Scotland - should we re-evaluate our love for Airbnb?

Airbnb and the shared economy

Founded in California, 2008 as a small start-up company, Airbnb is a short-term rental service whose platform connects travellers with hosts who want to rent out their homes or other property. Skyrocketing as a popular alternative to hotel stays, in just thirteen years Airbnb has supported over 1 billion guest arrivals and boasts over 6 million active listings worldwide as of 2021. Alongside Uber, Lime, and Borrow My Doggy, Airbnb is a leading light of the “sharing economy”, an economic model based on the peer to peer exchange of goods and services that is often facilitated by a community-based online platform. On Airbnb, customers interact with the platform by making bookings for accommodation. While hosts list and charge for the occupancy of their sofa, spare room or entire unit, Airbnb takes a flat service fee of 3% of the booking subtotal, facilitating the peer to peer sharing economy. In 2019, Scotland recorded 31,884 active Airbnb listings across the country, highlighting a three-fold growth in short-term Lets between 2016 and 2019. Now advertising stays in over 220 countries and regions, Airbnb harnesses Big Data to fuel its success.

How does Airbnb use Big Data?

While Airbnb allows hosts to set their own prices, the platform armed with billions of data points has intelligently utilised machine learning in order to earn hosts and themselves more money. To mitigate against day-to-day and week-to-week variables, Airbnb employs machine learning algorithms such as Smart Pricing and Aerosolve to assist hosts in maximising bookings and therefore, profit. Factors such as location, season, amenities, local festivals and events are likely to influence demand for accommodation. By using machine learning technology such as Smart Pricing, hosts’ can subscribe to having their nightly prices automatically and consistently altered based on demand in their area. In this way, Airbnb can compete with existing facilities such as hotels in specific locations in order to provide consumers with the best price.

To discover further relationships between listings and the prices they can command, Airbnb developed additional machine learning technology, Aerosolve. Aerosolve works to identify patterns that it uses to understand the popularity of a listing or why it holds a certain price. For example,the model Aerosolve highlighted to Airbnb that listings at a certain latitude and longitude were commanding high prices and were often using the word “sabbia”. By analysing the pattern Aerosolve had identified, Airbnb engineers were able to identify the location as Playa del Carmen, a popular beach town in Mexico. The word “Sabbia”, meaning “sand” in Italian, had boosted listing advertisements in this area, enhancing consumer interest and in turn directing higher prices.

By using machine learning, algorithmic tools and Big Data, Airbnb is able to suggest the best prices and proximity to major attractions such as beaches or popular restaurants. Their use of extensive data assists in predicting the needs and behaviours of consumers, allowing Airbnb to out-perform other accommodation facilities and making them a much-loved short term rental platform.

The implications of this success

Hugely successful, Airbnb cites being of benefit to the communities it operates within, generating tourism related jobs and revitalizing neighbourhoods previously left aside by the popular tourism industry. In an economic impact report compiled for Airbnb in 2020, BiGGAR Economics found that in the previous year, (2019), Airbnb boosted the Scottish economy by almost £2 million a day, counting 33,549 jobs that were directly connected to the impact of Airbnb’s platform. In 2019, an increase in Scottish and UK event tourism connected to an increase in short-term letting was identified in Edinburgh and Glasgow. As well as jobs within the tourism industry, Airbnb sustains jobs in sectors of the economy associated with host spending such as cleaning and trades companies servicing their properties.

Scholars as well as members of local communities have however argued that Airbnb is having negative consequences on the neighbourhoods it operates within. ‘Cities and communities around the world are increasingly grappling with the impact of short-term rentals on their housing markets’, sharing concerns with affordable housing advocates about the way in which demand is placing upward pressure on local rent prices. Studies by Wachsmuth and Weisler have shown that Airbnb and other facilitators of short-term rental housing are systematically driving gentrification and displacement. They argue that Airbnb has made it simpler and more lucrative for landlords and property managers to offer units as short-term lets than to offer units as long-term residential rentals. In doing so, short-term letting platforms subsequently price out local residents from housing stock reserved for tourism, gentrifying and raising rent prices in areas without redevelopment or replenishment of available housing. Indeed, in their 2019 research, the Scottish Government found property trends that indicated changes from long-term private lets and owner-occupation into short-term lets, significantly impacting housing supply and affordability, particularly in popular tourism locations Edinburgh, Fort William and Skye.

