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The Future of Airbnb

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In the travel wreckage caused by the pandemic, home-sharing has emerged as battered, but with a steady pulse, as rental houses became social-distancing refuges for the travel-starved.

Home rentals have outperformed hotels in 27 global markets since the onset of Covid-19, according to a report by the hotel benchmarking firm STR and the short-term rental analysts AirDNA. As leisure travel ticked up this summer, average daily rates were higher for rentals in July 2020 versus July 2019 in the United States — from about $300 to $323 — thanks to the popularity of larger homes.

Still, global restrictions have squeezed every aspect of the travel industry, including vacation rentals. Across home-sharing platforms, according to STR and AirDNA, occupancy fell by almost half between mid-March and the end of June to between roughly 33 and 36 percent, depending on the size of the rental (hotels by comparison fell to an average of 17.5 percent occupancy).

The biggest player in the short-term rental market, with more than 7 million listings in over 220 countries, is Airbnb. Over the years, its rampant growth and lack of transparency has made it a target for everything from charges of fueling overtourism and turning formerly residential neighborhoods into tourist zones to enabling raucous parties despite complaints and virus-related restrictions on gatherings.

After laying off a quarter of its work force in the spring, Airbnb jettisoned some new ventures, including forays into transportation and entertainment, and hunkered down to focus on its core strength, lodging, even as its valuation fell from a high of $31 billion to, recently, $18 billion, according to The Wall Street Journal.

Now, as Airbnb prepares to go public, we talked to Airbnb’s co-founder and chief executive, Brian Chesky, along with other industry experts, about some of the company’s challenges and the ways it is changing travel.

“People want to travel, they just don’t want to get on airplanes,” Mr. Chesky said. “They don’t want to go for business. They don’t want to stay in the really big cities as prevalently as they used to. They don’t want to be in crowded hotel districts.” But, he said, “they do want to get out of the house. And so we think demand is going to be strong in the future. I’m very optimistic, actually, about the industry.”

Airbnb has touted privacy and guests’ control over their environment — including having your own kitchen in lieu of patronizing restaurants — as safeguards during the pandemic. It instituted new cleaning guidelines and indicated in late August that more than 1 million listings had earned the “Enhanced Clean” certification, which involves training in new guidelines that detail how and what to wash and sanitize. The procedures recommend 45 minutes of cleaning per room. Some listings guarantee a 72-hour vacancy window before check in.

The company says its offerings are aligned with the way people are traveling now, in family and friend groups to less populated destinations. Over Labor Day weekend, 30 percent of its bookings — double the previous year — were in remote areas, though classic vacation spots like Hilton Head Island, S.C., and Palm Springs, Calif., were among the most popular. Urban bookings remain down.

“We’re seeing a little blurring between traveling and living,” Mr. Chesky said. “Before the pandemic, you lived somewhere 50, 51 weeks of the year, and if you were so fortunate, you’d go on your once-or-twice-a-year vacation. Now the pandemic is changing how people want to work, travel and live.” Remote school and work unbind families from their homes. “People are living differently and people want to live anywhere,” he added.

Whether travel truly turns into nomadism remains to be seen, though the average length of stay since May 1 increased 58 percent to more than four days, and fall bookings are stronger than usual, according to AirDNA.

ImageAn Airbnb rental cottage near New Hope, Pa. Since the pandemic began, many guests are choosing houses outside dense urban areas.
Credit…Airbnb

Cities around the world, from Barcelona to Vancouver, are looking to curb Airbnb and other short-term rental companies, which many blame for hollowing out neighborhoods as real estate managers took long-term leases and listed them as more lucrative short-term rentals.

“You can earn more renting out apartments and houses on Airbnb than renting to locals,” said David Wachsmuth, an associate professor in the School of Urban Planning at McGill University in Montreal. “What’s happened on their platform is that actual home-sharing is a fraction of the activity. It’s dominated by commercial interests.”

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Updated 2020-09-24T09:14:08.110Z

Research published in the Harvard Business Review found that as listings rise in a city, so do rents. Analyses by the Economic Policy Institute, a nonpartisan think tank, found the costs to local communities of having Airbnb listings, including rising housing prices and shrinking availability, likely outweigh the benefits.

