How disruptors deal with disruption
140 days ago
Both grew out of real frustration to try rent something, for Uber founders it was a limousine, for Airbnb it was was a place to stay during a popular conference.
Technology made it easier to determine spare capacity for a product or service which could be rented out short term to both create supplemental income for the owner and an easier and less expensive option for those seeking to use the product or service.
They are often described as being the largest transport company with no vehicles and the largest hospitality chain without any rooms.
In the decade since their founding, they have grown rapidly, attracted fierce competition and weathered a string of scandals.
Uber has branched out into multiple forms of taxi services, food delivery, logistics and autonomous driving.
Airbnb has spread around the globe to have over 100 million users and bookings available in over 60 000 cities. They have also moved to offer experiences that can be booked when visiting a destination.
Uber went public in May 2019, from the investments prior to its listing some put its value at over $100 billion, but despite the incredible growth of the company, it lacked one important element, profits. It is acceptable that while a business is growing that funds would be reinvested or that losses while building market share would be returned once market dominance was achieved, the catch is that Uber never has and while things were improving it was still going to be some time before they are profitable.
Airbnb was planning on going public this year, but given the situation and the market conditions, it is not likely.
Airbnb’s path to profitability was looking good having been profitable in the last two years.
That was until Covid-19
As countries began locking down so to did the revenues for Uber and Airbnb. Both have been creative to respond but like all businesses, during a pandemic, everything gets disrupted and while other industries like airlines and hotel groups which do own expensive assets that are not generating income and employ most of their workforce are facing much more serious challenges, there is no escaping the impact on any company.
Uber has announced withdrawals from multiple markets in which it does not believe it can be a major player. It will result in the loss of many gig economy jobs, although fewer formal jobs as their operations in the affected cities are not as big as the cities where they are dominant. Uber might still be cutting as many as 20% of its 20 000 workforce. The share price fell sharply in mid-March when the US lockdowns began but have since recovered to the upper $20 level, similar to levels in mid-2019.
After some pressure, the company has agreed to support drivers that have tested positive for Covid-19 or that are required to quarantine. In the US where testing is still difficult to secure, many drivers are caught having to stay home but can’t prove they are infected.
Uber has also partnered with health authorities to assist getting health workers to and from work while public transport is disrupted.
Uber Eats delivery users are being requested to avoid contact and leave food deliveries at the door.
While the company and those dependent on it for work will be very negatively affected during the lockdown periods and the business is likely to be slow to return to normal, the nature of the supply and demand should see it recover as demand returns. South African drivers may face an additional hurdle in that their vehicles are typically financed and often through by a business owner rather than a bank. The need to service the car repayments may result in many cars being put up for sale and fewer cars being available costs to use the service increased as a result. In one respect the companies ambition to make using Uber cheaper than owning a car less likely, but as riders, we have been relying on depressed prices and so assuming there is enough demand at higher fees, may see drivers able to earn a living and Uber to get into the black.
YouTube has many videos of people caught in lockdown in an Airbnb, depending on the circumstances some may remember lockdown as a positive experience.
Airbnb has not shut down as much as deferred to asking hosts and guests to not make bookings that would contravene local lockdown regulations. A search for places to stay in Cape Town and Joburg resulted in the maximum results of over 300 that could be reviewed in both cities.
It is actively encouraging authorities to allow health care workers to book with hosts that are near the healthcare centres and waiving their fees.
This is a significant reduction and the travel industry is likely to be one of the worst affected and may take the longest to recover, but when it does Airbnb looks well placed to recover too. Hotel chains may move to offer similar services and there will be others who enter the market to compete. One positive might be to reset the overbalance of short-term rentals in some cities to the detriment of locals. This period may allow authorities and those hoping to cash in on their homes to do so in a more sustainable way.
The Experiences program might have ground to a halt but has instead pivoted to offering experiences to those caught in lock-down via video conferencing. From spending virtual time with sharks to doing walking tours in cities you hope to visit or learning to make a new dish or a skill like magic. It offers support both for those that have lost the ability to be a tour guide, a performer or a chef and add some alternative entertainment for those that are binged out on Netflix.
These disruptors improved on things that were in need of improvement rather than create something new, this pandemic has shown that everyone is in this together but that when we return to the new normal, the kinds of companies that will remain will have more of the elements of these companies that those of the past and they will remain the norm until the next technology advance starts the process all over again.
This article first appeared on 702 : How disruptors deal with disruption