Sharing companies take over a share of the travel industry

Radkov/Shutterstock
Radkov/Shutterstock
Instead of paying $18 a day to park at San Francisco International Airport last month, Daniel Denegre tried something new. He handed the keys to his Hyundai Accent to a start-up company called FlightCar, which offered “free” parking at an off-airport lot in Burlingame, Calif., and an opportunity to earn up to $20 a day by renting his vehicle to someone else.

“If I can find a way to reduce the burden of leaving my car at the airport and make it profitable, I’m game,” says Denegre, an independent film producer from San Francisco. Even though no one rented his car, he didn’t pay a dime to park. “To me, the convenience is amazing.”

But city officials have another word for it: illegal. In a lawsuit filed earlier this year, the San Francisco city attorney’s office said that FlightCar is running an “unlawful and unfair operation.” It says that the company, which is part rental-car company, part parking-lot catering operation, lacks the necessary permits to do business at the airport.

The office is seeking unspecified damages and penalties of up to $2,500 per violation.

FlightCar is just the latest travel-related “sharing” company to run afoul of the law. Earlier this year, a judge ruled that a New York rental offered through Airbnb, a Web site that lets homeowners offer their residences as temporary rentals, violated a 2010 law that bans apartment residents from renting their spaces for less than 30 days.

Airbnb has promised to support an appeal of the ruling.

Taken together, these court challenges raise a bigger question: When it comes to travel, is sharing always the safe — or even the right — choice? Airbnb and FlightCar are just two outliers in the $3.5-billion-a-year “sharing” economy, which includes both travel businesses such as Zipcar, which rents cars in mostly urban areas and is owned by Avis Budget, and peer-to-peer car rental companies such as RelayRides, which already operates at more than 170 airports nationwide.

A FlightCar representative says that the answer is obvious: The park-and-rent choice is not only safe, but it’s also the future. The company has received “overwhelming” support from the community since being sued by San Francisco, with its listings rising from 1,000 to 1,400 between mid-May and mid-June. It also expects to prevail in court later this summer, because the company claims that it isn’t subject to the same regulations as a traditional rental car company.

“We are operating within existing city and airport regulations,” says Rujul Zaparde, FlightCar’s chief executive. “People seem to understand that FlightCar is creating jobs and contributing income to the city and that this dispute is purely about the airport wanting more money. We are disrupting two industries that haven’t changed in decades, so we expect challenges like these.”

True, the airport wants money from FlightCar. All permitted rental car companies, whether on- or off-airport, must pay the airport 10 percent of their gross profits and a $20 transportation fee on their airport transactions, says Doug Yakel, a spokesman for the San Francisco airport. By opting out of these fees, he says, FlightCar has an unfair advantage over the 12 car rental companies that do business at the airport. The fees that FlightCar owes the airport, he says, would directly help consumers by supporting the AirTrain light rail infrastructure. And passengers benefit from increased convenience, reduced roadway congestion and a decrease in pollution.

But Walt French, a San Francisco portfolio manager who was one of FlightCar’s first customers in that city, doubts that the lawsuit will stop the company in San Francisco or any of the other cities where it operates, such as Boston. He says that incumbent businesses at the airport are just “protecting their interests” through the legal action but that it will be difficult to curb the innovation that FlightCar represents.

“The two will work it out somehow,” he says. “Besides, San Francisco is a bad place to get away with anti-competitive, anti-innovation red tape.”

French finds FlightCar too attractive for a traveler like him to pass up. Before his last flight to New Orleans, a FlightCar town car picked him up at a remote parking lot and delivered him to the terminal. He avoided paying $18 a day for parking, saving a total of $144 for eight days. Alas, no one rented his Acura RSX, but he’s sure that someone will one day. “It’s a lot of fun to drive,” he says.

Companies such as FlightCar and Airbnb are doing their best to reassure customers that although they’re a non-traditional choice, they’re as safe and reliable as doing business with an established company. For example, Airbnb offers each host a $1 million “guarantee” of protection from property damage. FlightCar pre-screens its renters and insures each vehicle for up to $1 million. But though these measures can be reassuring to many travelers, there’s no substitute for dealing with a company with an established record, say travel experts.

Change takes time. Zaparde remembers that when he conducted market research for FlightCar last year, he asked passengers on the airport shuttle whether they’d consider sharing their cars with strangers. About four out of five said no. But attitudes have shifted in just a few short months. He points to the success of such companies as Airbnb and his own company as evidence. Today, even established companies are eyeing the sharing business with interest.

“Ultimately, the innovation will lead to competition and more innovation,” says Zaparde. “As long as the bureaucrats let it.”

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