“The problems of overtourism were in the making for a long time,” said Makarand Mody, an assistant professor of marketing in the School of Hospitality Administration at Boston University. “Airbnb came along and made it worse. It was seen as one evil that needs to be sorted out, but there are much deeper societal and economic issues. Airbnb is just the supply side. But demand has increased so much.”

By 2019, the rise of the middle class globally contributed to expanding tourism above the rate of worldwide economic growth for nine years in a row, according to the World Travel & Tourism Council. In Airbnb, many travelers found affordable accommodations that allowed them to stay in neighborhoods rather than business centers.

Now that the pandemic is the ultimate overtourism disrupter, Mr. Chesky believes travel has been redistributed in a lasting way to places beyond bucket-list capitals. “It’s kind of redeemed our vision,” he said. “What I would love is to be able to help spread out travel to as many communities as possible rather than over-concentrating them in any one place.”

“My speculation is that the world does not quickly snap back to the way it was,” he added. “I don’t think travel will ever, ever look like it did in January. The world can’t change so dramatically like it has and then one of the industries that’s been hit hardest just looks exactly like it did before.”

Communities aim to ensure that. Last summer, Oahu enacted a law to restrict rentals without permits on the Hawaiian island, enforced with fines. In Europe, cities like Lisbon and Dublin are buying back leases or forcing landlords into long-term rentals in an effort to ensure that when tourism rebounds it won’t overwhelm them again.

Enforcement remains thorny, and Airbnb has been accused of looking the other way when it comes to illegal listings. Last year, Los Angeles limited rentals to owner-occupied properties registered with the city, though many illegal units remain on the site, according to the Los Angeles Times.

In response, Airbnb just launched a new City Portal that it says will allow governments to more easily identify listings that don’t comply with local regulations, such as unregistered listings.

Before the launch, the company shared the new tool with San Francisco’s Office of Short-Term Rentals. “They’re pretty positive about it and hopeful this will definitely improve their ability to get bad actors off the platform,” said Jeffrey Cretan, a spokesman for the city’s mayor.

Perhaps because of these scofflaws, Airbnb says it has not lost significant listings. According to AllTheRooms Analytics, among popular cities in Europe, only Rome and Lisbon have shed listings, about 2,000 each. In Lisbon, the crackdown still leaves just above 14,500 listings, the same figure as in January 2019, but down from the peak in July 2019.

The effect of more regulations may show up in the future, posing a threat to a robust portfolio. “For a platform like Airbnb, they’re not just worried about the demand side, but the supply side,” Mr. Mody, of Boston University, said, noting the travel freeze may convince hosts to put their units in the long-term rental market, shrinking the platform, and worrying potential investors. “When you’re living on venture capital, profitability is not as important as growth,” Mr. Mody added. “Shareholders will be a lot less patient.”

During the pandemic, Host Compliance, which tracks legal compliance among short-term rentals for 350 cities and counties in the United States, said noise complaints about so-called “party houses” tripled.

“A lot of people have been at home for a long time and they have to let some steam off and can’t jump on a plane to go to Europe or Cancún to party so they are renting out short-term rentals in driving distance from their homes,” said Ulrik Binzer, the founder and general manager of Host Compliance.

Often, these rentals are in residential neighborhoods, triggering noise complaints and health concerns about large gatherings.

In Miami Beach, short-term rentals were closed this summer, though those within condo and apartment buildings were allowed to reopen, with capacity limits, in August. That month, the city of Los Angeles cut the power on a house rented by prominent TikTok stars during a large party.

Credit…Airbnb

In August, Airbnb pulled the plug, too, announcing a global ban on party houses, defined as those that persistently generate complaints from neighbors. The company says 73 percent of listings already ban parties, though hosts often allow small gatherings like baby showers and birthday parties. Occupancy is now limited to 16 people.

Airbnb imposed a similar restriction in Canada earlier this year after a party in Toronto ended in three shooting deaths, according to BBC News.

“We want to do everything we can do to preserve the character of the communities and not allow these parties to get out of hand,” Mr. Chesky said.

