New York vs. Airbnb. New York will Lose.

Here’s an example of the government is going to get in the way of economic shift underway.

IN New York, the hotel industry is a big business.  Beyond the taxes it pays to the city, both real estate taxes and by occupancy/sales taxes (~15%), it employs 30,000 unionized workers.

Airbnb arrives and gets a “toe-hold” of 1% in the hotel market and already enables 4,850 people that live in the city to host guests that provide that provide them with $7,530 a year in income.  62% of these hosts use that money to pay their rent or mortgage (much of which flows back to the city in real estate taxes).  Further, over the long term it generates much, much more income to self-sufficient home owners than it does workers doing it as a full time job in the industry.

There’s every reason to believe it will.  Behaviors relative to booking places to stay while travelling are already shifting quickly.  Moving beyond the Gen Y early adopter, who was driven to adopt it out of financial necessity.

In fact, I can already see it in my personal life.  All of the travel I do, and most of the people I know are using Airbnb for their travel now.  It’s that much better.

Like most of the tech change going on in this wave, it’s going global from the start, creating   It’s an ongoing reworking of the massive hotel industry on a global level.

Despite the obvious socioeconomic benefits it offers and a growing demand, it faces stiff opposition.  Entrenched companies, employees and governments see it as a threat, with good reason.

It’s particularly threatening to government. All layers of government — city, state, and federal — want the old, bureaucratic economy to continue, unchanged.  They can’t imagine a world without plentiful flows of taxes levied on corporate profits and withholding from personal incomes.

Without this flow of tax income, the entire edifice of the current economy falls. It is the source of the financial life-support to the increasingly obsolete bureaucracies — from the civil bureaucracy to education to national security to banking to health care — that still offer traditional jobs. The rest is spent providing services, from health care to retirement income, in an attempt to keep the existing economic system alive.

As a result, government is leading the charge against this change. Right now, most of that opposition is at the city level.  For example, in New York city, legal challenges have been brought against Airbnb to slow its rise. However, even New York City is likely to stop this change from happening.

Why? Airbnb, like almost all of the rapid tech changes that are gutting existing markets, went global at the start. As a result, with continued global growth Airbnb is brewing network dynamics that will become inexorable in a few short years.  Disconnecting isn’t an option without significant economic consequence (much of which would be due to a loss of income as people lose traditional jobs in the city).


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Discussion — 9 Responses

  • James Bowery February 7, 2014 on 4:52 pm

    It would be interesting to compare FICO’s algorithms to reputation networks.

    • John Robb James Bowery February 8, 2014 on 9:09 am

      That would be interesting. Low correlation I would think.

  • Vernondo February 12, 2014 on 8:33 pm

    “It is not the strongest or the most intelligent who will survive but those who can best manage change.”

    ― Charles Darwin

    • Vernondo Vernondo February 12, 2014 on 8:36 pm

      However, I would think that most extinct species didn’t put up much of a fight, as they didn’t even see their demise coming……..

    • John Robb Vernondo February 12, 2014 on 9:34 pm

      Very true. JR

  • Gregg Sinner February 13, 2014 on 8:00 am

    Am interested in technologies that allow 100% confirmation of identities that people are who they claim to be — not merely 100% confirmations of secure financial transactions. A scanned photo id helps, but biometrics can get it done — same issue for e-med records access, etc.

    Retinal or facial scans at both ends via mobil apps?

    • Vernondo Gregg Sinner February 13, 2014 on 1:04 pm