Yesterday the two European online accommodation platforms 9flats and Wimdu announced that they are going to merge, this in order to be able to compete with the well-known American market leader Airbnb.
Both companies were originally founded in Germany. 9Flats claims to offer 250.000 apartments worldwide and Wimdu offers around 300.000 residences, so together offering over a half million accommodations. Airbnb offers four times this amount through their platform, namely approximately two million accommodations (Techcrunch, 2016).
Important to notice is that online accommodation platforms are subject to increasing regulations in Europe. In 2014, Berlin implemented a law that prohibits short-term rentals, and checks properties actively to see if this implemented properly. Other cities, like Amsterdam, London, and Paris regulate the rentals through the number of rooms that can be rented, the number of persons and the rental period, which seems more favourable for the economy. In Brussels, homes can only be rented when permission is given from the owner, while this is not obligated in above-mentioned cities. The European Commission has stated in its 2015 digital single market strategy paper that sharing platforms ‘’offer opportunities for increased efficiency, growth and jobs, through improved customer choice, but also potentially raises new regulatory questions.’’ (European Commission, 2015, p11). At the moment sharing platforms are still supported by the European Commission, however legislation concerns the online accommodation platforms for the future.
Roman Bach, former CEO of 9flats, will lead the joint entity that is going to be headquartered in Singapore. 9flats already moved its business to Singapore, due to increasing limiting legislation. He stated that this merge would enable them to create a stronger value proposition for their guests and hosts, while simultaneously accelerating growth and improving long-term profitability (Wiwo, 2016).
I believe that if the new joint entity would be able to successfully increase their market share, by adding scale and entering more markets, it would have a chance against Airbnb. It has to mitigate the risk of increasing legislation by reaching into more markets and promoting their platform to both hosts and guests, in order to compete with the American current market leader.
References:
Airbnb rivals Wimdu and 9flats consolidate
http://www.europarl.europa.eu/RegData/etudes/BRIE/2015/568345/EPRS_BRI(2015)568345_EN.pdf
http://eurlex.europa.eu/legalcontent/EN/TXT/PDF/?uri=CELEX:52015DC0192&from=EN
http://www.nu.nl/internet/4333952/airbnb-concurrenten-wimdu-en-9flats-gaan-fuseren.html
Dear Annemiek, interesting post! I had actually not heard about 9flats before, while I thought wimdu was mainly for renting places for a longer (>1 week) period of time. So I did not know that they were directly competing with AirBnB. Do you happen to know what sets them, and this new joint venture, apart from AirBnB? Seems like it will be extremely tough to compete with AirBnB, considering the network effects.
Luca