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THE SHARING ECONOMY HOW IT WILL IMPACT THE TOURISM LANDSCAPE AND WHAT BUSINESSES CAN DO. “TRADITIONAL SHARING, BARTERING, LENDING, TRADING, RENTING, GIFTING AND SWAPPING REDEFINED THROUGH TECHNOLOGY AND PEER COMMUNITIES THAT IS TRANSFORMING BUSINESS, CONSUMERISM AND THE WAY WE LIVE.” QUEENSLAND TOURISM INDUSTRY COUNCIL 1 JULY 2014 The Queensland Tourism Industry Council has consulted with the QTIC Associations Council on the content of this document during the first round of consultation. Members of the QTIC Association Council include Accommodation Association Australia, Association of Marine Park Operators, Australian Resident Accommodation Managers’ Association, Australian Federation of Travel Agents, Australian Timeshare and Holiday Ownership Council, Backpacking Queensland, Bed and Breakfast and Farmstay Queensland, Caravanning Queensland, Clubs Queensland, Ecotourism Australia, Far North Queensland Tour Operators Association, Marine Queensland, Queensland Bus Industry Council, Queensland Hotels Association, Queensland Information Centres Association, Surf Lifesaving Queensland, Taxi Council of Queensland and Whitsunday Charter Boat Industry Association. The second round of consultation, with this version of the paper, will be held with the Department of Tourism, Major Events, Small Business and the Commonwealth Games, National Tourism Alliance, Regional Tourism Organisations, Tourism and Events Queensland and the QTIC Associations Council. Contents page 03 03 04 06 08 08 09 09 10 15 16 1. Introduction 2. Rise of the Sharing Economy 3. The Sharing Economy and Tourism 4. The Pros and Cons 5. Government Regulation 5.1 Shifting responsibilities 5.2 Introducing new regulations 5.3 Fostering the sharing economy 5.4 What’s happening in Queensland 6. Appendix A 7. Appendix B 2 1. Introduction New companies are frequently emerging and lending its name to the ‘sharing economy’, drawing the attention of many in the tourism industry who believe that they are simply allowing people a means to profit by ‘not playing by the books’. Airbnb stands as the most recognised sharing company disrupting the tourism industry’s accommodation sector – but they are not alone. Other sectors including transport, tours, retail and hospitality, may also face increased pressures from the sharing economy in the near future. If these pressures are not adequately addressed, tourism businesses stand to lose a significant portion of the market to “unlawful” businesses and struggle to survive. This report is only one step in addressing issues of the sharing economy. It focuses on understanding the impacts it will have on tourism, and provides some considerations for operators while changes to the regulatory environment are being sought. The report follows two key objectives: 1. Strengthen the competitiveness of ‘regulated’ tourism businesses; and 2. Mitigate the adverse impacts of ‘unregulated’ sharing companies on the tourism industry. In order to achieve these objectives, there are four themes of which the report has been structured: 1. Highlight the benefits of ‘regulated’ businesses 2. Identify the risks associated with ‘unregulated’ businesses 3. Promote ‘regulated’ businesses as the preferred choice 4. Identify how the tourism industry may need to evolve to maintain their market share As mentioned, this report is only one step in addressing the manifold relationship between the sharing economy and tourism. The goal is to ensure the resilience and quality of the tourism industry as the way people live and do business changes over the next few years. 2. Rise of the Sharing Economy Also known as collaborative consumption or the peer economy, the sharing economy refers to a recent economic model that uses network technologies to rent, lend, swap, barter and share personal products and services. While “sharing” has typically meant undertaking such acts out of generosity and trust, the newer models adopted by many sharing companies have turned it into a commercial venture where sharing now comes with a fee. Criticism for the for-profit sector of the sharing economy explains how businesses extract profits from their given sector by successfully making an end run around the existing costs of 3 doing business – taxes, regulations, and insurance. Sharing companies typically bypass regulations by not explicitly recognising their transactions as business transactions. Salon, a U.S news website, further writes that: “The sharing economy is not the internet ‘gift economy’ as originally conceived, a utopia in which we all benefit from our voluntary contributions. It’s something quite different – the relentless co-optation of the gift economy by market capitalism”. This evolved model of the sharing economy is changing the way people do business and the value placed on consumerism. It adopts the basic concept of demand and supply in the following way: DEMAND Consumers wanting lower prices for goods and services Everyday people wanting an income using their existing resources SUPPLY SHARING COMPANIES Some have predicted that the sharing economy will be a lifetime trend. The key drivers of un/under-employment, personal debt, globalization, resource scarcity, transparency and shifting demographics will mean collaborative networks will need to form throughout our life. KEY MESSAGE Sharing companies will continue to expand until governments can adequately apply regulations onto them and remove the loopholes. Tourism businesses need to also grow, expand and innovate to maintain the greater market share in the meantime, understanding that regulations are not the only way to keep themselves competitive. 