Original publication: October 2015
Authors: Partners: NHTV Breda University of Applied Sciences, Netherlands: Paul Peeters, Corné Dijkmans, Ondrej Mitas, Boukje Strous, Jeroen Vinkensteijn
Lead institution: The Institute of Transport & Tourism, University of Central Lancashire, United Kingdom: Richard Weston
Short link to this post: http://bit.ly/2NrgJcD

Background

Borrowing a car from a friend or lending a spare room to a visitor is not really new, but the massive interest in technology-facilitated sharing between strangers has been in the headlines constantly over the past few years. The sharing economy, as we called it in this report, makes available unused private assets and capacity (labour) to be valorised and used.

 

The sharing economy has been initially greeted with much enthusiasm, but more recently has been found to be ‘disruptive’ to the existing, conventional economy. The most well-known examples are often tourism-related and affect the accommodation sector (e.g. Airbnb, a platform enabling peers to rent a spare room or their whole homes to visitors) or local transportation (e.g. Uber, which uses peers to provide taxi services to visitors).

Aim, objectives and definitions

This report aims to explore and describe the following issues:

  1. Current situation and global developments of the sharing economy in the context of tourism;
  2. Advantages and disadvantages of the sharing economy in relation to the main goals (global competitiveness, seasonality, sustainability, accessibility, etc.) of the EU tourism policy;
  3. Best distributive and communicative practices by which “alternative tourism” is performed, within EU, and how it differs from traditional tourism.

When dividing enterprises found in the sharing economy between non-profit and for-profit at one hand and between peer-to-peer and business-to-peer on the other hand (see Figure 1 in Section 1.3), only for-profit platforms offering business-to-peer products or services (e.g. accommodation booking sites such as booking.com) do not belong to the sharing economy, according to the definition adopted in this report:

The sharing economy is a set of practices, models and platforms that, through technology and community, allows individuals and companies to, at least partly, share access to products,  services and experiences. It includes non-profit and for-profit platforms that have emerged from an originally pure sharing economy, peer-to-peer and/or non-profit organisations.

Typical business models for sharing platforms include a fee per transaction, subscription plans, or sales of the platform technology to be operationalized by the customer and membership fees for customers.

Trends

The sharing economy has grown rapidly and was valued at about $26 billion in 2013. Although this is an impressive figure, in the context of the global economy, it is only 0.035%. The most valuable sharing economy enterprises are tourism-related, where the sharing economy constitutes about 1% of its value. A Texan example showed the development of Airbnb accommodation to have followed an S-curve, slowing down in its 6th year.

In the competition between sharing platforms, increasingly, the ‘winner takes all’. This trend is caused by the increasing customer attraction and value of a high volume of listings, while at the same time the cost per listing decrease.

Furthermore, many sharing economy platforms start as non-profit based on idealistic motives, but, when successful, attract the attention of investors and shift towards for-profit models. Also, the pure peer-to-peer sharing then tends to shift to business-to-peer. Thus, there is a tendency for the big players to shift to for-profit/business-to-peer and out of the sharing economy. For instance, CouchSurfing developed from non-profit to for-profit peerto-peer. Uber now also serves businesses to hire their taxi drivers, thus entering for profit/ business-to-peer, but is still also firmly established in for-profit/peer-to-peer.

The following drivers for sharing economy development were recognised:

  1. Technological innovation (e.g. networking and mobile devices platforms)
  2. Peer motivations (e.g. empowerment, openness, altruism)
  3. Economic drivers (e.g. almost zero marginal cost)
  4. Environmental pressures (e.g. climate change, resource use)
  5. New digital institutions (e.g. peer review trust generating mechanisms)

The primary driver appears to be technology, whilst economic drivers support the shift to for-profit models. The sharing economy has an impact on the conventional economy. Traditional tourism businesses reacts in various ways, including new business models, shifting revenues from direct sales to advertising, and buying enterprises emerging in the sharing economy.

Best practices and lessons learned

At the beginning of 2015 almost 500 tourism related sharing economy platforms existed; 11% of these dealt in travel (and accommodation), 50% transport and 39% leisure. The main issues found with the sharing economy are the evasion of regulations, licensing, and taxes. Effects include missed tax revenues, an uneven economic playing field with the conventional economy, and increased risks for both producers and consumers. The consolidation of power in the biggest platforms reduces the competitive power of other stakeholders in the sharing economy.

The biggest accommodation platforms working globally are Tripping, Airbnb, Homeaway and Housetrip. For transport, the largest are Uber, Lyft and Blablacar. Upcoming are bike and boat sharing platforms like Spinlister and Boatbound.

The sharing economy and EU tourism policy

The original ideal of a fully free sharing economy is undesirable from a governance perspective. The main issues with the sharing economy are in taxes, licensing & certification, safety, liability, trust, labour and competitive equity, types of legal form, and spatial planning. Failure to collaborate with local governments may in the end threaten the longevity of sharing economy business models.

Current legislation is dedicated to the ownership-based economy and less suited to govern the sharing economy. A general EU policy on governing the sharing economy does not exist. Research to support such a policy is almost non-existent. Main strategies for governance may be found in i-teams (innovation teams collaborating between government and stakeholders based on sharing economy platforms and technology), EU guidelines for DMOs, and creation of a best and bad practice database.

Conclusions and Recommendations

The size of the sharing economy is still less than 1% of the formal economy, Most sharing platforms are growing fast, but some have already reached a phase of growth maturity. Within localized geographical areas, there appear to be limits to growth, for example around 10% of the overall accommodation sector. These limits also occur because successful sharing economy enterprises tend to move from pure non-profit platforms enabling peer-to-peer transactions to for-profit business-to-customer trade and thus away from the sharing economy into the formal economy. In this way, the pure sharing economy is an important initiator/innovator for the conventional economy.

The combination of a strong effect of volume of listings on a platform causing additional customer value and reduced cost per listing (addition listing costs virtually northing) create a system whereby the winner takes all, causing market concentration. This is only one issue that may require some form of governance. Other issues include social discontent and disruption to existing enterprises and whole economies. Therefore, the original ideal of a fully free sharing economy is undesirable from a governance perspective. We recommend applying anticipatory governance that balances between sharing platforms’ innovative power and their societal and economic disadvantages.

We also recommend using sharing economy principles for governance. Governments may provide more direct communication with citizens and stakeholders and may even unleash the skills of volunteers who can perform certain tasks that are otherwise too expensive to maintain.

The main strategies for governance are to draft and issue EU guidelines for DMOs on how to govern sharing economy initiatives, and develop and maintain a best and bad practice database. Also installing innovation teams in tourism (i-teams) is recommended. Better tourism-dedicated sharing economy research is necessary. First, the scope and scale of sharing economy must be analysed and reported on a detailed statistical level. Based on these findings, the mechanisms, relationships, and mutual effects between the sharing and conventional economy should be uncovered. This knowledge is required to develop governance for the traditional tourism economy and businesses to benefit from the sharing economy’s innovative power, without long established value and infrastructure being lost. Consider the undesirable consequences of Airbnb accommodation overwhelming a destination at the cost of its well-established, even historic, hotels that in themselves form part of the attraction of the destination.

Link to the full study: http://bit.ly/563-411

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