Call it the platform economy, the on-demand economy or even the access economy — but don’t call it the sharing economy. With powerful data-driven businesses such as Uber and Airbnb flipping our established way of doing business on its head, many critics say the “sharing” part of the equation has gone by the wayside.
Instead, critics say, these new companies are seriously disruptive forces to the way things have been done for decades, taking advantage of the proliferation of mobile devices to unlock value via the web for would-be buyers in arenas that previously were managed by traditional bricks-and-mortar corporations.
Take Airbnb, for example, which enables homeowners to use the Internet to broadcast availability of their empty rooms, apartments or homes to a global audience, where before there were only the classifieds. And Uber, which allows everyday drivers to offer a quick, web-powered convenience to short-haul travellers. Until recently, taxis mostly filled that niche.
Dozens more platform-based corporations have entered the fold in the last several years, from a website that matches heavy industrial equipment with users in other parts of the country to a program that helps busy families connect with neighbours who’ll cook for them. At the root of all these web-driven platforms is the notion that if you’ve got extra goods or talents other people might want, the Internet gives you a way to sell them.
The Stress of Market Shifts
The market has always shifted in response to consumer demand. Big-box stores would never have arisen if shoppers hadn’t crowded onto the “more! faster! cheaper!” bus. It’s what drives real estate pricing too. And so it is that human interest has steam-powered the increase in ride sharing, home sharing and, increasingly, experience sharing. Shoppers love competitive pricing and the idea of having more power and personal customization in their buying decisions. Add to that the fact that research shows millennials prefer access over ownership, and experiences over possessions, and you have a recipe for a fast-shifting marketplace.
“I think some of the benefits are new business opportunities,” says Victoria Mayor Lisa Helps. “Capitalism is by its very nature a disruptive force. Innovation is disruptive; it always is.”
Helps points to shifts such as early- 20th-century changes that saw the horse-and-buggy roll over to the car economy. “I think there’s a huge opportunity for repurposing and retooling and reskilling,” she says, “not just in Victoria but in Canada.”
New Rules For Short-term Rentals
Nevertheless, in September, Victoria City Council approved new rules designed to curtail short-term rentals of fewer than 30 days. The decision affects new developments in transient zones — mostly located in downtown Victoria, where many hotels and B&Bs are found.
The move was largely cheered by hoteliers, but received criticism from developer David Chard on several points, including its failure to grandfather in developments in the planning stages, its impact on housing affordability and the effect on market stability. Council was also criticized by some residents who felt the rule change didn’t go far enough.
But short-term rental does have advocates, including Victoria resident Rita [last name withheld], who signed up with Airbnb after several hair-raising experiences with long-term tenants (including one who sold her appliances while she was away).
“I am very passionate about what Airbnb has provided to neighbourhoods,” she says. “People who stay downtown generally don’t have cars. They stick to downtown restaurants and pubs, they check out downtown tourist attractions and shop in downtown stores, which is great, but if you put an Airbnb in a residential area, I have a restaurant, a pub, a breakfast place and a shopping centre with smaller businesses that people now go to because they’re staying in the neighbourhood. The money is being evenly dispersed in the city …”
But this kind of pinches traditional hospitality businesses, doesn’t it?
Ian MacPhee noticed Airbnb entering the space during his time as owner of Abbeymoore Manor B&B (he and Ann Mosher sold the bespoke mansion last spring), but said he didn’t feel the pinch like other hotels, partly because the B&B segment was smaller and less competitive, and partly because Abbeymoore’s reputation buoyed sales.
“As we sold it,” he says, “the owner was walking into what was going to be the most amazing year we’d ever had for sales. Having said that, I can tell you I have strong relations with all the innkeepers in town and several them are complaining vehemently [about Airbnb].”
