage spaces – will crop up in fast growing economies.
A lot of employment will be generated at the small and medium scale level, and if governments act quickly by creating an encouraging atmosphere for such businesses to flourish, then a lot of tax income can be generated – which means boosting local economies.
Growth is gaining pace
The short term rental economy is growing fast. The entire local hosting (short term rentals) industry generated about $169 billion in 2018 – per Skift. HomeAway had predicted that the short term rental industry would grow anywhere between two to four times – nearly as fast as the global economy. HomeAway claims that 82% of its current users prefer local hosts than fancy hotels. Given this acceleration, it is hardly surprising that investors are flocking to the short-term rental sector.
Asia at the center of short term rental innovation
Asia is touted to be at the center of sharing economy’s fruits of labor. Nielsen research has found that the Asia-Pacific residents were the most willing in the world to participate in sharing, with 81% willing to rent or share others’ assets and 78% willing to rent or share their own (vs. global figures of 66% and 68%), and of the top 10 countries most likely to do so, four are in Asia: China, the Philippines, Thailand, and India. And with 135 million outbound travelers (UN World Tourism Organization), China is well positioned to influence global trends.
Millennials are changing the travel industry
Business travel is now opening up to the short term rental market. With more such aggregators – like Airbnb – pop up, more the chances of businesses spending their money on affordable, innovative local hosts than large hotel chains. The Global Business Travel Association claims that in 2016 alone, business travelers spent nearly $1.3 trillion – with an average growth of 7% year-on-year.
Airbnb and its major competitor Booking.com have created services exclusively catering to business travelers. Offering self check in, free WiFi, flexible booking and cancellation policies among others. American Express Global Business Travel has already partnered with Airbnb to facilitate expensing.
Today, the newer generation of business travelers are combining business and leisure travel together and act as the main catalyst for short term rentals.
Condé Nast Traveler claims that nearly 8 out of 10 millennial business travelers wish to stay at short term rentals than at hotels. This trend is visible in the world’s fastest growing economies.
Evolving Business Models – create your own rental economy
The short term rental practice is now being applied to other aspects of personal and business lives. It’s not just renting rooms or villas, today small businesses are offering coworking spaces, car parking slots at stadiums, malls, and self storage spaces in big cities such as New York and London. This growth is mainly due to two reasons:
One – the existing services – such as hotel chains – have turned out to be expensive, pushing the economy to create innovative, low cost supplies – like short term rentals. Two – easy, affordable access to technology platforms – which enable anyone to create a platform and disrupt any part of the global economy has also played a major part.