The Rise of Peer to Peer Sharing and Rentals

Whether we recognize it or not, the American culture of consumerism is profoundly changing. Innovative peer to peer (P2P) technologies are giving up-start companies a set of tools to disrupt traditional forms of Business-to-Consumer (B2C) commerce. New payment technologies such as PayPal's Adaptive Payments system allow website developers to create marketplaces where people can rent or share virtually anything with anybody.

The future impact of these technologies may be difficult to gauge now, but they epitomize the basic premise of the discipline of economics: the efficient allocation of resources.  After all, why should you own a step ladder if you only use it once a year when someone in your neighborhood or apartment building owns a ladder that your could borrow or rent?  Until recently, it would have been nearly impossible to efficiently discover who in your area owned a ladder for you to use or rent. Plus, the P2P technologies to facilitate such transactions didn't so much as exist beyond auction and classified sites such as eBay and Craigslist.

However, new sites such as www.getaround.com and www.relayrides.com allow you to rent someone's unused car in California, and it's perfectly legal to do so given the recent changes in insurance laws in the state. These sites could have as significant of an impact on the traditional rental car companies and auto manufacturers as Google had on the publishing and newspaper businesses. My own experience with the car sharing service www.zipcar.com is a great example of how people can sell their cars and use car sharing services to locate and rent a car by the hour in the neighborhood.  I owned a car that I used only 5-10 hours a month. That level of utilization is not only a huge waste of money ($275/month for a garage and $200/month for insurance), but it's a total waste of resources (metal, plastic, rubber, etc).  Zipcars are utilized up to 80% of their physical capacity. This is the efficient allocation of resources at play, and it's good for me, better for the environment, and good for commerce to boot.

Sites such as www.rentalic.com allow you to list and rent your unused tools, law mower, and other household items. Our site, Sherpa Travel Exchange, allows people to rent their unused living space to travelers through a secure P2P online booking system using the latest Adaptive Payments technologies. All of these sites enable people to more efficiently allocate resources; whether those resources by lodging space (as in the case of Sherpa), household goods or your under-utilized Honda Civic in your driveway. The people who own the stuff make money from their stuff and the people that don't own the good or service benefit by paying only for what the need.

Thirteen years ago many people thought selling your items to complete strangers over the Internet was a crazy idea. Today, eBay is a multi-billion dollar business. Underscoring the success of sites like eBay and many of the new generation of P2P start-ups is the fact that these website operators offer the mechanism that is most essential to their survival and grown: ratings and reviews systems. Such systems engender trust and reliability and remove risk and uncertainty from the transaction. Ratings and reviews sites such as Yelp and TripAdvisor now permeate much of retail, travel and hospitality services, respectively. At the same time, the Better Business Bureau and the Gallup Organization recently found that 47% of consumers stated that they had "some, very little, or no trust at all" in companies that they do business with in everyday life. (Source found here) As our trust in companies erodes, we are beginning to trust complete strangers more and more.



P2P Sharing Goes Mainstream



Environmentally speaking, the impact of the new crop of P2P sites may impact the natural resource constraints that are so often an inconvenient truth about our modern society. Rachel Botsman's excellent book entitled What's Mine Is Yours: The Rise of Collaborative Consumption cites an interesting and chilling anecdote; that is, if everyone in the world lived like an average middle-class American, we would need five times more resources that actually exist on our planet. Frightening indeed. Folks, the planet's population ain't shrinking! So, we must find ways to more efficiently allocate the existing resources, goods and services we have at our disposal or face a future driven by unnecessary scarcity as the people within places like China, Brazil and India ascend to ever higher standards of living.  Collaborative Consumption is not just a fad.  In fact, Collaborative Consumption was listed as one of Time Magazine's top 10 sustainable trends.

If you're interested in learning even more about how P2P sharing business models are changing commerce, you can also check out an excellent new book by Lisa Gansky entitled The Mesh: the Future of Business is Sharing.

