Recent NYC legal troubles underscore why the crown jewel of the sharing economy urgently needs a sustainability strategy
By the time you are done reading this article 120 room nights will be booked with the hottest hospitality company in the world. That company is not Hilton or Marriott or Starwood. It is cloud-based tech startup, Airbnb. The firm is barely four years old and has never built or acquired a single hotel property. Yet Airbnb guests and hosts exchanged more than 10 million guest nights by 2012. Based on annual bookings, Airbnb now outweighs many brick and mortar hotel chains. If the company went public today, its market cap could rival Starwood, topping $10 billion.
For a firm with such an elite position in the hospitality business and in the sharing economy?, Airbnb’s lack of a sustainability strategy is shocking. Airbnb produces no annual sustainability report and shows no transparency around climate change impacts, pollution, energy use or waste generated by the firm or its global network of hosts and guests. While disappointing from a green business perspective, Airbnb’s lack of a sustainability strategy earns the firm no goodwill with regulators including New York State attorney general Eric Schneiderman.
New York State has declared war on the Airbnb business model, claiming that many of the firm’s hosts are operating illegal hotels under the law. New York seeks to recover millions in unpaid taxes from Airbnb.
While government regulators are primarily concerned with collecting hotel tax revenue lost to Airbnb’s peer-to-peer micro-enterprise business model, the top Airbnb cities also boast aggressive sustainability strategies. The firm’s position in the recent NYC legal battle is weakened by the fact that the company has done nothing to quantify the costs of waste, energy consumption and pollution resulting from guest nights booked in sustainably-minded cities.
Demonstrating sustainability leadership would strengthen Airbnb’s position with eco-conscious cities
Airbnb is lauded as the largest member of the sharing economy, a movement that is reshaping the way we live by helping to reallocate excess capacity in all kinds of creative ways. New hotel construction typically only serves peak demand, with rooms sitting idle the rest of the time. Airbnb guests make use of excess capacity while injecting money into local economies — $56 million in its home city of San Francisco alone. Making efficient use of excess capacity has been part of Airbnb’s story from the very beginning.
CEO Brian Chesky called Airbnb the “e-bay for space“ in a 2013 interview with The Atlantic. But Chesky also references the ever-expanding size of the global tourism industry in which the company operates. Chesky notes that tourism is as big as the oil industry and it’s not a “fixed pie“ — the size of the industry is expanding as demand increases in high-growth countries.
As a fast growing player in the massive and ever-expanding tourism industry, there is nothing virtual about Airbnb’s environmental footprint. Sooner or later the firm must embrace its responsibility or it risks falling short of the vision of efficiency underpinning the core business model.
“Utopian visions of efficiency all too often have a way of obscuring their potential for abuse, with workers, consumers and the environment the all-too-common victims,“ according to Wired’s Marcus Wohlson in a 2013 critique of the biggest players in the sharing economy.
The true environmental impact of Airbnb may be worse than traditional hotels
Unlike scrappy startups that embody the eco-chic principles of the sharing economy, Airbnb has a valuation in the billions of dollars and operates in the resource-intensive hospitality and technology sectors. A decentralized business model spreads Airbnb’s environmental impacts across tens of thousands of hosts and guests, masking the firm’s true footprint.
Hotels overall have a long way to go on sustainability. The entire guest experience is inherently wasteful, from frequent linen washing and use of disposable products to buffet breakfasts and free energy consumption for guests. But most large firms are making progress in order to cut costs and appeal to eco-conscious consumers.
A traditional hospitality company’s portfolio consists of relatively few large properties, most of which employ cost and energy saving features like high-volume commercial laundry facilities, energy saving lighting, sensors, central HVAC, and recycling programs. Nearly all of the big hotel chains operate sustainability programs, produce annual sustainability reports, and build new facilities to high efficiency standards.
The same cannot be said for Airbnb’s thousands of individual hosts who operate ad hoc hotels in their spare rooms. Private residences are not designed or required by code to include the same efficiency measures as commercial facilities.
Silent on sustainability, Airbnb leaves value on the table
In its meteoric rise, Airbnb has done very little to leverage its own sustainable attributes or guide hosts and guests on best practices that shore up weaknesses.
We found no substantial effort by Airbnb to tell its sustainability story. This is shocking given the firm’s inherently eco-conscious clientele and network of hosts. Our searches unearthed one mention of locally sourced food being served to employees at the company’s headquarters but no meaningful effort to measure, mitigate or report on enterprise-wide environmental impacts or green initiatives.
Today there is no telling what kind of energy powers Airbnb’s data infrastructure or how the global environmental impact created by its hosts and guests stacks up against the traditional brick-and-mortar hotel model.
Helping Airbnb reach its full sustainable potential
The lack of a visible sustainability strategy is a missed branding opportunity. In addition, there is a risk to sustained profitability if more cities like New York fail to consider Airbnb to be an eco-friendly and economically friendly bedfellow. Eventually, cities like New York will seek to recover the hidden environmental costs of Airbnb’s business model by imposing taxes, “impact fees“ or other regulations characteristic of the mainstream tourism business.
Here at Third Partners, we are not presently working with Airbnb but we are huge Airbnb fans. We love the platform, the business model and the opportunity for future growth into new kinds of spaces. After killing a lot of time browsing exotic eco-retreat listings on Airbnb, the Third Partners team finally buckled down and outlined a five point plan that would help Airbnb demonstrate leadership on sustainability both as a tech company and a virtual hotel firm.
We believe that building a strategy based on these ideas would boost the firm’s valuation and attractiveness with its target market by mitigating the largest, costliest, and riskiest environmental impacts.
- 1. Develop a voluntary sustainability recognition program for hosts, modeled on mainstream hotel efficiency programs but adapted for the unique dynamics of residential hoteling.
- This would include education on sustainability best practices, incentives for “green hosts” and ways for guests to identify hosts that have helped reduce environmental impact. Guests looking for eco-friendly accommodations benefit from an expedited search process and could take comfort that rigorous standards were applied to identify “green hosts.“ Hosts benefit from lower operating costs, healthier cities, and increased marketability of their listings in an increasingly crowded market.
- 2. Complete a lifecycle assessment or similar study of Airbnb’s cradle-to-cradle environmental footprint compared with traditional hotels in order to fix weaknesses and publicize strengths.
- Today Airbnb views itself as a guest-host facilitator, not an operator. While this is the case for most businesses in the sharing economy, making efficient use of resources does not negate environmental impact.
- 3. Green the firm’s operations by adopting renewable energy, energy efficiency practices, waste reduction, green teams and other tried-and-true sustainability practices.
- Then, report on impacts, challenges and achievements over time by following GRI standards.
- 4. Identify and disclose key risks and opportunities created by climate change.
- Despite inaction by Amazon, Apple and many public companies, climate change risk disclosure is required by the SEC in 10-K reports for public companies. It is also the right thing to do, considering the inevitability that climate change and increasing fuel prices will physically reshape many popular tourist destinations and the economics of the industry at large. Today Airbnb is private, but given its potential for growth, that may change someday.
- 5. Measure and mitigate end-user environmental impacts.
- The Airbnb customer experience results in environmental impact from fossil energy use at various stages in the user experience. Airbnb is embarking on a Facebook-esque “mobile, mobile, mobile“ strategy to speed the transaction process and drive higher sales. A mobile environment creates exciting new opportunities to bundle eco-friendly products and services such as green transportation options, sustainable dining recommendations, and eco-tourism excursions.
Third Partners is a team of creative and collaborative sustainability consultants based in New York City. This is the first in a series of articles focused on building the case for sustainability at brands we love. Contact Third Partners here.