When an Inspector calls... April 2018

Is there a place for hotels with the rise of the sharing economy? Deborah Heather, Director of Quality in Tourism looks at the future of the market, and what’s likely to change in the sharing economy.

If I spout the acronym APPG, it is entirely plausible you will have no idea what I am talking about. APPG stands for ‘All Party Parliamentary Group’, which is an informal cross-party group, set up in Parliament to discuss and debate key issues. Despite having no official binding status in Parliament, they are useful for discussing key issues, bridging the gap between MPs and industry, and drawing attention to potential challenges faced within an industry. We are currently supporting and engaging with the APPG for Tourism, and a core topic of discussion at the moment is the sharing economy, its role in industry, and the need to mitigate any potential adverse issues it brings to the fore.

What is the problem?

It’s clear that the sharing economy is here to stay, and that it has changed the face of the hospitality industry significantly over the last few years. Advertised as offering cost savings (i.e. cheaper than hotels) and providing guests with the opportunity to ‘live like a local’, a core USP of the sector is the personalised touch and the close host-guest relationship. Clearly this authentic ‘home away from home’ approach is not for every guest, and hotels of course continue to thrive, but aside from concerns over increased competition, many have argued that the cheaper rates come from the lack of compliance with regulation.

Guest safety is a legitimate and essential concern and one which needs to be tackled with a sense of urgency. The Tourism APPG is currently conducting a full inquiry into the sharing economy, establishing a balanced view of the benefits it provides, alongside the issues it creates and the impact it has on local community. The specific aim is to identify how benefits to industry can be maximised, while negative impacts are reduced, with a final report due to publish in May.

In a recent 5 Live Investigates  programme, reporters highlighted the serious and growing risk that home-sharing rental properties present in terms of fire safety for example; with a warning from the National Fire Chiefs Council (NFFC) of the potential of a ‘Grenfell-style incident’ without the enforcement of proper inspections. Fire Safety is just one concern, with food hygiene, building regulations, privacy, safeguarding and accessibility also of concern. There is an additional challenge tied to this, and that is how local Councils can assure the safety of these places, with already stretched and understaffed inspectorates.

A core challenge to tackling this issue is the lack of awareness of the scale of the problem. Sharing economy lets do not have to register, are often not inspected and may not even promote themselves as a business, meaning that it is extraordinarily difficult to quantify the number operating in any given area, nor the potential level of risk regionally. Of course, many operators are likely to be taking responsibility to mitigate risks – indeed many of the platform providers encourage hosts to follow national safety guidelines – but in many cases, it is lack of awareness not intentional negligence that drives safety concerns. Speaking to a number of sharing economy hosts, it is clear that they have little or no knowledge of the national standards in place, nor are they aware of the risk to guests through non-compliance. Add to this the fact that standard home insurance policies will not cover any form of sub-letting, and there is an additional issue for the hosts themselves.

Guests understandably assume that any place which offers lets is compliant with necessary regulation, and few have any awareness of the risk. They don’t know to ask, and the hosts don’t know to tell, to the point that this very naivety underpins the potential of future disaster. In 2017, a flat in Plymouth was dubbed a ‘deathtrap’ by fire inspection officers, after it was found to have toxic tiling, faulty locks and a fire extinguisher that hadn’t been tested in over 15 years. The owner was given a six-month suspended sentence and the property was removed from promotion, but it serves to highlight the potential risk to life from poorly managed properties.

The potential scale of the problem is massive; data from the Residential Landlords’ Association highlighted rapid growth in the market to more than 210,000 lets last year, which is 10 times as many rooms available than traditional B&Bs. Meanwhile an evaluation by PwC estimates that the market could be worth £30bn by 2025.

So what should be done?

Interestingly, the lack of regulatory compliance is not because the regulation framework does not exist, but due to challenges with enforcement, and difficulty locating details of who is offering these types of let. A core consideration of the APPG is how to tackle these issues and what can be done to improve transparency. As part of the debate in the tourism APPG, MPs highlighted in March that it is essential that “all businesses offering accommodation should compete on a level playing field” when it comes to regulation. Meanwhile Karen Buck MP, who has been campaigning for a short-term lets registration scheme, said there was now "growing consensus" around the issue.

Some of the change will need to come from the platform providers themselves. Indeed AirBNB specifically is taking responsibility for the issue by partnering with the NFCC to provide expert advice on safety to hosts, and running events to inform and tackle the issue. Meanwhile STAA has an exemplary code of conduct which puts many professional hospitality business standards to shame.