Safe travels,

Russ

Travel Review Sites: Moral Hazard Ahead

By Russ Hearl, CEO and Co-Founder, Sherpa Travel Exchange, LLC

"Trust me." "To be honest with you."

Have you ever noticed that these prefacing statements are often precursors to a tall-tale? Well, when it comes to endorsements (or indictments, for that matter) of travel experiences it becomes equally difficult to separate fact from fiction.

User generated and social travel review sites such as TripAdvisor and HotelChatter have become mainstream options for travelers seeking a third-party review of airlines, car rental companies, tour operators, hotels, and vacation rentals, to name a few. Millions of people use these sites to obtain a less biased review than they would get by looking at a travel services supplier website or brochure.

But, how un-biased are these sites in reality?

It's a question that we should all ask ourselves. After all, many of these sites are supported by advertising revenues. This applies a not-so-insignificant amount of pressure on the site operators/businesspeople to make sure the people paying the bills are happy. I know this may sound cynical, but as a former advertising executive myself, I can tell you that there is a significant moral hazard present in advertising supported businesses. Lest we think that the big, colorful real estate section in our local newspaper is there because the editor just couldn't wait to tell you about the new sub-division opening up on the other side of town.  I have friends in the newspaper business that tell me a meaningful portion of the content is written to garner paid advertisements. So ask yourself - Is it real news or bait to lure-in advertisers?

When it comes to review sites, how trustworthy is the 5-star aggregate score for the service provider in question? Case in point, Yelp was hit with a class action lawsuit alledging that they are really running an extortion scheme. The lawsuit was filed on behalf of a collection of local businesses that alledge Yelp promises to remove negative comments about their businesses only if they agree to pay a monthly advertising fee. Whoa. If that's true it really makes you wonder whether you're actually getting reviews of real exerpeinces or just the positive ones. Anyone that has used Yelp knows that there's no shortage of inflammatory reviews of service providers.  Many of the negative reviews are actually really funny, but most are plain outrageous and could be considered libelous in some jurisdictions.

Forrester Research examined the motivations of travelers that read and wrote reviews of travel experiences. The research found that 21% of travelers had read reviews on travel review sites like TripAdvisor in the previous 12 months in order to make travel purchase decsisions. The research also found that:

• 19% of the travelers who responded said that they left a review because they were told they would be entered into a drawing for a prize or would receive some form of compensation for submitting a review.
• 27% said they wanted to warn others about a bad experience.
• 48% said they wanted to share a good experience with others.

Overall, more than 6 in 10 U.S. leisure travelers were found to regularly participate in travel-focused social media activities like rating a hotel. Clearly, travelers like to tell almost anyone about our experiences (witness the 50,000+ travel blogs).

Indeed, many marketers would argue that the revolutionary impact of the social networks and user generated content sites (like travel review sites) is embodied in the ability to inspire, monitor and, (cough, ahem!) control word of mouth marketing.  Of course, the transparency offered by social networks can cut both ways.  As travelers, we ought to question the credibility and integrity of some of the advertising supported review sites. Perhaps a more faithful representation of travel experiences could be gained by polling your own social networks using a Facebook poll or some sort of survey. But even then it would be difficult to gain a large enough sample size or let alone locate anyone within your network that has purchased or consumed services from a provider in your intended destination.

Despite the moral hazard, review sites might still over the best solution in the market for obtaining fast background checks on potential service providers. 

How about you?  Do you trust these review sites?

Russ

Russ Hearl
CEO & Co-Founder
Sherpa Travel Exchange, LLC
601 Van Ness Ave., Suite E208
San Francisco, CA 94012
http://www.staysherpa.com/

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The real unemployment rate

Today, the U.S. Bureau of Labor Statistics reported that the U.S. economy lost a paltry 11,000 jobs. With all the fanfare, you would have thought that there was some reason to celebrate. Far from it.

