The Pinoy Business Chronicle

Business news and analysis. Covering financial news, economic issues, stock market data, local business, business policy and more.

Business opinions

Technology has its downside

technology has its downside 816x427 - Technology has its downside
Tort 071819 - Technology has its downside

Airbnb is an online marketplace or brokerage that people use to book or offer lodgings. It is popular among internet-savvy travelers and short-term renters. I have used the service myself a number of times looking for places to stay in while on vacation, and, to be honest, I have been quite happy with it. And, I am sure many others are happy with it, or else Airbnb’s global business couldn’t have made $2.6 billion in gross commissions in 2017.

Online companies like Airbnb and Uber and Grab have been matching people with surplus lodgings and transportation with consumers who need them. In the same way, Amazon and Alibaba have become online marketplaces for products from different makers all over the world, for sale to consumers globally. Even Facebook now has its own marketplace for goods and services, which I occasionally peruse.

And, for about a decade now, I have come to accept such use of technology to avail myself of goods and services. At some point, I even raved about it. Improvements in internet service in recent years, as well as the availability of more sophisticated and more powerful mobile devices, and the proliferation of sellers and service providers online have made all this happen. As such, when travelling, the mobile device with reliable data connection has become indispensable.

It was thus with some concern that I came across a story by Joseph Schmid of the Agence France Presse dated July 9, which narrated how families have been leaving Paris in favor of the French suburbs, and, as a consequence, many Paris schools have been forced to shut down. And the situation has been blamed on Airbnb, and how it prompted a significant rise in Paris property prices and how this has been driving out families from the French capital.

Schmid wrote, “Real estate prices in Paris and most Western capitals have soared in recent years, making it harder for middle-class couples to find family-sized apartments in a city already known for its cramped living conditions. While record low interest rates and a shortage of housing have fueled the boom, fingers are increasingly being pointed at Airbnb. Its popularity has encouraged thousands of property owners to turn Paris flats or commercial spaces into short-term rentals that are far more profitable than traditional leases.”

He added, “The fall in the number of children in Paris is inversely proportional to Airbnb’s spectacular growth since 2013. With 65,000 listings for a population of 2.2 million in the 20 districts that fall within the city’s limits, compared with 50,000 for the 8.5 million people spread across New York’s five boroughs, Paris is Airbnb’s single biggest market. By contrast with Berlin, where many Airbnb offerings are for a room in an apartment, nearly 90% of the Paris listings are for an entire home, according to the Paris Urbanism Institute. City officials accuse Airbnb of effectively siphoning thousands of apartments off the market.”

With homes suitable for families being lost to tourists and short-term renters, many couples with children have opted to live out of Paris. As such, they’ve also put their children in schools outside Paris. As a result, four schools have shut down in four years, following 10 others that have shut after being merged with other schools because of lack of enrollees, Schmid reported. He added that a dozen more “are at risk of closure or ‘merger’” since “student levels have fallen every year since 2012 — a decline of 9%, or nearly 13,000 pupils overall.

hand giving keys 071819 - Technology has its downside

I am sure that Airbnb is not entirely to blame for this situation, and that other factors may have had their contributions to the issue. Schmid’s report also noted a shortage in new housing projects and falling birth rates. He also quoted Airbnb as saying, “Official data show the Paris population has been declining since the 1950s, and the housing issues in Paris go back several decades before the creation of Airbnb.”

There is still a need to ascertain statistically that falling enrollment, and thus school closures, in Paris in recent years can truly be attributed to the popularity of Airbnb. However, never did I imagine school closures to be among the possible unintended adverse consequences of its business model. Such a socioeconomic implication, if at all proved to be strongly correlated with Airbnb’s success, should be a cause for concern.

But one cannot easily blame property owners for turning to short-term rentals. After all, it pays better, and not only in Paris. In Manhattan’s Lower East Side, one study found that full-time Airbnb listings earned, on average, two to three times the median long-term rent. This was noted by Daniel Guttentag, an assistant professor in hospitality and tourism management at the College of Charleston, South Carolina, who in 2018, was commissioned by the BBC News to analyze how Airbnb was affecting neighborhoods globally.

A number of territories have also started to curb short-term renting. BBC News quoted New York City council member Carlina Rivera: “The aim is protecting our affordable housing stock for the millions of New Yorkers who could not live here without it.” In Barcelona, short-term rentals must be licensed, and new licences are no longer being issued, noting that illegal accommodation “creates speculation and illicit economies and its activities leave nothing positive for local neighbors, causing nuisance and complaints.”

BBC News also noted that a Barcelona study and others looking at Boston, Los Angeles, and the entire US have “suggested a link between the concentration of Airbnb properties in a neighborhood and rising rents.” One report also “suggests that Airbnb profits from illegal rentals that ‘cause rent increases, reduce the housing supply, and exacerbate segregation’,” BBC News added.

Despite these developments, I still believe that technology is a friend, not a foe. But, to me, it should be seen as what it is: a tool, a means to an end. With Artificial Intelligence or AI, however, this may no longer be the case. AI and computer algorithms have become surrogates for human intelligence and discretion. Emotions, as well as accountability, have been neutralized as factors in decisions and actions. In this line, any business model that strongly relies on technology for its success should always be audited regularly for its economic and social implications and how it can adversely impact the human condition.

 

Marvin Tort is a former managing editor of BusinessWorld, and a former chairman of the Philippines Press Council.

matort@yahoo.com

Leave a Reply

Theme by Anders Norén