Going Out

MONEY TALKS: Uber, Airbnb, and other disruptive innovations

The October 2014 issue of Ottawa Magazine examined money in a variety of ways. From lemonade stands to last wills, plus upscale offices, cool currencies, and new economies that are challenging the old guard, it’s a wide-ranging assessment of the city’s portfolio is on newsstands until the end of October.  

As more people latch on to the idea that underutilized assets can be rented out for financial gain and the real estate industry becomes increasingly competitive, new models for doing business are disrupting established industries. Hattie Klotz offers a primer for negotiating the new guard.

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Uber 

What it is: Uber is billed as a “rideshare, taxi, and taxi alternative app.” It’s based in San Francisco, the heartland of the sharing economy. 

How it works: Download the free Uber app to your smartphone. Open the app and register with a credit card. Your location will appear on a map. Press ‘Request Uber’, choose the kind of car you want, and stand still. (Uber uses geolocation to establish your pickup location.) You’ll get a text message with car make, licence plate number, and photo of your driver. You’ll be able to see your car on your map as it approaches. When the car arrives, confirm your identity and hop in. No money changes hands at the end of the ride. Your driver will be paid directly from your Uber account. There’s no need to tip either, but you should rate your driver. Good ratings mean that he or she will get more rides. The driver will rate you too, so be nice. Various levels of service are available, depending on your city. UberX is the least expensive version, undercutting regular taxi fares, but it isn’t available in Canada. In Halifax, the company offers UberBlack (a luxury service); Montreal has UberTaxi; both are available in Toronto. UberTaxi and UberBlack use already municipally licensed cars, charging standard market rates or higher rates in times of peak demand (Thanksgiving, Christmas, New Year’s Eve). “Quality is very important to what we do,” says Ian Black, general manager at Uber Toronto. “Whenever a driver signs up, we ensure an adequately high level of service and make an assessment of the driver and vehicle. This ensures that an Uber experience feels different to other offerings.” 

By the numbers: Uber will not release any specifics, saying only that in Toronto, one of its first international markets launched over two and a half years ago, Uber drivers accept thousands of rides monthly. And they won’t say when or if the service will be coming to Ottawa. [Update! Uber has arrived, amid much controversy.] The company offers transportation in 41 countries, in over 135 cities. In addition to service in Toronto, Halifax, and Montreal, Uber also offered a seasonal water-taxi service in the Muskokas this past Victoria Day. Involved in multiple lawsuits, Uber has put up a good fight — to date, the company has withdrawn only from Vancouver. Uber is currently valued at over US$18 billion.

Who is affected: Anyone who makes a living from driving a licensed car or taxi. Recently, taxi drivers across Europe went on strike, complaining that ride-sharing companies like Uber are undercutting their market and are not subject to the same rules and costs. Until municipalities decide how they are going to handle Uber and its competitors, there is great uncertainty in the sector. Values of taxi licences have plummeted in cities where ride-sharing companies have gained a foothold. 

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ComFree

What it is: ComFree and its Quebec cousin, duProprio, are alternative marketing models to help you sell your home. Rather than the conventional method, ComFree works on the principle of volume over commission fees.

How it works: The house seller chooses a service package. Three levels of service and marketing are offered, ranging from $499.95 to $799.95. Money is paid up front. In Ontario and Alberta, the most expensive package also offers to list on the MLS Realtor.ca service. In Ontario, the company also offers realtor services, charging a flat fee for help with negotiation, offers, and other paperwork. ComFree/duProprio does not charge commission. 

By the numbers: Across Canada, 130,000 houses have been sold through ComFree and duProprio since it was founded in 1997. With the average commission paid to a realtor across Ontario at five percent and the average sale price of a house in the Ottawa area at $364,264, that means a saving of $20,300. But keep in mind those ComFree fees (see above) and any commission you might have to pay the buyer’s agent.

Who is affected: Conventional real estate agents. Have you seen the number of green-and-white signs popping up all over town? In Quebec, duProprio signs decorate the landscape like snowflakes on a pine tree. Nobody in Canada tracks how many sales are made without the services of a realtor, but anecdotal evidence suggests that it’s as high as 20 percent in Quebec. Effie Giannou from duProprio confirms: “In Quebec over the years, with the education we’ve provided, we’ve demystified the real estate process to homeowners. Today they don’t feel the need to have the same level of support. They want to have full control of the sale of their home. Over the years, they’ve gained the confidence and knowledge needed to do it on their own.” ComFree in Ontario has grown by a compound annual rate of 18.5 percent since 2010, while that figure is 23 percent for Quebec. 

Airbnb airbnb-logo

What it is: Airbnb is an online marketplace that connects people looking for accommodation with those who have space to rent. It is the best known of many similar companies offering private accommodation for short-term stays. Based in San Francisco. 

How it works: Create a free account withAirbnb. Sign up for verified identification. This is a bit of an undertaking, but it makes booking easier, and hosts feel secure that you are who you say you are. It’s a model that works on social trust — peer reviews that make everyone feel safe — so get lots of friends who are also members of Airbnb to write references for you. Search your city and the dates you are looking for. Press ‘Request to Book’ and correspond with your potential host.  Payment is by credit card and goes via Airbnb. 

By the numbers: Approximately 500,000 listings in over 30,000 cities in 190 countries. There are more than 600 listings in Ottawa alone, and almost every town has a few listings, so you should be able to find somewhere to stay for your great-aunt’s 105th birthday in the middle of nowhere. Airbnb makes its money through service fees, charged to both guest and host. The company is valued at approximately $10 billion after its latest round of fundraising in April 2014. 

Who is affected: Hotels, bed and breakfasts, and certified short-term rental spaces. Hosts in the hospitality industry say that private rentals, such as many available through Airbnb, put vacationers at risk because the spaces are not subject to the same rules, regulations, licensing, safety, and insurance demands. In Quebec, property owners are not allowed to rent out their spaces for fewer than 31 days on a regular basis without purchasing a special permit that costs $250. In an ironic twist of licensing laws, Airbnb hosting is illegal in San Francisco, where the company was founded and where the head office remains.