3. The Sharing Economy and Tourism The relationship between the sharing economy and the tourism industry will increasingly intertwine as visitors are given more choices in the way they travel. The 2013 CSIRO Futures report identified some megatrends likely to affect tourism over the next 20 years, including people increasing their networks of trusted peers who inform their travel choices, consumers having access to increasing amounts of information in real time, and consumers taking more control and seeking personal interactions. Sharing companies go some way to meet these trends. 4 The Digital Tourism Think Tank discusses how start-ups like Airbnb and Uber have seen tremendous growth over the past two years, now reaching a scale where they start to compete with mainstream hotels and transportation providers. But it seems that no sector is immune as the sharing economy gradually makes its incursions into four key areas of the tourism ecosystem: ACCOMMODATION TRANSPORT Car-pool Car-lending Car parking at private home Sub-letting in a private home Couchsurfing GUIDES AND TOURS HOSPITALITY Share a meal Social reviews of restaurants Locals as tour guides Online guidebooks Euromonitor International estimates that in the United States, 10 million overnight stays were sold on the lodging site Airbnb between 2007 and 2012. To put this in context, in 2012 a total of over a billion overnight stays were sold in the U.S by all types of tourism businesses taken together. Just how big the sharing economy could grow remains uncertain, but there is some research on its market potential. In an academic research project1, more than 84% of the Dutch respondents expressed interest in participating in collaborative consumption of some sort. Participation in Australia may not yet be at those levels, but it is certainly growing and we may not be too far behind. What remains important to the industry is Queensland and Australia’s tourism brand and the desirability of our destinations to visitors. As the sharing economy is yet to reach its full potential here in Australia, the largely unregulated environment will potentially come with a raft of issues that may damage our strong tourism reputation. Knowing how to address these issues and being prepared will prevent detrimental impacts. KEY MESSAGES The potential for the sharing economy to have impacts on tourism is considerable without proper regulation enforcement. The better prepared industry and government are, the better we will be at managing and sustaining our strong tourism brand. Businesses must focus on providing quality and professional experiences that will further separate them from individuals providing unprofessional products through sharing companies. Businesses must observe how technology is shifting the way people choose to travel, and socially and commercially interact with one another. This will offer insights into how businesses may need to evolve to keep up with the changing tourism landscape. The way sharing companies are utilising technology can in fact be adapted to regulated 1 Van de Blind, Pieter (2013), The consumer potential of Collaborative Consumption; Utrecht University, The Netherlands. 5 tourism businesses while still abiding by the law. This includes the use of apps for bookings and employing their innovative marking techniques. 4. The Pros and Cons Business regulations are often the result of many years of resolving issues on consumer rights and safety, and quality standards. Sharing companies that bypass these regulations and save on compliance and overhead costs can generally offer consumers a price advantage on their unregulated products. But what are the other pros and cons? The table below looks at the perceived pros and cons of regulated businesses and unregulated sharing companies, using the green box to show where the advantages might lie. FACTORS REGULATED Tourism Businesses UNREGULATED Sharing companies Price The price of regulated products covers all overhead costs including licensing and permits. The prices of unregulated products are typically lower than regulated products as compliance costs are not a factor. Authenticity Hotel rooms, taxis, and other tourism products provide a consistent approach, e.g. a hotel room in London and one in Sydney may operate and even feel the same. Consumers believe they are “living” in a similar way to a local resident and therefore believe they are experiencing greater authenticity. Environmental Regulated businesses usually consume greater amounts as products are purchased primarily for the consumer. This also includes the physical buildings where businesses operate. Sharing companies allow people to use their existing resources in a higher capacity. Communication There are established systems in place for response, complaints and queries. Consumers expect that the supplier will offer a quick-immediate response as risk of business loss would be higher. Communication with the consumer is dependent on when the supplier has time and their willingness to respond. No real damage is incurred to the supplier from lack of response. Reliability Booking systems are sophisticated and highly accurate. Where bookings are taken incorrectly, alternatives can in most cases be offered to the consumer. The booking system relies on the supplier regularly updating their profile/status. The consumer may not be adequately compensated when the booking is taken incorrectly due to the detached relationship 6 between the supplier and the sharing company. Transparency Businesses are generally required to identify their address, costs, detail their product and provide photographic or other evidence of the quality. The potential for false listings is significantly higher. There is great ease in operating under a false guise, or provide a product that does not exist or is vastly different to how it is advertised. Health and Safety Businesses require all the necessary licenses, permits and safety equipment to operate, guaranteeing the health and safety of consumers. There are no guarantee for the product. Consumers are subject to risk and essentially