Sure, we're no longer losing jobs at the same pace as at the beginning of the Great Recession, but one in ten people in the labor force is still out of work. Of the 165 million people in the labor pool, that's 16.5 million people that are out of work that are looking for a job and just can't find one. But it's a lot worse than that... The Bureau of Labor Statistics doesn't count people who are employed in part-time jobs to make ends meet or people who are considered to be "discoraged job seekers" and have stopped looking for work altogether - presumably because any family of four can eat off of the $800 subsidy paid twice a month. Yeah, that is, if you like to feed your kids ramen noodles three times a day.

The reality is that our economy, and our labor market, is in shambles. The real unemployment rate is closer to 17.5% when you factor in all the people that have stopped looking or have taken on part-time work just to make a few extra bucks. That's another 12 million people that can't find suitable full-time work. At a "full-employment" rate of 5% unemployment, our economy would have about 8 million unemployed people. There's nearly 20 million more people unemployed than there was when our economy was at full employment a couple years ago. That's freightening.

So, what's one to do if they can't find full-time work or refuses to don the orange apron at Home Depot or the blue apron at Wal-Mart for 25 hours a week and no benefits? Well, many people have turned to eBay to sell there stuff. In the last year, the number of online auctions on eBay has more than doubled. The average daily auction volume in August, 2008 was 15 million auctions. In November, 2009 it was close to 35 million. eBay is as popular as ever because it's a great place for people to make some extra cash. People are selling their stuff in droves.

The unemployed and underemployed are also turning to direct selling and Multi-Level marketing companies in droves. Amway, Tupperware and Avon have all experienced record growth in the ranks of their agents/salespeople. When times are tough, Americans become ultra resourceful. Door to door selling is even making a comeback. Who would've thought? I guess if people aren't at a job, then they're at home, so why not...

Speaking of resourceful, people are also getting into the hospitality business. I recently counted the number of short-term rooms for rent posted on Craigslist. These are rooms for rent by the day - not by the month or by the year. These are people looking to make a few extra bucks by providing lodging services to travelers. I found that on a typical weekday there are more than 1,000 new ads posted for short-term rooms for rent. This is more than double the number from just a year ago. Craigslist lacks essential security features to make it a fully functioning lodiging classifieds site, yet people are willing to take the risk to make a few extra bucks by renting out their extra space to travelers.

Americans possess an unprecendented amount of unused space in their homes. Resourceful people all around the country are learning that they can monetize their unused living space by getting into the hospitality/lodging business. People are running make-shift B&Bs as a way to avoid foreclosure. Not a bad idea if you ask me...

Mint.com posted a humorous video that discusses the real unemployment rate on YouTube.

Russ Hearl
Head Sherpa & Co-Founder
Sherpa Travel Exchange, LLC
601 Van Ness Ave, Suite E-208
San Francisco, CA 94102

415-997-9925 Google Voice
russ.hearl@staysherpa.com
www.sherpatravelexchange.com

Stay Smart. Stay Sherpa.

Home based lodging: A recession proof business

The last couple weeks I've been presenting and pitching Sherpa Travel Exchange to investors, potential vendors and just about anyone that will listen to me. Sometimes people have an instinctive reaction to the concept of home based lodging (housing paying guests in your primary or secondary home). The home based lodging market is a lot more than just 22 year olds backpacking around and crashing on each other's couches (ala Couchsurfing.org). This market consists of any type of lodging services provided in one's own home as opposed to a hotel, including: B&Bs, Homestays and Home Exchanges.

The market is actually a $5B+ market in the U.S. alone. With respect to B&Bs, the Professional Association of Innkeepers International cites more than 17,000 B&Bs in the U.S. generating more than $3.4B in revenue. Millions of people each year stay at B&Bs, while the owners sleep in a room nearby. Many consider B&Bs to offer a more authentic local experience than hotels. We agree. Which is why B&Bs will be a major component Sherpa - not only existing B&Bs, but enabling ordinary homeowners to create a make-shift B&B in their own homes to earn some extra cash. The B&B market niche as a whole has proven to be recession proof as money conscious travelers seek more affordable alternatives to boring, sterile and expensive hotel rooms.