In addition to the creation of rent gaps at the expense of communities and tenants, local citizens worldwide have highlighted the negative impacts of Airbnb and short-term let facilitators on their neighbourhoods. Adverse effects of short-term lets on communities are cited as: antisocial behaviour, noise caused by visitors, increased traffic, reduced parking, as well as improper waste management and inadequate infrastructure that is incapable of managing an increased turnover of population. Residents in some cities described a ‘loss of local culture and cohesion’. In Edinburgh, former MSP Andrew Wightman led a protest called by Living Rent to highlight concerns about the availability and affordability of homes in Edinburgh due to the prominence of short-term lets. Though Airbnb’s impact on the UK economy appears to be positive, attitudes towards toward short-term letting agencies such as Airbnb seem to be turning sour. Local residents have taken to protesting Airbnb through removing or defacing key safe’s that frequently appear in residential areas, touting slogans such as ‘neighbours not tourists’ and ‘castrate Airbnb’.

Policy implementations

To regulate against the negative effects of short-term letting in cities worldwide, a variety of restrictions have been implemented. Quantitative restrictions can include limiting the amount of short-term rental accommodations, the number of visitors allowed and the amount of time a property can be rented out per year. For example, regulations in Amsterdam, Netherlands have limited rentals to sixty nights per year. Qualitative restrictions impose regulations on specific types of accommodation and are often combined with specific requirements for safety and the obligation for hosts to apply for a licence or permit in order to rent properties.

Implementing qualitative restrictions, in January 2022 the Scottish Government approved regulations that will introduce a licensing scheme for short-term lets in Scotland, giving existing hosts until 1 April 2023 to apply for a short-term letting licence regulated by Local Councils. From 1 October 2022, brand new hosts have been required obtain a licence from their local authority before they operate as a short-term let.

While policies such as these are welcome, scholars have highlighted that this type of regulation holds hosts responsible rather than Airbnb itself. Cities such as Berlin and San Francisco have set alternative examples of public policy, restricting the letting of entire units as well as the number of nights a property can be rented in order to protect affordable housing as well as community cohesion.

The implications of a growing short-term letting market – what needs to change?

Unfortunately, without further policy intervention, trends in rent gaps and gentrification are likely to increase within areas populated by short-term lets. The Scottish government have already emphasised concerns in Edinburgh and the East Neuk of Fife about decreasing resident population and school rolls, which threaten to leave communities as ‘ghosts towns’ in low-tourism seasons.

Clearly, short-term letting is excluding local citizens from affordable housing. A 2020 report from London based Capital Economics, found that 2.7% of the UK’s 1.5 million landlords have switched from long-term to short-term rentals. This is equal to making 50,000 homes unavailable to long-term tenants. In order to protect against further depletion of housing stock, we must call for harsher regulation of short-term rentals in Scotland, restricting the letting of entire properties as short-term lets year-round such as in Berlin and San Francisco. By supporting the Government in further regulations, we can ensure fair and proper regulation of multi-property professional landlords, thus protecting housing stock and the gentrification of cities without appropriate investment and infrastructure.

Until now, we have happily enjoyed the benefits of short-term letting and the ease of access platforms such as Airbnb provide. However, in light of the evidence provided by recent studies highlighted above it is crucial that citizens who continue to enjoy short-term lets support the government in their campaign to ensure that short-term letting is appropriately regulated. To protect housing stock as well as sustain communities, there must be an equal and shared opportunity to comfortably live in as well as visit cities worldwide. It essential for the Scottish Government to ensure through policy and regulation that rental property does indeed remain part of the ‘sharedeconomy’, allocated equitably between local citizens and tourists.