June 12, 2020 12:59 pm
But in the end, instead of closing, Bamfo decided to remodel his service. Now users of the application can “buy” some time in empty apartments that under normal circumstances would be offered for rent for longer periods on other sites. By paying between $ 25 and $ 125 an hour, you can rent an apartment in San Francisco. An excellent solution for those who want to work for a while without children in need or need a change of environment. The demand for this type of service seems high, unlike the offer. The application has a worldwide waiting list of over 113 thousand people (the company must verify the identity of potential tenants) and claims to have ten thousand apartments in its database.
It is not yet clear whether Globe’s success is destined to last. Officials from the San Francisco city council wrote to the company that the service violates the city’s confinement ordinance. However, the initial success of the new Globe report shows that the catastrophic predictions for the “sharing economy” after the advent of covid-19 may prove to be exaggerated. More than decreeing its end, the virus is forcing the sector to reinvent itself. This evolution, among other things, could also include a return to its socialist roots.
Airbnb, Uber and Bird were the icons of the new sharing economy. In total, the world’s leading suppliers of vacation rentals, taxi rides and electric scooters have grossed over $ 30 billion in funding. At the height of their success, their overall valuation exceeded one hundred billion dollars. At one point it was thought that Airbnb and Uber would reach the highest share price ever for technology startups. And instead, even before the advent of the virus, the stars of the sharing economy had already started to die out.
Making money was more difficult than expected. Uber needed huge external financial contributions, while maintaining a fleet of electric scooters proved more expensive than Bird had imagined. Flooded with capital venture, these companies have expanded into other markets. Uber has decided to develop self-driving cars and deliver food. Airbnb has evaluated the possibility of producing television programs and managing hotels.
By the time it went public, in May last year, Uber had lost a total of $ 16.6 billion between 2016 and 2019. The company admitted that it would lose more money before becoming profitable, and this is one of the reasons why the initial public offering did not have the predicted success. In the case of Airbnb, the company has been able to generate profits for some time thanks to its business model based on a commission on rent, but subsequently it began to lose money: 322 million dollars in the first months of 2019. The pandemic has the stock exchange listing scheduled for April or May was interrupted.
Now, in addition to layoffs, companies are trying to convert their businesses to restore customer confidence. Health conditions are a major concern. Airbnb instructs the host on how to clean the rooms and has introduced a 24-hour waiting period between one stay and another (it is not mandatory, but guests can see on the website which host follow this indication). Bird scooters are regularly subjected to a “bath”. Uber verifies that drivers wear a mask through automatic technology that analyzes selfies.
The companies also exploited the crisis as an opportunity “to return to the fundamental principles”, as Brian Chesky, the head of Airbnb, pointed out. Today the company focuses on host who rent out their private homes rather than the professionals who manage various real estate properties and who accounted for a growing percentage of Airbnb’s businesses. Uber has canceled several businesses, including a driver credit card project and e-bike services. Today Uber wants to focus on its role as a company that “moves people and things in the cities,” said its CEO, Dara Khosrowshahi recently.
But will it really be enough for these companies to be cleaner and more agile to relaunch themselves when the confinement measures are canceled? What if the “isolation economy” changes people’s habits to the point of making sharing a marginal activity? Will we witness the return of the property in vogue?
All three companies mentioned expect a return of demand, but in different places and for different reasons. According to Chesky, instead of making short trips to the largest cities in the world, people will choose destinations closer to home and for a longer time. The average length of stays booked on Airbnb, in fact, has almost doubled, reaching a week, while the share of national reservations has more than doubled and now represents 80 percent of the total. Stays less than three hundred kilometers from home, which accounted for 33 percent of bookings, now make up 56 percent. Chesky also plans to benefit from the possibility that work from home remains a widespread practice, allowing people to change residence for some time. “Many people say to each other: ‘If this is so, maybe I don’t need to live in the city right now.”
Uber and Bird plan to migrate from public transport to cars and scooters. In the future people may want to avoid taking buses and trains, assuming that it is possible to do so considering the likely cuts in municipal budgets. Already now there are signs in this regard. Bird scooter rides are on average 50 percent longer than before the pandemic. Uber, meanwhile, aims to incorporate its competitors. Despite having renounced the electronic bicycle sector, in fact, the company has invested in Lime, Bird’s main rival in the field of electric scooters. Uber also wants to acquire Grubhub to strengthen its presence in the home food delivery sector, which it hopes will see great growth in the future. “In difficult times, it makes sense to focus on consolidation,” explains Khosrowshahi, who did this job excellently in his previous job as head of Expedia, an online travel site that engulfed his rivals.
Even some small companies in the sharing economy are surprisingly optimistic. In places that have already lifted some confinement measures, such as Germany, the activity immediately resumed, explains Nicolas Brusson, the head of BlaBlaCar, a company present in 22 countries that offers a service based on the sharing of travel expenses by car. According to Brusson, the recession due to coronavirus will further increase the demand for cheap car travel. Among other things, stresses Brusson, the pandemic forced BlaBlaCar “to look at its resources differently”. In the future, the company will offer more services to its driver and passenger community, and has already developed a new application called BlaBlaHelp that allows users to ask others to do their shopping for them.
According to Sonali De Rycker, partner of the European division of Accel, a capital company venture who invested in both BlaBlaCar and Oil, after the crisis, businesses based on activities that existed before the internet (such as sharing food with neighbors) will certainly do better than online stores. De Rycker is convinced that after the pandemic, consumers will be even more likely to save money or to put aside some money by renting goods and services. So let’s expect a world in which objects will pass more often from hand to hand, even if they must be carefully cleaned between one passage and another.
(Translated by Andrea Sparacino)
This article was published by the weekly The Economist.