It’s too soon, say observers, to know if the ban is working.

“The issue with Airbnb party houses is enforcement,” Mr. Binzer said. “It’s a little like having the fox watch the henhouse.”

On Sept. 14, a Twitter user wrote, “Found a cheap @Airbnb for 52 dollars. Cleaning fee for 1 night, 125. Nonsense.”

It’s a typical complaint about the platform, which lists attractive nightly rates, but buries the fees until users begin booking. Cleaning and service fees can be modest — zero to $25, say — or add $450 to a booking, reflecting a mix of mandatory and optional host-applied fees. Sometimes there are additional occupancy taxes. And in some countries, Airbnb applies a Value Added Tax on its service fees.

Under Airbnb’s pricing structure, hosts pay the company 3 percent of the booking subtotal, which includes the nightly rate plus any cleaning fee and fees for additional guests. Most guests are charged a service fee of less than 14.2 percent of the booking subtotal, which goes to Airbnb. (If hosts elect to cover the fee entirely, they normally pay Airbnb 14 to 16 percent of the subtotal.)

Because of their variability and lack of transparency, fees are the latest financial facet users have fixated on after the company created its extenuating circumstances policy during the pandemic. It said that travelers who had reservations made on or before March 14 could cancel and not be subject to cancellation fees, even if, in their rental agreement, they were in the penalty period. The policy has been extended several times, now to Oct. 31. (While most guests were happy with the resolution, many hosts were not and Airbnb later apologized to hosts for not consulting them).

Airbnb said it aims to introduce a redesign of price displays this year. “We’re trying to partner with hosts to create clear standards and change the search line, so if someone has higher cleaning fees, that affects their placement” in search results, Mr. Chesky said. “We’ve heard from travelers that they want a simpler way for us to show more of the price up front.”

Four years before George Floyd was killed by police in Minneapolis, igniting this summer’s protests for social justice, the emergence of the hashtag #AirbnbWhileBlack called attention to a spate of racist incidents that users said happened at rental homes. Some Black renters were reported by neighbors as thieves. Others were subject to abuse by racist hosts rejecting their bookings. Complaints by Muslim, transgender and other groups followed.

Airbnb worked to purge discrimination from its platform by hiding guest’s profile pictures until a booking is confirmed; hiring anti-discrimination specialists to audit the platform; and creating a reporting channel to identify listings not complying with its nondiscrimination policy. The company said it has removed 1.3 million offenders.

This month, Airbnb plans to launch Project Lighthouse, a research initiative in the United States that aims to measure bias through perception based on names and photos, to determine where and when bias happens on the platform, from booking through reviews.

According to the company, the study has been in the works for two years in partnership with the racial justice organization Color of Change, with input from several social justice nonprofits, including Asian Americans Advancing Justice and the National Association for the Advancement of Colored People.

“It’s really hard to change what you can’t measure,” Mr. Chesky said. “Then hopefully we will use this data to continue to evolve our platform and reduce the bias.”

Its tech focus — on the platform rather than the in-person experience — won’t address incidents of in-person bias. Through its existing Open Doors policy, Airbnb offers to find a guest an alternative place to stay if they feel they have been discriminated against by a host.

“In a departure from its peers in Big Tech who pass off structural problems on the behavior of individual users, with Project Lighthouse, Airbnb is attempting to take responsibility for how tech platforms create the opportunity for harm at scale,” wrote Jade Magnus Ogunnaike, senior campaigns director at Color Of Change, in an email.

Airbnb doesn’t just rent lodgings. Through its Airbnb Experiences branch, it offers classes in mole making with an Indigenous cook in Mexico City, a music and cultural tour of Havana with a D.J. and walks among penguins with a conservationist in South Africa.

During the pandemic, many of its Experiences went virtual. Now, via Zoom, armchair travelers can visit an animal rescue farm in Connecticut, follow a plague doctor through Prague and sit in on a songwriting session in Nashville.

