London's Uber ban a warning to Airbnb

In a blow to the tech-heavy sharing economy, London’s transportation regulation agency Transport for London deemed Uber “unfit” to run a taxi service on Friday and stripped it of its license to operate in the city. The rule will take effect on September 30 in what Reuters is calling “a major blow” to the ride-sharing service and its 3.5 million users in the UK’s capital. The company has 21 days to appeal in Britain’s courts—it immediately vowed to do so—and will be allowed to continue operating in the city during the appeal process.

“Uber’s approach and conduct demonstrate a lack of corporate responsibility in relation to a number of issues which have potential public safety and security implications,” TfL said, citing Uber’s approach to reporting “serious” criminal offenses, background checks on drivers and software that could be used to block regulators from gaining full access to the app.

In a Friday tweet, Uber CEO Dara Khosrowshahi made a plea to the city to work with the car-ride service. 

A Growing Trend

If limiting a sharing service in London sounds familiar, it should. In January, Airbnb started banning London-based hosts from renting out entire homes for more than 90 days per year without official consent from city councils, part of a move to "mollify" regulators. The rule had been in place since 2015, but was rarely enforced. In the nine months since the ban went into effect, Airbnb has reported a two-thirds reduction in London bookings of over 90 nights.

As noted in last week’s UK Insights Report, the city’s presence on the home-sharing site is still going strong with 64,000 listings, and London is still the site’s top destination for international visitors to the UK: Between July 1, 2016 and July 1, 2017, more than two million guests stayed in those London rooms, a 49-percent increase over the previous year.

But those numbers might be cold comfort for sharing services in the face of TfL’s announcement. The Uber ruling could be considered the continuation of a “slippery slope” that began with the Airbnb limits earlier this year, and should put the company on high alert. Just as Airbnb challenged traditional hotel models, Uber has challenged traditional taxis—and in London, at least, traditional taxis are winning.

Airbnb may have an advantage over Uber, however: The home-sharing service has worked with London regulators to keep the city council happy, while the ride-sharing service famously flouts laws and pays fines rather than appeasing government officials. In this case, Uber's disregard for rules may have been its undoing.

Tourism Growth

Perhaps coincidentally, the announcement came just as the UK’s Office for National Statistics reported a record four million international visits to the country in July, a 6-percent increase compared to July 2016 and a record for a month’s numbers. International visitors spent £2.7 billion on their UK visits that month, an increase of 3 percent over July 2016. From January to July, 23.1 visitors came to the country, an 8-percent increase over the same period in 2016 and (again) a record high. 

Tourism is worth £127 billion per year to the UK economy, and it seems unlikely that the country would do anything to hurt those numbers. It will be a challenge, then, for government regulators to balance the new sharing economy (and demand from the powerful millennial demographic) with the needs of established industries like traditional taxis and hotels. 

TfL’s decision on Uber has, predictably, sparked a variety of responses. David Leam, of London First (which campaigns for business in the capital) said that the city needs to be open to new ideas, business and services. “This will be seen as a Luddite decision by millions of Londoners and international visitors who use Uber, and will also hit London's reputation as a global tech hub.”