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'Sharing Economy' and the Hotel Industry

Contents Section Section title Pages

Introduction 2 1 Accommodation sector heavily penetrated 2 2 Varied hotel sector reaction 2 Part I Airbnb & the Sharing Economy 3-39 3 Where is Airbnb concentrated? 3-5 4 Peer-to-peer or aparthotels? 5-8 5 Airbnb guests motivated mainly by price 8-15 6 Is it really all about millennials? 15-16 7 Airbnb reaching out to new markets 16-30 8 Airbnb service companies 30-38 9 HouseTrip, 9flats and Wimdu are 'also rans' 38-39 Part II Other Forms of Alternative Lodging 42-61 10 Expedia/HomeAway 42-43 11 Priceline/Booking.com 43-44 12 TripAdvisor 44-45 13 Traditional vacation rental companies 45-53 14 Homestays and hostels 53-59 15 Metasearch 59-61 Part III Increasing Regulation of Rentals 63-84 16 Most short-term rentals in New York violated the law 64-70 17 France gets tougher on rentals 70-73 18 Berlin ups the ante 73-76 19 Barcelona threatens Airbnb and others 76-78 20 Andalusia's holiday rental law 78-82 21 London's mayor lobbied to take action 82-84 Part IV Sharing Economy Impact on the Hotel Industry 86-99 22 Airbnb vs. hotels 86-90 23 Accor moves into alternative accommodation 91-94 24 Choice vacation homes 94 25 Roommate/Be Mate 94-95 26 Some chains largely ignore the phenomenon 95-97 27 Conclusion/outlook 97-99

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This report looks at the following areas:

What are the key features of the 'sharing economy' accommodation sector? Which are the main players in the 'sharing economy' accommodation sector? Why do people stay in Airbnb accommodations? How is Airbnb reaching out to new markets? Which are the key players in the broader alternative accommodation sector? What is the trend in terms of regulation of short-term accommodation rentals? What has been the impact of Airbnb on the hotel industry? What has been the response of the hotel industry to the challenge of the 'sharing

economy' and short-term accommodation rentals generally?

Introduction

The 'sharing economy' has permeated the service sector and exists in a variety of areas, including: shared transport, like Uber, Blablacar (Europe), Lyft, Didi Chuxing (China), Ola (India) and Grab (Southeast Asia); “shared logistics” platforms, such as delivery food services like Deliveroo; Etsy, a peer-to-peer e-commerce website focused on handmade or vintage items and supplies; and WeWork which provides shared workspace for entrepreneurs, freelancers, startups and small businesses. Juniper Research, the digital market research specialists, project that the so-called 'sharing economy' will be worth a total of US$40.2 billion by 2022, compared with their 2017 estimate of US$18.6 billion1. This valuation is based on the revenues estimated to be earned by the platform providers.

1. Accommodation sector heavily penetrated The accommodation sector has been one of the most heavily penetrated by the sharing economy as evidenced by the rise of Airbnb, which Juniper estimates will have rented out 5.3 million properties over the course of 2017. While Airbnb is the most frequently cited accommodation rental platform, it should be recognised that there are other groups operating in this space, including: TripAdvisor, Priceline/Booking.com, Expedia’s HomeAway and China’s Tujia.com, for example. Meanwhile, there are also traditional holiday rental companies, such as Wyndham Worldwide, TUIvillas.com and Interhome, part of the Migros, Switzerland's biggest retailer, as well as sites offering hostels and homestays and serviced apartments. Expedia estimates that the alternative lodging sector which includes sharing economy, traditional holiday rentals and serviced apartments to be worth a total of US$100 billion in annual turnover.

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2. Varied hotel sector reaction While the sharing economy accommodation platforms, led by Airbnb, are clearly impacting the hotel sector, it's difficult to measure the effect with any degree of precision. Meanwhile the regulatory grip on accommodation rental platforms is tightening, due not only to hotel industry lobbying, but also to the realisation that the likes of Airbnb could be driving up rents and depriving permanent residents of housing. The hotel industry's response to the onslaught of the 'sharing economy' has varied from embracing it, as best exemplified by AccorHotels' acquisition of onefinestay or the Spanish hotel group Roommate, to ignoring the phenomenon, as Hilton Hotels, IHG and Marriott have largely done.

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Part I Airbnb & the Sharing Economy Founded only nine years ago, in August of 2008, San Francisco-based Airbnb has enjoyed explosive growth since and is now present in 65,000 cities located in 191 countries. In 2010, for instance, the company grew the number of nights booked by 800% and, by November, of that year, Airbnb has registered 700,000 overnights of which 80% had been reserved within the prior six months2. The company now claims to have about 4 million properties listed on its website and to have served some 200 million customers since it was founded. What's important for its competitive position vis-à-vis the hotel industry is that, of these 4 million listings, almost half (over 1.9 million) of these listings are now instantly bookable, which means that the hosts of these properties are obliged to accept any booking without their prior approval of guests, which has been the normal modus operandi of Airbnb since it was launched. According to Airbnb, no hotel chain has more rooms than Airbnb's instantly bookable listings. By comparison, Marriott International, now the world's biggest hotel chain, has just over 1.1 million branded rooms. In fact, Airbnb's current total capacity is roughly equivalent to that of the top-5 hotel groups combined. However, it should be recognised that the occupancy rate of Airbnb accommodation remains way below that of major hotel chains.

3.Where is Airbnb concentrated? Although Airbnb claims a presence in close to 200 countries, the company's listings are in fact concentrated in a few countries; indeed about half are in the group's top-five countries. FIGURE 1: TOP COUNTRIES BY NUMBER OF AIRBNB LISTINGS, 2017 Country # of listings % share US 660,000 16.5% France 485,000 12.1% Italy 340,000 8.5% Spain 245,000 6.1% UK 175,000 4.4% Total top 5 1,905,000 47.6% Other countries 2,095,000 52.4% Grand total 4,000,000 100.0%

Source: Airbnb

Mainly an urban phenomenon From its beginnings in San Francisco, Airbnb has been chiefly an urban phenomenon, as opposed to the older more established players in the holiday rental sector. Its coverage in resort areas can be less than that of more dedicated holiday rental groups like Expedia' HomeAway. Indeed, Airbnb listings are heavily concentrated in large cities that have major tourist attractions. Despite the attention paid to 'exotic' accommodation listings on Airbnb like treehouses and tepees, in 2015, 70% of whole-property listings were studios, one-bedroom and two-bedroom apartments3. Furthermore, over 55% of the US$2.4 billion in revenue generated by Airbnb in the US from October 2014 to September 2015 was captured in only five cites (New York, Los Angeles, San Francisco, Miami, and Boston)4.

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Supply concentrated in certain neighbourhoods In general, Airbnb listings are concentrated in the specific neighbourhoods of major cities which are of particular interest to tourists.

