BUSINESS MAVERICK

Devil’s in the detail as government toys with regulating Airbnb

By Ruan Jooste 24 April 2019
Caption
Photo: Pixabay

Echoing calls to regulate ride-share platform Uber in South Africa, which has disrupted the taxi industry worldwide, has spilt over into the local tourism industry players, which have called for Airbnb to be regulated. The Department of Tourism has heard the cries, but not everybody is happy with the proposals.

Ruan Jooste

The Tourism Amendment Bill has created much angst among people making their living from providing short-term lodging on web-based platforms such as Airbnb. The bill, released on April 12, 2019, for public comment, is considering, among other things, the legal steps to regulate private home rentals.

If the proposals were to be signed into law, the Department of Tourism could specify various “thresholds” in terms the number of nights guests can stay at chosen locations or how much money an Airbnb host can earn.

Minister of Tourism Derek Hanekom told BD TV that the main aim of the proposals is to deal with some anomalies in the legislation, of which short-term rentals form a small part.

He said that the bill stipulates that these online offerings are similarly regulated to guest houses and other lodging establishments in South Africa.

It will level the playing field,” he said. “It’s about getting the balance right from a competition perspective.”

Hanekom said similar regulation is already in place in Greece, the UK and France.

If homeowners are to run an Airbnb as a full-time business, it should be treated as such, and also pay its fair share of taxes, he said.

Hanekom said that South Africa also has a highly regarded lodging rating system in place, administered by the Tourism Grading Council of South Africa, which manages the quality of such offerings. He said the government wants to ensure this rating system stays intact and is implemented across the board.

People want to know what they get.”

Hanekom said the ministry had a meeting with Airbnb a few years ago, when the home-sharing platform indicated they actually preferred the appropriate regulation being in place.

It provides much more certainty for them as well,” he said.

Hanekom made it clear, however, that it was not the intention of the government to clamp down on the short-term rental sector per se, or hamper tourism growth.

When tourism numbers increase in the upcoming years, as we believe they will, more accommodation options will be required. Furthermore, Airbnb provides a different visitor experience and we want to allow for foreigners to experience a home visit in a township home, for example.”

Online literature agrees that Airbnb has developed into a major player in the tourism sector and that it allows tourists to have authentic, off-the-beaten-track experiences in neighbourhoods previously unvisited.

But more opposing voices are raising the issue that “short-term rentals can be disruptive to the traditional lodging industry and trigger gentrification processes; housing affordability and availability are jeopardised when housing units are turned into vacation rentals”.

The Tourism Business Council of SA for one has called on the government to regulate Airbnb in SA as it is threatening the viability of conventional lodging providers such as hotels, and this could lead to job losses.

In a recent media release, the council stated that the country’s hotels are losing millions of rand because some tourists choose to use Airbnb instead.

The council’s CEO, Tshifhiwa Tshivhengwa, said that while the tourism body had no qualms with Airbnb, the online accommodation platform should be regulated.

Airbnb has seen impressive growth in South Africa, and a lot of this came at the expense of established bed-and-breakfasts and hotels.

We’re not saying they must be like hotels. We’re saying we can’t just leave that space untouched, unregulated,” he said.

Most cities across the globe are relatively lenient towards short-term rentals, with little to no (complete) prohibition. Instead, they limit the number of guests, nights and times a property can be rented, demand certain safety precautions and information provision, or require primary residency. The South African stipulations are in line with that.

What makes SA different is that regulations abroad are mostly directed at mitigating neighbourhood impacts, rather than creating a level playing field for the traditional lodging industry.

Hanekom, however, remained adamant in his interview with BD TV that the consultation process on the bill will be an inclusive one, and expected great public participation in the matter.

We (the department of tourism) will mediate the considerations and proposals before we take it to Parliament for the second round of deliberations.”

If the bill is to be enacted as it stands, it will be at the minister’s discretion to what the appropriate measures will be in terms of periods of stay and remuneration, and not a blanket approach of fixed rules. The measures will probably be clarified with subsequent regulations from the ministry itself. This is in line with global trends.

But not everyone is happy with that. Lobby group Sakeliga said it would object to the bill as it could “seriously harm” small-scale, short-term home rental businesses.

The bill is ostensibly aimed at promoting the tourism industry, but really the bill is about intervening in the business of small-scale, short-term home rentals and the services offered by companies like Airbnb,” Gerhard van Onselen, senior analyst at Sakeliga said in a press release.

The minister is not going to promote the tourism industry, he is going to artificially drive up prices and interfere in an industry that regulates itself much better than the government can.”

Van Onselen said an increased supply of short-term rental units results in healthy competition.

Market innovations help to weed out poor service providers. At best, the government is reinventing the wheel and — at worst — it’s letting the air out of the tourism industry’s tyres.”

Sakeliga legal analyst Daniel du Plessis explained that the bill seeks to amend section 7 of the Tourism Act to expand the minister’s regulatory powers to include a number of limits and thresholds imposed on short-term home renters.

Despite the potential infringement of these thresholds on ownership rights, they may well be entirely superfluous,” said Du Plessis.

In the first instance, it is not entirely clear that such regulation would be necessary for this sector. Market innovations are producing their own solutions to concerns over sub-standard short-term rental accommodation. Innovations in mutual ratings provide rental consumers with rich information on offerings. Moreover, short-term rental providers and clients both are (already) rated, which leads to a higher trust marketplace.”

According to Sakeliga these regulations may have knock-on effects on the rest of SA’s tourism economy, and the government should consider the impact carefully and thoroughly before implementation.

John Dludlu, an executive in strategy and corporate affairs at the Small Business Institute (SBI) says “this is a classic case of the need for transparent regulatory impact assessments when government and the National Assembly develop policy, regulations, and law, which Section 18 of the National Small Business Act requires”.

As matters stand, the impact this proposed law could have on small and medium-sized enterprise (SMME) is unknown, but potentially devastating, and could harm a sector with relatively low barriers to entry.

We believe if correctly done, this assessment will ensure that a balance is struck between the need for innovation and enlightened regulation that enables economic growth. If we’re serious about achieving the National Development Plan’s (NDP) aspiration of 90% of all jobs coming from the SMME segment, which currently accounts for 98% of all firms, but contributes only 28% of jobs, we have to ensure Section 18 is fully implemented and every government minister becomes “a minister of small business”.

Finally, we welcome the Minister’s openness to comment but want to urge the government to ensure the consultation is thoroughgoing. As SBI, we stand ready to engage with the government in this regard.

But it doesn’t matter if all related parties get their way or what the actual underlying intention of local legislation turns out to be, the challenge will come down to enforcement.

Regulation of any part of the digital economy has not been easy for most governments across the world due to the dynamic nature and online practice of disruptive service offerings such as Uber and Airbnb. (See article on how Africa is being left out of the digital loop). So it will be very interesting to see how it all pans out in practice. DM

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