I did a quick scan of Craiglist yesterday and found more than 500 new listings posted that were advertising rooms for rent by the day in someones home. Yes, there are lots of people that want to earn a few extra bucks by taking in paying guests. For many of these people it's a better alternative to getting a full-time roommate. But, for all the great things you can do on Craigslist, it lacks important peer to peer reviews of hosts and guests, online booking, background records and other critical pieces of information most people would require to feel comfortable running a make-shift home based hotel/B&B. We are creating some exciting innovations in this regard. Stay tuned...


Russ Hearl
Head Sherpa & Co-Founder
Sherpa Travel Exchange
601 Van Ness Ave, Suite E-208
San Francisco, CA 94102

415-997-9925 Google Voice
russ.hearl@staysherpa.com

Stay Smart. Stay Sherpa.

Follow Lucky the Sherpa on Twitter: sherpatravelx

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Ponzis and Pyramids

Congress is set to pass another extension to the Federal unemployment benefits program. Now that the nation is approaching 10% unemployment, our government believes its a good idea to continue to extend the safety net. The news of the unemployment benefits extension got me thinking about what people do to make ends meet when they are unemployed or under-employed. So, I looked at the Bureau of Labor Statistics site (www.bls.gov) and found that for everyone one person that's unemployed in the U.S., there's at least one person that considers themselves "under-employed". That translates to more than 33 million working adults that aren't able to work as much as they'd like to.

One only needs to look at eBay to see the fallout of prolonged unemployment. In August, 2008 there were 15 million average daily auctions on eBay. In August, 2009 there were 30 million average daily auctions on eBay. People are selling their stuff to generate cash to survive.

Desperate times call for desperate measures for millions of people.

We've been hearing a lot about Ponzi schemes lately and it got me thinking about how people get involved in both illegal Ponzi schemes and borderline illegal multi-level marketing pyramid companies like Amway. People are trying to make an extra buck or two, which is why MLM companies like Amway exist where the members recruit other agents, who recruit more agents with everyone making a cut of the sales by their recruits - all the way down the pyramid.

In case you're curious about the origins of the term "Ponzi" scheme, it actually has nothing to do with my hero, Fonzi. Of course, Fonzi was the the always cool ladies man who I so desperately want to be . Charles Ponzi was an Italian immigrant to the U.S. who's likeness is associated with the get rich quick scams that he is so infamously associated with. Investors seeking abnormally high returns make investments in a fund that oddly generates a much higher rate of return than typical funds. Eventually, the fund manager running the Ponzi scheme can no longer afford to pay out the returns and the fraud becomes apparent. If you're trying to augment your income, try and stay away from anything that sounds too good to be true. It might turn out to be a Ponzi scheme.

Some people turn to other get rich schemes they find on the internet like the ones that promise you can earn thousands of dollars per week from the comfort of your own home. All you have to do is make a small investment - which is often where you get fleeced. Some people sell Tupperware, Longaberger Baskets, or Pre-Paid Legal services
to try and make ends meet. All of these involve making a pretty significant investment in time and/or money to actually make a decent income.

Sherpa has an idea that we think will prove to be the best way to earn some extra cash. There are 67 million homeowners in the U.S. with over 90 million unused rooms. Sherpa is going to help homeowners monetize those unused rooms by listing these rooms as Homestays. SmithTravel Research reports there are 4.8 million hotel rooms in the U.S. If only 5% of the unused rooms inside American homes become monetized on Sherpa, the lodging supply in the U.S. will more than double. This dramatic increase in supply will provide millions of homeowners with additional income and will make travel more affordable for so many more people. In doing so, Sherpa will address the growing demand for travel and empower millions of people to augment their income and earn a decent living.

Russ


Russ Hearl
Head Sherpa & Co-Founder
Sherpa Travel Exchange, LLC
601 Van Ness Ave, Suite E-208
San Francisco, CA 94102

415-997-9925 Google Voice
russ.hearl@staysherpa.com

Stay Smart. Stay Sherpa.