responsible for their own personal safety and belongings. Quality A minimum standard of quality is guaranteed through compliance with regulations. Reviews, which often include expert reviews, also provide indication of the quality of a product. The quality of the product is unknown and cannot be guaranteed. Peer reviews can be provided, however these reviews are generally controlled by the sharing companies and therefore can be moderated. KEY MESSAGES It may come down to an extra $10 or $20 for the guarantee of quality and safety with regulated businesses. Businesses must ensure that their products are seen to be worth the price. Authentic and personalised experiences can be found in quality tourism businesses that are shifting from more traditional ways of doing business to a way that meets the demands of the traveler. Tourism businesses are adapting to the changing face of consumerism. As an industry, we are well aware of our environmental responsibility. Particularly here in Queensland, there’s been a strong push for ecotourism and eco-products which help reduce our footprint. Visitors will be offered peace of mind that they are getting the product they seek when they use regulated businesses. These businesses have established a reputation, solid communication channels, booking systems and a high level of transparency so that consumers know exactly what to expect. Tripadvisor, Lonely Planet and other independent travel review sites offer unfiltered and independent reviews of tourism businesses. Visitors should be aware that sharing companies have a financial interest in receiving positive reviews. With the ability to remove negative comments as they wish, consumers may be unaware of how many reviews have been edited or removed. 7 5. Government Regulation Government regulators are continually being challenged by new ways people are choosing to do business – ‘transfer pricing’ by large corporations such as Google and Apple is just one other example. It is often the case that cities around the world will only take a stand once these issues reach a scale where the economic impacts can be felt. Reactions from governments around the world have been varied. Some allow or at least don’t prohibit sharing economies from operating, as others look to crack down on these unregulated businesses. Whichever way governments are looking to move, they know that there are tax losses, breaches of local laws such as zoning laws, and an increasing responsibility for them to ensure that their citizens are safe from harm. Governments also have a responsibility in having a solution for when things do go wrong – but should this be made available to consumers who have willingly used unregulated business? 5.1 SHIFTING RESPONSIBILITIES Some sharing companies have taken responsibility by providing insurance cover, offering to collect taxes, as well as providing a rating system to manage any bad behavior. These actions, while assisting their users and a small step towards regulatory compliance, is in most part financially motivated. Some sharing companies have shifted their responsibilities onto their users in a bid to escape their regulatory obligations. A recent email sent out by Airbnb states that the onus of local laws is the responsibility of each host: “Hosts should understand how the laws work in their respective cities. Some cities have laws that restrict their ability to host paying guests for short periods… In many cities, host must register, get a permit or obtain a license before listing a property or accepting guests. Certain types of short-term books may be prohibited altogether. You acknowledge and agree that, to the maximum extent permitted by law, the entire risk arising out of your access to and use of the site, application and services, and your listing of any accommodations... remains with you." But shifting the responsibility onto their users is not the right solution. Sharing companies must accept a level of responsibility to ensure that they, and their participants, are abiding by any laws that apply to them. These companies should work with regulators to figure out how this can be achieved, rather than placing the onus of local laws onto its users who may not understand they are in breach. KEY MESSAGE The responsibility for companies and individuals to be compliant with the law is on both parties, and should not be shifted from one to the other. 8 5.2 INTRODUCING NEW REGULATIONS In response to industry pressures, increased cases of unacceptable conduct and a raft of other issues, some governments have moved to enforcing new laws to try and prohibit the activities of some sharing economies. The most publicised legal battle is that between Airbnb and the city of New York (see Appendix A). Without a strategy for developing regulatory infrastructure to keep business models like Airbnb’s in check, state and federal authorities may be exposing themselves to the risk of regulatory obsolescence. Introducing new regulations may also have some negative effects. In Berlin for example, local government believes that hire-apartments are tightening the already tough rental market and could instead house Germans and Berliners. By introducing new laws this month that prohibited this activity, the number of holiday rental properties could be cut by around one third, compromise Berlin’s desire to become a tech hub, and change the perception of how welcomed visitors are to the city. KEY MESSAGES Governments certainly have a role in the way its citizens are participating in the sharing economy. Regulations need to find the right balance to support business models that exist today, those emerging and those of the future. Sharing companies must also acknowledge that governments do create safety nets and assist in creating fair-and-balanced regulation for these industries that work for everyone. Greater collaboration between industry, governments and sharing companies will advance our cities rather than bringing it backwards. 