53% of New York listings in 5 neighbourhoods For instance, in New York City, a disproportionate share of Airbnb listings has been concentrated in the boroughs of Manhattan and Brooklyn. According to Airdna, a provider of data and analytics to vacation rental entrepreneurs and investors, over 90% of the 51,397 Airbnb listings for calendar year 2015 were concentrated in these two boroughs, whereas less than 60% of the total housing supply in New York City is in these boroughs. Within Manhattan and Brooklyn, Airbnb listings are clustered in several neighbourhoods. In fact, 53% of all Airbnb listings were located in one of the five following “macro-neighbourhoods”: East Village/Lower East Side (LES); Chelsea/Hell’s Kitchen, West Village/Greenwich Village/SoHo; Williamsburg/Greenpoint/Bushwick; and Bedford Stuyvesant/Crown Heights.5

50% of nights in five London boroughs It's a similar story in London where nearly 50% of all nights booked on Airbnb in 2016 were in five boroughs, namely, Westminster, Tower Hamlets, Camden, Kensington & Chelsea and Hackney, as was the case in 2015, according to a report by property consultants, Colliers International6. FIGURE 2: AIRBNB BOOKINGS IN LONDON BY BOROUGH, 2017

Source: "AIRBNB IN LONDON", Colliers International, 2017

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5. Airbnb guests motivated mainly by price Travellers who use Airbnb tend to be motivated by the service’s practical benefits (low cost, convenient location, and household amenities), and usually rent entire homes rather than sharing the accommodation with a host, according to report released in August 2016, which was authored by Professor Daniel Guttentag, assistant professor at the Ted Rogers School of Hospitality and Tourism Management of Ryerson University in Ontario10. The report's findings tend to minimise the 'sharing economy' host-present ethos upon which Airbnb was originally founded. In order to understand the motivations of Airbnb users, Guttentag conducted an online survey between July and October 2015, which was completed by 844 respondents who stayed in an Airbnb accommodation at least once within the previous year. The survey queried the participants, mostly from Canada and the US, about their motivations for using Airbnb and whether they used the service as a substitute for existing accommodation. The participants were also asked about the purpose of their trip, party size, and length of stay. Finally, the survey also asked how often the tourists booked accommodations on Airbnb and the likelihood they would recommend the service to friends and family members. The report's key findings include:

Tourists are mostly motivated to book Airbnb accommodation because of its low cost, convenient location, and household amenities. They are generally less motivated by the opportunity to interact with the host or other locals, or by the promise of an 'authentic, local experience'. This interesting finding tend to debunk Airbnb’s marketing efforts and general impressions retained throughout the hospitality industry, which emphasise the service’s experiential side;

61% chose Airbnb as a substitute for a budget or mid-range hotel;

26% indicated that staying with Airbnb led them to increase the length of their trip;

70% stayed in an “entire home” rather than in “shared accommodation” together with a host;

89% were “satisfied” or “very satisfied” with their most recent Airbnb stay, and 91% were “likely” or “very likely” to recommend Airbnb to others; and

62% indicated that they were “very likely” to use Airbnb again within the following year, compared to just 26% who indicated that it was “very likely” they would book a hotel room within the following year.

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Guest profiles Guttentag also identified five typical Airbnb guest profiles based on their comparative motivations for using the service, including: 'money savers'; 'home seekers'; 'collaborative consumers'; 'pragmatic novelty seekers'; and 'interactive novelty seekers'. To arrive at his segmentation, Guttentag tested the motivation of survey respondents for staying in Airbnb against a list of 17 criteria divided into five categories as shown below in Figure 7.Thus, the five segments described below are defined by their comparative levels of agreement with the various reasons for choosing Airbnb. Overall, however, it can be noted that Airbnb’s 'low cost' is the most important motivation for nearly every segment. FIGURE 7: AIRBNB MARKET SEGMENTS AND CHARACTERISTICS, 2016 (1 = “STRONGLY DISAGREE” TO 6 = “STRONGLY AGREE) Characteristics Money

savers Home

seekers Collaborative consumers

Pragmatic novelty seekers

Interactive novelty seekers

General characteristics Low cost 5.67 5.01 5.28 5.16 5.04 Convenient location 5.17 4.91 4.88 5.03 4.93 Home benefits Household amenities 4.36 5.52 4.18 5.04 4.20 Homely feel 3.13 5.05 4.66 4.54 4.51 Large space 3.64 5.20 3.53 4.37 3.64 Local authenticity Authentic experience 3.23 4.47 5.08 4.56 4.96 Non-touristy neighbourhood 3.26 4.39 5.11 4.61 4.18 Novelty Unique experience 2.77 4.35 4.81 4.91 4.88 Exciting 2.88 3.66 4.17 4.78 4.89 New and different 2.86 3.46 4.23 4.85 4.86 Experience to talk about 2.43 2.96 3.47 4.15 4.08 Unpredictable 2.17 2.23 2.32 2.93 3.62 Sharing economy ethos Philosophy of Airbnb 3.11 4.17 4.56 3.87 3.79 Money goes to locals 2.86 3.76 4.77 3.58 3.51 Environmentally friendly 2.57 3.30 3.93 3.36 2.97 Interaction Local information/tips 3.09 3.92 4.88 3.03 4.78 Interact with host/locals 2.44 3.19 4.76 2.57 4.59 SOURCE: "AIRBNB: WHY TOURISTS CHOOSE IT AND HOW THEY USE IT", BY DR. DANIEL GUTTENTAG, AUGUST 2016

Money savers These travellers choose Airbnb mostly because it's cheap. They are typically young (30 and under) and generally are not travelling with children. Indeed, their mean score (5.67) for this item (low cost) is the highest value in the entire table. They also agreed most strongly with the ‘convenient location' motivation; meanwhile, money savers' agreement with the other motivations was very limited, as their mean scores were well below the sample mean scores for the remaining 15 criteria. In fact, the money savers showed the lowest agreement of all the segments with 12 of the 15 motivations, other than ‘low

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cost’ and ‘location convenience,’ including all of the Novelty, Sharing economy ethos, and Local authenticity criteria. Of these 15 items, the money savers indicated disagreement (based on a score of less than 3.5) with every item except for ‘household amenities’ and ‘large space'. For instance, 'interact with host/locals' was attributed the rock bottom score of 2.44, the second lowest in the whole table. This finding is particularly interesting, since the dominant demographic segment of this profile is quite young, which again tends to contradict the thesis that young millennial travellers are using Airbnb for the purpose of having a 'local experience'.

Home seekers 'Home seekers' are primarily interested in the household amenities and large space provided by Airbnb rentals and almost exclusively stay in entire-home rentals. Compared to other Airbnb guests, they tend to be somewhat older, have more education, travel with larger groups and take longer trips. They also are more frequent Airbnb users. The 'home seekers' are especially motivated by the three criteria in the 'home benefits' category, as their agreement with all three motivations in this area was notably higher than in any other segment. In particular, they agreed very strongly with the ‘household amenities’ item, and agreed much stronger than any other segment with the ‘large space’ item. Meanwhile, in contrast to the 'money savers', 'home seekers' have comparatively low levels of interest in the ‘low cost’ and ‘location convenience’ motivations, although in each case the absolute level of agreement was fairly high and the scores were not much lower than the overall sample means. Nevertheless, it can be noted that the home seekers’ agreement with the 'home benefits' criteria exceeded their agreement with the ‘low cost’ item, which represents the only instance in which any segment agreed with any motivation item more than that of ‘low cost’ (i.e. all other client segments awarded ‘low cost’ the highest rating). 'Home seekers' are also attracted, though to a much lesser degree, by the 'sharing economy' ethos and 'local authenticity' criteria, as they showed moderate levels of agreement, just above the sample mean for all five of the relevant items except for ‘environmentally friendly.’ 'Home seekers' also exhibited relatively low levels of agreement with the Novelty items, indicating agreement below the sample mean for all five items and indicating overall disagreement with three of the five items. Of the two Interaction items, home seekers showed fairly average agreement with the ‘local info/tips from host’ item and fairly low agreement with the ‘interact with locals’ item.

