Case Study Airbnb—Navigating the Sharing Economy Travelers frequently stay with
ID: 362548 • Letter: C
Question
Case Study Airbnb—Navigating the Sharing Economy Travelers frequently stay with friends and family as they visit various places. Some stay with alumni from their colleges through alumni networking sites; others stay with friends of friends. The concept of “couch surfing” is not new. However, Airbnb has taken the concept global. Chris Weeks/Getty Images Airbnb, founded in 2008 and headquartered in San Francisco, is a pure play Internet business that connects travelers with accommodations in private homes or properties worldwide. The company has offices in San Francisco, London, Paris, Barcelona, Sao Paulo, Copenhagen, Moscow, Hamburg, Berlin, Milan, and Singapore. As of May 2014, Airbnb had accumulated more than 600,000 listings in more than 35,000 cities and 192 countries.13 This amounted to more than 11 million guests. 13 Airbnb, accessed May 14, 2014, https://www.airbnb.com/about. The Process Individuals offer rooms in their homes, entire homes or condominiums, or other accommodations or shared spaces on the Airbnb site. They set prices and terms and provide photos and descriptions, as well as house rules to be posted on Airbnb. Their job is to list a site, respond to prospective guest inquiries, accept bookings, and act as a host for the guests. Guests can visit featured locations or search for places they might like to visit. Through the Airbnb search function, they can find accommodations that match their criteria. They can then view photos, descriptions, rules, available dates, and guest reviews for the situations that interest them. If they are willing to share a home with a host, they can search for sharing opportunities. If the guest has questions, she can send an inquiry through Airbnb and expect a response directly from the prospective host. The site tracks the speed and frequency of responses for each host, and this is posted for site visitors to see. Once a guest decides on a place to stay, he or she requests a reservation through the Airbnb site and provides credit card information. Airbnb then requests a booking confirmation from the host. When the host accepts the booking, Airbnb charges the guest’s credit card according to its policy. The host is paid one day after the guest checks in at the property. Legal Guidelines from Airbnb Airbnb has specific legal language on its Web site defining its role in the transaction and those of the hosts and guests. When hosts register their listing(s) on Airbnb, they agree to certain terms and conditions. Specifically, the site states, “You understand and agree that Airbnb is not a party to any agreements entered into between hosts and guests, nor is Airbnb a real estate broker, agent or insurer. Airbnb has no control over the conduct of hosts, guests and other users of the site, application and services or any accommodations, and disclaims all liability in this regard.”14 It further elucidates: 14 Airbnb, accessed September 14, 2013, http://www.airbnb.com. You acknowledge and agree that you are responsible for any and all Listings you post. Accordingly, you represent and warrant that any Listing you post and the booking of, or Guest stay at, an Accommodation in a Listing you post (i) will not breach any agreements you have entered into with any third parties and (ii) will (a) be in compliance with all applicable laws, Tax requirements, and rules and regulations that may apply to any Accommodation included in a Listing you post, including, but not limited to, zoning laws and laws governing rentals of residential and other properties and (b) not conflict with the rights of third parties. Please note that Airbnb assumes no responsibility for a Host’s compliance with any applicable laws, rules and regulations. Airbnb reserves the right, at any time and without prior notice, to remove or disable access to any Listing for any reason. . . . Airbnb also articulates its limits of liability with respect to guests: “Airbnb cannot and does not control the content contained in any listings and the condition, legality or suitability of any accommodations. Airbnb is not responsible for and disclaims any and all liability related to any and all listings and accommodations. Accordingly, any bookings will be made at the guest’s own risk.” Safety and Security Travelers and hosts alike face risks to their personal safety and property when they connect via Airbnb. To increase safety, Airbnb encourages hosts and guests to take several precautions. They can verify their respective identities through social networks, or by confirming personal details or scanning official