Rejigging the model

Rejigging the model

The sharing economy must rework how it does business, as some trends may linger well past a Covid-19 recovery

Unicorn startups operating under the sharing economy model have not been spared by the coronavirus pandemic, as social distancing measures and travel restrictions have dimmed their outlook.

Unlike Amazon, an e-commerce behemoth reaping gains from a surge in online orders, travel-related tech companies, ride-hailing firms and apartment-booking apps are struggling as a major chunk of revenue is shaved off by global lockdown measures.

Singapore-based Grab's ride-hailing profit is declining because of the outbreak, while the GrabFood delivery service is still unprofitable despite growing demand because it subsidises delivery costs and offers promotions to attract users, said Tarin Thaniyavarn, who last week stepped down as head of Grab Thailand.

In 2018, Grab recorded a loss of more than 700 million baht. The loss doubled last year as the company expanded the GrabFood business.

Initially lauded as a force to be reckoned with, businesses operating under the sharing economy are now in danger of shouldering heavier losses because there is still no cure for the coronavirus, with the global death toll rising daily.

RIDE-SHARING WOES

Ride-sharing has become popular for a generation of people who choose not to own their own vehicle, saving the financial burden that comes with a car purchase.

After some early competition, GrabCar took a clear lead in the local market.

As the outbreak worsened in March, people became wary of sitting in vehicles belonging to others for fear of infection.

Pongsapak Apaiso, a GrabCar driver who commonly gets passengers at Suvarnabhumi and Don Mueang airports, said he earned 3,000 baht a day before the virus hit. He uses his Toyota Fortuner for the service.

"My earnings dropped to no more than 1,000 baht a day around March. Then the trips kept decreasing until I had no customers," Mr Pongsapak said.

He has stopped driving for GrabCar for two months, relying on the government's three-month 5,000-baht monthly compensation scheme.

Mr Pongsapak estimated that about 60% of GrabCar drivers have stopped driving for the app, with many going back to their home provinces or sourcing products for sale.

"I hope the situation will get better in the next 2-3 months," he said.

Mr Pongsapak worries that passengers' concerns about using ride-sharing services could become a permanent shift.

"They may be afraid to use our service," the 46-year-old driver said. "They may feel uneasy sitting in vehicles shared with other people."

Mr Pongsapak said he frequently cleans his vehicle and uses a face mask when driving.

He hopes the government will allow the resumption of international flights and reopen key tourist attractions soon so Grab drivers can find more passengers.

Grab Thailand has said the Covid-19 crisis reduced the number of passengers using both GrabCar and GrabTaxi services as more people worked from home.

This contrasts with GrabFood, which recorded higher demand after the outbreak.

Weeradej Panichwisai, senior research manager of IDC Thailand, said car-sharing firms face the same challenges as other modes of public transport.

Even though the government has eased the lockdown, more offices offer work-from-home measures to reduce costs and ease the density of workers in the city, also decreasing the likelihood of infection.

"Some offices ask employees to work 15 days at home and 15 days at the office to reduce crowding at the workplace," Mr Weeradej said. "This means the number of passengers declined for transport businesses.

"In the post-Covid-19 era, there are still concerns about consumer sentiment and spending, but I believe services that provide people with convenience, such as online ordering and picking up passengers close to their door without requiring them to hail a cab, will still be attractive to customers."

GrabCar ride-sharing service, which has riders using personal vehicles to pick up passengers, has had a negative impact from the corona virus. 

QUALITATIVE CHANGES

The sharing economy is a subset of the platform economy, where companies like Uber and Airbnb rely on access to demand as well as supply without ownership of the platform company, said Pavida Pananond, associate professor in the Department of International Business, Logistics and Transport at Thammasat Business School.

"That logic should not change, but there will be qualitative changes to how demand may be curbed because of health concerns, and to the governance relationships between the platform company and those who access the platform to provide services," Assoc Prof Pavida said.

For instance, Airbnb was hobbled by global travel restrictions and lockdown measures, she said, while fears of using public transport and work-from-home policies offered by several employers have affected ride-hailing services like Uber.

With falling revenue, these tech firms have undertaken major job cuts to mitigate losses. Uber said it's cutting 3,700 jobs around the world as usage nosedives, while Airbnb is axing nearly 1,900 jobs or 25% of its workforce.

These companies can more easily let go of employees because the firms have no obligation to their service providers, Assoc Prof Pavida said.

But since demand for these services may change, business operators will want to ensure employment prospects for those providing services on their platforms as part of qualitative changes in the post-Covid-19 period, she said.

