Airbnb Regulation - Case Study Example

Airbnb Regulation Name Name of Institution Airbnb Regulation Introduction The sharing economy phenomenon has enabled individuals to make use of under-utilised resources to earn extra income (Koopman, Mitchell & Thierer 2015, p. 2). In recent years, Airbnb has risen to become one of the most prominent participants in the sharing economy with the firm advertising itself as a platform that allows hosts to offer accommodation services to short-term clients. It is essential to note that the sharing economy has three defining features (Kaplan & Nadler 2015). The first is that it relies on recent technological progress to satisfy customers in ways not previously possible. The second defining feature is that firms in the sharing economy work parallel to established sectors and attempt to disrupt them. Thirdly, firms like Airbnb function in what can be referred to as legal grey areas since laws and regulations have not adapted to this emerging sector of the economy (Kaplan & Nadler 2015, p. 103). This essay addresses the third feature of the sharing economy by discussing whether Airbnb should be regulated like the traditional hotel industry. The paper also discusses the implications for Airbnb and the hotel industry in the case of regulation or non-regulation. Should Airbnb be Regulated Airbnb is a global marketplace for accommodation that was founded in 2008. The company experienced phenomenal growth over the years with figures showing that it has served over 60 million guests in 34,000 cities around the world (Airbnb 2016). The company has successful operations in Australia, with 75,000 Airbnb-listed properties serving 700,000 people in 2015. Hosts earned an average of $7,100 from an average of 51 nights a year (Heber 2015). The firm’s success in the sharing economy and its continuous growth has provoked debate over whether Airbnb should be regulated. It is essential to examine both sides of the argument to come up with an informed conclusion as to whether the Australian Government and local jurisdictions should take the step of regulating Airbnb. Although Airbnb has experienced phenomenal growth in recent years, it is yet to hurt the traditional hotel industry (Kaplan & Nadler 2015, p. 106). For example, Australia recorded 7.85 million arrivals for the year ending June 2016, a 10% increase from the preceding year (Tourism Australia 2016). In the same period, the Australian Hotel Industry recorded robust growth with many hotels surpassing 90% occupancy rates (Tickle 2015). As such, it can be seen that Airbnb satisfies the excessive demand in the market while not harming the traditional hotel industry. However, the continued expansion of Airbnb and a reduction in tourism might result in Airbnb hurting the hotel industry and threatening millions of jobs. As such it is essential to create legislation to ensure that there is a level playing field where Airbnb’s growth matches hotel development which has to adhere to strict regulations (Tickle 2015). The second argument for regulation comes from concerns about health and safety. As stated, the development of hotels is constrained by numerous regulations with some covering health and safety, fire risks, food safety, accessibility for individuals with disabilities, and other standard features in hotels (Serkin 2016, p. 239). The general assumption about Airbnb is that hosts will provide safe, clean, and well-maintained facilities that match standard hotels. On the other hand, hosts assume that guests will respect their property and refrain from risky activities like wild parties that pose a threat to health and safety of neighbouring properties (Mitroff 2016, p. 8). However, Mitroff notes these assumptions on health and safety have been proven to be false. Therefore, there needs to be government regulations on health and safety that guarantees the well-being of hosts, guests, and those in neighbouring properties while allowing the platform to thrive (Lehrer & Moylan 2014, p. 56). Airbnb should also be regulated because of the current abuses of the platform. This abuse takes the form of individuals taking entire apartments and running them as illegal hotels. According to Kaplan & Nadler (2015, p. 113), Airbnb has acknowledged that it has a problem with individuals abusing the system thereby making housing inaccessible and more expensive for locals. Airbnb has taken the role of finding these abusers and removing them from the platform. However, this function can be better performed by an independent regulatory body that does not earn commissions from the illegal operations. Airbnb should also be regulated for the purpose of taxation. According to Serkin (2016, p. 239), local jurisdictions derive a significant proportion of their income from properties taxes. The hospitality industry has provided an alternative source of income for local governments through levying a tax on visitors and not the residents of the jurisdiction. An unregulated platform in the hospitality industry, therefore, prevents local governments from obtaining much-needed revenue. The final and most significant argument for the regulation of Airbnb comes from the current regulation covering the firm in Australia. A study of Airbnb in NSW found that the platform is governed by complex and in some cases undefined regulations that vary from council to council (Haylen 2015, p. 8). Some councils have granted approval to Airbnb with specific conditions while others have threatened hosts with punishments that range from a $750 fine to a $1.1 million penalty (Haylen 2015, p. 9). Airbnb is one of the parties that has called for uniform regulations that apply to the entire state, thereby supporting this essay’s argument