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Playing fair in the 'sharing economy'

10/13/2014| 3:45:57 PM|

As Hong Kong begins to lose its appeal for some Chinese tourists, Taiwan is rising in the ranks.

Abta’s chairman Noel Josephides made the headlines last month with his attack on the rise of the “sharing economy” accommodation sector, describing online players such as Airbnb and HouseTrip as “another name for the black economy”.

Josephides admits that his speech at the Travel Convention in Ljubljana was designed to “wake up” the travel industry to the growing threat of Airbnb and its competitors, which provide online platforms to allow people to rent spare rooms or properties to paying visitors.

The growth of the “sharing economy”, also known as the “peer-to-peer” sector, has been phenomenal, particularly for Airbnb. The US-based company, which was launched in 2008, now has more than 800,000 accommodation listings across 34,000 cities in 190 countries. This includes more than 35,000 premises in the UK - an increase of 73% in the last year.

Airbnb has also made no secret of its desire to offer more tourist services through its platforms and has been quietly testing an “experiences” section on its website offering a limited number of activities and tours run by local guides in the US.

“At the rate at which these things are growing, we could begin to a lot of business within a year or so”

Noel Josephides, Abta

But what threat do these websites, which also include the likes of Wimdu and Love Home Swap, pose to traditional travel agents and tour operators? An “enormous” one, according to Josephides. He believes they need to be “taken very seriously” and points out that 40% of Airbnb hosts have multiple listings so are effectively operating as businesses.

“It’s not reached us in a big way yet as tour operators and travel agents, but at the rate at which these things are growing, we could begin to lose business - and a lot of business - within a year or so,” he told TTG.

“I felt I had to speak about it because I needed to raise awareness. When I go to regional meetings and speak to travel agents, nobody understands how big a threat these are. But these are enormous threats to our businesses which we have to tackle now.”

Josephides believes that those operating in the “sharing economy” are able to avoid having to comply with the same regulations as more traditional tourism businesses, particularly on issues such as health and safety. He also questions whether hosts are paying tax on their rental income, hence the comparison to the black economy.

Rules of engagement

These fears are shared by David Weston, chief executive of the Bed & Breakfast Association, which is lobbying the government and regulators to ensure that all accommodation providers must conform to the same standards, including those listed on peer-to-peer websites.

“We only want to see a level playing field in regulations, which are sensibly enforced according to the actual risk, bearing in mind the size of the business,” said Weston.

“Many of our members are small with only a couple of rooms. But because they have a sign outside saying ‘bed and breakfast’, they are routinely inspected by fire services and must comply with fire regulations.

“This is not the case with listings on Airbnb where they are only inspected if there is a fire or if somebody makes a complaint. This isn’t fair to our members and is anti-competitive.”

Richard Solomons, chief executive of InterContinental Hotels Group, has also been calling for a “level playing field” between traditional accommodation providers and the sharing economy, on issues such as fire safety, food hygiene, security and cleanliness.

“We only want to see a level playing field in regulations, which are sensibly enforced according to the actual risk”

David Weston, Bed & Breakfast Association

Others in the industry, such as the British Hospitality Association, have urged peer-to-peer platforms to “improve their safety requirements”.

Airbnb says it offers guidance on health and safety on its website, as well as advising hosts on their tax obligations although it adds that regulations vary from “city to city”. One of the company’s initiatives has been sending free smoke and carbon monoxide detectors to hosts in the US.

A spokesperson told TTG: “The vast majority of Airbnb hosts are regular people who occasionally rent out only the home in which they live. They receive income statements so they can pay taxes on the money they earn and we remind them of their obligations to review local laws and regulations before listing their home.

“In the US we are piloting programmes to automate the collection of occupancy taxes and are committed to rolling this out elsewhere.”

He added: “In studies conducted in the US and Europe, it’s been demonstrated that Airbnb brings significant economic benefit and also that it brings tourists to areas of cities not well catered for by hotels.

“In the UK, for example, Airbnb had an economic impact of £502 million between November 2012 and October 2013 and supported close to 12,000 jobs.”

Despite these assurances, the likes of Airbnb continue to court controversy, particularly in the US where there have been protests on the streets of New York about the emergence of “illegal hotels” being sold through peer-to-peer platforms. In Paris, mayor Anne Hidalgo hascreated a team of inspectors targeting properties suspected of being unlawfully rented.

On the flip side of this, the UK government has shown considerable enthusiasm for the sharing economy, with business and enterprise minister Matthew Hancock last month launching an independent reviewinto the sector’s potential. Some eyebrows have been raised in the travel industry however, by the appointment of Love Home Swap chief executive Debbie Wosskow to lead the review, which is due to report by the end of the year.

New marketplace

“The sharing economy is disrupting existing markets and changing the face of business,” said Hancock.

“By opening doors for everyday entrepreneurs to trade directly with each other online, these new market-places are driving down costs and pushing the frontiers of innovation.”

Hancock has already rounded on critics of the sharing economy by claiming they “wanted to stop new entrants” from providing extra competition.

“Hoteliers should be vigilant, given the awareness of Airbnb and the conversion rate from site visit to booking”

UBS report

But Josephides and Weston both reject this criticism and insist they just want regulations to be applied for all types of accommodation providers so that there is “fair competition” for everybody in the sector.

As to which travel businesses are likely to be most affected, research by investment bank UBS found that budget hotels were most at risk of losing sales to the sharing economy. Online travel agencies could also suffer, with UBS noting that Airbnb has a 60% conversion rate for leisure travellers, which is on a par with online travel giant Expedia.

“Hoteliers should be vigilant, given the relatively high awareness of Airbnb and the conversion rate from site visit to booking,” said UBS in its report. “Airbnb may also have a negative impact on OTAs, given reduced bookings through OTAs as consumers use the Airbnb marketplace.”

Perhaps the scale of Airbnb’s ambitions to target all sectors of the industry is best illustrated by its decision to launch a business travel platform in July, despite widespread evidence that corporate travellers are less likely to use its services than holidaymakers.

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TAGS: sharing economy | fair | airbnb
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