Interestingly, despite a fairly strong drive for compliance, a core counterargument which is being discussed and defined is whether proposed regulatory requirements should be proportionate to the size and scale of the business. An intensive regulatory framework including inspections - as you would receive for any other hospitality business - has the potential to stifle the growth of this market and the economic opportunity presented by the sharing economy, given that many of the lets are run part-time for supplemental income. This may present an interesting modification to the framework.

Why not just ban the sharing economy?

True, one solution could be to ban the sharing economy, but the consensus is that this will be a blow to the industry, and undermine the very tenets of our economy. Earlier this year, Ibiza banned a number of sharing economy websites, but this came after demand for party houses created a shortage of rental properties, forcing locals into homelessness. Slightly less aggressive approaches have also been applied in San Francisco, New York and Amsterdam, where concern for the traditional hospitality providers has resulted in stringent protocols for sharing economy businesses, assuring long-term stability and profitability, but the long-term impact on competition and innovation are yet to be quantified.      

I firmly believe that levelling the playing field in the UK is essential, but also believe that a total ban for the sharing economy would be a huge loss to industry, driven by greed or perhaps some strange sense of nostalgia. The sharing economy is arguably the single biggest evolution in hospitality in the last 50 years, and there is much we can all learn from its model, despite its listed shortcomings. I also believe it is essential however that we create a framework which heralds and favours those who are committed to standards, and eliminates opportunity for those who are not, regardless of their business model.

In my view, competition is largely positive; it encourages us to strive – to be better and do better in order to compete. The sharing economy is highlighted as the pinnacle of authentic local experience, but in my experience, the hospitality businesses that are thriving best at the moment are those which have passion and value at their core and are delivering just as authentic an experience. The days of faceless corporate hotels are dwindling and in their stead come hotels which are better and brighter, and which employ interesting, passionate and engaged people, and have USPs that set them apart not just locally, but nationally too. The sharing economy was the first to capitalise on the hunger for new and original experiences, but it was the guests themselves who demanded it; it does businesses well to remember this.

Taleb Rifai, secretary-general of the UN World Tourism Organisation, spoke to Telegraph Travel at the World Travel and Tourism Council Global Summit in Bangkok in April and told hotels to “stop complaining about companies such as AirBNB and instead embrace the accommodation phenomenon”. He continued “Yes, there must be some sort of government interference. The sharing industry cannot be unregulated, unchecked, unregistered like it is now… but hoteliers and the hospitality industry must come to terms with this, embrace it.” Of course platforms such as AirBNB are now actively encouraging hotel participation, and potentially, this provides new technologically-driven opportunities to drive trade too.

What should hotels be doing?

Interestingly, many industry providers see sharing economy lets as direct competitors; and true, in terms of passively capturing guests within Destination, they are perhaps a threat. But from my experience, sharing economy businesses lack so much of what hotels have to offer, if only hotels would capitalise on it. My top tips are:

  • BE the destination, not just be in it. The sharing economy competes most for guests who are already heading to Destination, and are looking for a place to stay. There is a whole other market who visits because of a desire to stay somewhere specific, or who has been engaged by the property provider. This market can still fill your bookings many times over if you are savvy with your marketing and approach.
  • build loyalty for your property or group of properties. The sharing economy is often part-time, transient or has inexperienced hosts and you offer something different. Use all the marketing tools you have, from added-value offers to pull-backs, to keep people returning for multiple trips.
  • capitalise on your facilities and size. The type of guest that stays with you is likely to seek more than just a room to stay in, and your facilities will satisfy this need. Highlight restaurants, spas, gym facilities, as well as the extra special touches you offer that others don’t. Set yourself apart.
  • review local lets, and see what they are doing that you can too. They do still compete for some of your market, and it is important not to discount this. Review the portfolio that are available where you are, and consider what they have that you don’t and how you can overcome this challenge. They provide a brilliant opportunity to learn!

For me, ultimately, I am pro good hospitality, wherever it originates. Some of the hotels I have the pleasure of visiting are the very best at what they do, filled with passionate providers and providing authentic experiences, and ultimately, this is what we need more of. I am relishing the changing face of the industry, and the ultimate increase in standards over the last few years, and welcome the next phase of industry evolution.  

For those wanting to demonstrate their commitment to compliance and standards, or seeking to gain insight into their business, Quality in Tourism has launched a new set of independent assessments, as well as a new Safe, Clean & LegalTM marque to highlight compliance. For more information visit www.qualityintourism.com. If you have any comments on the article, please direct them to our team.

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