Obstacles to a ‘sharing economy’

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Obstacles to a ‘sharing economy’

This year the so-called “sharing economy” has really come into full swing in the arena of holiday accommodation. Websites such as VBRO, HomeAway and Airbnb have become huge businesses offering platforms for everyday people to dabble in the hospitality industry and for travelers to stay in more comfortable and spacious surroundings than cramped hotel rooms.

This is how the sharing economy is supposed to work, in the ideal world. It is supposed to represent a purer form of capitalism - eliminating the proverbial “middleman” in favor of direct contact between service providers and consumers. In theory, the sharing economy is not really about sharing at all, but about maximizing efficiency and letting the market run uninhibited.

Of course, real-world economics rarely turn out perfectly neat and clean, and the sharing economy is no exception. People who go into business renting property or driving a taxicab on their own often operate without paying taxes, buying insurance and following regulations that hold their industry counterparts accountable (This is why “rideshare” provider Uber has generated intense controversy in several large cities around the world).

And there is yet another fundamental problem with the sharing economy: The quality of the services is wildly unpredictable and erratic - and this introduces all sorts of hidden inefficiencies into the system. I have seen this firsthand while traveling overseas for the past few months. When it comes to the sharing economy, my key phrase is “expect the unexpected.”

For starters, I could see very clearly the hazards of the “sharing economy” this spring, while looking for an apartment to rent for a short stay in London in June. Several listings I browsed online had alarming comments from past guests that made me steer clear of the properties: buildings that apparently weren’t safe; neighbors that were noisy or dealing drugs; owners who rented out apartments that were dirty and in need of repair. Obviously, it is crucial to scope out the exact location and condition of any property before agreeing to rent it even for a single night, and this is not always easy to do online.

There are always possible legal minefields, as well. Two days before the start of our stay in the London apartment that we eventually decided to rent, the owner emailed me a detailed list of guidelines for the property that included one big surprise: She expected us to pay her an extra 100 pounds ($154) as a refundable damage deposit. I immediately objected to this since we weren’t informed of this at the time we agreed to rent the property two months earlier, and the owner quickly backed down (This practice isn’t allowed by big websites that provide some mediation between owners and renters).

There were other little surprises, too, once we arrived. While the apartment was reasonably clean and in line with what we expected, there were lots of little flaws: the shower head had a broken wall attachment; the bathroom had no toilet paper; the pots, pans, plates and kitchen utensils were a random collection of low-quality items; the bath towels were rough; the sponge in the kitchen sink was falling apart; and the oven’s labeling markings had been wiped away, rendering it impossible to use. All this might sound petty, but I want to make the point that renting from a homeowner is very different from staying in a hotel.

The apartment was located in a convenient and attractive neighborhood in London, and we paid far less money than we would have paid for a hotel room in this area. But we had to deal with the flaws of the apartment and figure out which problems the owner needed to address and which ones we should overlook. In this case, the owner quickly brought us toilet paper and found us the user’s manual for the oven, while we bought a new sponge.

When the owner met us at the apartment upon our arrival and apologetically called some of the problems to our attention before we had even unpacked our bags, I couldn’t help but think she was an amateur: that anyone good in the hospitality business would show us how she had made improvements, not point out flaws in her own place.

Despite the numerous problems, though, we felt sympathy toward the owner. We saw her as someone sincerely trying to make her way in the hospitality business who isn’t yet fully up to speed.

Since our stay in London, we have navigated the “sharing economy” in North America, with mostly good results but continued surprises, both good and bad.

Keep in mind that I am writing from the vantage point of a short-term tenant. I can only imagine how many unpleasant surprises property owners must receive when their homes are damaged, and in some cases, trashed by careless or even malicious guests. Since so many of these owners are not professionals, many underestimate the risks they take when they rent out their properties - and learn some very hard lessons along the way.

Once again, when it comes to the sharing economy, expect the unexpected. Overall the sharing economy offers more benefits than drawbacks in the opportunities it opens up for both buyers and sellers. However, the unpredictable side effects and the risks and inefficiencies they create need to be accounted for - and prevented - much more satisfactorily than at present. Negative online reviews are not enough; we need new forms of standard setting and dispute resolution processes to tame the marketplace and make life easier for all concerned.

*The author is a professor of political science at Yonsei University.

by Hans Schattle

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