Many properties have seen a dramatic drop in business and, in contrast to Rita’s assertion that short-term rentals bring benefits to residential neighbourhoods, MacPhee says B&Bs like his have unfairly suffered criticism from neighbours blaming them for parking congestion instead of nearby — and nearly invisible — Airbnb suites.
MacPhee experienced concerns, too, around housing affordability for his staff. “When you go to rent an apartment, they’re harder to find because the $800-a-month bachelor pad now rents for $100 a night. It’s so hard to find accommodation for your employees that you’re at risk of closing your business.”
One of his key staff was forced to settle in Metchosin, he says, and drive to work in Rockland every day.
But, according to some hoteliers, the problem for the hospitality industry is bigger than Airbnb.
“We don’t have to single out Airbnb,” says Hotel Grand Pacific General Manager Reid James. “If we start with the Internet and online travel agencies like Expedia and Hotels.com, that has changed our world significantly. It’s just an online purchase, but it takes control of our rates and inventory, and it’s changed it forever.”
The platform economy is a constantly evolving opponent whose presence is shifting the game — and fast.
“We’re used to competition,” says James. “Hotels open and close all the time, but we want a level playing field.”
To level the field, industry experts say short-term rental providers on platforms like Airbnb (valued at $31 billion) and VRBO (estimated at $3 billion) should pony up their fair share of taxes. In B.C., the hotel tax hovers around 17 to 18 per cent, with a sliver going to Tourism Victoria and other destination marketing organizations that promote the region (and from which short-term rental operators benefit).
“Hotels pay commercial property tax, which is a higher rate than residential property tax,” says Tourism Victoria CEO Paul Nursey. Add to that the GST and PST hotels collect, plus Food-Safe training and payroll deductions and the like.
“Airbnb gets a free ride, and not only that, I don’t want to be pushing people out of their homes. My employees need places to live too.”
It’s a sentiment echoed by Eric Ney, a downtown strata owner who’s been leading the charge at City Hall to change the way strata properties are being rented out as short-term vacation homes. Ney and his colleagues, including housing advocate and urban planner Victoria Adams — whose white paper “Home Truths: Implications of Short-term Vacation Rentals on Victoria’s Housing Market” was released last January —have lobbied to see the City get rid of transient accommodation as a permitted use. They also want the city to stop issuing business licences to strata owners who turn around and rent their (typically vacant) properties to vacationers.
“So anything that’s residential should be right-zoned to allow residential and not any other use,” says Ney. Failing that, he says, the City should at least uphold the Strata Property Act as set forth by the Province, which stipulates that strata lots are for residential and not commercial purposes, and/or put in place an opt-in process for strata owners who, given a majority interest by other owners within their building, can then proceed with short-term renting.
A Fight To the Death?
While Airbnb has disrupted hotels and housing, Uber (valued anywhere between $12 billion and $63 billion) has been idling on the shoulder, waiting for the green light to move into B.C.
Whereas the fee-based residential car-sharing service Modo works on a cooperative model — closer to that sharing we were talking about earlier — Uber, when it arrives, will deliver a direct blow to the taxi industry, according to critics.
“Some of our shareholders have been trying to sell,” says Mike Westeroth, operations manager for BlueBird Cabs in Victoria. “One fellow here who’s 76 years old has been trying to sell his taxi going on a couple years now, and nobody seems to be willing to purchase his taxi so that he can carry on with his retirement.”
It’s different than it was just a few years ago, when competition was stiff for a limited number of taxi licences. While the B.C. government has promised taxi drivers some perks along the lines of investment for on-board accident-prevention devices and ride-hailing apps, it feels like too little and much too late for Westeroth.
“It doesn’t really level the playing field,” he says. He’s not opposed to competition, he says, as long as everyone’s operating by the same rules. But the taxi industry doesn’t even know how many Uber-licensed cars are going to be allowed on Victoria streets, he notes.
“Right now in Victoria we do pretty good,” says Westeroth. “We get our taxis to our customers generally on average in seven minutes. I don’t know how many extra cars the city can bear so that everybody can make a reasonable living.”
