key: cord-0490467-4mnt9ftx
authors: Krouk, Rim; Almeida, Fernando
title: Exploring the Impact of COVID-19 in the Sustainability of Airbnb Business Model
date: 2021-01-01
journal: nan
DOI: nan
sha: 0c23509499413a484d20c9099f7aaa31b9bfd736
doc_id: 490467
cord_uid: 4mnt9ftx

Society is undergoing many transformations and faces economic crises, environmental, social, and public health issues. At the same time, the Internet, mobile communications, cloud technologies, and social networks are growing rapidly and fostering the digitalization processes of business and society. It is in this context that the shared economy has assumed itself as a new social and economic system based on the sharing of resources and has allowed the emergence of innovative businesses like Airbnb. However, COVID-19 has challenged this business model in the face of restrictions imposed in the tourism sector. Its consequences are not exclusively short-term and may also call into question the sustainability of Airbnb. In this sense, this study aims to explore the sustainability of the Airbnb business model considering two theories which advocate that hosts can cover the short-term financial effects, while another defends a paradigm shift in the demand for long-term accommodations to ensure greater stability for hosts.

Consumer habits have experienced several significant changes over the last few years and many of these changes are mainly due to the emergence of online and cloud applications available to consumers. The tourism sector has been one of the areas where these of the shared economy is to make profitable assets that are little used and, in this way, to take advantage of market gaps.

According to the actual sanitary conditions, in the context of a worldwide pandemic, a lot of companies need to make crucial decisions. Either close or choose a way to adapt their business. Some of them were really innovative and found creative ways to survive an unknown situation posed by COVID-19 (Almeida, 2020; Harris et al., 2020) . The Internet was a major way to maintain the sale for some, but for other enterprises that furnish services, it is time to innovate and find ways to adapt their offer in order to take advantage of the situation. Flexibility and agility emerge as two crucial factors for the tourism industry to adapt and mitigate the effects of travel restrictions (Ugur & Albiyik, 2020 Some succeeding economic models based on the shared economy were highly impacted too.

In this paper, we're going to focus on the service provider platform, Airbnb, in order to highlight the extent of the crisis. Since its establishment in 2008, Airbnb has become one of the largest online accommodation providers and an epitome of the shared economy. The firm has gained public and scholarly attention due to its disruptive effects on the hospitality industry, impacts on housing markets, and legal conflicts over housing, taxation, and consumer regulations. Today, the CEO of Airbnb, Brian Chesky, qualified these times as "the most painful crisis of our lives" (Airbnb, 2020) .

This paper will seek to understand and explore how Airbnb, as well as similar companies using the same economic model, can survive considering the context of this global pandemic.

Equally relevant is exploring the innovative decisions that can be made to ensure their sustainability in this period. This manuscript is organized as follows: In the first phase, a review is made of the literature on the shared economy and the role of Airbnb in this business model. Then, in the methodology, the methods adopted for information collection, analysis, and interpretation are presented. After that, the results are discussed considering Airbnb's evolution and sustainability perspectives. Finally, the main conclusions of the study are presented, and some indications of future work are given. Airbnb's business model still has few regulatory mechanisms when compared to those facing hotel accommodation. However, some cities (e.g., New York, Los Angeles, Boston) have proposed legal mechanisms to limit the possibility of having paying guests for short periods of time and special licenses are required to advertise a property and receive guests (Hamed, 2019 

This study adopts the qualitative methodology for the analysis of the effects of COVID-19 on 

Even though the COVID-19 has affected all sectors, it has particularly affected companies the shared economy model in the touristic sector. The simultaneous combination of these two factors makes companies very vulnerable to the effects of COVID-19 in areas such as income reduction, job loss, and anxiety (Hossain, 2020) . Above all, service providers are among the most vulnerable. Airbnb lost in a few weeks 25% of its workforce, or about 1,900 people.

Furthermore, significant cuts were imposed on the marketing area and other sectors (Syed, 2020 The question now is to know how Airbnb is going to react facing COVID-19 and all it implies. They already lifted a $250m fund to support with cancellations caused by the pandemic and Members of the Superhost club, which gives Airbnb hosts "more visibility, earning potential, and exclusive rewards", also have access to a $17m fund to help pay the rents of their listed properties. (Temperton, 2020) . In order to implement these measures, the company had to make a cut in its budget, which caused a layoff of about a quarter of their (Freedman, 2020) . With this, the aim is to offer a unique entertainment experience to the tourist without having to leave home, but that allows the tourist to know the playful, social, and historical context of each place. In addition to meeting a short-term need, these initiatives also seek to arouse in the tourist the desire to know these places when the measures to restrict the movement of people have been lifted.

It is possible to predict the future of Airbnb considering the multiple visions of hosts and guests' reactions and on how the company is going to adapt its business model to face the pandemic and everything it implies. Two hypotheses can be formulated:

 Hypothesis I: Hosts who are able to afford to cover their expenses for the duration of the crisis, may choose to remain in the short-term market (would help the sustainability of Airbnb); 98  Hypotheses II: Hosts who are not able to afford short-term expenses will opt for midterm and long-term rentals due to their relative stability to ensure their expenses will be covered (would not help the sustainability of Airbnb).

Two kinds of hosts exist: the ones that use Airbnb as a subletting business based on rentalarbitrage with several listings and the others who are renting their principal residence. In both cases, there are many advantages for them and, accordingly, they will not leave the platform and continue short-term rentals.

