Leistungen // Laterales Management
digitalisation is changing property markets
In 2014, the business book The Second Machine Age posited the extreme hypothesis that business and society were on the brink of a digital revolution. In our current publication Lateral Management we have endorsed this hypothesis. But is this really the case? Is the world really changing fundamentally?
We have examined this on the basis of Airbnb’s corporate history. The Internet portal was established in San Francisco in 2008 and has arranged overnight accommodation for more than 100 million people throughout the world since then. Originally, the business model was based on the idea of brokering holiday homes, which was why it was called “Airbed and breakfast” (Airbnb). Today, its offer is much more diverse than that suggested by the air mattress with breakfast. It includes villas, castles, tree houses, igloos, boats and even islands.
Airbnb is still loss-making
The market value of Airbnb is estimated at 25 billion dollars and consequently exceeds the current stock market value of the Hilton Group, which operates worldwide, by two billion dollars. At the same time, an overnight stay in Airbnb accommodation is half the cost of a Hilton room. Although the Hilton Group has over 700,000 rooms in 4,000 hotels. The difference between Hilton Hotels and Airbnb is profitability. In 2014, the Hilton Group reported a net profit of ca. 500 million dollars. Experts estimate that Airbnb is still loss-making.
If the press is to be believed there is no way Airbnb can succeed. Local authorities are fighting back against scarce accommodation in cities being converted into illegal accommodation for tourists. Hotels are complaining about competition, which is significantly inferior in quality and would certainly not bother to meet government requirements. Cities like Berlin are taking action against Airbnb with government decrees such as a ban on misuse. The aim of this tool is to sue landlords who accommodate guests overnight and ultimately to forbid this new form of letting.
However, the facts look very different. In Germany, one in eleven tourists books private accommodation via an online portal, which is 15 million bookings per year in approximately 50,000 private homes. It is six million bookings in Berlin alone.
Cosmopolitan cities need private accommodation
The Berlin Senate is now backpedalling in its battle against the online portals. It has emerged that 80 per cent of the bookings in the city occur in two districts, namely in the hip neighbourhoods of Prenzlauer Berg and Neukölln. The fable of wicked landlords, who misappropriate traditional residential areas and gentrify them is groundless. It is non-Berliners, who are gentrifying hip neighbourhoods and driving property prices sky-high, as in all major cities. Municipalities may deplore this but it is very rarely that they can do anything to change things.
Today, cosmopolitan cities need private accommodation, which can be booked by online intermediaries. It is impossible for global cities to compete for tourists and exclude modern methods for finding accommodation.
Oh yes, the figures and the history entirely support this hypothesis of “The Second Machine Age” that we are in the middle of a digital revolution. Such changes always come up against small-minded, backward-looking Luddites, who think they can use red-tape to hold up far-reaching, technological changes but they have never yet succeeded in doing so.