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Disrupting Fargo: How Airbnb and Uber are impacting the city

Fargo using Uber

In the past year, something called the sharing economy has sprouted roots in Fargo. It’s the idea that people can use the goods they already have and engage in a peer-to-peer based sharing market.

Companies like Airbnb and Uber have capitalized on the idea, disrupting the way people think about lodging, traveling and community. Here in Fargo, they are just starting to catch.

 

Sharing Cars: Uber in Fargo

Uber is a rideshare service that started in San Francisco in 2009, that last year reached over 1 million drivers in 300 cities worldwide. It launched in Fargo last May, and in barely under a year has made a significant impact on the local cab industry.

John Schneider, co-founder of Fargo 3D Printing, became an Uber driver last September. He works one weekend night a week to make “beer money,” he said.

On an average shift from 8 p.m. to 4 a.m. he gives around 20 rides, and makes $150. The price of an Uber ride in Fargo is determined based on the distance, with a base fare of about $2.

Schneider said he was partial to Uber after a poor experience with the cab service in Fargo, where he was left stranded at bar close in mid-February, someone took his cab, and the next one was a 45 minute wait.

“I’ll never take a traditional cab again if I can help it,” he said. “With Uber, you know where it’s at. You know how long it will take to get there. There’s none of this uncertainty.”

 

Local taxi cabs are feeling the burn.

“Uber has been terrible,” said Abdulie Barry, supervisor of FM Taxi. “It has affected 90 percent of our business.”

Barry said their fleet of 20 cab drivers is now down to 11, and their average pay of $400-500 a week has been cut down as well. One of their drivers even left to become an Uber driver, he said.

But Barry is certain Uber will not last, and that the taxi industry will bounce back from the losses.

“There is a lot of risk with Uber,” he said. “Anybody can be a driver. There is no security in this Uber thing.”

Barry voiced concerns that Uber puts no limit on the amount of drivers they hire, making the average wages much lower than cab companies, who put a limit on the size of their fleet. He also said that eventually Uber will be regulated like other riding industries and then no one will want to be an Uber driver.

“We have to cut costs for now, but the truth will be there someday,” he said.

Other cab companies are struggling as well. In early January 2016, local cab company Lucky 7 Taxi Cab Services retaliated by requesting the city raise taxi meter rates – a move that caused the city to question why they are in charge of that at all.

“The Dodds said they’re having a hard time competing with Uber without explaining how higher rates would help,” the Forum reported. “They did mention the pressure of higher costs of living, alluding to the pay drivers get.”

Despite Barry’s predictions for a decrease in Uber’s popularity, Schneider says he has seen only an increase in drivers since joining the Uber squad last September.

Yesterday, at around 2:40 p.m., a quick look at the Uber app showed six active Uber drivers in the city limits.

 

Still, the number of riders has remained consistent, Schneider said, suggesting that Uber is meeting a growing demand.

His riders vary across the board, as well, he said. He’s driven everyone from college students to an 80-year-old couple, he said.

“I see a variety of age groups that are using Uber. It’s not just college age students,” he said. “It’s everyone.”

Sharing Homes: Airbnb in Fargo

The impact of Airbnb on the local hotel industry has been much more gentle.

Airbnb, which stands for Air Bed and Breakfast, is an online platform that allows people to list their own homes for guests to rent as lodging. It was founded in 2008 in San Francisco, Calif., and has since swept the globe with over 2 million listings worldwide.

 

There are currently about 30 hosts in Fargo on Airbnb (and counting). Not a ton, but much more than there were last year, according to Simone Wai.

She and Joe Burgum live in a quaint 1900s-style house south of Main Avenue. They bought the house knowing they would use Airbnb to pay off mortgage, Wai said.

“Airbnb covers most months,” she said. “It helps us pay for what we do.”

Extra helpful given the fact that they are self-employed “community builders,” Wai said, and run an organization called Folkways. For other younger people looking to buy a house, Airbnb has become a way to cushion the financial blow, she said.

“It makes it easier for young people to buy homes these days,” Wai said.

Individuals can rent a single room at Wai and Burgum’s house for $75 a night, or rent the whole house, which fits up to nine people, for a total of $300 a night.

Airbnb takes a cut, varying between 6% and 12% depending on the price of the booking. Hosts are also charged an additional 3% from each guest booking for credit card processing.

For a family that might otherwise pay to house nine people at a hotel, the deal is a score, Wai said. Guests are free to use the kitchen, take a look at the art, and are closer to downtown than most Fargo hotels, she added.

 

Wai said they try to make it more than just a place to stay. Guests enter to find a personalized welcome sign, and travel guides on how to get the most out of Fargo. Wai also leaves out snacks for road trippers, and chocolates on the pillows.

“We do it because we like to use the house to its full potential, but also because we like to be ambassadors for Fargo,” Wai said.

Hotels vs. Airbnb

Chocolates on pillows might sound familiar. The Hotel Donaldson, on the corner of Broadway and First Avenue, famously leaves special treats for their guests as well. The art-deco hotel prides itself on offering a unique experience for guests, according to Tanner Tweten, Hotel Manager.

 

Bookings at the Hotel Donaldson are doing well, Tweten said. They have not seen any changes come from the growth of Airbnb, in the same way they have not been affected by new hoteliers opening in the area, he said.

According to a hefty, 33-page report done by the Boston University released in January 2016, this is not too surprising. The conclusion of the research was that Airbnb has had minimal impact on the hotel industry.

“The study concludes that a 1% increase in [Airbnb’s] listings in a given market would result in a 0.05% decrease in quarterly hotel revenues—at least for the Texas market, which served as the sample,” writes Patrick Mayock in an article for Hotel News Now.

However, Mayock goes on to say that hoteliers must take into account that Airbnb is growing at a rapid rate.

“In a vacuum, Airbnb supply is less threatening than hotel supply,” he writes. “But here’s the rub: Airbnb continues to grow rapidly. From its launch in 2008 to 2012, for which the most recent data was available for the study, the site had more than 4 million guests and more than 10 million nights of cumulative bookings.”

“Sure, if Airbnb was growing slowly, .05% would be negligible, but this isn’t the case,” said the report’s co-author, Davide Proserpio.

There are a few speculations as to how this will impact hotels in the long run. One positive outlook is that Airbnb could in fact be stimulating more travel demand, Mayock said.

 

As a Fargo-Moorhead native, Wai said this appears to be the case in Fargo. As the city continues to grow, and more events are held that draw visitors from abroad, the need for more lodging and transportation is on the rise.

“There’s more people visiting Fargo, and that’s a fact,” she said. “That demand is going up equally.”

This is consistent with Boston University’s research, which poses that while the sharing economy is disrupting industries, it could also be creating an increase in demand by generating new products and services.

However, across the globe, and certainly here in Fargo, the full transformation of the sharing economy remains to be seen.

“With the projected rapid growth of the sharing economy, a host of related studies will be needed to fully understand and reap its benefits,” the study concludes.

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Written by Emerging Prairie

Emerging Prairie was founded in 2013, by four guys with a dream to turn Fargo into a vibrant startup community. Our mission is to connect and celebrate the entrepreneurial ecosystem in Fargo-Moorhead. We do so by operating a wide variety of events and initiatives, such as Drone Focus, the Prairie Den coworking space and 1 Million Cups (1MC) Fargo, the largest and most active 1 Million Cups program in the country. We also operate an online publication that highlights the regions entrepreneurs and innovators that are turning Fargo into a flourishing tech hub. In March of 2016 Emerging Prairie became a 501(c)3 non-profit.

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