After Airbnb’s layoffs, many wondered whether Airbnb Experiences, long rumored to be losing money, would be shelved, too. In January, it had 50,000 Experiences in 1,000 cities. During the pandemic, the division was shut down, and later transitioned, with a fraction of its offerings, online. Today, it has 700 virtual Experiences generating $2 million in bookings over the past five months. In-person Experiences have resumed in more than 70 countries with restrictions on group sizes, though the company declined to say how many Experiences are available in person and how much money they are making.

“I would be surprised if they drop it completely,” Mr. Mody, of Boston University, said. “They don’t want to be just a home rental company. Travel is about experiencing the destination in its entirety and they want to play a role in that.”

The company said it stands by Experiences, even waiving its take — which is normally 20 percent — for its Social Impact Experiences, which include playing with shelter cats in Osaka, Japan ($25) and learning beat-making with an organization devoted to teaching underserved youth ($75).

“Experiences was hit hard by social distancing,” Mr. Chesky said, maintaining that the online transition has been successful. “In a world where there’s not a lot of things to do, we think there’s a window for Airbnb Experiences,” he said.


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The Trump campaign celebrated a growth record that Democrats downplayed.

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The White House celebrated economic growth numbers for the third quarter released on Thursday, even as Joseph R. Biden Jr.’s presidential campaign sought to throw cold water on the report — the last major data release leading up to the Nov. 3 election — and warned that the economic recovery was losing steam.

The economy grew at a record pace last quarter, but the upswing was a partial bounce-back after an enormous decline and left the economy smaller than it was before the pandemic. The White House took no notice of those glum caveats.

“This record economic growth is absolute validation of President Trump’s policies, which create jobs and opportunities for Americans in every corner of the country,” Mr. Trump’s re-election campaign said in a statement, highlighting a rebound of 33.1 percent at an annualized rate. Mr. Trump heralded the data on Twitter, posting that he was “so glad” that the number had come out before Election Day.

The annualized rate that the White House emphasized extrapolates growth numbers as if the current pace held up for a year, and risks overstating big swings. Because the economy’s growth has been so volatile amid the pandemic, economists have urged focusing on quarterly numbers.

Those showed a 7.4 percent gain in the third quarter. That rebound, by far the biggest since reliable statistics began after World War II, still leaves the economy short of its pre-pandemic levels. The pace of recovery has also slowed, and now coronavirus cases are rising again across much of the United States, raising the prospect of further pullback.

“The recovery is stalling out, thanks to Trump’s refusal to have a serious plan to deal with Covid or to pass a new economic relief plan for workers, small businesses and communities,” Mr. Biden’s campaign said in a release ahead of Thursday’s report. The rebound was widely expected, and the campaign characterized it as “a partial return from a catastrophic hit.”

Economists have warned that the recovery could face serious roadblocks ahead. Temporary measures meant to shore up households and businesses — including unemployment insurance supplements and forgivable loans — have run dry. Swaths of the service sector remain shut down as the virus continues to spread, and job losses that were temporary are increasingly turning permanent.

“With coronavirus infections hitting a record high in recent days and any additional fiscal stimulus unlikely to arrive until, at the earliest, the start of next year, further progress will be much slower,” Paul Ashworth, chief United States economist at Capital Economics, wrote in a note following the report.

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Black and Hispanic workers, especially women, lag in the U.S. economic recovery.

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The surge in economic output in the third quarter set a record, but the recovery isn’t reaching everyone.

Economists have long warned that aggregate statistics like gross domestic product can obscure important differences beneath the surface. In the aftermath of the last recession, for example, G.D.P. returned to its previous level in early 2011, even as poverty rates remained high and the unemployment rate for Black Americans was above 15 percent.

Aggregate statistics could be even more misleading during the current crisis. The job losses in the initial months of the pandemic disproportionately struck low-wage service workers, many of them Black and Hispanic women. Service-sector jobs have been slow to return, while school closings are keeping many parents, especially mothers, from returning to work. Nearly half a million Hispanic women have left the labor force over the last three months.

“If we’re thinking that the economy is recovering completely and uniformly, that is simply not the case,” said Michelle Holder, an economist at John Jay College in New York. “This rebound is unevenly distributed along racial and gender lines.”

