Is Airbnb a threat to SA's tourism sector? Fedhasa thinks so as it calls for 'urgent regulation'

2017-05-25 07:08 - Selene Brophy
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Cape Town - If you’ve ever used Airbnb, you’ll know that it is relatively more affordable than regularly hospitality providers, especially in sought-after destinations and around peak-season times. It also harnesses a local perspective look and feel, most boutique hotels would pride themselves on.

Not forgetting how functional it can be, if you’re the kind of traveller who simply wants a secure and clean space to rest your head, shower and perhaps catch-up on a few emails, while in a destination that isn’t home.

But one Airbnb host’s ability to offer you a complimentary bottle of wine without any regard for SA’s liquor act for example is another industry-regulated hotel’s "lack of competitive advantage". 

Competitive advantage of the share-economy

“Slight as it may seem, this is but one example where non-compliance and lack of formal regulation is tipping the scale unfairly in Airbnb’s favour,” says the Federated Hospitality Association of South Africa (Fedhasa).

According to Tshifhiwa Shivhengwa, Fedhasa’s Chief Executive Officer, Airbnb would be a 'valid segment' of the country’s tourism industry, provided the hospitality platform abided by a strict set of industry rules and regulations. 

Considering that the Airbnb Community boosted the South-African economy with an estimated 2.4 billion ZAR in 2016 - it already is a massive segment though and there is debate on either side of the regulation line that needs to be toed of where the competitive advantage lies.

The issue of regulation continues to be in the focus for the successful share-economy online platform and its hosts who are able to rent space in their homes to guests for short-term stays - with Airbnb taking the hospitality industry by storm since its inception back in 2008, just short of a decade ago.

But now Fedhasa says compliance from the online hospitality platform needs to be addressed urgently to "safeguard the tourism sector". 

'Safeguard the tourism sector'

To the extent that it is calling on government to intervene to ensure online hospitality platform Airbnb becomes “industry complaint and regulated. 

Speaking at the Indaba Ministerial Session at the Tourism Indaba in Durban last week, Tshivhengwa expressed his concern at the hospitality service’s “non-compliance” and called on the Department of Tourism and key industry role players to "get involved".

“The hospitality industry as a whole has an obligation to adhere to these various guidelines, they have been created for a reason and it’s vital that they are upheld,” he says.

“We are not concerned about competition if we are all playing in an equal field. What concerns us are new industry players that are listed on Airbnb that don’t follow any regulation, some are not even registered as businesses,” Tshivhengwa says.

But according to Velma Corcoran, Regional Market Manager Southern Africa at Airbnb, these allegations are baseless. Corcoran states they’re “filed by lobby groups who want to avoid competition and protect their bottom line".  

'Non-compliance allegations baseless to protect the bottom line'

“Hosting on Airbnb allows regular South Africans to share their homes, boost their income and spread benefits beyond hotel districts to local communities and businesses,” says Corcoran. 

The typical host in South-Africa shares their home for 16 days a year and earns an additional 28 000 ZAR a year, according to Airbnb. 

Corcoran stresses that Airbnb is not an accommodation provider, but merely “a platform that hosts can use to advertise their property and connect with guests”.

“We want to be good partners to cities and work closely with authorities in South Africa and across the world and ask hosts to confirm that they comply with the laws that apply to them before they list their property on the platform.”

On the Airbnb site it states, "Some cities have laws that restrict your ability to host paying guests for short periods. These laws are often part of a city's zoning or administrative codes. In many cities, you must register, get a permit, or obtain a license before you list your property or accept guests.

Certain types of short-term bookings may be prohibited altogether. Local governments vary greatly in how they enforce these laws. Penalties may include fines or other enforcement. These rules can be confusing. We're working with governments around the world to clarify these rules so that everyone has a clear understanding of what the laws are."

But what are those laws?

Short-term rental laws in SA certainly can vary when it comes to regular individuals who simply wants to make some money on the side.

According to legal firm ABGross, the steps for South Africans to host on Airbnb are rather simple and subject to an agreement between the host and the guests, safeguarding against cancellation, damages as well as things like extortion - with Airbnb adding in safety-net measures for "extenuating circumstances" - but nothing in the terms of specific commercial law in relation to short-term rental restrictions or compliance around safety other than these suggestions on its Responsible Hosting page - the onus rests entirely with the host.

While some body corporates would communicate if subletting is illegal for apartments, interpretation is wide open for other types of home owners.

Undercutting rates

Cape Town’s newest Radisson Blu Hotel & Residence has recently opened its doors, and Hotel General Manager, Desmond O’Connor, says he believes 100% that non-regulation of Airbnb has a direct impact on the hotel, which is made up of 11 floors serviced as a the five-star hotel, as well as 153 apartments with tenants. 

