After rapid rises, tech darlings Uber and Airbnb face up to the backlash

Around the world, Uber has faced opprobrium from taxi drivers while Airbnb is facing harsher regulations. John Hearne reports

THE note went out to all Uber employees on the evening of Tuesday, February 28. It was headed ‘A profound apology’ and came from chief executive Travis Kalanick.

“To say that I am ashamed is an extreme understatement. My job as your leader is to lead… and that starts with behaving in a way that makes us all proud. That is not what I did, and it cannot be explained away... The criticism we’ve received is a stark reminder that I must fundamentally change as a leader and grow up. This is the first time I’ve been willing to admit that I need leadership help and I intend to get it.”

Kalanick was referring to an incident a few weeks earlier, in which he had taken a ride with an Uber driver called Fawzi Kamel. In the course of that journey, Kamel challenged Kalanick on the company’s policies, in particular the way in which price changes to the some services had impacted its driver community.

Powerful men don’t tend to apologise unless someone somewhere has turned on a camera. This incident was no different. Kamel’s dashboard footage shows Kalanick, flanked by two female friends, holding forth on various topics before the driver decides to take advantage of the fact his de facto boss is sitting in the back.

Kamel explains that declining prices in Uber’s high-end service, Uber Black, have bankrupted him. This discussion doesn’t go on for too long before Kalanick begins to lose his temper. It ends with him stabbing the air with his finger and saying, “Some people don’t like to take responsibility for their own shit. They blame everything in their life on somebody else. Good luck!” And off he goes into the night — the CEO of a company worth in excess of $60bn (€54.9bn).

Uber — and its spiritual bedfellow Airbnb — are very new forms of enterprise. We’ve all given lifts and let people sleep in the spare room. These two companies have managed to take these simple human interactions and turn them into a global network of services.

Airbnb is a virtual brokerage for accommodation, allowing people to lease out their apartments, spare rooms, houses, igloos, teepees, treehouses, and so on for short-staying guests. It didn’t exist 10 years ago. Today, it has over 150m users and lists 3m rentals across 191 countries.

Uber is a virtual transport network, connecting people who need a lift with people who give lifts. It’s just six months younger than Airbnb but has 6,700 employees, operates in 570 cities, and had revenues in 2016 of $20bn.

And yet, despite their similarities, these companies are perceived very differently. Kalanick’s outburst — while it may have prompted a fairly abject apology — isn’t really out of character. More than one commentator has noted the strange coincidence that the CEO should share his first name with Travis Bickle, the lunatic taxi driver from Martin Scorsese’s 1976 film. Kalanick, who has served on Donald Trump’s advisory council, has a reputation for being arrogant, argumentative, and pugnacious, while the company itself seems to exist — thrive even — in a welter of protest and controversy.

Then there’s the name. Uber — with all its unpleasant wartime resonances.

The story goes that the idea was dreamed up by a Canadian entrepreneur called Garrett Camp while he was watching Daniel Craig’s first Bond movie, Casino Royale. The lightbulb appeared above Camp’s head in the scene where Bond looks down at his phone to see a graphical representation of his car move across a map. What if, thought Camp, you could track your limo’s progress as it moved across town. He set up the company, installed Kalanick as CEO, and then stood well back and watched the sparks fly and the money roll in.

Like Uber, Airbnb began as a San Francisco tech startup, but its origin story reflects an altogether different image. When school friends Brian Chesky and Joe Gebbia moved to San Francisco in 2007, they were short on rent, so one of them

suggested putting an air bed in the living room and doing B&B. Nothing too revolutionary in that. It led to Airbedandbreakfast.com — a website that offered short stays (not necessarily on an airbed) and breakfast in a city where hotel accommodation was notoriously hard to come by. The key innovation lay in tapping into the hidden world of spare bedrooms. With that, the business took flight.