It’s a big concern in a fast-shifting industry, where a sexy, much-hyped competitor serves up the same product with a precise, data-driven one-two punch.
“Everything is kind of up in the air,” says Westeroth. “We just don’t know what to do.”
MacPhee says he had the opportunity to use Uber during his recent travels in the U.S.
“They are so technologically advanced and amazing that they are making this so possible,” he says, speaking of both Airbnb and Uber.
“From a competition perspective they’re tough. I’d hate to be a taxi driver.”
Trouble For Experiential Tourism
Besides the accommodation and transportation industries, critics say another industry in need of checks and balances relates to rogue recreation providers that are increasingly popping up on the scene, many touting their services online.
Along with the “stay local” vibe goes a new “play with the locals” vibe, where locals offer to take visitors out on potentially risky experiential excursions that historically have been left to the pros. Whale watching, kayaking, hiking, you name it — it’s part of the movement to experience a destination on a more authentic (and often cheaper) level.
“Basically the whole tourism industry is being amateurized, where there’s no insurance, regulation or training,” says Nursey. Where operators like Ocean River, Springtide and Oak Bay Marine Group labour under consumer protection laws, rigorous training and stringent safety standards, this new brand of off-the-cuff guiding threatens the legitimacy of Victoria’s tourism industry.
“Anybody who has a boat can take people out,” says Ben Duthie, operations manager at Prince of Whales, a whale-watching company.
“It’s a huge risk from a liability standpoint and a guest standpoint to go out with someone who’s potentially uninsured and doesn’t have the knowledge to handle anything that might happen.”
Duthie — whose company is a member of the cross-border Pacific Whale Watch Association and as such is guided by strict regulations around both human and cetacean safety — has witnessed firsthand people in private boats roaring through pods of whales. Equally worrisome is the possibility that these small operators will mushroom, unregulated and largely uncatchable, to a point where they begin to undercut businesses before they even know it’s happening.
“This is definitely new, but I would not take the perspective of the naive and sit and wait,” he says. “Airbnb has shown how powerful it can be in transforming the landscape of an entire industry.” He points to the analytics-driven behemoth’s recent hiring of top product managers who know the tourism market well.
“These individuals have worked for TripAdvisor and other organizations that have big data sets to work with,” he says. “They’re moving employees over to grow their own competencies. We’re not feeling it yet; it’s still early stages.”
Globally, tourism is growing by five to seven per cent a year, but if Victoria doesn’t change its course, experts warn we could become just another Venice or Barcelona, overrun by madding crowds bent on experiencing the West-Coast lifestyle.
Managing the Unstoppable
Nobody reasonably expects to be able to stop an avalanche once it’s started, and many Victoria businesses are smart enough to innovate in the face of the platform economy. But while some industries can adapt nimbly to the challenge posed by platform interlopers, others need legislative backup.
“We do not want to operate in the grey economy space,” says Nursey of Victoria’s commitment to offer sustainable, high-yield experiential tourism. “We want to be a legitimate business which is counted, which contributes its fair share of tax at all levels and gives back to the community.”
And he wants the same for platform players, which means it’s up to governments at all levels to regulate these industries appropriately.
“I think too much market intervention isn’t a good thing,” says Mayor Helps. “There needs to be a balance. I think the direction the provincial government took with Uber is a fair and balanced approach. They spent a lot of time with the taxi industry and with people who were in support of Uber. Not everyone’s going to love it, but I think the approach they took is balanced.”
While she feels over-regulation gets in the way of innovation, Helps agrees checks and balances need to be put in place, as long as they don’t stifle economic opportunity and creativity.
“We want to make sure that we have a nice balance,” says Paul Nursey, “where residents and tourists can coexist.”
And perhaps that sounds a lot like the way sharing is actually meant to be.
This article is from the October/November 2017 issue.