Airbnb uses the FIFA World Cup to bring the sharing economy to Brazil

As online room-sharing service Airbnb Inc. battles US authorities, the company is using the upcoming FIFA World Cup to slip relatively comfortably into one of the world’s major markets.

In Brazil, which hosts the month-long internationally acclaimed soccer tournament from Thursday, Airbnb has seen a well-publicized tenant boom, government acceptance and a limited setback in the local hospitality industry.


Airbnb Brazil: In the Business section of June 11, an article about Airbnb’s activities in Brazil during the World Cup referred to Sao Paulo as the national capital. Brasilia is the capital. Additionally, the first name of Professor Giorgos Zervas of Boston University was misspelled as Giorgis.
While Latin America’s largest country is widely blamed for failing to upgrade its infrastructure adequately for the FIFA event, the government is content to allow Airbnb to step in and meet the additional demand from some 3.5 million foreigners and locals looking for accommodation.

For Airbnb, expanding into a friendly international market offers a widely visible chance to gain exposure and spread the idea of ​​the so-called sharing economy to potentially lucrative new markets – an opportunity to build hosts and customers. Airbnb loyal customers and establish trust in its service.

Plus, it avoids the kind of battles it faces in U.S. cities like New York, San Francisco and Malibu, where regulators accuse the company of dodging hotel laws and taxes.

“It will be a learning experience for the hosts,” said Christian Gessner, general manager of Airbnb Brazil, speaking at the company’s local headquarters in a small converted house away from the main business district of Sao Paulo. “Our goal is to grow the Brazilian community of hosts and guests… In Brazil, we see trust and hospitality as key growth factors.”

Airbnb expects more than 50,000 people to stay in Airbnb accommodations on major World Cup nights. Perhaps the best-known hire is that of Ronaldinho, one of Brazil’s most famous footballers. He recently offered his house in Rio for $15,000 a day during the FIFA event.

But most hosts in Brazil offer something much cheaper, taking advantage of tourists’ reluctance to pay for expensive hotels.

Margarida Dodnar, 58 and retired, rents single rooms in her house in Cuiabá for just over $100 a night. Since discovering the Airbnb website, she said, she has turned her old house into cubicles.

“I’ve worked in telecoms, I’ve worked in four-star hotels as an executive assistant, but now I live entirely on that money,” Dodnar said. “During the World Cup we will be full of foreigners – Americans, Colombians, a couple of Chinese, Austrians, some from Bosnia.”

Cuiabá is one of 12 World Cup host cities that critics doubted the ability to host such a big event. The city’s infrastructure remains, visibly, a work in progress.

There is 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 hotels in the Texas area, Boston University professor Giorgis Zervas found that events such as auto races and the South by Southwest festival in Austin have helped boost Airbnb’s business there.

“Because there’s a lot of demand, maybe you keep your room on Airbnb,” he said. “These events where you grab a lot of money for your room could motivate you to enter the sharing economy.”

But Zervas’ study also lent credence to the argument of hoteliers who say Airbnb is hurting their business. His article concluded that every 1% increase in Airbnb’s market would decrease the hotel’s revenue by 0.05%.

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

In San Francisco, where short-term rentals are illegal, authorities have fined Airbnb hosts and allowed landlords to evict them in a boiling housing market with skyrocketing rents.

Partly in response to these legal issues, Airbnb launched a shared city initiative in Portland, Oregon, in which the company collects resort taxes from hosts and pays the city directly. In a statement, the company said it wants to work with all host cities, whether or not they’re enthusiastic about Airbnb.

San Francisco-based Airbnb is one of the West Coast’s fastest growing online startups and recently closed an investment valuing the company at $10 billion. Revenue and profit comes from a 3% reduction in guest bookings and 6% to 12% guest fees.

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

Brazilian hoteliers may be more accepting of Airbnb than their American counterparts, but that may only last for the duration of the World Cup.

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

“There is no demand for this kind of product in Brazil. It is very rare for a foreign traveler or tourist to want to stay with someone, without information, when there is a hotel,” Fermi said. “We don’t think there is cause for concern about an increase in the supply of… rooms available in the houses.”

Still, the president of the hotel association in São Paulo, the national capital located in Brazil’s largest state, said he has filed formal complaints against sites such as Airbnb with the country’s prosecutor’s office.

“Renting houses like this is illegal, and those who do so should be fined or punished,” regional president Bruno Omori said. “We oppose any unlawful action, and this one in particular means tax evasion.”

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

“There are specific laws that support us. Everyone is allowed to house people in their homes for 30 days,” he said.

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Times writer Riley Snyder contributed to this report.

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