Is Airbnb creating an accommodation grey market? Hoteliers fear modern competitor

And as taxi drivers prepare to suffer the onslaught of state-sanctioned competition, they’re not the only ones fearing the rise of the sharing market.

The hotel and accommodation industry is now worried it will be the next cab off the rank with modern competitors like Airbnb primed to pounce on its market share.

Senior industry figures say Uber is only the “tip of the iceberg” when it comes to companies setting out to “deliberately break the law”, and that the entire multi-billion dollar short-term accommodation sector is in a similarly uncertain position to those disgruntled cabbies.

Tourism Accommodation Australia, the peak body for the Australian hotel and accommodation industry, says the increasingly popular practice of sharing in the accommodation sector leaves commercial property owners wide open to operating multiple apartments as a business while flouting the responsibilities and obligations imposed on “legitimate” players in the industry.

In this respect, the industry body says, it’s “the taking economy”.

WHAT THEY’RE WORRIED ABOUT

Airbnb promotes its service as a great way to rent unique places to stay from local hosts. For those who list their properties with the online booking agency, Airbnb “lets you make money renting out your place”, its marketing material boasts.

The sharing site, which has grown since 2008 to become one of the world’s biggest accommodation providers, has well and truly caught on in Australia. It offers to connect people to “unique travel experiences” at around 11,000 properties in Sydney alone.

The issue for its heavily regulated competitors is that not all of these experiences may be as unique as the sales pitch suggests.

“It’s not the person renting out their spare room to a traveller or filling their place while they’re away for a while that we’re worried about. If you’re renting a property out for a short period when you’re not there, that’s true sharing,” Carol Giuseppi, CEO of the TAA tells news.com.au.

“Where the issue is, and where we don’t think the sharing economy channels have a part to play, is when it becomes a commercial operation.”

Accommodation providers are bound by swathes of legislation and regulations. There are checks and balances in place to make sure each property is up to scratch, and it’s an expensive business to be in when you’re running by the book.

A comprehensive industry report obtained by news.com.au details the various regulatory processes, legislative frameworks, taxes and consumer protections the accommodation giant is allegedly flouting.

For struggling commercial operators faced with an unregulated alternative that’s growing in popularity and demand, it makes you think, why not jump ship?

“Research overseas has demonstrated this and we’ve definitely seen it happened here. You can’t have part of the economy operating under the radar — not if you want a fair and equitable market,” Ms Giuseppi says.

CONCERNS FOR CONSUMERS

Sure, they might sound like a fearful industry whining about competition, but a scan of requirements for regulated hotel accommodation shows a lot of the red tape is in place for guests’ own good.

There’s disability access, fire safety, public liability and food safety standards.

Though Airbnb encourages its hosts to “host responsibly”, recent news of a death in a property rented through a sharing economy services has highlighted the complications that can arise if something does go wrong.

“At the end of the day some sharing economy channels are starting to assist with this area of liability insurance but we would say that’s the ambulance at the bottom of the cliff,” Ms Giuseppi says.

“They still haven’t addressed the issue of fire safety and other precautions. These are residential buildings that are not subject to the same restrictions, regulations as commercial buildings. Emergency lighting, exit signs, fire safety measures, none of it.

“Safety is important for guests and for the industry as well. One of the things that Chinese travellers rank as a top five concern when making a decision about destinations, is safety.”

The TAA also claims owners of properties rented through Airbnb may be engaging the service as a tax dodge as well.

“Currently the application for GST is only if you have a turnover threshold of $75,000 per annum. In the genuine sharing economy that won’t be reached, but we feel there’s a large number, and it’s indicated among the Airbnb stats, that are not registered, not coming under any sort of regulation, that would qualify for payment of GST,” Ms Giuseppi says.

“If you’re using your house for commercial accommodation, then you’re main residence is subject to capital gains tax.”

Airbnb says the traditional accommodation industry has nothing to worry about.

Despite the rapid growth of its listings in recent years, the industry is continuing to thrive, Airbnb’s Australian country manager Sam McDonagh told news.com.au in a statement.

“Seventy four per cent of Airbnb listings are outside of traditional hotel districts meaning our guests live like a local and spend money at cafes, shops and restaurants not normally visited by travellers. By staying in these great local neighbourhoods, Airbnb guests distribute the economic impact of tourism to places that never previously benefited from tourism,” he said.

“The average income generated through our platform in Australia is just $7100, and while this doesn’t sound like a lot, the impact can often be life changing. Our hosts tell us this modest extra income helps pay down the mortgage, cover bills and household expenses. Others list their home to pay for their own holiday away with the family once or twice a year. “

WHAT ARE THEY GOING TO DO ABOUT IT?

Users of sharing economy operators like Airbnb and Uber, and the companies themselves, are wading into largely uncharted territory in the Australian economy with industries and governments still testing how they’ll handle them.

Starting with imposing some regulation on UberX operators in the ACT with NSW expected to follow, state governments are slowly working out how to manage the new players.

They’ve been slower to act with accommodation providers. Sydney councils have reportedly contacted hosts subletting their rooms via Airbnb saying they’re running authorised bed and breakfasts and could face fines of up to $1 million.

The Australian Tax Office advises if people are engaged in sharing economy activities, they may have tax obligations, and Airbnb along with Uber has had to front a Senate tax avoidance inquiry.

In his previous role as communications minister, Prime Minister Malcolm Turnbull praised businesses like Airbnb and the wider sharing economy.

“In seven years, Airbnb has added more than one million rooms globally compared to the century-old Hilton chain’s 700,000 hotel rooms,” he told a Sydney tech conference earlier this year.

“(Airbnb) added more than 10,000 rooms to Sydney’s holiday rental market, without a single brick being laid and planning permit being approved.”

In Airbnb’s home city of San Frasisco, authorities have had to step in to deal with concerns from the hotel industry about unfair competition.

Some critics also claim the start-up provides an incentive for property owners to evict long-term residents and convert lodgings to short-term rentals, creating an upheaval in the traditional market for rentals.

The company promised this month to pay taxes and not cut into long-term housing amid criticism it unfairly competes with hotels and has exacerbated a San Francisco housing crisis.

SORE LOSERS?

The TAA wants to make it known they’re not against the sharing economy, they say they’re not bitter, competition-fearing Luddites as some taxi groups have been portrayed as their battle against Uber publicly played out.

“We’ve tried to be very clear that we’re not stopping the sharing economy activities and there’s a place for them in the market,” Ms Giuseppi says.

“What we want to say is, be aware. They’re not all true sharing. They’re owned by commercial operators and that don’t contribute to employment or the economy. It’s all about to what extent they’re operating commercially, and if they are, to what extent do the regulations apply.”

Airbnb says it’s happy to co-operate with governments, and has even been critical of the complex rules governing home sharing in Australia.

“The rules governing home sharing in Australia often differ from Council to Council, even street to street, all over the country,” Mr McDonagh said.

“A lot of hosts and regulators tell us these rules are sometimes outdated and difficult to interpret — in fact, in many cases even written long before the internet even existed. That’s why we’re happy to be working with governments to bring about fair and progressive rules to govern home sharing right across Australia.”

Source: News Limited, Liz Burke, 28^th November 2015
Originally published as: Is Airbnb creating an accommodation grey market? Hoteliers fear modern competitor