Airbnb is a sharing-economy firm. The sharing economy is an economic model often defined as a peer-to-peer (P2P) based activity of acquiring, providing or sharing access to goods and services that are facilitated by a community based on-line platform. Not all sharing-economy firms are created equal. The invention of the Internet has made it easier for asset owners and those seeking to use those assets to find each other. This can be referred to as the share economy, collaborative consumption, collaborative economy, or peer economy. This allows people to profit from underused assets. For example, car sharing services like Lyft and Uber exist. Private vehicles could go unused for 95% of their lifetime. Airbnb has cost advantage over the hotel rooms, because homeowners put their spare bedrooms to use. Airbnb rates are usually 30% - 60% cheaper than hotel rates around the world.
Even after Uber's stock recovery, there are still doubts about the future of sharing economy companies. Investors are thinking about the soon coming Airbnb IPO. The usual Uber car ride is not a luxury ride. You would usually get a room-temperature bottle of water. But, Airbnb has very expensive exotic options: horse farm cottages, sailboats, tree houses, houses on the beach and mansions. You can choose from a wide variety of unique rentals. Users can choose based on the location they desire. The value of a house generally goes up over time. But, a car depreciates over time. Just in the first year, a new car loses about a fifth of its value. Some progress has been made on self-driving cars, but cars still require a human driver. This can be exhausting for the driver. On the other hand, an Airbnb stay has economies of scale for the home-sharing host. The seller observes the host checking in, sometimes with lock boxes and digital devices. The seller does not have to be at the location - another advantage for Airbnb. Uber is not as economically efficient. Uber expenses are usually higher with insurance, maintenance and gas. Drivers usually get about $15/hour profit. A home-sharing host usually gets 85% of a stay’s revenue and Airbnb continues to try to stay competitive. There is also an opportunity for more revenues with meals, laundry and guided tours. Uber and Lyft could become more profitable if they offer a monthly subscription service to drivers and passengers. Airbnb shows a huge network with almost six million listings and 150 million engaged users. Airbnb’s expansion to other countries like Cuba could greatly increase profits. When Airbnb goes public, investors will see how good this investment is.
There are other types of sharing economy companies. B2B are business to business interactions. Co-working Platforms provide shared open work spaces for freelancers, entrepreneurs, and work-from-home employees in major metropolitan areas. Peer-to-Peer Lending Platforms allow for individuals to lend money at rates cheaper than usual credit lending. Fashion Platforms allow for individuals to sell or rent their clothes. Freelancing Platforms offer to match freelance workers across a wide spectrum ranging from traditional freelance work to services traditionally reserved to handymen. Businesses offering rental services are often regulated by federal, state or local authorities. Unlicensed individuals offering rental services may not be following these regulations, giving them an unfair advantage that enables them to charge lower prices.