Collaborative consumers 'Collaborative consumers' are particularly motivated by Airbnb’s 'sharing economy' philosophy, the opportunity to have an 'authentic experience' and the chance to interact with their host and other locals. They are more likely than other Airbnb guests to be backpackers, and frequently stay in shared accommodation.

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Collaborative consumers are attracted to Airbnb by a variety of motivations related to the 'sharing economy' (i.e., collaborative consumption). First of all, they show the highest levels of agreement with the three 'sharing economy' ethos criteria. They also evidence a notably higher level of agreement with the ‘money to locals’ criterion than any other client segment and agree with the ‘environmentally friendly’ item with which every other segment disagreed (i.e. the other client segments gave this criterion ratings below 3.5. 'Collaborative consumers' also showed the highest absolute levels of agreement with the 'Interaction and Local authenticity' sets of criteria, with only 'interactive novelty seekers' showing somewhat comparable levels of agreement. 'Collaborative consumers' exhibit comparatively middling levels of agreement with most of the Novelty items, although they indicated a quite high absolute level of agreement with the ‘unique (non-standardised)’ and notable disagreement with the ‘unpredictable’ criteria. Regarding the 'home benefits', 'collaborative consumers' showed the lowest levels of interest in the ‘household amenities’ and ‘large space’ criteria, but exhibited above average agreement with the ‘homely feel’ item. Finally, this segment had fairly average levels of agreement with the ‘low cost’ and ‘location convenience’ items, although the absolute agreement levels were high, as with every other segment.

Pragmatic novelty seekers Pragmatic novelty seekers are attracted by the novelty of Airbnb and the household benefits the accommodations offer. They almost always choose to rent entire homes, but are not regular Airbnb users. Pragmatic novelty seekers are motivated comparatively strongly by the 'home benefit' and 'novelty' items. Like the 'interactive novelty seekers' (mentioned below), 'pragmatic novelty seekers' show the highest levels of agreement with the 'novelty' items, far exceeding the other three customer segments in practically every case. However, 'pragmatic novelty seekers' show notably less interest in the ‘unpredictable’ criterion than do 'interactive novelty seekers', indicating an average level of difference. 'Pragmatic novelty seekers' also notably exhibit especially high levels of interest in two of the three 'home benefits' criteria (‘household amenities’ and ‘large space’), agreeing less than the 'home seekers', but much more than any of the other segments. 'Pragmatic novelty seekers' additionally showed a distinct lack of interested in the 'interaction items'. Otherwise, this customer segment showed typical levels of agreement with most of the other items, including high levels of agreement in absolute terms with the ‘low cost’ and ‘location convenience’ criteria.

Interactive novelty seekers 'Interactive novelty seekers' are intrigued by the novelty of Airbnb and the chance to interact with their host or other locals. They often stay in shared accommodations, but generally have limited experience using Airbnb. As explained above, 'interactive novelty seekers', along with 'pragmatic novelty seekers', are especially drawn to Airbnb by the 'novelty' aspect. However, 'interactive novelty seekers' showed a somewhat opposite pattern of agreement from the 'pragmatic novelty seekers' regarding the 'interaction' and 'home benefits' criteria. Unlike their more pragmatic counterparts, 'interactive novelty seekers' showed strong interest in the 'interaction' items, but indicated comparatively little agreement with the 'home benefits' criteria. 'Interactive novelty seekers' also exhibited high levels of agreement with the ‘authentic local experience’ item, and mostly typical levels of agreement with the other items, including strong interest, in absolute terms, in the ‘low cost’ and ‘location convenience’ criteria.

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The integration with TMCs makes it possible for the reservation details of each business trip to be automatically registered with TMCs, allowing travel managers to access that data in real-time through expense-reporting platforms and travellers to view their booking details in their corporate itineraries and on their mobile devices, which was not possible previously, if they booked through Airbnb. This integration went live in the US in the summer of 2016 and was expanded to other countries later in the year. The traditional TMCs are following in the footsteps of Concur, the abovementioned online travel expense company, which began allowing business travellers to book Airbnb rentals through its TripLink service in July 2014, before Airbnb for Business was launched.

Airbnb still far from mainstream in corporate travel

Nevertheless, in spite of these advances, it's difficult to maintain that the Concur integration, for example, puts Airbnb in the corporate travel "mainstream", since booking properties still requires toggling away from Concur over to Airbnb's site and Airbnb has shown little interest in going the traditional distribution route via global distribution systems (GDS). David Holyoke, the head of Airbnb's business travel division, has stated that the company intends to make corporate travel 30% of its total business by 2020. For the time being, Airbnb doesn't want its corporate clients to use it for every overnight stay, just a portion, according to Holyoke, who notes that, "This isn't about us versus hotels". Clarifying that, plus enabling risk management capabilities and travel manager tools, already seems to have gone a long way with the corporate travel audience, which, while not ready to get rid of hotels, is prepared to embrace new content that keeps a diverse traveling population satisfied. 25

Only 0.27% of US business travel lodging expenses In fact, Airbnb is still a long way off from broad adoption, as noted by Certify's SpendSmart Report for the fourth quarter of 2016, which highlighted Airbnb usage and showed that Airbnb accounted for only 0.27% of US business travel lodging expenses. By comparison, the 15th-ranked brand, Residence Inn, alone had a share of 1.18% or over 4 times that of Airbnb. While Airbnb's share represented a doubling of the number of transactions compared to 2014, it remains an infinitesimal amount in relative terms. Furthermore, Concur's analysis from November 2016 found that the number of companies for which a traveller expensed an Airbnb stay grew by 32% between the second quarter of 2015 and the second quarter of 2016. While such growth rates are impressive, it must be recognised that they come off a very low base.

8. Airbnb service companies The rapid spread of Airbnb and, in particular, the growing predominance of non-host present accommodations and landlords with multiple listing has spawned a cottage industry of companies providing various services to hosts, who could be the owners or lessees of accommodations. Airbnb’s massive network of rental properties has opened up a window of opportunity for a variety of entrepreneurs, who have been able to piggyback on the Airbnb phenomenon. These operators offer various services to hosts, ranging from handling guest communication, cleaning services, key swaps, and revenue management. Former Expedia CEO, travel startup investor, and Couchsurfing chairman, Erik Blachford, describes these services, which target hosts across the home-sharing market as “shadow hospitality infrastructure that allow hosts to offer up a more professional type of stay and allow stays to be a little more consistent across various listings and cities.” 26 It also must be said that these services also allow commercial operators with multiple listings to scale their operations more effectively.

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The Airbnb service ecosystem The rise of these nascent service companies, which can be characterised as startups for the most part, raises the question as to what is their relationship with Airbnb? To what extent are they supported, tolerated or discouraged by Airbnb? Or does Airbnb have the intention to launch similar services under its own auspices? The startup, Beyond Pricing, provides data-driven, automatic daily price updates for home shares. Guesty CEO and co-founder Amiad Soto's startup grew out of his own support needs as an Airbnb host. Guesty does not have an official partnership with Airbnb, but both companies are Ycombinator alumni and thus have a good relationship. (Y Combinator provides seed funding for startups.) Emily Benkert, CEO of check-in and concierge service Guesthop, states that she has worked with Airbnb’s product, customer experience, design, and photography teams “to streamline hosting and deliver a consistently high-quality guest experience".

