Are We There Yet?: An Airbnb Situationer in London

1. [BRAND LOGO] Are We There Yet?: An Airbnb Situationer in London LHA London 11 Belgrave Road London SW1V 1RB United Kingdom 020 3733 1030

2. [BRAND LOGO] A simple Google search of the keywords “airbnb” and “London” will lead to about 14,900,000 results in a matter of 0.72 seconds. Rates begin at $18 a night and options range from cottage houses with a wood burning fireplace to an urban guesthouse made out of glass. Should a traveller feel like splurging, there’s also a floating Airbnb, a blue house located right in the city’s main waterway, the River Thames. One of the top results was also a news article about the legalisation of Airbnb in London. Local residents can now rent their own homes without the risk of fines. London is one of the most expensive cities of the world, but it still remains the world’s most popular tourist destination. What will this new law bring to the capital? How will the rise of Airbnb affect the region’s accommodation market? Airbnb is Soaring There are about 141,500 hotel rooms in London as of the latest counts. While the number seems positive, it isn’t when compared with Airbnb and its growth at a breakneck pace. Despite only being a few years old, this market is growing and is looking to conquer not only the millennial generation, but the older and younger generations, as well. In fact, Airbnb listings in London today are at 31,500. With the legislation of the new law regarding private residential areas being put for rent as legal, it seems the number will grow even more and at an even faster rate. The trend will likely continue, but it will also likely cause localised issues for the more traditional accommodation market, such as hotels, motels and hostels. Hotel leaders are both concerned and amazed: hotel numbers have grown 5% the past year, while Airbnb has exploded to a whopping 100%. Experts are predicting 16,000 new rooms to open up in the UK in 2016 and more than 38,000 rooms to pipeline the next. To understand the inflation of Airbnb numbers, here’s a rundown of the new legislation: And London’s Laws are Changing As the world’s top tourist destination, it’s to be expected that London has thousands of hotels, hostels and homes up for short-term holiday lets. While hotels and hostels have long existed – legally – in the market, apparently, the practice of advertising a Londoner’s home for short-term stay is still illegal and residents face fines of up to £20,000. Housing minister Brandon Lewis spoke during the announcement of the law update, saying the previous law and the fine are outdated and inconsistently enforced. This new law that allows for locals to offer their own residential homes to tourists is their move to not only update the law, but also to boost the sharing economy and the city’s tourism industry. As one of the most expensive cities of the world, London will become a more accessible destination with this change. But it isn’t only the touring crowd that benefits from this law, but the locals themselves. Lewis says this new law will provide “income to householders who want to rent out their home, for example, if they themselves go on holiday.”

3. [BRAND LOGO] The law now allows homeowners to let out their house, flat or even just a spare room for up to three months a year. Despite the opposition from some of London’s councils regarding the change, Airbnb itself has praised the law update. Airbnb has already faced several legal issues in many cities around the world, but it wouldn’t be seeing any problem cropping up in London any time soon. The Rise of Share Economy Crucial to understanding the situation of London, its accommodation industry and the rise of Airbnb is the concept of share economy. This has been going on for a while, but it only recently caught fire. This is the age where the consumers are also producers: this is share economy, where owners capitalize the unused capacity of what they already have for more income. While consumers have grown more perceptive over the years, they’ve also grown smarter. This means they do not simply buy a commodity because everybody else is doing so—it means they are buying smarter. More importantly, this means they have become so smart that they are renting out their room down to their loft storage, their car down to their lawn mower, their bag down to their pet. In this sharing economy, extended family and wider social circles become the first customers. Consumers nowadays rent more from their peers than from a company or a known brand. This is the foundation of the share economy and one it used to gain the foothold it has today. Airbnb is the best-known example of this phenomenon, its power over consumers and its impressive growth. This whole notion of sharing has created considerable niche markets out of things that really would have not been considered as assets that could be monetised before. The driveway can be rented the same way a camping tent can generate income. Bicycles, dog houses and beds owned by private individuals have become commodities, and the power of the Internet has reduced transaction costs, making the income even more desirable. The revenue flows immediately to the people’s wallets. The world today is no longer simply organized around assets, but around those who have access to those assets –what’s mine is yours, if you can afford it for a night. Through technology, everyone is both a consumer and a producer. If you own something, you can earn something. Airbnb could make $1 billion a year in revenue if this trend continues – and it will. People will continue to accumulate stuff, forget to use it, and then find a friend or a stranger who needs it for a night. It’s a cycle that banks on human materialism, the power of technology and the endless cycle of wants. It’s also a cycle that disrupts existing markets and their economic force.

4. [BRAND LOGO] And the Hotel Economy Slowdown Despite all the good things the rise to superpower Airbnb seem to be bringing London’s locals, tourists and position as a travel destination, it’s hurting the city’s hotels, motels, hostels and friendly country bed and breakfasts. Airbnb is shaking up the hotel industry and although it’s not likely going to kill this market, it’s eating up revenue. The effects cannot be downplayed: more and more travellers, businessmen and millennials are taking their vacation rental concerns to Airbnb. It can increase supply at the click of a mouse, customize rental options, and offer clients with wonderfully hip rooms and flats—some edges hotels and hostels simply cannot offer, but could. What the hotel industry can learn from the rise of Airbnb and the share economy is that consumers today not only purchase a commodity because of its price or its name, but because of what it can offer: experience. When one uses Airbnb, they live with the locals, they pay the locals and they experience what it’s like to be one of the locals. Although hotels can’t offer its guests this same level of humility and experience, hotels can offer a different level of experience and luxury no random residential property can provide. Airbnb banks on collaborative consumption; the traditional accommodation industry champions privacy. There are different types of consumers: it pays to pay attention to who your consumers are. The sharing, swapping and renting of possessions is one of the biggest trends of the century and it’s giving birth to several other economic and cultural phenomenon. London is a witness to these changes and although parts of it are shaken by these new dynamics, the city is doing the best it can adapting and updating to the ways the new society works. References: http://www.lhalondon.com http://www.theguardian.com/travel/2015/feb/10/airbnb-to-be-legalised-in-london http://www.businessinsider.com/airbnbs-floating-house-on-the-thames-in-london-2015-5 http://www.dailymail.co.uk/travel/travel_news/article-3108839/London-named-world-s-popular-travel-destination-New- York-falls-five.html http://www.meetpie.com/Modules/NewsModule/newsdetails.aspx?newsid=22041 http://www.forbes.com/sites/tomiogeron/2013/01/23/airbnb-and-the-unstoppable-rise-of-the-share-economy/