Soft power, Airbnb and the island of Capri

In international relations, the ability to build consensus through persuasion and not coercion characterizes soft power. Similarly, in modern times, corporations must proactively resort to soft power to make sure that the consensus among stakeholders is informed, pertinent and, most importantly, competent. The Influence, Relevance and Growth methodology, introduced in a previous newsletter, might be handy in anticipating a potential crisis. What follows is a current affairs case that might, if not managed, derail.

Airbnb, $ 78 billion in market capitalization, is the second largest travel company in the world after Booking.com, $ 98 billion in market cap. Based in San Francisco, Airbnb operates an online marketplace for short- and long-term homestays. This platform has revolutionized the world of home owners. Like all disruptions, shock waves are far reaching becoming a potential headache for policymakers. Airbnb should dedicate its best resources to inform policymakers. It should strive to provide its stakeholders with a holistic and accessible understanding of the phenomenon providing option for possible and implementable solutions among diverging and, at times, conflicting interests. A statesman like positioning and the respect it engenders. Given its size, Airbnb runs the risk of becoming the scapegoat for evils beyond its own doing and ability.

The case of the Island of Capri, one of the most prestigious holiday destinations on the planet, is in the making for Airbnb and its competitors. The off the chart tourist affluence, unprecedented room availability thanks to online marketplaces and the social and environmental impacts of such a surge might involve negatively Airbnb & Co.: a visible, easy target for revanchism of sort. Almost all Italians (82%) own their own home, 6 million are the second homes, 17.2% of total housing. This makes Italy about 10% of Airbnb business. So, Capri and Italy do matter globally.

Capri is located 17 nautical miles south of Naples, an island of 6 square miles, 27% of Manhattan. Ferries during the spring-summer period of 2022, a record year, disembarked on average 15.000 tourists every day. Capri needs to import everything for its 14.000 inhabitants and tourists.

Traditionally, the island was engineered to cope with June-July week-end peaks and a fully booked month of August. Excluding the hotels (58), in 2010 there were 66 properties providing lodging, 238 in 2018 and 375 in 2022, according to Capri Tourism, a 60% increase since the pre-pandemic period. This number does not include the villas and the ones not registered. Expedia lists 459 properties on June.

The occupancy rate of the 2.700 hotel rooms has skyrocketed above 70% and so have the prices: a five-star hotel in June charges on average $ 2.700 per night, sky is the limit! B&Bs and apartments’ owners have welcomed this new and steady source of income. Last but not least, Capri is a must go-to destination for the mega-yachts and their wealthy guests, an additional boon for the local economy. Capri’s GDP is estimated to be short of $ 500 million.

In season, of the 15.000 daily tourists, about 6,000 stay overnight and dine in 120 restaurants (not all opened for dinner). The average 3-to-4-night stay challenged food supply, restaurants, supermarkets, transportation, logistics, cleaning services, waste disposal, workers and raises questions on the environmental sustainability of this operating model. Electric vehicles, for example, are rare and public transportation – buses and taxi (42 licensed) -- run on combustion engines. Notably, apartments rentals have subtracted rooms to seasonal workers and to the youngsters.

In 2022, 2 out of 3 tourists where foreigners and, in particular, Americans, a segment that is sensitive to environmental issues and, value for money. This situation could derail in a number of unpredictable ways: a cynical politician, a local movement, media attention on sustainability, a series on social posting on the old and polluting ships that serve the island of Capri …

The island represents a test lab where all parties are under stress – whether welcome or not--, yet a vision on how to cope and to manage an altogether positive phenomenon is not in sight. The debate is indeed happening yet behind closed doors. Most likely lobbyist and ambassadors of sort are walking the corridors of Brussels and Rome to mitigate and/or contain what will be a typical simple solution to a complex problem.

Outstanding companies can do everything right and still lose their market leadership and tarnish their reputations.