Pricelabs provides revenue management services PriceLabs sells online revenue management software for vacation rentals which provides pricing solutions for short term rentals. Through a data-driven approach, it helps to automate pricing on the basis of demand and supply trends. The dynamic pricing features allow vacation rentals to manage minimum stay restrictions as well as the revenues through its dashboard. FIGURE 15: PRICELAB'S PRICE LIST FOR ITS REVENUE MANAGEMENT SERVICES, 2017 Properties Price* per month 1 $19.99 2-5 $14.99 for each property after 1st 6-15 $10.99 for each property after 5th 16-30 $6.99 for each property after 15th 31-100 $4.99 for each property after 30th 100+ $4.49 for each property after 100th Note: *includes 1st channel connection $1/property for each additional channel Source: Pricelabs

Relationship to Airbnb often not clear However, several of the startups appear reluctant to discuss their relationship and communication with Airbnb, who have not been forthcoming regarding its perspective on this growing market of parallel services, including their plans to introduce, or acquire, Airbnb-branded services for hosts or guests. FIGURE 16: AIRBNB SERVICE COMPANIES BY TYPE OF SERVICE OFFERED, 2017

Type of service Company Features Cost (US$) Cleaning FlyCleaners On-Demand Dry-Cleaning App for Airbnb guests $4.95 per 5 lbs of

laundry Cleaning properly Full-service cleaning service, key delivery, welcome gifts

and restocking $95+ per cleaning

Cleaning Porter Cleaning, laundry for towels and linens, restocking N/A Guest Communications

Guesty Respond to guest inquiries, screen potential guests, coordinate key exchanges and cleaning, optimize listing and profile.

3% of rental revenue

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Overseas expansion Tujia's strategy for expanding abroad is basically to follow the flow of outbound tourists from China. For the moment, the majority of outbound Chinese travellers go to destinations in Asia, which is the company's top priority for overseas expansion.

9. HouseTrip, 9flats and Wimdu are 'also rans' Three or four years ago, it looked like Airbnb was facing real competition in the peer-to-peer accommodation rental space. However, Airbnb's erstwhile competitors, including HouseTrip, 9flats and Wimdu, have now either faded into the background or been acquired by bigger entities. It has been very difficult for these European-based platforms to compete with Airbnb. First of all, operating in a large homogenous territory like North America allows a startup to scale up easier and faster than in Europe where there are cross-border linguistic, legal and cultural barriers. In addition, in Europe, the ecosystem for funding startups is less developed and more fragmented than in Silicon Valley. Also, early regulatory moves in cities like Berlin and Barcelona no doubted stunted the initial growth of firms in the sector.

Housetrip was acquired by TripAdvisor HouseTrip was founded in 2009 by Arnaud Bertrand and Junjun Chen, who are both graduates of the Ecole hôtelière de Lausanne in Switzerland. The pair stumbled on the HouseTrip concept as a result of difficulties encountered when trying to book a weekend rental in Scotland. The booking process was so complicated that they decided to dedicate themselves to creating a simpler system. They reasoned that, since rentals are better value and more ‘authentic’ than hotels, people would more likely choose them over hotels, provided it is easier and safer to book. HouseTrip was subsequently financed by Index Ventures and various business angels. In 2011, Index Ventures invested £1.7 million in the company, bringing the total amount invested to £2.4 million. These funds were primarily used to increase the database of properties to over 230,000 property listings. At the time, HouseTrip.com had offices in Switzerland (Lausanne), Portugal (Lisbon) and the UK (London). HouseTrip was notably different from Airbnb in that from the beginning the site only offered entire properties. Property owners could list their properties free of charge, with no commission charge to them. Guests then paid HouseTrip the cost of the rental plus a commission. The commission was between 10% and 20% depending on a number of factors, but the usual mark- up was about 17.5%. For example, if a host listed a property and wanted €100/night net, the listing would appear on the HouseTrip site for an amount of between €110 and €120 per night (most likely €117.50). The guest will then pay that cost with HouseTrip pocketing the difference. Following the departure of founder and CEO Arnaud Bertrand in 2014, it became evident that the startup was falling behind the competition and growth was not meeting initial expectations. Thus, in April 2016, the company was sold to TripAdvisor for an undisclosed sum. According to TripAdvisor, at the time of acquisition, HouseTrip had around 130,000 properties on the site; meanwhile some 300,000 homes had been listed on the site over the course of the group’s seven-year history. The startup had only generated 8 million in bookings since it launched, compared to a forecasted total of 129 million guests for Airbnb for the year 2016.33 Otherwise, HouseTrip has continued to operate as a standalone brand, but its inventory is shared across TripAdvisor rental sites. (Please discussion of TripAdvisor on pages 44 - 45.)

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Wimdu merged with 9flats and then was acquired by Wyndham Wimdu and 9flats are both peer-to-peer accommodation rental websites, which were founded in Germany in 2011. Of the two platforms, Wimdu was the better funded, receiving some US$90 million from venture investors since it was founded, but paradoxically it was taken over and merged into 9flats in October 2016. Then barely two months later in early December, Wimdu was sold to Novosol, a holiday rental unit of Wyndham Worldwide, no doubt, due to 9flats' need to bolster its flagging financial position. (Please see discussion of Wyndham Worldwide on pages48-53.)

9flats 9flats.com seems to be drifting into obscurity as an 'also ran' in the peer-to-peer accommodation rental landscape. The group was originally headquartered in Berlin, but moved to its head office to Singapore and then back to Hamburg, due to the restrictive regulatory environment in the German capital. Currently, the company's website claims to have more than 200,000 private accommodations in 140 countries on 6 continents and to employ a staff of 40.

Wimdu Although Wimdu is now a fully owned unit of Wyndham, it continues to maintain an individual web presence. Wimdu's trajectory has been similar to that of HouseTrip, as the two founders, Arne Blackwenn and Hinrich Dreiling, stepped down as joint CEO's of the group in 2014. The group's website airily states that, "2016 was a time of change for Wimdu and by the end of the year we found ourselves happily part of Novasol and Wyndham Vacation Rentals, the world’s leading provider of holiday homes". Nevertheless, Wimdu appears to be a bit more substantial than 9flats with its over 350,000 listed properties in more than 150 countries. The firm continues to be headquartered in Berlin and employs a staff of 150. Over its lifetime the platform has served 2.5 million users who have registered some 10 million nights, which, of course, is a mere pittance compared to Airbnb's 4 million-plus listings and 200 million guests served over the firm's lifetime. Thus it can be concluded that Airbnb has 8.5 times more listing and has served 80 times more guests since it was founded than Wimdu.