Follow Lucky the Sherpa on Twitter: sherpatravelx

Check out our Facebook page: www.facebook.com/home.php?#/pages/Sherpa-Travel-Exchange/123269124279?ref=ts

Creepy roommate stories

Renting the typical one bedroom apartment in San Francisco will put you back about $2k a month, so it’s no wonder so many people opt for a two-bedroom pad and a roommate. After having lived in London, New Haven, Tucson, Dallas, El Paso and Cleveland, I can tell you that I’d gladly pay $2k a month for a place in San Francisco. I’ve got nothing against those cities, but there’s just nothing like a balmy climate where you’d be hard pressed to find more than a few days a year when you break a sweat and you don’t freeze your ears off. In any case, living in San Francisco does have some disadvantages, not the least of which is the cost of housing.

So, many people deal with the high cost of living finding a roommate – often by posting a roommate wanted ad on classified sites like Craigslist. I always thought there was something a bit strange about a site where you had roommate wanted ads near casual encounter ads. You just hope that your possible new roommate is not also an active user of the casual encounter section as well. Eeew, weird.

The so-called Great Recession is driving more people to cohabitate. According to the U.S. Census Bureau’s American Community Survey, over 228,000 “family households” in California cohabitate with a non-family member as a roommate. Moreover, the Census Bureau reports that 674,000 “non-family households” cohabitate with a roommate in California. Clearly, lots of people in California and our country live with people to which they are not directly related. The Great Recession has contributed to a 9.7% rise in the number of American households that cohabitate. When facing the need to augment your income and offset your expenses with a roommate, millions of Americans are already comfortable living with relative strangers. For a proof point, just look at http://www.couchsurfing.org/. Couchsurfing touts more than 1.2 million members who crash on the couches of other members to avoid hotel costs.

A few years ago I was in search of an extra 500 bucks a month to help defray the cost of my rent and I entered into a short stint with a roommate who was probably a super user of Craiglist’s casual encounters section. Needless to say, after a nearly two months of constant strange women visiting my house at all hours of the night, I asked the guy to move out. As a follow-up to that movie-of-the-week special presentation, there was this roommate who thought it was great to have fondue parties at my house every weekend with 10 of his closest friends. Oh, and I can’t forget the roommate who drilled a hole in my bedroom wall, presumably for ventilation. Yeah right.

Not all roommates are sociopathic or party-animals, but there’s one thing you can say about at least 90% of roommates, it’s a full-time invasion of privacy. Sure, some people really like sharing their living space for social reasons, but if given the option, most people would rather live on their own.

This is why we came up with the idea to establish a viable homestay market in the U.S. A homestay is a pretty simple concept that involves an ordinary homeowner or tenant entering the hotel business by taking in lodgers on a part-time basis rather than taking in a full-time roommate. The homestay business has been around for centuries. America is full of people that augment their primary income with part-time jobs. Just look at the ongoing (if not utterly surprising) growth of direct selling/multi-level marketing companies like Amway or Avon as a microcosm of our entrepreneurial spirit here in the good ole US of A.

We think that many people, if given a properly functioning and safe marketplace, will opt to earn extra cash by taking in lodgers instead of a full-time roommate… especially if you can make more money in less time than sharing your home every day of the month. We're creating the first efficient online marketplace that provides homeowners with the tools that will enable them to compete with hotels by offering lodging services to travelers.

It may not be a solution for everyone, but it sure beats trying to recruit your cousin to become an Amway rep, and it certainly beats selling all your stuff on eBay or Craigslist to make ends meet.

What do you think??

Russ

Russ Hearl

Head Sherpa & Co-Founder

Sherpa Travel Exchange, LLC

601 Van Ness Ave, Suite E-208

San Francisco, CA 94102

415-601-6244 mobile

russ.hearl@staysherpa.com

Stay Smart. Stay Sherpa.

Follow Lucky the Sherpa on Twitter: sherpatravelx
Check out our Facebook page: www.facebook.com/home.php?#/pages/Sherpa-Travel-Exchange/123269124279?ref=ts