Friday, February 10, 2017

Uber, Lyft, Airbnb, and their Jobs are Sputtering as Expected

It’s not been a good several months for the two largest car-and-driver-sharing companies and the main sleeping-space one.  As I predicted years ago when they made broad-based national news in 2014, these three ever-growing and still successful “sharing economy” companies are falling prey to two things:  the catching-up of regulations they had thus far avoided; and proper cost accounting being done by those providing those services, showing that neither ride-sharing nor home rentals are as profitable as Airbnb, Lyft, and Uber management want us to think. 

On June 27th, even a rare regulatory victory, in which Airbnb in San Francisco won the legal right to offer extensive short-term living quarters without being subject to hotel laws, sprung a leak, as that city’s supervisors ended up voting to require registration of each person providing such services, with $1,000 per incident fines for noncompliance.  The problem, as the board saw it, was not occasional home-sharing, but, per Katie Benner’s June 28th New York Times article, their owners doing that almost continuously.  That controversy resulted in the view from Abha Bhattarai’s July 31st Washington Post piece, “As regulatory attacks mount, Airbnb goes on a charm offensive,” describing how that company organized Washington rental hosts to meet with other local business owners to get their customers to shop with them, in exchange for, they hoped, their votes against a strongly regulatory city council bill. 

The Economist, for which being based in Britain is no excuse for being behind the times, issued a September 3rd piece, “Uberworld,” which looked like it could have been written a year before.  Its unbilled author told us that Uber is “the world’s most valuable startup” (more than Wal-Mart?), which is “shaking up the $100-billion-a-year taxi business” and “will transform daily life as profoundly as cars did in the 20th century” and “could reduce the number of cars needed by 80-90%.”  Though driverless vehicles will have great effects, cheaper taxis will not.  All we need to do to confirm that is to look at cities such as Seoul and Buenos Aires, where relatively low-priced cabs are used more often than in America and have facilitated such improvements as less drink-driving, but have barely if at all reduced the number of privately-owned cars.

Uber, though, has been expanding their business offerings in other, if not new, ways.  Per Business Insider on September 29th, it is now delivering food from over 500 London restaurants to a large area of that city.  If customers will choose Uber for such a service instead of from two other companies, and will pay rates not specified in this James Cook article but seeming to approach $12 to $15 per hour, it will succeed.

Another sign of regulation being applied as much to Uber and Lyft as to true taxi companies reached San Jose’s Mercury News two days later, as the California governor signed a bill requiring both to strengthen their already robust driver background checks.  One more, “New York cracks down on Airbnb” (Sara Ashley O’Brien, October 21,, banned renting of “entire apartments” for less than 30 days in that city.  Those against that activity, per O’Brien, “say (the law) is aimed at people who use Airbnb to effectively turn their homes into hotels – and thus take potential rental housing off the market and deny cities tax revenue.” Airbnb’s resulting lawsuit, which they dropped six weeks later (“Airbnb Ends Fight With New York City Over Fines,” The New York Times, December 3), claimed that they should not be responsible for what their hosts do.

Going beyond simply driverless vehicles, one of the ridesharing companies seemingly let loose more than that in an October 28th USA Today piece, “Uber looks to flying cars as next big shift” by Eli Blumenthal.  The article itself, however, was about helicopters proposed for especially large and heavily trafficked cities, such as Sao Paulo, New Delhi, and the San Francisco Bay area.  Not the same thing as flying cars, and such services are, in New York for one place, available already.

On another flawed area of ridesharing, that company lost another judgment that same day.  The title of Danica Kirka’s October 28th “UK Uber drivers win case to get paid vacation, minimum wage” said it all, with the chances of Uber getting away with calling its workers contractors taking another legal hit.  That issue was discussed further in The New York Times (“In Europe, Is Uber a Transportation Service or a Digital Platform?,” November 27th), in which Mark Scott recapped conflict between that company’s practices and both governments and taxi companies in France, Frankfurt, Barcelona, and elsewhere.   Scott also mentioned similar European issues with Airbnb.  A few days after that, a Danish appeals court upheld an unlicensed-taxi conviction against an Uber provider, (Salon, December 2), judging only that cabdriving regulations applied to that company.

Not every situation, though, has been clearly lost by the sharers.  In “New Orleans Becomes New Model for Airbnb to Work With Cities” (Katie Benner, The New York Times, December 7), we saw the results of a rare cooperative effort.  There, the company agreed, in exchange for being allowed to do business in its usual way:  to share data including host names and addresses; to its hosts being required to obtain city permits; to be limited to 90 annual rental days per entire home; and, perhaps most painfully, to almost completely stay away from the French Quarter.  If these agreements hold, expect them to be duplicated elsewhere.

Three more stories, though, showed how reality is catching up with the ridesharers.  Fox News’s “Uber, Lyft clashing with cities over new regulations” (Dan Springer, December 20) was mainly about what could be called an “et tu, Brute?” moment for those two, in which tech-loving Seattle determined that they should be subject to the same rules as taxi companies, since, as an assistant city attorney common-sensically put it, “at the end of the day, they do the same thing, they drive people from point A to point B.”  Fox Business informed us on January 5th that the state of Massachusetts will soon be subjecting “tens of thousands” of Uber and Lyft drivers to what “officials say are the country’s most stringent background checks.”  And, as for the cost accounting problem mentioned earlier, per The Wall Street Journal on January 19th, Uber has been fined $20 million by the Federal Trade Commission for misleading potential drivers about their actual earning potential.  
The possibility is real that, within two years or so, Uber, Lyft, and Airbnb will consistently be held to the same standards as traditional lodging and taxi companies.  Whether they will survive in some form, such as with driverless cars, we do not know.  In an intriguing February 2nd Forbes article (“Uber and Lyft May Just Be Here For A Brief Ride”), Jeff McMahon told us about an idea from urban real estate expert Randy Rowe, that automobile companies may, when self-driving vehicles are well established, sell contracts instead of cars, in which “you’ll get a certain number of points in a year, and if you order a sports car for that morning it costs you that many points, if you order a van for the family trip to the mountains it costs you that many points, and when you have your four-door sedan for your normal stuff it’s a different price.”  Ford, which is as Rowe put it “rebranding itself… as a mobility company rather than an automaker,” may lead the way.

Will that happen?  Hang on – we will see.  In the meantime, don’t buy stock from any ride or home sharing companies. 

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