But while Airbnb may be using a different marketing playbook, these companies are essentially trying to do the same thing in two related markets. Both have been hugely successful in a very short space of time, and both have created powerful enemies. You don’t take on two vast, highly regulated industries like hotels and taxis with impunity. The backlash has begun, and it’s getting increasingly nasty.

After rapid rises, tech darlings Uber and Airbnb face up to the backlash

WHEN you look a little more closely at what Uber is trying to do, you begin to understand why the company needed to install a leader with a particular temperament and skillset. It is a business that flies in the face of regulators and legislatures in most of the jurisdictions in which it operates.

In Europe, the protests began in early 2014 when cab drivers in Paris attacked an Uber car at Charles de Gaulle Airport. The following June, concerted action across Europe saw taxis blocking roads in a host of European cities in a protest against the company.

The wave of hostility has hardly abated since then. In June 2015, the singer Courtney Love got caught in another protest in Paris. She claimed her Uber driver’s car had been smashed and that he was taken hostage by protesters. In the course of that particular protest, riot police were called in as drivers burned cars and blocked access to train stations and airports.

The French, as we know, are no slouches when it comes to protesting, but it’s not as if they are the only ones to see a downside to the rise of Uber. That same June, a thousand taxi drivers in Rio de Janeiro turned the morning rush-hour into the morning go-nowhere hour in protest against Uber’s expansion into Brazil. In March 2016, Jakarta came to a standstill when taxi drivers protested the rise of Uber and a competitor — the charmingly named Grab. There are multiple reports of Uber drivers being attacked in France, Brazil, Costa Rica, and South Africa.

The point these taxi drivers are trying to make is a simple one. Securing a taxi licence in any of these countries — in most countries — is a lengthy, tightly controlled process. In Paris, a taxi medallion can set you back as much as €240,000. If you’ve made that kind of investment in your business and find yourself competing with someone who hasn’t had to invest anything at all... well, you can see how frustrations might build. Taxi unions have claimed the advent of Uber and other ride-hailing services has prompted huge declines in revenues, not to mention a collapse in the value of the taxi medallions themselves.

It’s no surprise, therefore, that attempting to change the law and roll back regulation is a central part of Uber’s expansion plans. A 2014 report in the Washington Post found the company had hired at least 161 people to lobby for its interests in legislatures across 50 US cities and states. The company has also been successful in harnessing its popularity among consumers, particularly in the US. Uber sends out notices to customers in markets where regulation threatens to squeeze it out, asking them to contact local politicians and get them on the case.

Just to point out the obvious here: Uber is hugely popular in the cities where it has gained a foothold. This is something that’s easy to forget, particularly in a jurisdiction where the brand is not established, and when you only ever hear about Uber in the context of the controversies it generates. The success of the model lies in an interface that is exceptionally user friendly, especially among millennials. And of course it’s priced below the more traditional alternatives.

In his book The Upstarts, Bloomberg writer Brad Stone profiles the rise of Uber and Airbnb. He posits what he calls ‘Travis’ Law’: “Our product is so superior to the status quo that if we give people the opportunity to try it, they will defend it and demand its right to exist.”

And while Kalanick may have had Trump sympathies, he’s not averse to hiring from the opposite side of the political spectrum when it suits. Uber’s political arm was led (until he was poached by Mark Zuckerberg in January) by Barack Obama’s former campaign manager, David Plouffe.

Fighting regulators across multiple markets is a tough business, however; the list of lawsuits in which Uber is or has been embroiled is a long one. Many jurisdictions have halted the march of Uber and its competitors in one way or the other.

Both Denmark and Italy kicked Uber out last month following separate court rulings. An Italian court found that Uber’s business practices constituted unfair competition and blocked its services. Though an appellate court has granted a stay of execution until a final ruling is made, it’s expected that the last Italian Uber ride is not far away. In Spain, France, and the Netherlands, meanwhile, Uber services have been suspended on more than one occasion.

