This article first appeared in The Edge Malaysia Weekly on May 4, 2020 - May 10, 2020

OVER the last decade, the sharing economy, propelled by the digital revolution, has mushroomed the world over. The notion that anyone has the means to become an entrepreneur appeals to many as it points the way to better economic prospects and income independence.

However, due to the social nature of the sharing economy, the Covid-19 pandemic has exposed flaws in the business model of some players such as Airbnb, while others have had to innovate.

One casualty of the Movement Control Order (MCO) that has been in place in Malaysia since March 18 is Colony, a co-working space provider.

“I believe the co-working industry is taking quite a hit during this MCO period. As macroeconomic conditions deteriorate, some start-ups may run into cash flow issues and default on their rent,” says Colony co-founder Timothy Tiah in an email response to The Edge’s questions.

Co-working space providers allow individuals and companies to rent space — desks and rooms — for their operations on a short-term basis. This allows start-ups and budding entrepreneurs to reduce their capital outlay on office space, the cost of which becomes a monthly operational expenditure instead.

Many co-working space customers are aspiring entrepreneurs or early-stage start-ups that do not have the financial capacity to enter into long-term rental tenures for office space. And when lockdowns are imposed, such start-ups rapidly run out of cash.

“Fortunately, Colony is relatively mitigated from that by virtue of us being a higher-end product. Our tenants tend to be more mature companies that are able to withstand these tough times. However, we have been hit more than other co-working spaces in another area,” says Tiah.

“The Colony model is quite different from the traditional co-working model. One-third of our revenue comes from events so we’ve seen a one-third drop in revenue just from events alone ... that’s huge to us,” he says.

Similarly, Grab — a Singapore-based technology company that offers ride-hailing transport services as well as food delivery and payment solutions — has seen a huge drop in transport demand due to the lockdowns across the region.

However, a mitigating factor is the higher demand for the company’s delivery services because the MCO requires people to stay at home.

“Our deliveries have grown by more than 30% compared with the week before the MCO commenced,” says Sean Goh, country head of Grab Malaysia, in an email reply.

“Today, we have activated more than 100,000 drivers as delivery-partners to provide them an additional source of income while providing reliability to support our food, mart and delivery services.

“Almost 25% of food deliveries are completed by GrabCar drivers and we have also on-boarded 40% more merchants across our platform compared to our previous monthly average,” he tells The Edge.

Nevertheless, the sharing economy industry will have to adapt to the changing times. Since more attention will be placed on personal hygiene and social distancing post-MCO, the players will have to take measures to help allay such concerns.

One player that has been severely impacted by the pandemic has been accommodation-sharing site Airbnb, which has been hit by a wave of cancellations as global travel slowed to a halt. According to market research firm AirDNA, Airbnb hosts saw US$1.5 billion (RM6.4 billion) in bookings evaporate in mid-March.

This has spelt financial disaster for hosts who have mortgages to pay on properties acquired to be let out through Airbnb. The company responded by setting aside US$260 million to reimburse hosts with cancelled reservations.

It was reported that in early April, Airbnb revised its valuation downward from US$31 billion to US$26 billion.

While many companies have implemented various health safety measures such as reducing physical contact through social distancing, temperature screening and contact tracing, what additional measures can sharing economy companies take?

For businesses that provide a matching platform for users to share their resources such as Grab and Airbnb, what can they get their partners to do?

An Airbnb spokesperson contacted by The Edge says that while the Airbnb community already has a strong historical track record of cleanliness, it is building on this by introducing the company’s Enhanced Cleaning Initiative.

“This initiative includes the first overarching standardised protocol for cleaning and sanitisation in the home-sharing industry. This global initiative will roll out enhanced guidelines developed by hospitality and medical hygiene experts,” says the spokesperson.

Hosts who go through the learning and certification programme will have their listings identified on the platform and will be easy for travellers to find, the spokesperson adds.

Airbnb requires hosts to ensure a certain level of cleanliness and it responds to reports when those expectations are not being met. It says 94% of all Airbnb reviews show that guests are satisfied with the cleaning done, scoring it at four or five stars after their stays.

Meanwhile, Grab goes beyond ensuring a high level of hygiene and social distancing in its operations. It also provides economic and financial assistance to its partners through the Partner Protection Fund and Partner Relief Funds.

Under the Partner Protection Fund, Grab offers cash assistance of up to RM1,000 for its partners who either test positive for Covid-19, or are required by the Ministry of Health to self-quarantine.

Under the Partner Relief Fund, Grab provides its active partners with RM300 vouchers, which can be used on most Grab services such as reloading their mobile phones or purchasing essential food and grocery items at up to 50% off for their families during this period, says Goh.

“Our strategy is clear: provide our delivery network and merchants with firm support and at the same time, fight to keep them safe on the platform and against the invisible enemy.

“We recognise that times are tough and we are focused on helping our driver and delivery partners to safeguard their livelihoods as they continue to serve our customers. We are proactively adapting our business to this new reality and helping our partners however we can,” he says.

Meanwhile, social distancing might be a challenge that co-working space providers will have to face. Will they have to reduce the number of persons per square meter in the co-working space? Does this mean having lower capacity for co-working space but higher rental?

According to Nam Do, a co-founder of UPGen, a Vietnam-based co-working space provider, the requirements for each market vary and his team is working to ensure that each location is following the relevant directives.

“We are going to have to redesign some elements of our space to help ensure we are in line with government guidelines, but this won’t always mean a reduction in capacity.

“In Vietnam, we are putting these plans into action as lockdown restrictions start to be lifted, which will be a helpful experience for us in other markets as they eventually follow suit,” says Nam.

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