Since its early beginnings in San Francisco all the way back in 2008, Airbnb has proved immensely popular in the Caribbean and around the world. Recent figures indicate over US$266 million has been earned via Airbnb throughout the Caribbean and the Yucatan Peninsula of Mexico from January to September of 2017. This figure is all the more impressive when one considers the lower costs of many Airbnb accommodations compared to traditional hotels.
Yet Airbnb does cater to a diverse clientele. Not only is it growing in popularity with tourists and short-term stayers but also the luxury crowd. The potential to rent Bird Island off the coast of Belize as your own private island (for around US$600 per night) is surely one of the most novel attractions offered by the app but is also just one of many islands you can rent via the service.
The growth of Airbnb has been closely followed, especially by incumbents in the tourism industry. With such rapid growth of the hospitality service, veteran hoteliers and established accommodation businesses have anguished over what threat Airbnb poses to their business.
In turn, in what areas does Airbnb hold a true advantage, as opposed to simply pioneering new services that longstanding businesses could incorporate too?
THE AIRBNB ADVANTAGE
Breaking with old conventions and offering something new is a core part of every new business that seeks an edge in the market. Undoubtedly, where Airbnb has done especially well is the deliberate effort to market its service as one that is global in reach but local in access. While previously many tourists would have to hop from site to site to organise their accommodation over a long trip or many nations, via Airbnb it can be done on just one platform.
This is an aspect where traditional hotels could continue to make better inroads as even chains that have many locations around the world often ask the user to navigate from one local site to another in order to make a booking. Beyond this, Airbnb also allows for the easy arrangement of medium-term accommodation such as one to three months.
Not only for holidayers‚ but people who may be moving house‚ or in one location for a time on business‚ this can be a great solution that is more affordable than a hotel but doesn’t require the complex paperwork that can come with renting a home.
While Airbnb has entered the market as a potential competitor to traditional accommodation businesses, it has also looked to do so with precision. For its part, Airbnb has looked to build a working relationship with a number of governments in the region‚ and this should be recognised. Alongside a high level meeting with the Caribbean Tourism Organisation earlier in the year, Airbnb has also reached deals with the Jamaican government, the Bermudan government and others to grow tourism. While Airbnb may be a poster child of ‘disruption’, these partnerships have shown its constructive impact on the industry.
Furthermore, though these partnerships don’t eradicate all challenges surrounding Airbnb, they do decrease the likelihood of a bitter rancour evolving, the likes of which saw fellow disruptor and ridesharing services Uber receive a ban in London‚ UK back in September (which is now currently on appeal).
Nonetheless, the evolving nature and rapid growth of Airbnb could mean these foundations are tested. Presently there are two major issues that loom especially large surrounding Airbnb’s status in the Caribbean, and indeed around the globe.
While Airbnb offers great flexibility to a traveller, it is clear this freedom has sometimes come with its own unique problems. While private property laws have been a pillar of Western society for hundreds of years, the ability for individuals who are renters or lessees to then sub-rent their residence to an Airbnb user (whether the landlord is aware of this or not) has generated complex legal questions.
While most often this may be a minor issue – such as who is responsible if a shower doesn’t work or a window is broken – it can also be more problematic when questions of trespass, liability and more serious episodes like an accident or even a death have occurred.
One of the chief issues with Airbnb has been with tax. This has been a common theme not only in the Caribbean but around the world as the Panama Papers and Paradise Papers have exposed the strategies of many wealthy investors and businesses in tax minimisation. Though Airbnb has begun addressing this issue in recent times – notably forming an agreement with the U.S. Virgin Islands government in May – there remains work to be done.
It need be underscored that tax minimisation may be unsavoury to many readers but it is also legal, and there is no suggestion that Airbnb or any parties named in the Paradise Papers or Panama Papers leaks broke the law. Yet when Airbnb globally has shifted profits offshore in other territories, it’s been faced with the question: If you make money as a business locally, why can’t you have your profits taxed locally? This is a difficult question for any business but especially a tourism one.
There have been a number of inquires into Airbnb’s tax status in other nations around the world. Though this is unlikely to have a direct impact on Airbnb’s operations in the region, it could have a knock-on effect if Caribbean islands feel their countries are getting a raw deal on tax compared to other nations.
In this regard, the traditional hotel has a clear advantage as a known commodity. As a local business bound to operate by local laws and regulations, the shades of grey surrounding legal issues like duty of care, liability and voluntary assumption of risk do not exist in the same way.
While far more tourists will likely pick their accommodation based on its location and views, over policy concerns, the revelations of tax minimisation offshore have done few favours for a number of prestigious global brands. Tourists seeking to ensure their tourism dollar goes to supporting a local business and local community may be wary of picking an Airbnb rental.
THE CHALLENGE TO HOTEL
It is worthwhile noting that Airbnb’s challenges to hotels in many areas are not direct. As Brian Chesky, Airbnb founder and CEO indicated back in May, an Airbnb stay is, on average, two and a half times longer than the average hotel stay. Further, around 20% of total Airbnb stays are for a duration longer than 30 days. Certainly there is contested space between hotels and Airbnb but it is asymmetrical.
Its virtues notwithstanding, like Uber, Airbnb also poses a number of challenges beyond competition alone. These issues most immediately surround liability and taxation matters but also go beyond them. Just as Uber has generated immense debate in many cities around the world about its impact on licensed taxi drivers and concerns over whether Uber’s license-free operation leaves veteran taxi drivers disadvantaged‚ so too has the rise of Airbnb seen a growth in Airbnb investment properties in many markets.
In less than a decade Airbnb has transformed the tourism market forever.
Its innovations should be commended, and its partnerships with local governments noted. While the existing issues surrounding its service are not insignificant, they are also not insurmountable. Resolving the questions surrounding liability, security and local taxation of profits will not only benefit the tourism industries of our many Caribbean nations, but also Airbnb as a partner.
At present there is also much evidence to suggest Airbnb can grow without posing a threat to existing hotels and tourism businesses. In fact, a number of hoteliers have sought to integrate Airbnb rentals into their existing business, offering dedicated Airbnb rentals alongside their other accommodation to ensure they cater to a new market in tandem with their longstanding clientele.
For now, though, the situation remains fluid. For someone with a limited budget and a great sense of adventure, any concerns about Airbnb will likely seem minor compared to the many dollars they can save using the service. On the other hand, for traditional hotels that have maintained a longstanding business and loyal clientele, the quality of service and assurance of security that comes with their accomodation will surely stand them in good stead.
All up, Airbnb has ensured there’s never been a more exciting time for the tourism industry in the Caribbean. Now the chief question for the future is: What changes come next?