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Airbnb uses FIFA World Cup to bring sharing economy to Brazil

Economy, Business and FinanceBrazilRentalsSoccerLaws and LegislationRooms and SubletsHotel and Accommodation Industry
Airbnb hosts in Brazil are cashing in on tourists' reluctance to pay for pricey hotels during the World Cup
Hoteliers in Brazil may accept Airbnb, but only as long as the World Cup lasts

As online room-sharing service Airbnb Inc. battles authorities in the U.S., the company is using the upcoming FIFA World Cup to slide relatively comfortably into one of the world's major markets.

In Brazil, which hosts the monthlong, internationally renowned soccer tournament starting Thursday, Airbnb has seen a high-profile boom in renters, acceptance from the government and limited push-back from the local hotel industry.

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FOR THE RECORD:

Airbnb Brazil: In the June 11 Business section, an article about Airbnb's operations in Brazil during the World Cup referred to Sao Paulo as the nation's capital. Brasilia is the capital. Also, Boston University professor Giorgos Zervas' first name was misspelled as Giorgis.
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With Latin America's largest country widely accused of failing to upgrade its infrastructure adequately for the FIFA event, the government is content to allow Airbnb to step in and pick up extra demand from the estimated 3.5 million foreigners and locals looking for a place to stay.

For Airbnb, expansion into a friendly international market offers a widely visible chance to advertise itself and spread the idea of the so-called sharing economy into potentially lucrative new markets — an opportunity to create loyal Airbnb hosts and customers and to establish trust in its service.

Moreover, it is avoiding the kind of battles it faces in such U.S. cities as New York, San Francisco and Malibu, where regulators accuse the company of circumventing hotel laws and taxes.

"This will be a learning experience for hosts," said Christian Gessner, general director of Airbnb Brazil, speaking at the company's local headquarters in a small converted house tucked away from São Paulo's main business district. "Our goal is to grow the Brazilian community of hosts and guests.... In Brazil, we see trust and hospitality as key factors for growth."

Airbnb expects that more than 50,000 people will stay in Airbnb accommodations on big nights during the World Cup. The best-known rental may well be that of Ronaldinho, one of Brazil's most famous soccer players. He recently offered his house in Rio for $15,000 a day during the FIFA event.

But most hosts in Brazil are offering something much cheaper, cashing in on tourists' reluctance to pay for pricey hotels.

Margarida Dodnar, 58 and retired, is renting out single rooms in her Cuiabá home for a little more than $100 a night. Ever since she found out about the Airbnb website, she said, she has been converting her old house into compartments.

"I worked in telecoms, I worked at four-star hotels as a management assistant, but now I live entirely off this money," Dodnar said. "During the World Cup, we'll be full of foreigners — Americans, Colombians, a Chinese couple, Austrians, some from Bosnia."

Cuiabá is one of the 12 World Cup host cities that critics doubted have the capacity to accommodate such a large event. The city's infrastructure remains, visibly, a work in progress.

There is some academic evidence indicating that international events like the World Cup can serve as an effective catalyst for the sharing economy.

In a recent report on Airbnb's effect on Texas-area hotels, Boston University professor Giorgis Zervas found that events such as auto races and the South by Southwest festival in Austin helped boost Airbnb activity there.

"Because there's a lot of demand, maybe you stick your room on Airbnb," he said. "These events where you catch a lot of money for your room might motivate you to enter the sharing economy."

But Zervas' study also lent credence to the argument of hotel operators who say that Airbnb cuts into their business. His paper concluded that every 1% increase in Airbnb's market would decrease hotel revenue 0.05%.

Meantime, the company has run into trouble in highly populated cities such as San Francisco and New York, where hotel companies claim that Airbnb is ignoring or not paying hotel taxes.

In San Francisco, where short-term rentals are illegal, officials have fined Airbnb hosts and have allowed landlords to evict them in a hot housing market where rents are soaring.

Partly in response to those legal issues, Airbnb launched a Shared City initiative in Portland, Ore., in which the company collects room taxes from hosts and directly pays the city. In a statement, the company said it wanted to work with all host cities, regardless of whether they were enthusiastic about the Airbnb idea.

San Francisco-based Airbnb is one of the West Coast's fastest-growing online start-ups, and recently closed an investment valuing the firm at $10 billion. Revenue and profit come from a 3% cut of the bookings from hosts and a 6% to 12% fee from guests.

The company began ramping up international expansion in 2011, and has more than a dozen offices throughout Europe and Asia with more than 600 employees worldwide. Airbnb boasts that rooms are available in 192 countries.

Hoteliers in Brazil may be more accepting of Airbnb than their counterparts in the U.S., but that may last only as long as the World Cup.

The president of Brazil's national hotel association, Enrico Fermi, said sites such as Airbnb operating in this area posed no threat to the country's hotel industry.

"There is no demand for that kind of product in Brazil. Very rarely will a traveler or foreign tourist want to stay in someone's house, without information, when there is a hotel," Fermi said. "We don't think a rise in the supply of … rooms available in houses is anything to worry about."

Yet the president of the hotel association in São Paulo, the nation's capital located in Brazil's largest state, said he has lodged official complaints against sites such as Airbnb with the country's public prosecutor's office.

"Renting out homes like that is illegal, and those that do it should be fined or punished," regional President Bruno Omori said. "We oppose any illegal action, and this particular one means tax evasion."

Gessner countered that his company's activities are completely legal in Brazil.

"There are specific laws supporting us. Everyone is allowed to host people in his or her home for 30 days," he said.

business@latimes.com

Times staff writer Riley Snyder contributed to this report.

Copyright © 2014, Los Angeles Times
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