The G.D.P. report released Thursday doesn’t break down the data by race, sex or income. But other sources make the disparities clear. A pair of studies by researchers at the Urban Institute released this week found that Black and Hispanic adults were more likely to have lost jobs or income since March, and were twice as likely as white adults to experience food insecurity in September.

The financial impact of the pandemic hit many of the families that were least able to afford it, even as white-collar workers were largely spared, said Michael Karpman, an Urban Institute researcher and one of the studies’ authors.

“A lot of people who were already in a precarious position before the pandemic are now in worse shape, whereas people who were better off have generally been faring better financially,” he said.

Federal relief programs, such as expanded unemployment benefits, helped offset the damage for many families in the first months of the pandemic. But those programs have mostly ended, and talks to revive them have stalled in Washington. With virus cases surging in much of the country, Mr. Karpman warned, the economic toll could increase.

“There could be a lot more hardship coming up this winter if there’s not more relief from Congress, with the impact falling disproportionately on Black and Hispanic workers and their families,” he said.

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Ant Challenged Beijing and Prospered. Now It Toes the Line.

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As Jack Ma of Alibaba helped turn China into the world’s biggest e-commerce market over the past two decades, he was also vowing to pull off a more audacious transformation.

“If the banks don’t change, we’ll change the banks,” he said in 2008, decrying how hard it was for small businesses in China to borrow from government-run lenders.

“The financial industry needs disrupters,” he told People’s Daily, the official Communist Party newspaper, a few years later. His goal, he said, was to make banks and other state-owned enterprises “feel unwell.”

The scope of Mr. Ma’s success is becoming clearer. The vehicle for his financial-technology ambitions, an Alibaba spinoff called Ant Group, is preparing for the largest initial public offering on record. Ant is set to raise $34 billion by selling its shares to the public in Hong Kong and Shanghai, according to stock exchange documents released on Monday. After the listing, Ant would be worth around $310 billion, much more than many global banks.

The company is going public not as a scrappy upstart, but as a leviathan deeply dependent on the good will of the government Mr. Ma once relished prodding.

More than 730 million people use Ant’s Alipay app every month to pay for lunch, invest their savings and shop on credit. Yet Alipay’s size and importance have made it an inevitable target for China’s regulators, which have already brought its business to heel in certain areas.

These days, Ant talks mostly about creating partnerships with big banks, not disrupting or supplanting them. Several government-owned funds and institutions are Ant shareholders and stand to profit handsomely from the public offering.

The question now is how much higher Ant can fly without provoking the Chinese authorities into clipping its wings further.

Excitable investors see Ant as a buzzy internet innovator. The risk is that it becomes more like a heavily regulated “financial digital utility,” said Fraser Howie, the co-author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise.”

“Utility stocks, as far as I remember, were not the ones to be seen as the most exciting,” Mr. Howie said.

Ant declined to comment, citing the quiet period demanded by regulators before its share sale.

The company has played give-and-take with Beijing for years. As smartphone payments became ubiquitous in China, Ant found itself managing huge piles of money in Alipay users’ virtual wallets. The central bank made it park those funds in special accounts where they would earn minimal interest.

After people piled into an easy-to-use investment fund inside Alipay, the government forced the fund to shed risk and lower returns. Regulators curbed a plan to use Alipay data as the basis for a credit-scoring system akin to Americans’ FICO scores.

China’s Supreme Court this summer capped interest rates for consumer loans, though it was unclear how the ceiling would apply to Ant. The central bank is preparing a new virtual currency that could compete against Alipay and another digital wallet, the messaging app WeChat, as an everyday payment tool.

Ant has learned ways of keeping the authorities on its side. Mr. Ma once boasted at the World Economic Forum in Davos, Switzerland, about never taking money from the Chinese government. Today, funds associated with China’s social security system, its sovereign wealth fund, a state-owned life insurance company and the national postal carrier hold stakes in Ant. The I.P.O. is likely to increase the value of their holdings considerably.

“That’s how the state gets its payoff,” Mr. Howie said. With Ant, he said, “the line between state-owned enterprise and private enterprise is highly, highly blurred.”