Across Asia too, the company hasn’t had things all its own way. Far from it. A loss-making launch in China eventually saw Uber bought out by a competitor. The company suspended activity in Taiwan in February after the government hit it with millions in fines. Services have subsequently been reintroduced, albeit in a restricted capacity, and in Taipei only. The company can only operate in a handful of places in Japan, which does not include Tokyo, where only licenced drivers can operate.

In Ireland, the National Transport Authority has not looked on Uber with a benevolent eye. While it’s been licenced as a public service vehicles dispatch operator, it doesn’t look like the company’s bulldozing business model will ever be allowed in here. Last August, the NTA told the Irish Examiner: “That model of operating commercial services for hire without licences is not a model that would comply with primary legislation in Ireland, and it is not anticipated that small public-service vehicles legislation will be amended in this regard.”

But Airbnb? According to a report from the company released last November, Ireland has 6,000 “hosts” who welcomed 331,000 inbound guests in the year to August 2016. The report itself is titled Home-Sharing: Empowering Regional and Rural Ireland and it’s got an introduction from Minister Heather Humphreys.

How’s that for positioning? While Uber is busy trying and failing to cajole an intransigent regulator, Airbnb manages to set itself up as an economic saviour, spreading the wealth and the craic into the furthest corners of the country.

After rapid rises, tech darlings Uber and Airbnb face up to the backlash

THE other thing that Airbnb has that Uber does not is profit. While both companies remain in private hands — for the moment at least — Airbnb has stolen a march on its evil twin in that it hit profitability in the first half of last year. The extent of that profitability we don’t know, and nor do we know how far Uber is from going into the black. Sources close to the company suggest it lost some €3bn last year.

But you would be wrong to conclude from this that Airbnb is cruising serenely towards an early IPO, or indeed that the company is looked upon benignly in all circles. Just as Uber has seen a long list of cities shut its gates against it, Airbnb too is increasingly finding itself out in the cold.

In essence, it’s a victim of its own popularity. Landlords who would once have contented themselves with long-stay rentals have moved in large numbers into the short-stay market, turning a housing shortage in many cities into a housing crisis. Moreover, householders with a spare room have blighted the residential districts of popular destinations with pop-up hotels, creating a nuisance factor that has stoked tensions between residents and tourists.

Amsterdam has banned any vacation apartment rented out for more than 60 days per year. In London it’s 90 days. New York, Paris, Barcelona, and Reykjavik have also imposed limits on Airbnb, while Germany instituted a national ban on unlicenced rentals last May.

Nor is it surprising that the report Airbnb issued in Ireland last year focused on rural Ireland. The company’s Dublin experiences haven’t been uniformly positive.

Last October, residents of one of the city’s biggest apartment complexes, Spencer Dock, received a letter from their management agency telling them that all Airbnb rentals would have to stop. The move came after multiple complaints of antisocial behaviour, especially at weekends. Security has had to be called to deal with rowdy guests, while common areas have become so busy, they have been likened to hotel lobbies. The management company in question, Indigo Property Management, went on to say that it intends to roll out the ban to the other 30 residential developments it manages in Dublin.

Also in October, An Bord Pleanála upheld a planning decision which found that an apartment in Temple Bar had undergone a material change of use when it was offered for rent via Airbnb, and was not therefore exempt from planning regulations. The implication here is that in order to continue with short-term renting, the property would have to reapply for planning permission.

This finding was site specific; Airbnb hosts in general have little to fear unless a similar complaint is brought against their property. It’s also worth pointing out that Airbnb employs 500 people at its European HQ in Dublin, so don’t expect a Berlin-type ban or a London-style restriction anytime soon, housing crisis or no housing crisis.

Housing authorities are not the only ones who aren’t warming to the rise and rise of Airbnb. The hotel industry argues that the company has secured an unfair competitive advantage by avoiding the laws, regulations, and taxes that the hotel sector has to labour under. They maintain that Airbnb has exerted downward pressure on prices and stolen market share.

Asked for its reaction to the growth of Airbnb in Ireland, the Irish Hotels Federation (IHF) said in a statement that it supports a level playing field for all accommodation providers.

