102 - Is Airbnb just like Uber?

On Friday 20 February 2021, the UK Supreme Court upheld a judgement issued by lower courts that Uber drivers legally counted as workers, and were therefore entitled to worker's rights like the national minimum wage and paid annual leave. You can read the judgement here

We aren't going to dive into the rights and wrongs of the judgement itself - we aren't employment lawyers, and we don't have in-depth knowledge of Uber. But we are going to look at a specific claim that we have seen made over the past few years that has resurfaced since the judgement was announced: that Airbnb is similar to Uber, and therefore could (and maybe should) also be impacted by the judgement. 

We have a lot of experience working with Airbnb. Looking at the judgement, it seems clear to us that:

  1. Airbnb is a fundamentally different business because it's primarily about assets whereas Uber is primarily about working
  2. Airbnb's way of working is really quite differently to Uber, particularly on the things that count in the judgement
  3. It's therefore unlikely that Airbnb will be impacted directly, but some of the companies on Airbnb may well be

We'll also offer one tentative prediction: Uber will change its way of working to be closer to Airbnb's in an attempt to avoid the tax and employment implications from the judgement. Drivers will still be workers, but they'll be somebody else's workers.

Airbnb vs. Uber's business model

Airbnb's business model is about matching hosts who have an asset (a room or a whole home)  with guests looking for an asset that meets their needs. Uber is about matching a passenger with a driver who will drive them to where they want to be. 

Whatever superficial similarities there may be, these are two very different businesses. Though there's some work that goes into preparing the room/home for a guest (like cleaning it), the transaction is fundamentally about the asset itself. And though there is an asset involved in an Uber trip (the car!), the transaction is primarily about driving the passenger from A to B. 

Fundamentally, a person doesn't purchase a stay in a home on Airbnb for the cleaning, and a person doesn't hire an Uber primarily for the car the driver is driving. 

Given that this judgement is about the definition of a worker, we think this clearly excludes Airbnb. In fact, though the Supreme Court doesn't mention Airbnb directly, it does very specifically give the reasons why it wouldn't apply to an platform like Airbnb. And this brings us to the different ways of working. 

Airbnb vs. Uber's ways of working

The Supreme Court highlights five major reasons Uber drivers are classified as workers:

  1. Uber decides how much the driver earns. The company decides the fare, and it works out what to pay the driver. In contrast. Airbnb never sets prices for hosts. There is a tool on Airbnb which you can use to adjust your prices (as an aside I strongly discourage you from this, as it focuses too heavily on discounting). But fundamentally, on Airbnb you can set the price that you want, on Uber you get what Uber says.
  2. Uber decides the contractual terms of service. Now in truth Airbnb sets its own terms and hosts have to accept them. However, where they significantly differ is on how the two companies use their terms to enforce product and service standards.
  3. Uber controls the way drivers deliver their services. Uber vets the car the driver will use, and even encourages them to be a certain model and colour (there's a reason most Uber drivers in London drive a silver Prius). Uber also sets the route, and drivers are vulnerable to a penalty if they choose a different route and the customer complains. In contrast, Airbnb does not define the product or service, it just defines that it needs to be offered in a way that hits a certain standard (i.e. clean, safe) and in line with what was advertised.
  4. Uber controls the ability to accept/decline a ride. Once logged onto the app, a driver essentially has to accept a ride request, without knowing the destination or type of passenger. If a driver cancels too frequently, they are forcibly logged out as a penalty. On Airbnb, the host can define their own acceptance terms. You can have it on request-only, or you can define which days you want booked, and you can even set criteria such as minimum length stays. Once you've accepted a stay you need to honour it and face a penalty if you don't, but you get to define the terms you'll accept.
  5. Uber continuously restricts non-app communication. Uber and Airbnb naturally don't want everyone to be able to book off-platform, as then they won't earn money. But on Uber, drivers are banned from contacting passengers except to return lost property. Once a booking is made on Airbnb, you are free to share mobile numbers, email addresses, third-party links or whatever really. Airbnb recommends you communicate primarily by their platform so they can assess a case if there is ever a dispute, and you aren't allowed to solicit future business off Airbnb. But once the match has been made, Airbnb gives more freedom to the host and guest than Uber gives to the drivers or passengers.

