Level the playing field in the sharing economy
(Photo above: Eric Barber)
New business disruptors such as Airbnb and Uber have been making headlines globally for a variety of reasons. The headlines are both positive and negative but they are most certainly prospering, and the sharing economy will be part of the business landscape for a long time to come.
Hoteliers have been quicker to react to the rise of Airbnb than our counterparts in the taxi/transportation sector, seeking to minimize its impact on their own business as much as possible.
Perhaps the greatest controversy of the Airbnb and other sharing economy accommodation sites is the impact of affordability of properties in cities across the globe, whether these are rental prices or affecting purchase prices.
As investors buy properties for use on Airbnb or similar sites, this reduces the number of units available for rent to citizens residing in those areas. Shrunken supply simply creates upward pressure in the city’s rental costs, and in many cities, there was always a considerable shortage of affordable accommodation, i.e. London, Paris, New York, and now Toronto and Vancouver.
Some jurisdictions have already created legislation to restrict the number of units permitted for short-term rental use to ensure there is enough affordability for local residents.
Some argue that the plethora of short-term rentals is affecting the character of neighbourhoods, as they create a population of very transient people with no direct local ties.
The ‘local’ issue
From a hotelier’s standpoint, there are other issues with the short-term rental market that need to be addressed by government, while other issues we’ve been able to address with our own business practices. Travel agents should familiarize themselves with our perspectives, as they may often have a direct effect on their business as well.
Airbnb has touted itself as a way for travellers to stay more “local” when they visit a city. Why visit a city and stay in a hotel when you can stay in a local residence and have a more relevant experience?
Hotels were quick to react to this, and it can even be argued that many properties were already innovating their products before Airbnb became a disruptor.
Hotels began creating a more “local” experience for their guests through a number of avenues such as changes in design where the building will take on a more local looking appearance, to offering locally grown food products, and to have the overall design of the rooms and public areas reflect the neighbourhood or city they are located in.
Food & Beverage options were created to become destinations within themselves and part of the community the hotel is located in. This has created an experience for guests that are much different than the “cookie-cutter” designs that were the norm in the past.
Catering to millennials
Airbnb and its competitors have done an excellent job in catering to the experiences desired by the Millennial generation who seek a more local type of experience as has been marketed to them, but hotels have also recognized that they must innovate their product to Millennials as well and have created a variety of shared spaces in their public areas that will cater to the needs of that generation. Shared seating areas in lobbies, breakfast rooms, open concept floor plans with new types of lighting and even music have been designed with this generation in mind.
Rather than disrupt the public with wildcat strike actions and disruptions as were seen all over the world by taxi and transport providers, the hotel industry has started to adapt and react to accommodation sharing platforms by innovating their products.
But perhaps the most important issue for the hotel industry is the current legislation in Canada not being modernized, allowing companies such as Airbnb to avoid compliance to laws, such as the health and safety issues and taxation.
Health and safety is a major concern for the accommodation sharing economy, and there is currently little legislation for enforcement of standards required of hotels by government. This creates potential unsafe or unsanitary conditions for travellers, thus currently many publicly traded companies forbid their employees from using Airbnb.
Duty of care
With such a focus on duty of care in the travel agent industry, what the liability companies can be responsible for is tremendous should injury occur, whereas the hotel industry has been working with partners in the travel sphere for decades to ensure that all health and safety items are clearly laid out. Global Business Travel Association has created standardized templates used by the industry to ensure that companies and their travel managers are able to easily understand the important health and safety measures in place to keep their travellers safe.
Another layer to this is the fact that 80% of Airbnb’s rentals in Canada are whole unit rentals and not spare rooms in the same house as an owner. A further 30% of their revenues in Canada are by multi-unit owners
that are renting out entire home units that are de facto hotels. [Source: Hotel Association of Canada, Sept. 27, 2017] It only makes sense that laws that govern hotels would apply to these types of rentals operating as informal hotels.
In terms of taxation, in 2016, the hotel industry’s contributions to consumer taxes based on room revenues were estimated at $2.2 billion. [Source: Hotel Association of Canada] Based on Airbnb’s revenue in Canada, the Canadian economy is missing approximately $85 million in taxes and fees that would be payable by Airbnb.
What about agents?
From the travel industry perspective, the hotel segment of the business is one of the last partners not to restrict or cut travel agent commissions for bookings received. Airbnb currently has no commission program to travel agents for accommodation bookings thus rendering the entire community obsolete from their business standpoint.
Part of the value of travel agents is that they are trusted by their clients, whether corporate or leisure, to furnish them with knowledgeable advice that is relevant to their needs, with a diverse scope of criteria, i.e. safety, health, security, amenities, location, etc., so the client makes informed decisions for their travel and accommodation needs.
It is difficult to see how this value-added service that travel agents provide for clients aligns in any way currently with platforms like Airbnb.
How can an agency trust and stake its reputation with clients on non-vetted accommodation that doesn’t comply with much stricter regulation that hotels conform to?
As a segment of the travel industry, the Canadian and global hotel providers simply seek to have governments provide an equal playing field in terms of taxation and health and safety. 191,600 full-time employees in Canada (and partners of the travel agencies) depend on our government modernizing and adapting legislation to reflect the true state of today’s accommodation providers.
Eric Barber is the senior director, national sales for Realstar Hospitality, and he contributes a monthly column to Canadian Travel Press that offers an insider’s look at the hotel industry.