that Airbnb should be regulated. The regulations should extend across the country since the current scenario has a chilling effect on the adoption of a platform that stands to benefit hosts, visitors, local communities, and governments. Having presented the arguments for regulation, it is worth examining some of the arguments against the regulation of Airbnb. A major reason for opposing government regulation is that it will increase the costs of travel. Airbnb attracts individuals who would not travel in its absence. In particular, the platform is attractive to young individuals who have not yet acquired the earnings to travel and stay in expensive hotels (Kaplan & Nadler 2015, p. 105). The attractiveness comes from the fact that Airbnb listings are significantly cheaper than hotels, caravan parks, guest houses, and motels (Tickle 2015). However, the preceding arguments have shown that the cost of regulating Airbnb will be very low and that regulation can prevent punitive fines and penalties (Richardson 2016). This will mean that the cost will remain at levels that will continue to attract individuals who would not have travelled without the platform. Another argument against regulation and taxation is that hosts are normal individuals who need the extra income. This argument can be resolved by ensuring that only those individuals who earn beyond a certain amount will be subjected to tax. In summary, it is evident that the reasons for regulation outweigh those against regulation. Implications for Airbnb The current regulatory environment in the country makes it difficult for hosts to list their properties on the Airbnb platform. The introduction of standard regulations that cover entire territories or even the whole country would go a long way in easing Airbnb operations. Law-abiding hosts will also benefit from standardised procedures when preparing their properties for listing, with customers benefitting from uniform standards. When it comes to costs, Richardson (2016) notes that the cost of adhering to health and safety regulations will be small. This will be critical for the hosts whose operations in legal grey areas has exposed them to the risk of punitive fines and penalties. Another implication of regulation is that governments will be in a better position to collect taxes. Airbnb will need to share some data on its users to facilitate the calculation of taxes where applicable and to assist the regulators in finding illegal hotels that can have a detrimental effect on the availability and cost of accommodation. Given that Airbnb has advocated for clear regulations for the sharing economy, it can be concluded that such regulations will have a positive impact on Airbnb. Implications for the Hotel Industry An evaluation of Airbnb has shown that it is yet to pose a threat to the hotel industry. The regulation of the platform will go a long way in ensuring that the two services continue to thrive. This is because regulation will allow jurisdictions to determine the suitable number of licenses and the areas where Airbnb will be allowed to operate. This will allow Airbnb to continue offering services to individuals who would not have travelled while allowing hotels to continue serving high-end customers and business travellers. In the long-run, the regulation of Airbnb and its acceptance as a major player in the hospitality industry will result in increased competition for hotels. This will lower prices and harm hotel revenues, but the lower prices will attract more travellers who should cover for the reduced revenue. As such, regulation of Airbnb will have a minimal impact on the country’s strong hotel industry. Conclusion In conclusion, this essay defines the sharing economy and examines the history of Airbnb and its position in Australia. The essay argues for the regulation of Airbnb to create a level playing field when it comes to the growth of Airbnb and the hotel industry. Other reasons for regulation include health and safety concerns, the existing abuses of Airbnb that result in illegal hotels, and taxation. There is also the need to replace the complex regulations that vary from council to council. The paper also points to the fact that the firm has called for regulation to make it easier for hosts to operate in the country. The paper concludes by examining the impacts of regulation with the conclusion being that regulation will be beneficial for Airbnb while posing minimal threats to the hotel industry. References About us, 2016, Airbnb Australia, viewed 27 August 2016 Haylen, A 2015, Uber and Airbnb: The legal and policy debate in NSW, NSW Parliamentary Research Servies, viewed 27 August 2016 Heber A 2015, How Airbnb is pushing to change the law for Australia's sharing economy, Business Insider Australia, viewed 27 August 2016 Kaplan, RA and Nadler, ML 2015. Airbnb: A case study in occupancy regulation and taxation. U. Chi. L. Rev. Dialogue, 82, p.103. Koopman, C Mitchell, MD and Thierer, AD 2015, The sharing economy: Issues facing platforms, participants, and regulators. participants, and regulators, George Mason University, Arlington, VA. Lehrer, E and Moylan, A 2014, Embracing the peer-production economy, National Affairs, vol. 21, pp.51-63. Mitroff, II 2016, Combatting disruptive change: Beating unruly competition at their own game, Springer, New York. Richardson, D 2016, Let's go: A history of package holidays and escorted tours, Amberly Publishing, Gloucestershire. Serkin, C 2016. The Law of Property, Thomson Reuters, St. Paul, MN. Tickle, M 2015, Australian hotel industry cries foul over Airbnb, Australia Broadcasting Corporation, viewed 27 August 2016 Visitor arrivals data, 2016, Tourism Australia, viewed 27 August 2016 Read More