“The accommodation sector in Ireland is highly regulated. It has one of the highest standards of service and quality of hotel stock in Europe and indeed across the world. In this regard, the IHF believes that quality assurance is paramount and that all accommodation services should be regulated and classified. Unregulated accommodation providers raise serious issues in terms of insurance cover and lack of adequate safeguards and systems for redress for guests.”

The war between Airbnb and the traditional hotel sector has largely moved to the courts on one hand and the corridors of power on the other. Airbnb — against the backdrop of an expected IPO sometime this year — is fighting court battles all around the US and beyond, while the New York Times reports that the American Hotel and Lodging Association has engaged in a multipronged lobbying campaign to limit Airbnb’s expansion.

The other point to make here is the image that Airbnb likes to push is beginning to crack. That report about the positive impact of Airbnb in Ireland says this: “We are delighted to see that people across Ireland have joined the growing home-sharing movement, which reflects the way that people live and travel in the 21st century. People of all ages and walks of life are recognising that there is great value in sharing a spare room, or your home when you’re away.”

Yes, there are still plenty of hosts that fit with this homespun vision, but the reality is that Airbnb could not have experienced its wildfire growth without a broader reach. Wouter Geerts of market research organisation Euromonitor International writes that as Airbnb has grown, it has lost its image as a technology start-up and peer-to-peer platform.

“The company is attracting more than just private homeowners, with independent hotels, serviced apartment operators, and estate agents showing an interest in using the platform to rent out properties. Property consultancy firm Knight Frank, for example, notes in its 2016 Cities Report that ‘for investors and landlords, there are clear long-term rewards in the world of short-term rental accommodation’.”

As national and regional legislatures gear up to face the good and bad that Uber and Airbnb engender, the European Commission has warned that member states should only ban these players as a last resort. But, as Euromonitor points out, the mood remains hostile.

Uber remains caught in a vortex of bad PR while Airbnb is spending ever more time in the courts. Will they be dragged kicking and screaming into the regulatory framework, or will they succeed in tearing it all down? Watch this space.

Cities take action against rise in unwanted visitors

After rapid rises, tech darlings Uber and Airbnb face up to the backlash

THE honeymoon is well and truly over. The world’s biggest tourist destinations, buckling under the weight of their popularity and struggling to find accommodation for those who live and work there, have been forced to put a stop to Airbnb’s gallop. Here’s how the restrictions are playing out in five of the world’s hottest cities.

Berlin

Nowhere has been tougher on Airbnb than Germany, where a ban on unlicenced rentals in Hamburg, Munich, and Berlin was imposed last May. Almost overnight, 40% of the company’s Berlin listings disappeared. While it’s acceptable to rent out a room, full apartment or house rentals are out. Landlords can apply for a licence, but few are granted, and hardly any in areas with high housing demand.

Anyone who contravenes these rules is looking at a fine of up to €100,000. When the rules were announced, Berlin’s head of urban development, Andreas Geise, told local press the law was both necessary and sensible in the light of Berlin’s housing shortage. He went on, “I am absolutely determined to return such misappropriated apartments to the people of Berlin and to newcomers.”

Amsterdam

The Dutch capital has just 850,000 inhabitants, but took in 17m visitors in 2016, up from 12m five years earlier. They have learned just how much tourism is too much, and have taken a range of measures to curb the negative impact of this influx. Vacation apartments cannot now be rented out for any more than 60 days per year, or to more than four people at a time. In December, Amsterdam city council and Airbnb agreed a deal whereby the company will put a limiter on its site which will automatically delist any apartment once it has been rented out for the allotted 60 days. In addition, the site has installed a “neighbour tool” which allows other residents to lodge complaints about noisy or aggressive tenants.

London

The English capital is another destination which has arrived at an amicable arrangement with Airbnb. The company announced last November it would ban hosts in London from renting out their entire homes for more than 90 days, unless they receive official consent.