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Part II Other Forms of Alternative Lodging

10. Expedia/HomeAway Expedia, one of the two leading OTAs worldwide, formally entered the holiday rental business in December 2015 when it acquired the US vacation rental platform, HomeAway, which operates over 50 websites representing over one million paid listings of holiday rental properties in more than 190 countries. Over the years, HomeAway has acquired or developed internally a number of individual platforms to serve specific market segments. The HomeAway portfolio includes the following holiday rental websites: HomeAway.com, VRBO.com and VacationRentals.com in the US; HomeAway.co.uk and OwnersDirect.co.uk in the UK; HomeAway.de in Germany; Abritel.fr and Homelidays.com in France; HomeAway.es and Toprural.es in Spain; AlugueTemporada.com.br in Brazil; HomeAway.com.au and Stayz.com.au in Australia; and travelmob.com in Singapore. HomeAway also owns a majority interest in Bookabach.com.nz, a holiday rental site in New Zealand, and operates BedandBreakfast.com, a comprehensive global site for finding bed-and-breakfast accommodation. In addition to its online marketplace, HomeAway also offers software solutions to property managers through its ''HomeAway Software for Professionals and 'Glad to Have You' products.

Moving from subscriptions to commissions HomeAway's business model has been based on selling subscriptions for holiday rental listings and services to property owners or managers whereby property owners or managers purchase in advance online advertising services related to the listing of their properties over a fixed term (typically one year), and on a transaction basis where a commission is earned on bookings completed on the group's websites. Expedia is in the process of transitioning to more transaction-based service offerings and introduced a consumer booking fee at the start of 2016 (similar to Airbnb). Furthermore, HomeAway moved to a single subscription option globally in July 2016. Historically HomeAway generated the majority of its revenue from subscription fees for the listing of properties paid by owners and managers of vacation rental properties. While subscription fees have been the main source of revenue for HomeAway historically, a growing share of the company's revenue is now generated from a commission-based business model, whereby the traveller pays a service fee for the use of the HomeAway platform and the owner or manager of the property pays HomeAway a fee or a commission on a transactional basis for each property booking. HomeAway now requires all new or renewed listings to be instantly bookable and the site now has nearly 1.5 million online bookable listings on its platform and has introduced a US$1 million liability insurance facility that provides owners and property managers with liability protection for all stays processed online through the HomeAway website.

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Margin pressure HomeAway is currently experiencing some margin pressure, as bookings and revenue were up in strong double-digits year-on-year in Q2 2017; meanwhile EBITDA only advanced by 3%. FIGURE 17: HOMEAWAY'S FINANCIAL RESULTS, 2016- Q2 2017 (US$ MILLION) 2016 2017 Y-O-Y growth

in Q2 2017 (%) Q1 Q2 Q3 Q4 Q1 Q2 Gross bookings 1,818 1,460 1,403 1,299 2,697 2,123 45% Revenue 142 172 210 166 185 224 31% EBITDA 17 38 77 42 6 39 3%

Source: Expedia

More in the direction of Airbnb than Booking.com HomeAway's business model is moving more in the direction of Airbnb with the introduction of a service charge for bookers. Also like Airbnb, but unlike Booking.com, HomeAway has an important amount of legacy listings which are not yet instantaneously bookable. However, like Priceline/Booking, Expedia has the advantage over Airbnb of providing one-stop shopping for tourists booking a trip with its airline, hotel and other travel-related offerings.

11. Priceline/Booking.com Priceline/Booking.com (PCLN), the world's leading online accommodation booking platform, grew its vacation rentals listings by over 50% in the year to end June 2017, as the total rose from 467,000 on 30 June 2016 to 721,000 12 months later. Although the company is particularly known for hotel bookings, vacation rentals, which include villas, apartments, aparthotels, and chalets, now amount to over half of the 1,340,000 properties listed on the company's website as of 30 June 2017. Holiday rentals generally consist of properties categorised as single-unit and multi-unit villas, apartments, "aparthotels" (which are apartments with a front desk and cleaning service) and chalets and are generally self-catered (i.e., include a kitchen), directly bookable properties.

Priceline/Booking's competitive advantage In fact, Priceline/Booking.com has an important advantage over it direct competitors. A major distinguishing point about PCLN's holiday rentals is that all they are instantly bookable unlike, for instance, most Airbnb and Expedia's HomeAway listings where the guest has to be 'accepted' by the host. Also it can be said that both Priceline/Booking.com and Expedia offer customers one-stop shopping for accommodation (including both rentals and hotels) in any given destination and other travel services, as compared to Airbnb which is still largely restricted to rentals. Booking.com has the added advantage of its ''Booking Genius ' a rewards programme, which is offered to the site's most frequent bookers. These customers get 10% off best available rates offered by properties which take part in the programme. The properties of participating owners appear higher in Genius bookers’ search results and are also be tagged as a Genius property across the website. Some of the benefits of the Genius programme for landlords include:

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14. Homestays and hostels Homestays Homestays have existed for centuries and represent the true 'sharing economy', much more so than recent manifestations, such as Airbnb, where increasingly guests are offered whole living units without a host present on the property. Homestay is a form of tourism accommodation that expressly connects guests with individual hosts who have opened their homes to travellers. Homestay lodging differs from other forms of private accommodation because by definition the host is always present on the premises. Thus, guests don’t stay in an empty apartment or home, but instead share the accommodation provided by homeowners and their families. Although homestays have typically been undertaken by young people of student age, they are growing in popularity for consumers of all ages who seek a more personalised, immersive and authentic travel experience. The personal relationship between the host/property owner and the homestay guest is a key differentiating aspect of this form of tourism. Thus, a good homestay experience for both host and guest depends not only on finding the right accommodation, but also on connecting the right people. While some guests are seeking cultural immersion, others might simply want good quality, affordable accommodation in the right location with a host they find congenial. Similarly, some hosts will want to spend hours chatting with guests over a meal while others will prefer that guests keep to themselves. The demand for long-term stays is broad-based, not limited to either a small number of global destinations, or to a small group of travellers. Homestay tourism still represents a small proportion of overall travel which leaves plenty of opportunity for growth.

Comparison with other types of accommodation The homestay product can be considered as a subset of listings on apartment rental platforms, such as Airbnb or Wimdu, which offer rooms within houses or apartments. B&Bs offer a complementary experience to homestays and they account for 20-25% of travellers in US and Europe, according to Homestay.com. What distinguishes homestays from the various tourism products mentioned above is the emphasis on finding a good match between guest and host, i.e. it's not just a question of finding a convenient and well-appointed accommodation, but also of a assuring a harmonious relationship between guest and host. Another important differentiating point is length of stay. As defined by Homestay.com, a medium-length homestay is between 5 and 30 days, whereas long-term homestays are over 30 days. Although 40% of Airbnb guests in the US stay with their hosts in the same house or apartment, the average length of stay is far shorter at about 4 days.

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Homestays are ecological and sustainable It can be argued that homestays are a particularly ecological and sustainable form of tourism. First of all, homestays do not entail an increase in the physical accommodation capacity at a destination, since travellers lodge in the existing homes of residents. Thus, concerns about developing hotels or other forms of tourism accommodation in fragile environments or about depriving indigenous people of precious resources like water are obviated. Homestays also allow for tourism to be spread out in a more balanced fashion in a destination and not concentrated in certain mass tourism locations, which can result in undesirable side effects for the local populace like rowdiness, criminality and prostitution. Homestays are sustainable from both a cultural and an economic point of view. They foster local cultures, as 'living like a local' is one of the key features sought after by travellers who choose to lodge with local families rather than staying in an anonymous hotel. Homestays also put money directly into the pockets of the local families who receive the guests. Thus there is less risk of the 'leakage' of incoming tourist revenues which is a frequently observed phenomenon in developing countries that attempt to boost their economies through encouraging tourism. Unfortunately, if the tourism development in the country is dominated by foreign hotel chains and tour operators who are supplying a standardised holiday product, much of the benefit of incoming tourism expenditure 'leaks' out of the local economic circuit due to imports of goods and services and remittances of profits abroad.