The property is in a prime location for business and leisure travellers as it is located in the city precinct. O’Connor says that despite body-corporate clauses that make it clear that an apartment cannot be rented out for less than six-months as a short term rental for example, it is being done "with owners undercutting rates considerably".

“Having run hotels like Mandela Rhodes Place and Cape Royal and seeing the impact of Airbnb, I would 100% support a move to have Airbnb regulated along the same lines as all accommodation providers.”

"I can also see that Airbnb is undermining cost-effective living in the city as rentals are in fact becoming exorbitant, and it is as if locals are being ostracized in favour of making a quick buck”.

Where are Airbnb hosts regulated?

Airbnb has come under fire in at least eight countries across the globe, according to this CNN Traveler 2016 round-up.  

In New York it is illegal to rent out an entire apartment for a stay less than 30 days and recent legislation passed by its Governor Andrew Cuomo in 2016 makes advertising for short-term rentals on home-sharing sites  such as Airbnb illegal and subject to a fine of $7 500.

Similarly, since January 2017 Iceland, which has seen a major tourism boom in recent months, requires people renting out their apartments for up to 90 days per year in Reykjavik, to have a hospitality license. 

Also Airbnb hosts are still required to get their property registered, which requires meeting health and safety regulations. Icelandic police are taking violators seriously and have raided several Airbnbs believed to be operating illegally, according to the report. 

The City of Lights, one of Airbnb's most popular destinations with some 40 000 listings in Paris, forbids owners from renting out their flats for more than 120 days a year.  Amsterdam also aggressively fines illegal rentals.

Santa Monica is said to have some of the “toughest laws against Airbnb, as it mandates that hosts will have to live on the property during the renter’s stay, register for a business license, and collect the city’s 14 percent occupancy tax”.  

Berlin has banned landlords from renting out apartment for short-term visitors with the exception that people can rent out rooms, as long as they don’t cover more than 50 percent of the entire floor space. Landlords can still apply for short-term rental permits.

'Embrace the phenomenon and stop complaining'

There is no denying that the share-economy is a disruptive force and that change is not always welcome for those who happen to feel the brunt of the disruption.

However, the secretary-general of the UN World Tourism Organisation recently stated that "hotel chains need to stop complaining about companies such as Airbnb and instead embrace the accommodation phenomenon". 

Minister of Economic Opportunities in the Western Cape Alan Winde seems to have taken the same tack. Speaking during his budget briefing in March, he says unlike in Germany and France, the "platform will not be slowed down in Cape Town". 

Winde says SA has become the first government that “requires all proposed legislation to be subjected to a Regulatory Impact Assessment before it is passed. In our province, we will not tolerate businesses being slowed down by unnecessary regulations".

“In the past month alone, the number of Airbnb properties in our region have climbed from 16 000 to 17 500. That’s an additional 1 500 households making an income from their spare rooms.

“We know that there are regulatory concerns around Airbnb, a fact which is common for most new technology companies. We are eager to become a place of learning for disruptors, and are active in engaging these players to ensure they are able to thrive, while meeting good practice standards,” says Winde.

In the Western Cape, both Airbnb and Airbnb Experiences have taken off and Cape Town currently has the largest number of listings in Africa.  

“Hosting on Airbnb allows regular South Africans to share their home, while helping to grow and diversify the tourism industry across the country,” say Corcoran.  

Corcoran adds, “We want to be good partners to everyone in South Africa and support the responsible and sustainable growth of innovative forms of travel.” 

'Not adhering to the rules of engagement'

But Fedhasa maintains Airbnb, or its hosts, are not adhering to the rules of engagement.

“There are rules of engagement and Airbnb needs to adhere to these rules. There can’t be a different set of rules to benefit only them. I know many will say it’s different, it’s a sharing economy and not part of the industry, well if you provide a short term accommodation for gain, it’s not sharing” he says. 

Tshivhengwa explained that in the tourism industry, sharing usually happens when people are visiting friends or relatives (VFR), a visitor doesn’t have to pay to stay at friend or relative’s house, that’s sharing," he says.

To address the matter, Tshivhengwa recommended that Fedhasa, along with key industry role players and the Department of Tourism partner during the upcoming Shared Economy Conference to discuss the best way forward to ensure the hospitality platform becomes compliant. 

“We need to escalate this matter, we need to have the necessary discussions with stakeholders. It’s at a point where it’s now serious and we need to address it as a matter of urgency.” 

What to read next on Traveller24: 

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* A previous version of this article stated a Shared Economy Conference will take place on 3 July, as per Fedhasa release but Traveller24 has not been able to confirm this.