As part of this inquiry, respondents are asked to provide evidence related to seven specific questions. The objective is, quite rightly to gain some factual substance to the issue. However, there are currently no resources dedicated to establishing how much impact there has been in Wales, from the growth of the sharing economy. Without this research it is still fair to say this growth been the biggest single issue to hit our businesses in the last five to ten years. It is therefore worthy of research spend and we will be raising the lack of research undertaken with Welsh AMs at the next Tourism Cross Party Group of Assembly Members in the Senedd on the 29th November 2016.
Unfortunately, until there is a commitment to undertake such a piece of work we can only respond to the questions, with anecdotal, but professionally grounded knowledge from the tourism industry in Wales and draw on the experience of the tourism industry from other destinations.
What has been the overall impact of the sharing economy on the UK tourism industry – to what extent has it increased the size of the total market in terms of revenue and employment? Is this growth different between the inbound and domestic tourism sectors?
If you take the number of overseas visitors to Wales as one measure, volume increased 15% in the first 6 months of 2016 compared to the first 6 months of 2015 and expenditure by overseas visitors in Wales has increased by more than 8%. Of course you cannot place this growth entirely down to the ‘Sharing economy’ however it can deducted that there has been some contribution. Therefore it can only be that total market size has increased. Although we also suspect the actual size of growth attributable is less than it actually is as many customers will simply be market ‘channel’ hopping to find the cheapest deal. I.e. looking at the site or agency then using a sharing channel to book.
The bigger issue is growing industry concern that while these new peer to peer channels may have opened up a new budget market, it has also have attracted others away to property that is being let ‘below the radar’ and which both undercuts the legitimate tax paying business.
Will the growth in the tourism-related sharing economy continue or is it approaching a natural limit in terms of market share? How will the sharing economy develop in future?
We suspect it has probably reached a natural limit in mature domestic UK markets. Less so from short haul visitors, particularly the EU. With regard to the developing long haul BRIC nations, then no. Although we are aware many of the nationals from these nations are not confident about self-packaging. Research has shown that the Chinese in particular, prefer the security of group travel, so the growth of these markets via the sharing economy coupled to other barriers to international tourism growth (Visa restrictions; APD) means it may take some time to develop.
Do sharing economy platforms provide any benefits or opportunities for existing tourism accommodation businesses in terms of gaining access to new customers?
The obvious benefit is the fee base substantially cheaper (at least at the outset) than the cost of reaching the market would be, or have been, via more traditional agency. For example Airbnb top slices around 3 to 4%; whereas HOSEASONS (Wyndham Group) is closer to 15%. Benefits of each vary. In terms of opportunities, they do potentially offer a far greater, almost global reach, than the more traditional travel agent/marketing companies. Niche marketing is also made easier.
What evidence is there that people operating a tourism accommodation business marketing through a sharing economy platform are less likely to comply with regulations than other tourism accommodation SMEs? If so, what steps should be taken to ensure that there is a level playing field in terms of regulatory compliance?
- Forbes recent article citing that ‘Airbnb Could Wipe Out 70% Of Its South Korea Listings by next month’, due to regulatory issues. That would mean 7 out of 10 of their listings in the destination could be removed. Amongst a host of non-compliance issues, the hosting of a home for a tourist is illegal as regulators require hosts to be living in the same accommodation.
- Similarly in New York City, new legislation has been introduced targeting those using Social media to rent property to tourists, so that people advertising rentals of less than 30 days can be fined up to $7,500 if it is found that the host is not on the premises during the rental.
Interestingly, Airbnb is now looking to extend its offer by incorporating product beyond accommodation, for example ticketing for attractions. In the UK as small operators we have struggled with EU package travel legislation enacted in UK law. Obviously changes are afoot on this front, however, could it be possible that an offshore company could eventually trump (excuse the pun) domestic legislation whilst the ‘legitimate’ micro and small business community cannot.
The sharing economy operates on trust, whereby both the buyer and the seller are able to moderate the activities of the other by providing feedback, which enables poor performers to be excluded from the community. However, this model does not take into account the views of neighbours that are impacted by the operation of such businesses. What can be done to make sure that the external impacts of these businesses are fully taken into account?
Greater regulation of ‘invisible’ and/or unscrupulous operators through legislation that targets the rogue operator (as outlined above in the case examples). However in a UK environment of deregulation, much of which we support, and diminishing public funds with which to regulate - this would appear extremely unlikely. Introducing new legislation to combat this situation is difficult, but with the cost of enforcement this option does not seem possible anytime soon. Unless of course an economic assessment can prove otherwise!
We note the move in the Chancellors Autumn statement that the Budget 2017 will set out further details for making access to licences or services for businesses conditional on them being registered for tax.
In conclusion: In more general terms beyond the questions above - whilst the UK Government has suggested measures to help to build consumers’ trust in online transactions in the sharing economy’ (Independent review of the sharing economy Government response; March 2015) our concern is with the micro and small tourism operator:
- There is simply not the protection afforded to the micro or small business as there is for the consumer. Our industry is dominated by micro businesses supporting many livelihoods’ across Wales. Whilst we largely operate as businesses, most are self-employed, often struggling to hold up their end of a business transaction via a faceless off-shore on-line travel agency (OTA). Granted there are advantages too, but there is a misguided assumption by both the consumer and the operator that the OTA offers protection for both, when in reality they offer little when things go wrong.
- On-line reviews are a serious concern to the micro operator. Where there are serious flaws in the product on offer, which need to be rectified, a bad review is understandable. However removing a malicious or incorrect review is extremely difficult.
- Whilst, we appreciate we cannot turn back time, online travel agencies, such as Airbnb, have the potential to provide opportunities, but also hold risk of monopolisation with a few off shore companies that are difficult to regulate or be enforced upon to pay UK tax.
We have great concern that our legitimate small businesses, paying UK rates of tax and abiding by our often stringent legislation in relation to a range of consumer protection issues such as food hygiene; fire safety; PA testing, etc. are being penalised by an unregulated sub-industry who can undercut on pricing and destroy viability. Is this really a sharing economy or simply a legitimised underground economy that in reality the Government can do little to control?