IDs. Profiles and confirmed reviews can provide insights into guests and hosts. In addition, guests and hosts can communicate through the Airbnb messaging system. In fact, direct communication is not permitted until the booking is confirmed through Airbnb. The company maintains a customer support team that is available 24 hours a day. Finally, guest payments are handled through a secure server and hosts are paid by Airbnb. After a 2011 incident, where a host arrived back at her apartment to find it burglarized and heavily damaged by an Airbnb renter, the company added a safety tool, called the Airbnb Guarantee, and created a trust and safety department.15 According to the company Web site, the $1,000,000 Host Guarantee covers property for guest damages, but doesn’t cover cash and securities, rare artwork, collectibles, jewelry, pets, and personal liability. The company encourages hosts to consider carrying homeowner’s or renter’s insurance, and suggests that they can charge guests a security deposit. 15 Lyneka Little, “San Francisco Burglary Inspires Changes at Airbnb: Airbnb User’s Home Ransacked,” ABC News, August 2, 2011, accessed September 14, 2013, http://abcnews.go.com/Business/airbnb-user-horrified-home-burglarized-vandalized-trashed/print?id=14183840. Challenges to Airbnb from Competitors and the Law Recently, the popularity of sites that provide connections between hosts and guests for short-term stays has triggered challenges on multiple fronts.16 For organized, registered businesses providing accommodations, such as hotels, motels, and bed and breakfasts, it seems that the homeowners and renters that provide accommodations without legal registration gain an unfair competitive advantage. For landlords and governments, as well as condo, homeowner, and civic associations, the hosts may be violating the culture of the community, lease terms, and zoning regulations and avoiding taxes. This has led to animosity and serious issues for Airbnb and its hosts. In 2012, an Airbnb host returned home after renting out his room to find that his landlord had been charged by New York City authorities for violating the city’s transient hotel regulations.17 This is a scenario in which the “sharing economy” ran afoul of the mainstream economy, with the law on the side of the latter. 16 Alan Farnham, “Airbnb: Towns Crack Down on Homeowners Who Take Guests,” ABC News, September 9, 2013, accessed September 10, 2013, http://abcnews.go.com/Business/users-airbnb-breaking-law-critics-claim/story?id=20148183. 17 Ron Lieber, “A Warning for Hosts of Airbnb Travelers,” The New York Times, November 30, 2012, accessed September 14, 2013, http://www.nytimes.com/2012/12/01/your-money/a-warning-for-airbnb-hosts-who-may-be-breaking-the-law.html?pagewanted=all. With its rapid growth and substantial financial support, Airbnb will face both opportunities and challenges in the future.
Case Study Analysis
11-24. What types of contracts does Airbnb need? With whom?
11-25. How is insurance involved in the Airbnb business model? How would you recommend this be changed, if at all? Why?
11-26. How does Airbnb distribute the liability between itself, hosts, and guests? Provide examples.
11-27. Why would hotels, motels, and bed and breakfasts be unhappy with Airbnb?
11-28. Looking at the below accommodation for yourself. Describe the legal and risk issues you see addressed during the process, and those that would be of most concern if you booked a reservation: The Surf Rider Lisboa · Surf in the best spots in Lisbon with an expert Sports experience Hosted by Nuno ?? 3.5 hours total ?? Equipment and Transportation ?? Offered in English People are eyeing this experience. Over 12,500 people have viewed it this week. About your host, Nuno I´ve been surfing for the last 25 years mainly in Lisbon but also all around the World. Graduated in Sport Sciences and GM of Surf Lisbon - House & School, I´ll make sure you have the best experience! What we’ll do Lisbon is one of the best places to Surf in the world! We have waves for every level all year round. We pick you up at a central meeting point and drive you to the beach with the best daily conditions…+ More What I’ll provide Transfer both ways ?? Pick up at the entrance of Hotel Fénix Lisboa (Praça Marquês de Pombal) Surfboard & Wetsuit ?? We have softboards for beginners and hardboards for more experienced surfers. Wetsuits for all sizes. Who can come Guests ages 10 and up can attend. Notes Please bring a towel, swimsuit / bikini and sunscreen. Where we’ll be Depending on the daily weather & wave conditions we choose the most suitable beach for your level (from first timer to experienced). In Summer we cross