Market size and growth The market for homestays is significant and expanding rapidly. The global private accommodation market is estimated to be worth about €11 billion (US $12.3 billion), according to Homestay.com. Homestays are part of the broader worldwide holiday rental industry which has an approximate annual value of US$100 billion (as mentioned above). Awareness and usage of the global private accommodation marketplace is growing. Currently, the share of all travellers staying in private home accommodation is estimated at 3%, according to Homestay.com, which leaves considerable room for growth. In the US, which has lagged Europe in terms of the penetration rate of holiday rentals, the share of travellers who have rented private homes or condos grew from 8% in 2010 to 14% in 2014.

Profile of the homestay traveller While homestays are not restricted to people below 35 years of age, there is no question that this form of tourism is particularly appealing to millennials (those born between 1980 and 2000). As a result of gap years, study abroad programmes, language immersion and foreign internships, this group enters the travel market with established knowledge and experience of shared accommodation, having previously stayed with host families and in hostels. Nevertheless, more than half of all homestay guests are over the age of 29, according to Homestay.com's research . FIGURE 24: HOMESTAY GUESTS BY AGE SEGMENT, 2014 Age segment % of total 18 - 29 47% (with 29% aged 18-24 and 18% aged 25-29) 30 - 39 21% 40 - 49 15% 50 - 59 11% over 60 6% Source: Homestay.com's Homestay Index (2014)

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Hostels Hostelworld Group, plc, the leading hostel booking platform, which operates Hostelworld.com, Hostels.com and HostelBookers.com.

Hostelworld Hostelworld has more than nine million reviews across 35,000 properties in more than 170 countries, making the brand the leading online hub for hostels. The website and mobile app operate in 19 different languages. Headquartered in Dublin, Hostelworld has offices around the world - in London, Shanghai, Sydney, Seoul and Porto. Hostelworld is a lower cost distribution channel than most major OTAs, with a starting base commission rate of 12%. Otherwise, the company's websites registered 7.1million bookings which earned revenues of €80.5 million in 2016. Overall Group bookings declined by 1% in 2016 and revenue was down by 4% year-on-year, due to softer demand in European destinations as a result of geopolitical events (terrorist incidents), in the second and third quarters, and by the attempt to optimise margin performance. Adjusted EBITDA rose by 1% for the year to reach €23.9 million.

The hostel business has evolved While the concept of youth hostels has existed for over a century, having been first developed in Germany, the new thrust of more luxurious establishments, which serve as entertainment hubs for travelling young adults, basically dates from the mid-to-late 1990s, when many of the private integrated hostel chains (such as wombat’s, Generator or Meininger) were formed. Branded hostel properties typically offer a wide range of accommodation types, going from large eight- to ten-bed dormitories to single and double rooms with private en-suite facilities and hotel-like amenities.

'Flashpackers' drive amenity creep Increasingly, backpackers are older, with a higher spending power (so-called 'flashpackers') than younger cohorts and business travellers are a strongly growing customer segment. These trends are driving hostels to offer more luxurious amenities, such as laundry services, pools, saunas and spas. To be competitive, hostels have to do more than just rent out a bed. They must engage travellers through holding events, staging parties, offering tours or even free lessons, in the local language, for instance.

Hostels as social centres Since the origins of hostels are in study trips, many hostel chains have tailored offers for various kinds of groups, including special online booking facilities, as well as assistance in organising activities at the destination. Hostels, nevertheless, compete with budget hotels, rental apartments and websites like Airbnb, which allows individuals to rent out spare rooms or whole apartments to transient guests. However, hostels have a built-in advantage over such competition due to their emphasis on hosting events and providing entertainment and conviviality at the properties, especially in their food and beverage outlets.

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Part III Increasing regulation of rentals So far, for the most part, Airbnb's activities have been subject to little or none of the regulatory or taxation requirements to which the traditional accommodation sector is subjected. Currently, however, it's clear that the tide is turning against the freewheeling ways of the likes of Airbnb in many jurisdictions, as the regulatory grip on the peer-to-peer rental sector tightens. Criticism of Airbnb centres on essentially four aspects:

1. Airbnb and similar rental platforms are not subject to the same degree of regulation with regards to safety, fire hazard and access for those with reduced mobility, as conventional tourist lodging establishments, including hotels, guesthouses, BnB's, etc. which creates an un-level playing field from a competitive point of view;

2. Airbnb's activities increasingly have nothing to do with a so-called 'sharing economy', as a significant portion of listings and revenue are attributable to a small group of commercial operators who may control as many as 100 properties or more;

3. Airbnb hosts are not paying taxes, including income taxes on their earning and municipal bed night taxes; and

4. Airbnb activities are depriving urban communities of available housing as more and more lodging capacity is devoted to short term rentals. Also, short term rentals are degrading neighbourhoods due to noise, disruption and even increased criminality.

Thus, there are basically two constituencies fighting for stricter regulation of short term rentals: the traditional lodging sector, as represented by hotelier and tourism accommodation associations, as well as employee unions in some cases; and left wing political parties and municipal authorities, who decry the loss of available housing stock due to the proliferation of short term rentals. Apartment rental hosts are increasingly being required to register with the municipality, to pay bed night taxes (as well as income taxes on their earnings), and to conform to some minimal safety and insurance standards. Regulation of short term rental apartments has been spotty so far, differing from one city to the next as summarised below. FIGURE 32: EXAMPLE OF REGULATORY MEASURES IN FORCE BY CITY, 2017

Measures Cities & localities Obligation to register with the municipality San Francisco, Santa Monica, Amsterdam, Berlin, Barcelona, Paris Limitations on use of properties as rentals San Francisco, Santa Monica, Amsterdam, New York Collection of bed night taxes Santa Monica, Québec City, Amsterdam, Paris, Milan, Berlin,

Berne, Basel City, Basel Land, Montreux-Vevey, Zurich & Geneva Landlord approval required Berlin, Barcelona, Swiss guidelines in tenancy law Controls New York, Québec City Guest registration required Milan Recording of statistics Milan Fire safety regulations Amsterdam Moratorium on new rental properties Barcelona, Balearic Islands

SOURCE: HOTREC, MUNICIPAL GOVERNMENTS

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A further consideration that has surfaced following the multiple terrorist attacks in Paris, Brussels and, most recently, in Barcelona, is the need for increased surveillance of transient populations. This heightened concern for safety and security may accelerate the trend towards regulation - notably towards requiring guests in Airbnb-style accommodation to be officially registered on arrival.