The move came following an admission that 23% of the almost 5,000 London homes listed on the site were let out for more than 90 days — in contravention of a legal ban introduced to try to limit the impact of holiday rentals on the city’s housing crisis.

In a letter sent to hosts, Airbnb said that the new measures would begin this year, adding, “If you want to host more often, you will need to certify that you have permission to do so or apply for the relevant permissions from your local council.”

Barcelona

No sign here of the detente that has marked negotiations between the company and city authorities in London and Amsterdam. In November, the city council announced that it would fine Airbnb and one of its competitors, HomeAway, €600,000 each for continuing to offer unlicenced accommodation on their sites. Airbnb’s response sounds more offended than anything else. The company said it was saddened by the decision and would appeal, adding that Barcelona was the only city in the world that fined them.

New York

In October, governor Andrew Cuomo signed a bill that would fine residents who lease their apartments for illegal short-term stays. You can rent out a room in your house as long as you’re staying there as well, but if you advertise a vacant apartment in a multi-unit building for 30 days or less, you could be looking at a fine of up to $7,500 per rental. Reports suggest Airbnb spent $10m on a failed campaign to defeat the passage of the bill, and thereafter promised to take legal action to block the law from going into effect. The first fines hit in February, when two New York property managers were found guilty of 17 violations of the law, each of which cost them $1,000. And that legal action Airbnb took last year? It was dropped when the city agreed to pursue individual hosts as opposed to the company itself.

Uber: Diary of a bad year

After rapid rises, tech darlings Uber and Airbnb face up to the backlash

Thus far, 2017 has been a bit of an annushorribilus for Uber. Over the past four months, the company has endured a raft of high-profile departures, accusations of sexism and harassment, a consumer ledcampaign against it as well as numerous reports of sharp practice. This is just a taste of the PR disaster that has engulfed the company since January.

January 2017

  • The ‘DeleteUber’ campaign takes off, sparked by an incident in which Uber offered rides to JFK Airport during a strike by New York City taxi drivers in protest against President Trump’s controversial immigration ban. It’s estimated 500,000 Uber customers deleted the app.
  • Also in January, Uber agrees to pay $20m (€18.3m) to settle a complaint by the US Federal Trade Commission (FTC) that it misled drivers about earnings and vehicle financing. The FTC statement says Uber had claimed its drivers in New York had a median income of more than $90,000 while drivers in San Francisco made over $74,000. In reality, drivers make just two thirds of these figures.

February 2017

  • Bloomberg news posts a video of CEO Travis Kalanick losing his temper with an Uber driver and storming from the car. Soon after the footage hits the internet, Kalanick issues a fulsome apology and promises to get help to develop his leadership skills.
  • The same month a former Uber Engineer, Susan Fowler blogs about a culture of sexism and harassment at Uber, and sparks similar stories from other former female employees. Fowler says women made up 25% of the workforce when she joined in November 2015 but only 3% when she left in December 2016.
  • Kalanick also announces he’s stepping down from an advisory committee to President Trump following criticism from many quarters of his effective support for the immigration ban that impacted many of Uber’s drivers.
  • The company’s head of self-driving cars is accused of having stolen thousands of secret documents from Google in a federal lawsuit.

March 2017

  • A range of high-profile departures from Uber include its president, Jeff Jones, who leaves after just six months at the company. In a statement, Jones says that “the beliefs and approach to leadership that have guided my career are inconsistent with what I saw and experienced at Uber and I can no longer continue as president”.
  • The same month sees the departure of the company’s head of maps, the senior VP of engineering, and the head of Uber’s self-driving car group.

April 2017

  • Rachel Whetstone, Uber’s head of public policy and ommunications becomes the latest high profile team member to depart the company, less than two years after Uber poached her from Google.
  • News emerges of the existence of a secret software programme called “Hell” which Uber is reported to use to track drivers working for both the company and its competitor Lyft. The discovery opens up Uber to the possibility of a range of legal actions including breach of contract and unfair business practises.


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