BEYOND the impact of the Zika virus, the opening of Cuba to U.S. travellers and the warnings of an economic slowdown by the International Monetary Fund and others, the Caribbean faces in Airbnb, a phenomena that poses a challenge to the status quo.
One need not look too far to see how a seemingly harmless concept has grown to become a flashpoint, with states, municipalities and quite possibly federal governments in the U.S. and Europe lined up on one side, with airbnb on the other. Recent studies by groups supporting and challenging this technology company, and the engagement of high powered lobbyists by both sides, is further proof of how much of a high profile issue the operations of this entity has become.
The fundamental question being posed is whether Airbnb is positive for local economies or whether it is an entity damaging the tourism industry by undercutting prices and not contributing to local and national tax rolls. Further, is airbnb facilitating the rise of unregulated product offerings?
According to airbnb and its defenders, the portal allows people to make some extra revenue through the renting of rooms and single units. On a granular level, airbnb is simply a “people-to-people platform” that helps individuals leverage a private asset in their homes to generate revenue to support their families. All this while allowing the traveling community the ability to visit locations that they may not have considered prior, at reduced cost.airbnb is also arguing that within certain markets, many of its listings are outside of the main hotel areas and that evidence shows that guests using Airbnb are likely to stay longer than other travellers – adding more in terms of revenues to the local economy.
The airbnb model as postulated by its defenders merely serves to open tourism beyond the traditional “owners” of the product, allowing for a certain democratization of the industry.
Pitted against airbnb and joining many governments has been industry and their representative associations, who argue that amongst other things, airbnb has evolved from a peer to peer system to one dependent on much of its revenues from multi-unit operations and full time operators. This side presents an analysis that highlights the fact that in many markets, the model for airbnb and parties that own multiple units has been to bypass the regulated system associated with how one runs what is in essence a hotel, and instead list units on the platform, lessening exposure to taxes and regulations. Discontent is also being expressed by bed and breakfast operators who in the State of Virginia are challenging the legislature as to why they are obliged to adhere to hospitality licensing requirements and fees while people who rent rooms and units online through airbnb are not.
In response to being called a less than stellar corporate citizen, airbnb responds that in markets where it has managed to come to an agreement with regulators, there has been a stream of revenue to government. A recent report highlights that that Paris received over US$1.3 million in revenue from airbnb for the fourth quarter of 2015, with Airbnb taking on the responsibility of collecting a nightly tax. Despite the Paris example, Airbnb is being portrayed as being less than transparent in its operations as it does not disclose information on numbers and types of units rented. The lack of shared data according to its detractors serves to stymie government efforts to verify rentals and collect revenues.
For the Caribbean, the challenges facing the traditional system as it relates to airbnb and its services are many and varied. While on one hand there has been in many countries a stated interest in allowing individuals to rent out rooms and homes (within CARICOM this allowed for construction incentives to individuals for World Cup Cricket in 2007), the concern for operators be they large or small is understandable. Facing competition that may not be operating within the same parameters that one is is never welcome.
While for the traditional Caribbean operator, there is some vindication in the argument by airbnb that tariffs and fees associated with traditional operations are disincentives to travellers, the entry into the market of a system that disrupts the model and allows parties to dodge fees that contribute to the relatively high costs of operations that hoteliers face must be chilling. Reports that point out that once someone tries airbnb, they are less likely to try to stay at a traditional hotel cannot be comforting.
In a region where tourism is often relegated to the second or third tier of the policy agenda, airbnb and like operations present regulatory and financial challenges to industry, as well as to tourism and finance policy makers. While the if you can’t beat them join them motto may be an easy answer for operators who may feel that they are under siege and as a result join the platform to circumvent the system; for governments, the question is how do you balance the opportunities for all concept with the fact that the current regime is the foundation of Caribbean economic stability.
With airbnb already in the Caribbean space, a short list of possible questions for policy makers on the national and regional level to consider may include:
• Is tracking airbnb and its impact as simple as assuming that a percentage of people filling out the visitor form stating that they are staying at a private residence are using this platform, or should it be listed?
• Is the value of the money spent by users of airbnb in the economy as significant as is claimed by its advocates?
• Is airbnb to be a partner in collecting relevant tariffs of the new visitors that they claim they bring into the market space?
• Related to the above, even if they appear to be reticent about sharing data and revenue information?
• Is there enough fiscal space to lower the tax burden on the industry in exchange for more travel?
• Can the region afford for traditional operators to see portals such as airbnb as a way to circumvent the traditional way of reporting the rental of units?
• Is the system already being gamed by parties bypassing requirements related to hotel operations that may end up placing travellers at risk?
With the questions many and the time short to determine the model of tourism that the Caribbean embraces for its future, the answer will only be found if all relevant public and private sector stakeholders recognize the threat to the status quo and engage proactively with each other. A collective sense of urgency in ensuring more travellers and an open and fair market is critical, as waiting can only result in the chipping away of the current model with its product offerings that it is argued is expensive, taxed to the max and in need of attention.