16. Most short-term rentals in New York violated the law During the period 2010-2014, 72% of units used as private short-term rentals on Airbnb appeared to violate state and local laws in New York—including the Multiple Dwelling Law and the New York City Administrative Code—which prohibit certain short-term rentals, according to a 2014 report, prepared by the Office of the Attorney General of the State of New York (NYAG) which launched an investigation of users of web platforms like Airbnb who run large-scale enterprises in violation of fire safety, zoning, tax, and other applicable laws.47 The NYAG cited the Multiple Dwelling Law (MDL), which prohibits rentals in “Class A” buildings—a category encompassing most residential apartment buildings in New York City—for stays of less than 30 days. This prohibition exists due to the fire and safety regulations to which hotels and other transient accommodations are subjected. The NYAG's report, which analyses Airbnb bookings for “private” stays and presents a snapshot of short-term rentals in New York City from 1 January 2010 through 2 June 2014, noted the following key findings:

Most short-term rentals booked in New York violated the law.

Commercial users accounted for a disproportionate share of private short-term rentals by volume and revenue. Fully 94% of Airbnb hosts offered at most two unique units during the review period, but the remaining 6% of hosts were disproportionately represented on the platform during that period, individually offering up to hundreds of unique units. Furthermore they accounted for 36% of private short-term bookings and earned US$168 million, which amounted to 37% of total host revenue over the period under review;

Top commercial users employed rental platforms to run multimillion-dollar short-term rental businesses. Well over 100 commercial users each controlled 10 or more unique Airbnb units during the review period. Together, these hosts registered 47,103 private short-term reservations and earned US$59.4 million in revenue. The highest-earning operation administered 272 Airbnb listings, booked 3,024 reservations, and earned US$6.8 million in revenue over the 4-year period. Each of the top 12 New York City operations on Airbnb during that period earned revenue exceeding US$1 million;

Private short-term rentals displaced long-term housing in thousands of apartments. In 2013, more than 4,600 units were booked as short-term rentals through Airbnb for three months of the year or more. Of these, nearly 2,000 units were booked as short-term rentals for a cumulative total of half the year or more—rendering them largely unavailable for use by long-term residents. The actual number of apartments that shifted from long- to short-term housing could be much higher, as the analysis covers paid Airbnb bookings only, omitting short-term rentals simultaneously offered on other platforms. This analysis also excludes nights when the apartments remained vacant between bookings. Notably, the share of revenue to Airbnb and its hosts from units booked as private short-term rentals for more than half the year increased steadily, accounting for 38% of each figure by 2013;

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property to make ends meet, but the wealthier who deliberately break the law in order to earn significant income from listing multiple apartments or even entire buildings on peer-to-peer platforms. The latter will be shown no mercy by the municipal authorities and the courts. As for the websites themselves, the law is also very clear; in many French cities (including Paris), the sites are now only allowed to list officially registered properties. 54

18. Berlin ups the ante In Berlin, where rents rose by 4.4% in 2015 and property prices soared by 14.4%, property owners who rent out their premises to tourist without authorisation now risk a fine of up to €100,000. For several years, the city has been a hotbed of protests against Airbnb-type rentals which are perceived to reduce the available housing stock and to subject the neighbours of renters to disturbance and even crime. Now, Berliners are being invited by the authorities to make use of a dedicated website to denounce neighbours who rent out their premises without authorisation. "Residential space is there to be lived in", declares Andreas Geisel, Berlin's minister for urbanism and the environment. On 1 May 2016 the so-called ‘Zweck – entfremdungs - verbot’ came into effect, prohibiting the letting of entire apartments through Airbnb and other platforms, with offenders facing fines of up to €100,000. Yet despite the ban, these platforms continue to list large numbers of entire properties for rent. The number of Airbnb listings in Berlin grew rapidly between March 2015 and January 2016. In March 2015 there were almost 11,500 listings on the site, which, by January 2016, had grown to 19,700, a rise of 71 % in just 10 months.

A 40% drop in listings In anticipation of the impending 1 May 2016 ban, many hosts deleted their listings, resulting in a 40 % drop in the total number of listings between March and May 2016. The growth in listings over the previous 10 months was reversed in less than two, and by May the number had fallen to the level at the beginning of 2015. However, it’s not clear how many of those listings were deleted by Airbnb hosts voluntarily and how many were removed by Airbnb. Interestingly, since the ban came into effect, the number of listings has actually increased slightly over the year 2016. By the beginning of October 2016, there were almost 12,400 listings available for rent on Airbnb. These new figures highlight that, so far, any deterrent effect of the ban has been short term and has had little lasting effect on the behaviour of Airbnb hosts. Still, it can be concluded that the number of listings at the end of 2016 was much less than it would have been without the ban. The fact that the number of listings did increase can be explained by the lack of vigour with which the ban has been enforced, as few offenders have actually been fined. The wording of the law itself was somewhat ambiguous and has been interpreted differently across Berlin's districts which has sown confusion and created uncertainty as to what is legal and what is not. It seems that many hosts have decided that, after taking down their listings for a while, they could simply start listing their properties on the site once again. FIGURE 35: WEEKLY NUMBER OF AIRBNB LISTINGS, FEBRUARY 2015 - SEPTEMBER 2016

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Source: www.Karat.Studio

‘Home sharer’ or commercial operator Along with the growth in total listings, there was a sharp rise in the total number of commercial listings (from hosts letting more than one apartment) on the platform from March 2015, since the total number of listings also rose in the same period and the share of commercially-let apartments remained constant at 30 % of the total market up until November 2015. However, between November 2015 and February 2016, the share of commercial properties rose to almost 40 % of the listings on the site. Subsequently that share fell significantly, with commercial properties making up just a fifth of Airbnb listings by September 2016. Thus, the partial ban on listings did prove to be a deterrent, leading to a dramatic fall in commercial listings on the site. Their share fell from 40 % of the total in the middle of November 2015 to 20 % by late 2016. Since September 2016 the trend appears to have changed again, however, as the proportion of commercial listings began to creep up.55 FIGURE 36: WEEKLY SHARE OF COMMERCIAL AND NON-COMMERCIAL AIRBNB LISTINGS IN BERLIN, FEBRUARY 2015 - SEPTEMBER 2016

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21. London's mayor lobbied to take action The UK government has generally welcomed Airbnb, allowing homeowners to rent out a room for up to 90 days a year without planning permission - a rule now being enforced with Airbnb’s help. It has also approved government employees use “sharing economy solutions” to book accommodation when travelling on official business. However, immediately following the election of London's new Labour Mayor Sadiq Khan in May 2016, the British Hospitality Association (BHA)'s CEO Ufi Ibrahim stepped up her campaign to deal with the issue of accommodation rental websites in the UK. She wanted the 'urgent attention' of Khan, who has been urged to clamp down on London landlords letting out their properties to holidaymakers via websites like Airbnb. In particular, Ms. Ibrahim has demanded that Khan enforce fire and safety regulations for online accommodation rental companies, which the BHA claims are used by professional landlords to advertise short term rentals.58

When giving evidence to the government's Business Innovation and Skills Committee in January 2016, Ibrahim noted that 40% of all listings on peer-to- peer accommodation websites in the UK were professional landlords running unregulated 'pseudo hotels', and half of all listings are entire properties rather than rooms in host's own homes, therefore technically not 'shared' accommodation.

