Paris Is On Fire

Last week marked the beginning of summer, and while temperatures in Paris rose in the 30s (ºC), something else set the City of Light on fire…it was a week overshadowed by hatred and aggression against Uber and the sharing economy. More specifically, UberPop — the low cost, peer-to-peer Uber service that was ruled illegal last year, but continued to operate in full force — was the major reason for the uprising.

First, there were several incidents where taxi drivers organized plots against Uber drivers and passengers, causing damage to cars and humans. In Lyon, a passenger hailed a taxi but was refused to be driven to his destination as it was not a “good area” for the cab driver, so the passenger told the driver he would take an Uber instead. The cab driver called up a few of his colleagues, followed the passenger, and beat him up brutally. In Marseille, Uber drivers in two occasions were called up by groups of taxi drivers, and upon arrival, the cabbies demolished their cars…

Midweek, the French taxi union organized mass demonstrations against Uber across all major cities, resulting in blocked streets, highways, and airports. What’s worse, taxi drivers attacked Uber cars, and burned everything and anything that had the big U.

The Streets of Paris on Thursday

What many people know is that Paris is not as startup friendly as, say, Silicon Valley. While there is an enormous supply of talent and some of the world’s best universities in Paris, successful entrepreneurs often choose to relocate to London or to Silicon Valley as they face bureaucracy and administrative hurdles at home. But what very few people know, is that Paris has become the global capital of the Sharing Economy — one of the most disruptive trends in the world. Paris is Airbnb’s single largest market, as well as one of Uber’s largest global markets.

The Parisian taxi industry is getting hit hard. Taxi cabs are seeing a huge drop in demand, for all the obvious reasons, which leaves drivers essentially unemployed. So why wouldn’t a cab driver switch to become an Uber driver? He could be making twice as much, work his own schedule, and be his own boss… One of the major problems is rooted in the French taxi system: to become a taxi driver, one needs to put down €200K for the license, more or less the same as buying a house. So once you become a taxi driver, you are locked up for life with repayments (similar to the debt incurred by the higher education system in the U.S.).

Accordingly, the real problem is a political one. Regulators have created this very inefficient system which is now getting disrupted, and in struggling to find solutions, they are considering imposing new laws to pull France back in time. The UberPop service, the “rebel” of the Sharing Economy, has been one of the most powerful trends in urban transportation in recent years. A pure peer-to-peer service, it was originally started by Lyft and then quickly copied by Uber and now also by Didi+Kuaidi in China, and has become the most popular service. As a passenger, I pay significantly below what I would pay for a cab, receive excellent service from drivers seeking a 5 star rating, and I don’t have to have my wallet on me. As a driver, it is a perfect second job, offering extra income at my convenience and my own time schedule. The experience is pleasant for both parties. (Disclosure: GSV owns shares in Lyft)

So why would a country like France, or any other country, consider blocking a service that, a) benefits all parties involved, b) helps lower unemployment, c) provides a positive work environment, and d) increases productivity, efficiency, and ultimately GDP?

Governments around the world should be re-engineering the old taxi industry, rather than attacking the emerging Sharing Economy. The Genie is out of the bottle, and she won’t go back inside. Rather than fighting a disruptive mega-trend, we should help adjust the broken “nega-trend”.

Airbnb’s rise in Paris has been more impressive than anywhere else. First launched in 2010 in Paris, its popularity has now grown to an estimated one million guests staying with Airbnb housing this summer. With 40,000 listings, the French capital is Airbnb’s largest city in the world, and attracts about one in eight tourists in Paris.

Number of Airbnb Guests in Paris

Source: WSJ, GSV estimate

In 2013, Airbnb released some data of its economic impact, showing that guests stayed an average of 2.9 nights longer with Airbnb than if they had stayed at a hotel. The data also revealed that 27% of guests said they would not have come to Paris otherwise. All that resulting in $240 million of economic activity and 1,100 new jobs. Applying the estimated growth rate in number of guests from 2013 to 2015, today’s economic impact is an estimated $1 billion of annual revenue and 4,400 new jobs for Parisians.

Meanwhile, regulators are getting pressured by hoteliers and their unions, and are trying to find ways to block some of Airbnb’s activity. Authorities have claimed that as much as two-thirds of Airbnb apartments are operated illegally. However, inspectors made surprise visits in 2,000 apartments in the popular Marais district, and found that just 100 had potential violations…in other words, a number less than 100 were actually illegal, meaning only 2% to 3%, and not two-thirds of listings, comprise the real “underground economy.”

Unlike Uber, Airbnb has been much more cooperative with authorities around the world, and has not seen actual aggression against its disruptive marketplace. Lately, Airbnb has been agreeing to collect tourist taxes in many of its cities, and to work closer with authorities. Capturing just an estimated 1% of the global hotel industry, Airbnb is still in the very early stages of its development, and we believe the SF-based “startup” will be able to grow and capture close to 10% of that global market over the long-term.

As published in this week’s A 2 Apple: http://bit.ly/1edtUfg

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