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29 January 2014

Why is Airbnb Checked Out On Sustainability?

Recent NYC legal troubles underscore why the crown jewel of the sharing economy urgently needs a sustainability strategy

Adam Freedgood Third Partners Airbnb graphicBy the time you are done reading this article 120 room nights will be booked with the hottest hospitality company in the world. That company is not Hilton or Marriott or Starwood. It is cloud-based tech startup, Airbnb. The firm is barely four years old and has never built or acquired a single hotel property. Yet Airbnb guests and hosts exchanged more than 10 million guest nights by 2012. Based on annual bookings, Airbnb now outweighs many brick and mortar hotel chains. If the company went public today, its market cap could rival Starwood, topping $10 billion.

For a firm with such an elite position in the hospitality business and in the sharing economy, Airbnb’s lack of a sustainability strategy is shocking. Airbnb produces no annual sustainability report and shows no transparency around climate change impacts, pollution, energy use or waste generated by the firm or its global network of hosts and guests. While disappointing from a green business perspective, Airbnb’s lack of a sustainability strategy earns the firm no goodwill with regulators including New York State attorney general Eric Schneiderman.  

New York State has declared war on the Airbnb business model, claiming that many of the firm’s hosts are operating illegal hotels under the law.  New York seeks to recover millions in unpaid taxes from Airbnb.

While government regulators are primarily concerned with collecting hotel tax revenue lost to Airbnb’s peer-to-peer micro-enterprise business model, the top Airbnb cities also boast aggressive sustainability strategies. The firm’s position in the recent NYC legal battle is weakened by the fact that the company has done nothing to quantify the costs of waste, energy consumption and pollution resulting from guest nights booked in sustainably-minded cities.

Demonstrating sustainability leadership would strengthen Airbnb’s position with eco-conscious cities

Airbnb is lauded as the largest member of the sharing economy, a movement that is reshaping the way we live by helping to reallocate excess capacity in all kinds of creative ways. New hotel construction typically only serves peak demand, with rooms sitting idle the rest of the time. Airbnb guests make use of excess capacity while injecting money into local economies -- $56 million in its home city of San Francisco alone. Making efficient use of excess capacity has been part of Airbnb’s story from the very beginning.

CEO Brian Chesky called Airbnb the “e-bay for space” in a 2013 interview with The Atlantic. But Chesky also references the ever-expanding size of the global tourism industry in which the company operates. Chesky notes that tourism is as big as the oil industry and it’s not a “fixed pie” -- the size of the industry is expanding as demand increases in high-growth countries.

As a fast growing player in the massive and ever-expanding tourism industry, there is nothing virtual about Airbnb's environmental footprint. Sooner or later the firm must embrace its responsibility or it risks falling short of the vision of efficiency underpinning the core business model.

“Utopian visions of efficiency all too often have a way of obscuring their potential for abuse, with workers, consumers and the environment the all-too-common victims,” according to Wired’s Marcus Wohlson in a 2013 critique of the biggest players in the sharing economy.

The true environmental impact of Airbnb may be worse than traditional hotels

Unlike scrappy startups that embody the eco-chic principles of the sharing economy, Airbnb has a valuation in the billions of dollars and operates in the resource-intensive hospitality and technology sectors. A decentralized business model spreads Airbnb's environmental impacts