Although future demand may be curbed because of health concerns, there is still "matching demand" on these platforms, while ride-hailing is poised to become active again as people will eventually return to work at their offices, Assoc Prof Pavida said.

Businesses can use this opportunity to ensure better hygiene standards between users and service providers.

"A plastic screen could be installed between the driver and passengers," Assoc Prof Pavida said. "Airbnb could enter the quarantine business by having medical or hospital-certified homes for quarantine use."

According to home-sharing platform Airbnb, the desire to stay in private and safe accommodations will grow as people shy away from large accommodations.

BACK TO THE CORE

The announcement by Airbnb, the largest marketplace for home-sharing booking, that it's cutting 25% of its workforce is another blow to a hospitality industry reeling from extensive revenue losses.

Kum Hong Siew, regional director for Asia-Pacific at Airbnb, told the Bangkok Post that the crisis provides an opportunity for the company to evaluate and focus on its priorities.

Before the new coronavirus emerged, growth in travel and tourism outpaced growth in the global economy for nine straight years. In 2019, the industry made up more than 10% of global GDP and created one in every four new jobs.

Mr Siew said this kind of momentum cannot be paused for long. But as travel recovers, it will look different.

People will find nearby things to do and places to visit, eager for longer-stay options for family, work and study. Some may want the sites and activities to be away from tourist spots, Mr Siew said.

This demand will create new ways for regular people and communities to benefit from travel and tourism, he said.

In a post-Covid-19 world, health and safety will be top priorities for travellers. Cleanliness at accommodation, activities and restaurants will be key factors in their decision-making, Mr Siew said.

"At the core of Airbnb are the hosts, and we have been working closely with them to chart a path through these difficult times and ensure they are ready for the future," he said.

As authentic travel will be favoured by travellers, the desire to stay in private and safe accommodation will grow as people shy away from large lodgings, he said.

The company is developing an "enhanced cleaning protocol", partnering with global experts in hospitality and medical hygiene to provide hosts with procedures and guidance on how to clean every room in a home.

These guidelines will include a learning and certification programme to empower the host community, Mr Siew said.

The protocol is informed by the US Centers for Disease Control and Prevention's published standards; leading experts such as Dr Vivek Murthy, former surgeon-general of the US; and companies in the hospitality and medical hygiene sector such as Ecolab, a global leader in cleaning and hygiene technologies and services.

Guests will be able to identify and book accommodation certified in the programme soon after hosts enrol, Mr Siew said.

"Supporting our guests and hosts during this time is the utmost priority," he said. "We have created new experience activities online to support our hosts earning an income, as well as travellers limited in their movements but who still wish to experience something new and authentic from local hosts around the world."

Airbnb's Online Experiences, which can be viewed and booked via the online channel, had 20,000 seats booked in the first two weeks after it launched.

According to a recently commissioned Airbnb online survey, guests booked Online Experiences to be entertained (63%), to learn something new (60%) and to experience other cultures and lifestyles (56%).

Food and drink is the most popular category, accounting for nearly 40% of seats booked, but guests are also drawn to a number of distinctive activities.

CO-WORKING THROUGH A CRISIS

The co-working industry already faced an uncertain future before the pandemic after the world's largest company in the sector, WeWork, suffered a big devaluation heading into an initial public offering and required a US$10-billion bailout by its major investor, SoftBank.

Even so, the crisis could lead to co-working spaces being considered an ideal option for many companies looking to downsize office space or seek shorter-term leases.

"I read about this trend, but it may just be wishful thinking," said Gavin Vongkusolkit, founder of Glowfish Offices, which operates two co-working spaces in Bangkok. "It may be the case in New York and London, but we have not seen it yet in Thailand."

While not seeing a major influx of new tenants, the company was able to hold onto existing ones during the lockdown by offering flexible packages to companies transitioning to work from home. Only one tenant stopped paying rent, while the rest switched to a discounted work-from-home package.

Since the government's easing of lockdown measures, most workers have returned to the office, with about 40% continuing to work from home.

Mr Gavin said most of the businesses renting offices at Glowfish were able to survive the crisis, likely because they are newer companies with more digital savvy.

"Even if they were not startups or strictly online businesses, they were already new types of businesses that understood how to find customers online or adapt to a digital-only model," he said.

Most of Glowfish's revenue comes from its serviced offices, but its events business was key to its growth strategy and the appeal of a co-working space as a place to bring like-minded and talented people together.

Some 30% of its events were cancelled, while the remaining 70% were postponed to the end of the year. Some event organisers are already selling tickets for September, ready to quickly move events online at reduced prices if events are still not permitted at that time.

William Hicks and Pathom Sangwongwanich

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