How Airbnb learned the importance of playing nice with regulators

A few months ago, I asked whether the gig economy could survive a renewed regulatory onslaught – something which has come to the fore in recent months as regulators take aim at the practices of companies like Uber, Lyft, Airbnb and others.

In a series of blogs, we talked about how the Governor of New York had signed restrictive rules on short-term apartment rentals in the state of New York into law in October last year – a move aimed directly at Airbnb.

The new rules made it illegal to advertise vacant apartments in multi-unit buildings for rentals of 30 days or less, with fines up to $7,500 for those caught listing such a property on Airbnb.

At the time, Airbnb announced its intention to challenge the new regulations, adopting a similar stance it had taken in the past – threatening to use its vast reserves of cash to mount legal challenges at any attempt to curb growth. However, in the six months since then, Airbnb has had a notable change of heart…and has adopted a different approach.

The company dropped its lawsuit against the State of New York after receiving assurances that the laws in question would only target hosts with illegal listings. Similarly, in May of this year, Airbnb proposed a settlement in its lawsuit against San Francisco over its short-term rental laws. The settlement would include a plan for Airbnb to help build an easy system for hosts to register with the city.

So, what happened? And more importantly, why does it matter?

Like Uber, Airbnb is – or was – something of a rock star in the world of the start-up gig economy. Airbnb disrupted the hospitality industry with an innovative product, a unique value proposition and great branding. It changed the face of the market and saw its valuation sky-rocket as a result. And just like Uber, the company was well-known for its combative stance towards lawmakers seeking to regulate their model of business – arguing it was just an online marketplace, and as such shouldn’t be subject to the same regulations as other property-rental companies.

But the world in which these companies were created has changed and momentum has clearly shifted. Economic disparity is a pervasive theme in the current political landscape and regulators are increasingly keen to take on the gig economy giants, who are perceived – rightly or wrongly – as enabling this disparity. For example, the Governor of New York argued that the regulation in question was necessary to stem the growing housing crisis in the city, noting that building owners were opting to take apartments off the rental market and list them on Airbnb instead.

From a communications and external reputation perspective, it has been fascinating – and welcoming – to watch Airbnb transform its message into one of responsibility and partnership with regulators. This reflects a company that had the maturity to recognize the palpable shift in mood and readjust its strategy accordingly. Consider for example the conciliatory language used in a recently issued progress update on its policy framework for partnering with governments around the world: The company cites the principle of “…paying our community’s fair share of hotel and tourist taxes; and developing public policy solutions to help governments put in place new rules for this new activity.”

This change in approach not only reaps benefits from a PR perspective, it also makes solid business sense. Airbnb was previously facing multiple battles in cities around the world. This new commitment to partnering with governments, local and national, from the outset is enabling the company to expand rapidly and more seamlessly into other markets. As it notes in its policy framework update, the company recently formalized a regulatory path to begin collecting and remitting taxes in Mexico City, putting in place a model for conducting business which can now be replicated across Latin America.

In adopting a more appeasing tone and recognizing the value in partnering with law makers, Airbnb has done more to secure the long-term viability of its brand and business than endless expensive battles with regulators ever could. It is worth remembering that Airbnb is one of the few Silicon Valley “unicorns” that is actually profitable.

The rest of the gig economy leaders may do well to take note.