the "golden gate" bridge to go to the golden sandy beaches of Caparica and in Winter time we surf at Carcavelos, famous for hosting surfing events. Map data ©2017 Google, Inst. Geogr. Nacional Terms of Use Report a map error Where we’ll meet Hotel Fénix Lisboa · Coração de Jesus, Lisboa Upcoming availability Sat, Nov 11 10:00 AM 1:30 PM · $43 per person Choose Sat, Nov 11 3:00 PM 6:30 PM · $43 per person Choose Sun, Nov 12 10:00 AM 1:30 PM · $43 per person Choose See all available dates Reviews Pufi - Aleksandar November 6, 2017 I've always been interested in surfing, so when I visited Portugal, I just knew I had to try it out. This experience has both…+ More Hendrik November 5, 2017 Awesome experience, and a must-do in Lisbon! The instructors were great, material good and the spot they chose was perfect for beginners and advanced surfers. Hamish November 4, 2017 Really enjoyed the day. The waves weren't the best but had great ! Instructors keep a good eye on everyone, pickup was easy ....I've just booked in for another 10 lessons :)
Explanation / Answer
11-24. What types of contracts does Airbnb need? With whom?
Airbnb would need contracts with both the renter of the home and the tenant who is renting the home. This is to ensure the safety of the homeowner from the tenant damaging any property. Airbnb would have to have contracts with their hosts, with their travelers, and between hosts and travelers that are all agreed upon line with each booking and when registering a home for rent. This would be to ensure limited liability of Airbnb in case of any damaged property or false advertisement.
11-25. How is insurance involved in the Airbnb business model? How would you recommend this be changed, if at all? Why?
Insurance is involved in the Airbnb business model is only recommended. I think that Airbnb should change their business model and include homeowner’s and renter’s insurance in the rental agreement that way the people renting out their home do not have to worry about burglary or damages to their home.
Airbnb allows hosts to require a security deposit with may allow for any small damages done to property during a stay (as hotels do), this acts as a small insurance policy for home owners. Furthermore, Airbnb has a special insurance policy (The Host Garuntee; provides up to $1 million) that will cover any major damages to property prior to a lawsuit, suing for damages, of the renter/traveler due to a breach of the renting contract and likely breaking the “house rules” they agreed upon when booking, set up by the home owner. If an insurance company would provide such a policy, Airbnb should have a renter and home owner insurance policy that is directly set in place and agreed upon by both parties when each booking is made, of which covers any proven damages and issues due to Airbnb interactions directly with the travelers and home owners.
11-26. How does Airbnb distribute the liability between itself, hosts, and guests? Provide examples.
Airbnb does not hold liability between themselves their hosts and guests. They do offer a $1,000,000 Host Guarantee that covers property for guest damages, but does not cover any cash or valuables taken from the house. They recommend their hosts to purchase homeowner’s insurance or renter’s insurance.
Guests and hosts both sign contracts agreeing to liability terms. However, guests are required to place a security deposit, set by the host, with payment for booking and agree that they will be help liable if any major damages to the property are incurred. Airbnb takes on liability through the Host Guarantee Program, which ensures that all hosts will be covered up to $1 million in coverage with limitations and stipulations (reasonable wear and tear, cash and securities, pets, personal liability, and shared or common areas).
11-27. Why would hotels, motels, and bed and breakfasts be unhappy with Airbnb?
Hotels, motels, and bed and breakfasts are unhappy with Airbnb because it takes away from their business. It hurts people staying at these places and they would rather stay at an Airbnb because it may be cheaper and more convenient for their stay.
Airbnb provides guests with the ability to stay with their friends and family all together, have a kitchen and living room, and other comforts of home which most hotels, motels and bed and breakfasts cannot offer. Further, prices may be in competition with those of said establishments, all of which have driven away potential clientele.
11-28: The risk in this case is that of the listing being potentially “fake.” I would be concerned, based on some listing, that after arriving at my destination, the “home” I’ve booked is not a real listing.