40% of Airbnb listings from multiple-property hosts Ibrahim claims that the top 100 home-exchange hosts net £150 million of accommodation revenue a year, much of it from London, the city with the highest number of landlords. The BHA claims that 40% of all listings in London were from multiple-property owners renting out accommodation on a short-term basis year-round. Ibrahim told the abovementioned committee that sites such as Airbnb allow hosts 'to circumvent planning regulations, break short term rental regulations and avoid tax, food, health, and fire safety regulations. In calling on the new mayor to take action, Ibrahim stated that, "London is the world's most-visited capital city, generating over £36 billion in tourism revenue and £14 billion gross added value by the hospitality industry. Our businesses employ one in 10 Londoners. We also want the mayor's urgent attention on a number of outstanding decisions including - protecting visitors and Londoners by ensuring the enforcement of fire and safety regulations for online home rental companies." In conclusion, there may be more chance of regulation with a Labour mayor than there was under the freewheeling Tory leadership of Brexiter, Boris Johnson.

Call to enforce existing laws In any case, the industry, as represented by Ufi Ibrahim, CEO of the BHA (British Hospitality Association), who chaired a roundtable at the International Hotel Investment Forum (IHIF) in March 2016, has decried the lack of 'level playing field' with respect to the regulation and taxation of Airbnb-type accommodation. Furthermore, when speaking at Hotel Analyst's Hotel Distribution event in London on 28 September, 2016, Ibrahim declared that it was not a question of creating new regulations, but just one of actually enforcing laws already on the books.

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A new regulation went into effect a year after Airbnb agreed to self-regulate its listings in London. In December 2016, Airbnb announced that it would ban London-based hosts from renting out entire homes for more than 90 days per year without official consent from city councils. Significantly, the site itself claims to prevent the listings rather than leaving enforcement up to local officials. At the time of the announcement, a report suggested that Airbnb could lose more than US$400 million in potential London bookings for 2017.

B & B association raises compliance issue too…. David Weston, chairman of the Bed and Breakfast Association, has criticised Airbnb for not ensuring compliance with fire regulations. “I think the public assumes some sort of checking if you are booking with a big global brand,” he notes. By contrast, members of his association with as few as three rented rooms have been required to install fully wired fire alarms and fire doors. “We have had instances of people having to spend thousands of pounds,” he remarks, adding that, “It is extremely galling to find that fast-growing competitors are not complying with anything.” Dr Jim Glockling, technical director of the Fire Protection Association, a UK-wide body that promotes fire safety, notes that, “It is clear that there will be a need for legislation to catch up with these innovative hostelling methods; competitive services like this should be cost effective by merit of the expansiveness of the supply chain, rather than lowering of customer safety standards.”

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27. Conclusion/outlook There are growing signs of convergence in tourist accommodation. Airbnb increasingly mirrors the operational model of professionally managed accommodation providers through offering tailored services, distinguishing between different grades of lodging, providing guarantees on the quality of its listings, as well as progressively eliminating private individual amateurs from the supply chain. Meanwhile, the big hotel chains have responded to the challenge of the 'sharing economy' by acquiring operators in the sector or through issuing new brands and concepts which attempt to appeal to the supposed tastes of millennial customers through offering 'local' experiences to guests. The sharing economy alternative lodging segment, led by Airbnb, has realised that it must adapt its offering to a more demanding client segment if it wishes to maintain growth. This means adopting more and more the trappings of hotels in terms of offering consistent reliable accommodation, combined with training hosts to act more like hotel staff. Both Airbnb and Expedia's HomeAway are also transforming their portfolios as rapidly as possible to render them instantly bookable like hotel rooms. Meanwhile, most of the major hotel chains are making at least some concessions to the 'sharing economy'. Some like AccorHotels have actively pursued acquisitions in the sharing economy sector, while others (like Room Mate/Be Mate) seek to offer hotel services to surrounding rental properties. The large Anglo-Saxon chains operating in the mid-to-upscale segments have mainly tried to incorporate some elements of the 'sharing economy' into their new brand offerings (e.g. Marriott's Moxy, Hilton's Tru, Hyatt's Centric or Best Western's GLō and Vīb flags).

Airbnb's growth to slow further due to regulation Airbnb's growth rates have slowed, partly due to increased regulation of the shared accommodation sector, according to a UBS analysis, published in April 2017.65 The Swiss investment bank analysed data from 127 cities where Airbnb is present to gauge growth of the platform's listings and its impact on the hotel sector. UBS found that the year-on-year growth rate of Airbnb monthly listings worldwide has been on a downward trend since October 2016. For example, Airbnb listings in that month grew by about 110%, while in February 2017, the rate had slowed to around 35%. Nevertheless, it can be noted that listings are still growing and haven't begun to decline. In Airbnb's seven largest country markets, the US, France, Italy, Japan, Spain, U.K. and Germany, available nights did grew by 40% year-on-year in Q1 2017. Airbnb's listing nights booked hit 52 million in 2016 versus 25 million in 2015, more than doubling, according to the UBS. The value of gross bookings worldwide has also more than doubled and reached US$6.4 billion in 2016.

Noticeable impact in Barcelona, New York & Berlin However, many cities around the world have moved to regulate shared accommodation, which is a reason behind the recent slowdown in Airbnb's growth. As noted above, in Barcelona, a special license is required for short-term rentals and the city stopped issuing licenses in 2014, so the only way to start a new Airbnb (legally) would be to buy an existing property with a license. Furthermore, Airbnb was fined €600,000 (US$638,454) by the Barcelona city council for offering unlicensed accommodation on its site. New York meanwhile introduced legislation allowing the state to fine Airbnb hosts for listing properties for terms less than 30 days if a permanent resident is not present and, by the end of 2017, all rental apartments in Paris must registered with the city. "Our analysis suggests it is likely that regulation is having a negative impact on the supply and demand growth of Airbnb, especially in

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New York and Barcelona. Both cities showed year-on-year declines in available listing nights of around 10% in Feb 2017, notes the UBS. As shown above on pages73-76, the introduction of stiff fines for unregistered illegally operating rentals in Berlin in the spring of 2016 had an immediate and drastic effect on the number and types of properties being offered on Airbnb. Even though there was a net increase in the number of properties listed in Berlin over the year, the growth was far below what it would have been without the tightening of regulations and the number of entire property lets was substantially reduced.

Regulation attenuates the threat of Airbnb to hotels However, this is not necessarily the case in all markets where regulation has been introduced. "We believe that the findings are less conclusive for San Francisco, London and Paris, although in our view it appears there is a negative impact from regulation on Airbnb listing-night growth given the slowdown," notes the UBS. The negative impact of regulation does not remove the threat of Airbnb to the hotel industry, but it does reduce it, the UBS concludes, adding that, "Nevertheless, we believe Airbnb is still likely a threat to hotels, but think the change in regulations has reduced the magnitude of the threat". In any case, it is reasonable to assume that what is already visible in heavily regulated environments in Barcelona, New York and Berlin could well spread to other major cities. Sure there may be plenty of property owners and leaseholders around the world that would love to earn some extra money by letting their property on Airbnb-type platforms. The conundrum, however, for the likes of Airbnb, is that only certain key locations in major cities and some resorts are really attractive tourist destinations which offer the possibility to both hosts and the likes of Airbnb to make significant money. Author: Macy Marvel is a Geneva-based consultant and advisor to the Swiss School of Tourism & Hospitality (SSTH), a division of the Ecole hôtelière de Lausanne (EHL). He is a frequent presenter at international hospitality and tourism industry conferences. 19 September 2017