• by Gord Hotchkiss , Featured Contributor, 5 hours ago

Ripple Effect: the continuing and spreading results of an event or action.

I’m pretty sure Brian Chesky and Joe Gebbia had no idea what they were unleashing when they decided to rent out an air mattress in the front room of their San Francisco apartment in the fall of 2007. The idea made all kinds of sense: there was not a hotel room to be had, there was a huge conference in town, and they were perpetually short on their rent. It seemed like the perfect win-win -- and, at first, it was.

But then came the Internet. Airbnb was born and would unleash unintended consequences that would change the face of tourism and upmarket real estate markets, and tear apart neighborhoods in cities around the world.

For the past two decades, we have seen the impact of simple ideas that can scale massively thanks to the networked world we live in. In a physical world, there are real-world factors that limit growth. Distribution, logistics, production, awareness -- each of these critical requirements for growth are necessarily limited by geography and physical reality.

But in a wired world, sometimes all you need is to provide an intermediary link between two pools of latent potential and the effect is the digital equivalent of an explosion. There is no physical friction to moderate the effect. That’s what Airbnb did. Chesky and Gebbia’s simple idea became the connection between frustrated travelers who were tired of exorbitant hotel prices and millions of ordinary people who happened to have a spare bed. There was enormous potential on both sides, and all Airbnb had to do was facilitate the connection.

Airbnb’s rise was meteoric. After Chesky and Gebbia’s initial brainstorm in 2007, they launched a website the next spring, in 2008. One year later there were hosts in 1,700 cities in 100 different countries. Two years after that, Airbnb had hosted its 1 millionth guest and had over 120,000 listings. By 2020, the year Covid threw a pandemic-sized spanner in the works of tourism, Airbnb had 5.6 million listings and was heading toward an IPO.

Surprisingly, though, a global pandemic wasn’t the biggest problem facing Airbnb. There was a global backlash building that had nothing to do with COVID 19. Airbnb’s biggest problem was the unintended ripple effects of Chesky and Gebbia’s simple idea.

Up until the debut of the internet and the virtual rewiring of our world, new business ideas usually grew slowly enough for the world to react to their unintended consequences. As problems emerged, new legislation could be passed and new safeguards could be introduced. But when Airbnb grew from a simple idea to a global juggernaut in a decade, things happened too quickly for the physical world to respond. Everything was accelerated: business growth, demand and the impact on both tourism and the communities those tourists were flocking to.

Before we knew what was happening, tourism had exploded to unsustainable levels, real estate markets went haywire and entire communities were being gutted as their character changed from a traditional neighborhood to temporary housing for wave after wave of tourists.

It’s only recently that many cities that were being threatened with the Airbnb effect responded with legislation that either banned or severely curtailed short-term vacation rentals.

The question is, now that it’s been unleashed, can the damage done by Airbnb be undone? Real estate markets that were artificially fueled by sales to prospective short-term rental hosts may eventually find a new equilibrium, but many formerly affordable listings could remain priced beyond the reach of first-time home buyers. Will neighbourhoods that were transformed by owners cashing in on the Airbnb boom ever regain their former character?

In our networked world, the ripples of unintended consequences spread quickly, but their effects may be with us forever.