China, in less than two generations, went from having a state-planned financial system to being at the global vanguard of internet finance, with trillions of dollars in transactions being made on mobile devices each year. Alipay had a lot to do with it.

Alibaba created the service in the early 2000s to hold payments for online purchases in escrow. Its broader usefulness quickly became clear in a country that mostly missed out on the credit card era. Features were added and users piled in. It became impossible for regulators and banks not to see the app as a threat.

ImageAnt Group’s headquarters in Hangzhou, China.
Credit…Alex Plavevski/EPA, via Shutterstock

A big test came when Ant began making an offer to Alipay users: Park your money in a section of the app called Yu’ebao, which means “leftover treasure,” and we will pay you more than the low rates fixed by the government at banks.

People could invest as much or as little as they wanted, making them feel like they were putting their pocket change to use. Yu’ebao was a hit, becoming one of the world’s largest money market funds.

The banks were terrified. One commentator for a state broadcaster called the fund a “vampire” and a “parasite.”

Still, “all the main regulators remained unanimous in saying that this was a positive thing for the Chinese financial system,” said Martin Chorzempa, a research fellow at the Peterson Institute for International Economics in Washington.

“If you can’t actually reform the banks,” Mr. Chorzempa said, “you can inject more competition.”

But then came worries about shadowy, unregulated corners of finance and the dangers they posed to the wider economy. Today, Chinese regulators are tightening supervision of financial holding companies, Ant included. Beijing has kept close watch on the financial instruments that small lenders create out of their consumer loans and sell to investors. Such securities help Ant fund some of its lending. But they also amplify the blowup if too many of those loans aren’t repaid.

“Those kinds of derivative products are something the government is really concerned about,” said Tian X. Hou, founder of the research firm TH Data Capital. Given Ant’s size, she said, “the government should be concerned.”

The broader worry for China is about growing levels of household debt. Beijing wants to cultivate a consumer economy, but excessive borrowing could eventually weigh on people’s spending power. The names of two of Alipay’s popular credit functions, Huabei and Jiebei, are jaunty invitations to spend and borrow.

Huang Ling, 22, started using Huabei when she was in high school. At the time, she didn’t qualify for a credit card. With Huabei’s help, she bought a drone, a scooter, a laptop and more.

The credit line made her feel rich. It also made her realize that if she actually wanted to be rich, she had to get busy.

“Living beyond my means forced me to work harder,” Ms. Huang said.

First, she opened a clothing shop in her hometown, Nanchang, in southeastern China. Then she started an advertising company in the inland metropolis of Chongqing. When the business needed cash, she borrowed from Jiebei.

Online shopping became a way to soothe daily anxieties, and Ms. Huang sometimes racked up thousands of dollars in Huabei bills, which only made her even more anxious. When the pandemic slammed her business, she started falling behind on her payments. That cast her into a deep depression.

Finally, early this month, with her parents’ help, she paid off her debts and closed her Huabei and Jiebei accounts. She felt “elated,” she said.

China’s recent troubles with freewheeling online loan platforms have put the government under pressure to protect ordinary borrowers.

Ant is helped by the fact that its business lines up with many of the Chinese leadership’s priorities: encouraging entrepreneurship and financial inclusion, and expanding the middle class. This year, the company helped the eastern city of Hangzhou, where it is based, set up an early version of the government’s app-based system for dictating coronavirus quarantines.

Such coziness is bound to raise hackles overseas. In Washington, Chinese tech companies that are seen as close to the government are radioactive.

In January 2017, Eric Jing, then Ant’s chief executive, said the company aimed to be serving two billion users worldwide within a decade. Shortly after, Ant announced that it was acquiring the money transfer company MoneyGram to increase its U.S. footprint. By the following January, the deal was dead, thwarted by data security concerns.

More recently, top officials in the Trump administration have discussed whether to place Ant Group on the so-called entity list, which prohibits foreign companies from purchasing American products. Officials from the State Department have suggested that an interagency committee, which also includes officials from the departments of defense, commerce and energy, review Ant for the potential entity listing, according to three people familiar with the matter.

Ant does not talk much anymore about expanding in the United States.

Ana Swanson contributed reporting.

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