Both types want by all means to avoid stable leases because it implies a lot more risk and less profitability. Accordingly, a transfer of homes to long-term rentals will probably not occur as a general trend. Moreover, the short-term rental market is way more highly profitable and practical for landlords. They can sell the property, use it, or directly abandon the market when they will with no legal procedure concerning the end of a lease (since there's none). Another advantage of this control over the asset is that the maintenance of the property is constant since it is possible to check the condition of the apartments weekly; that tourists pay in advance; and that the high turnover of "tenants" allows landlords to constantly speculate with rental prices (Cocola-Gant, 2020).

Unfortunately, all these businesses and the rise of commercial intermediaries managing properties for third parties, suggests that Airbnb was shifting away from its original philosophy, becoming primarily a commercial space trading platform. We hypothesize that the COVID19-induced super-shock will lead to a re-emergence of the original Airbnb ethos

An argument is also important to understand why hosts would want to continue renting shortterm. When the touristic activities will start again or even for the local or business travelers, booking an Airbnb might become the safest accommodation the tourist can find. Touristic apartments, unlike hotels, might have many years ahead of them, allowing the customer to isolate himself and feel complete safe. Maybe travelers would feel more secure in private condos rather than in a hotel resort where they will find themselves interacting with more people (AFP, 2020). This perspective is confirmed in the study performed by Cheng et al. Airbnb will be to maintain the level of trust of its consumer to ensure its sustainable growth.

The understanding of the Airbnb sustainability phenomenon is also strongly related to consumption habits and the role of transport companies, especially in low-cost airline transport which has been a key pillar for the growth of Airbnb (Kunwar, 2020) . This has allowed the capture of new audiences that were not used to traveling, or that traveled less frequently, and that now have much greater and diversified access. However, COVID-19 challenged this paradigm. The challenges are not only short-term but may also have long-term repercussions. Therefore, the changes we are experiencing in the market may not be temporary or of short duration. As Sheth (2020) points out, COVID-19 may have long-term effects on consumers' consumption patterns. Also, in the tourism field, people are expected to

seek accommodation closer to home, safer, and more affordable.

The COVID-19 has prompted firms and service providers to think about their services differently, and many have adopted strategies to mitigate the effects of the COVID-19. 100 spaces that were not as usual as spacious houses to house families, equipment to receive pets, or longer stays (Antunes, 2020) . It is expected that once restrictions will be lifted demand for Airbnb-listed properties will increase again. But not all hosts will return to the short-term market. Hosts will now factor into their calculations the risk associated with economic supershocks. Supply will reach an upper limit, irrespective of the demand (Dolnicar & Zare, 2020).

Landlords using short-term rentals may have realized how dependent they were on their environment. The problem is that with the actual restrictions they have no power on the reservation. There are no more international tourists which were the main source of income usually. And with no guests, there's nobody to pay the rent, and that leaves Airbnb entrepreneurs open to huge financial liabilities (Tenderson, 2020). This is the reason why some of them might add flexibility to their business and move to other forms of rental during times when the short-term is no longer profitable.

Many cities worldwide are still struggling to find ways to regulate Airbnb (Guttentag, 2015) .

In general, three regulatory approaches have been identified in the existing literature:

prohibition, laissez-faire, and allowing it with certain restrictions (Jefferson-Jones, 2014).

Since some governments such as Spain, are allowing "seasonal leases" it's easier to avoid making long-term contracts and keep their advantages by going to mid-term. The change from short-to mid-term rentals is what seems to be happening during the current pandemic. It's a bit similar to 'seasonal leases' which propose the property for students (mainly) from September to June and practice short-term during summer. But here, landlords will switch way more often from one type of renting to another because the situation is too uncertain for now.

Shared economy has the potential to revolutionize the way we buy and sell, use and provide services, and think about market transactions. Shared economy and collaborative consumption businesses can generate change especially in the tourism sector, as they attract new profiles of travelers as individuals looking for low prices, local experiences, or environmental concerns.

Furthermore, these platforms are also a means of facilitating distinctive and authentic social encounters between tourists and locals and contribute to the reduction of accommodation and transportation prices for travelers. 101 Shared economy platforms are highly vast, but some platforms stand out for their success and the way they have changed the paradigm of consuming certain services or products. Airbnb is one of the best-known platforms that has changed the paradigm in the accommodation sector.

However, it was also one of the platforms that was most affected by the COVID-19

pandemic, due to its model based on the shared economy in the touristic sector. These effects This study offers both theoretical and practical contributions. From a conceptual perspective, it was possible to deepen the knowledge about the shared economy and the impact of COVID-19 on this business model. In the practical dimension, this study is relevant especially for Airbnb hosts to realize what strategies they can adopt to ensure the sustainability of their business model while the effects of the pandemic are being felt. Predicting tourist behavior in the shared economy is essential for making informed decisions that will both address the sharp reduction in demand in the short term and ensure the sustainability of operations in the long term. As future work, it becomes relevant to explore the impact of COVID-19 on other businesses in the shared economy that are not restricted to the accommodation sector. It is also relevant to explore the effects of COVID-19 on the economy of some cities that have grown strongly in recent years due to the proliferation of local housing and low-cost airlines.

The authors declare no conflict of interest and plagiarism.

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