If you take a look at the verbs used above, we can see what defines Uber's approach. It decides, controls, and restricts. In contrast, apart from the terms of service and some restrictions on contact before booking, Airbnb enables hosts to decide for themselves how to conduct their business. Those differences are crucial elements of why Uber is seen as an employer, but Airbnb won't be. 

Aggregation vs. Commodification

Leaving aside the asset vs. work difference, Airbnb and Uber have taken very different approaches to their platforms. 

  • Airbnb wants to aggregate different experiences. Yes, it wants as much accommodation as possible, and it wants consistency of quality in both product and service. But it specifically wants to keep the variance and diversity inherent in different locations and property styles. If you want a 3 bed house, 2 bed apartment, a caravan or even a yurt in a field, you can find it - and Airbnb wants the yurt to stay a yurt.
  • Uber wants to commoditise different journeys. Uber wants every journey to be as similar as possible. It wants the same pricing structure, the same cars, the same type of service provided. It offers almost zero opportunity to differentiate.

Though both are platforms that have revolutionised the method of booking, Uber seeks to extend much more hierarchical control over the customer experience, and it enforces that on its drivers. 

As the judgement says itself: the greater the extent of such control, the stronger the case for classifying the individual as a “worker”. The strong product and service enforcement practices of Uber are one of the things that led to its undoing.

Will Uber become more like Airbnb?

As far as I can tell, Uber has two choices in how to respond to the judgement:

  1. Accept thats its drivers are workers, with all of the worker rights that brings, and accept that it's the “principal” on the transaction and therefore pay VAT, or;
  2. Try to find a way around it

Given Uber's long history of trying to avoid classifying its drivers as workers, and its good form on trying to find its way around things, my hunch is strongly on the second. 

How might it do that? Ironically, by becoming more like Airbnb. 

Airbnb works in, and enables, ecosystems. Uber could follow that. 

The vast majority of professional property managers on Airbnb put their properties not just on Airbnb but also Booking.com, VRBO, TripAdvisor and often 40-50+ platforms (that's what we take care of at Hospiria). 

That means Airbnb is a receiver of information that can be defined elsewhere. You don't need to be active in the platform to receive a booking, and you aren't tied exclusively at any given time.  

Uber (to my understanding), currently doesn't enable such an ecosystem. Its Developer Suite has lots of good tools for connecting to Uber, but these seem designed solely for businesses or users that wants to request Uber's services. 

If Uber and other taxi/rideshare platforms wants to avoid being an employer, then I suspect it will move to more of an eco-system model. Imagine a world where a driver could connect simultaneously to Uber, Lyft, Kapten or any other number of taxi-request apps. Then imagine that the driver would set their own prices, or at least define relatively how expensive or cheap they wanted to be vs. the central price from the algorithm. Drivers could even offer additional services, like carrying the shopping to the door, specialising in safety features for young children, or establishing themselves as highly trustworthy with vulnerable people. 

Now there may not be a deep enough well of drivers to have such specialisation, but at the very least I could see Uber enabling existing taxi firms to plug into its systems. A local taxi firm might use Uber to “top-up” its direct business, or to expand its brand. That taxi firm would be a subcontractor of Uber's, so they would have to manage the employment status of the drivers, not Uber. Prices would probably have to rise still in the UK, but Uber would avoid its VAT bill, and avoid being seen as a direct employer. 

Last year Uber bought Autocab, which provides booking & dispatch technology for taxi firms, so it may already be on this path. It will be interesting to see if it learns from Airbnb all that it could. 

In the meantime, this ruling doesn't seem very likely to impact Airbnb.