Beyond the impact of the Zika virus, the opening of Cuba to U.S. travelers and the warnings of an economic slowdown by the International Monetary Fund and others, the Caribbean faces another phenomenon that poses a challenge to the status quo, in the form of Airbnb.

One need not look too far to see how the accommodation-sharing concept has grown to become a flashpoint, with states, municipalities and governments in the U.S. and Europe lined up on one side, and Airbnb on the other.  Recent studies by groups supporting and challenging the 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 Airbnb has become.

In all cases, the fundamental question being posed is whether Airbnb is positive for local economies, or whether it damages the tourism industry by undercutting prices and not contributing to local and national tax rolls. Beyond that, the further question is whether Airbnb is facilitating the rise of unregulated accommodation offerings.

According to Airbnb and its defenders, the company allows people to make extra revenue through the renting of their own rooms and homes.  On a granular level, Airbnb is simply a “people-to-people platform” that helps individuals leverage a private asset in their homes to generate disposable income. All this while allowing the traveling community the ability to visit locations that they may not have considered prior, at reduced cost. 

Airbnb also argues that within certain markets, many of its listings are outside of the main hotel areas, with evidence showing that guests using Airbnb are likely to stay longer than other travelers, adding more in terms of revenues to the local economy. 

The Airbnb model, according to its defenders, merely serves to open tourism beyond the traditional owners of the product, allowing for a certain democratization of the industry.

Still, those in the tourism industry and their representative associations have joined many governments in the pushback to Airbnb, arguing that it has evolved from a peer to peer system to one dependent on multi-unit rentals and full time realtors for much of its revenue.

In many markets, the Airbnb model for people that own multiple properties has been to bypass the regulated system associated with hotels, and instead list their properties on the platform, lessening their exposure to taxes and regulations.  This has led to discontent even among 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 claims that in markets where it has managed to come to an agreement with regulators, there has been a steady 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. But despite the Paris example, Airbnb is being portrayed as being less than transparent in its operations, as it does not disclose information on the numbers and types of units rented. This lack of shared data, according to Airbnb’s detractors, serves to stymie government efforts to verify rentals and collect revenues.

For the Caribbean, the challenges posted by Airbnb to the traditional hotel system are many and varied. While on one hand there has been a stated interest in allowing individuals to rent their rooms and homes (within CARICOM this allowed for construction incentives to individuals to increase accommodation stock for the 2007 Cricket World Cup), the concern for hotel operators is understandable. Facing competition that operates on an uneven playing field is never welcome.

While for the traditional Caribbean operator, there is some vindication in Airbnb’s argument that hotel tariffs and fees are disincentives to travelers, the ability of Airbnb to allow travelers to dodge these previously-inescapable fees are chilling.  Reports which suggest that once someone tries Airbnb, they are less likely to try to stay at a traditional hotel, are also not comforting.

In a region where tourism is often relegated to the second or third tier of the policy agenda, Airbnb and similar operations present regulatory and financial challenges to tourism and finance policymakers.  While traditional operators themselves may join the platform to circumvent the system; for governments, the question remains how to balance the opportunities for enterprise presented by Airbnb against the fact that the region’s tourism-based economy is supported, at its core, by traditional hotel offerings.

With Airbnb already in the Caribbean space, there are now important questions for national and regional policymakers to confront. How easy will it be to track Airbnb rental data on current immigration forms? And is the value of the money spent by users of Airbnb in the economy as significant as is claimed by its advocates?

Could Airbnb, as it did in Paris, be a partner to governments in charging and collecting hotel tariffs on private rentals Or is there enough fiscal space to lower the tax burden on the industry in exchange for more travel? 

Failing all else, policymakers at the least need to understand whether they can afford for traditional operators to use Airbnb as a way to circumvent tariffs, and whether travelers are being put at risk with the rise of unregulated accommodation.

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 to attract more travelers and to run a fair tourism market is critical. A wait-and-see game would only further erode the current traditional Caribbean hotel model, which has had its product offerings increasingly viewed as expensive and overtaxed.

What does Airbnb mean for the Caribbean’s hotels?

Anton Edmunds

Anton Edmunds is the head of a Washington, DC based consulting firm that provides advisory services to governments, businesses and associations with interests in the Caribbean.

PUBLISHED — March 13, 2016

Category: BusinessOpinions & EditorialsTravel