5.3 FOSTERING THE SHARING ECONOMY Probably the greatest advantage of the sharing economy for society in general is maximising the use of underutilised assets, and governments are in fact able to adopt this approach to public assets as well. For example, San Francisco has called for an audit of city-owned land and rooftops to see where urban agriculture may be suitable. Local governments are also able to be facilitators of the sharing economy by providing the service themselves similar to the way they currently run libraries – instead of books, they can provide libraries for tools, equipment, etc. History has shown that an entirely deregulated market has not worked in favour of creating jobs, lowering prices or eliminating the administrative burden of controlling the quality of the products. As with the case of Seattle’s deregulation of the taxi industry in 1979, consumer complaints sky rocketed as residents encountered dirty cars, inconsistent (and higher) fare rates, untrained drivers and drivers refusing short-haul rides. The public outcry convinced the local government to reinstate fare restrictions and limit the number of taxi licenses. 9 A recent solution trialed in California proposes that the California Public Utilities Commission create a new category of prearranged for-hire companies. Each company, and not the individual drivers, would need to be licensed by the commission. Companies must conduct criminal background checks for each driver, train their drivers, implement a zero-tolerance policy on drugs and alcohol, and require an insurance policy of $1 million. No doubt many cities will be watching to see how these new laws unfold. More and more cities are slowly adapting to the sharing economy, recognising that there are ways that regulation could be applied appropriately. At the U.S Conference of Mayor’s annual meeting in 2013, nine city Mayors signed a resolution titled In support of Policies for Shareable Cities which described sharing companies as “engines of innovation” that empower citizens (see Appendix B). They key to successfully regulating the sharing economy is to ensure that there is “benefit for the greater good”. Equaling the playing field between regulated businesses and sharing companies does not mean turning one into the other. It means making sure that regulations tailored to each category offers very little competitive advantages, but greater advantages for the consumer by way of increased choice and assurances. KEY MESSAGES History would tell us that an entirely deregulated market does not achieve the best results. Governments should look at how they can regulate new markets to achieve the same principles and objectives as the regulations placed on existing business models. Government’s should observe where regulated businesses are being burdened - e.g. expensive licence fees, unnecessary red tape - and assist these businesses in these areas. 5.4 WHAT’S HAPPENING IN QUEENSLAND Both the state and local governments in Queensland are quiet in how they are addressing the growing sharing economy. As similar to most other cities of the world, there is a grey legal area that exists around individuals “sharing” their personal resources for a fee. The issue for government lies in setting apart registered businesses providing dedicated products from the casual, non-professional products offered by individuals and facilitated by sharing companies. In the case of Airbnb, local governments are responsible for land use matters in their own jurisdictions. While local laws exists for bed & breakfast businesses (including holding a permit to use their home for a business activity, food business licensing, fire and safety regulations and increased Council rates), Airbnb hosts have been able to bypass these local laws largely due to their belief that the website has provided them a legitimate means of monetising their spare resources without needing to set up a business. 10 Local governments have indicated a lack of resources and the difficulty in identifying hosts as the main barriers to enforcing their laws. This includes not being able to obtain the address and details of the host as this is only revealed once bookings have been made. Furthermore, most local governments do not fully understand their rights to audit and penalise hosts who are acting under the premise of “sharing”. As mentioned earlier, the accommodation sector is not the only tourism sector that will be affected. As witnessed with the rise of Uber in Brisbane, there have been concerns by those in the taxi industry about the idea of the ride-sharing app entering the Brisbane transport market. In May, the Department of Transport and Main Roads Minister Scott Emerson had directed his department to contact the company and investigate whether it complied with the public passenger transport legislation. Queensland’s governments will need to start preparing its response to the sharing economy as more companies and more people are starting to exploit its advantages. As seen in the image extracted from Airbnb below, the popularity of Airbnb listings in Australia is led by the southeast corner of Queensland. Source: Airbnb.com. Image not referenced to actual data. KEY MESSAGES Queensland’s ambition to be Australia’s premier tourism destination means that sharing companies will be looking at our state as a perfect place to expand their operation. We need to make sure that our industry, as well as our state and local governments, are well prepared to tackle the issues that will surface over the coming years. Queensland may find itself in a position to take a lead on how governments are dealing with the sharing economy. Other states will be looking at us as an example and so governments and industry need to make sure that we get the approach right. 11 6. Appendix A Business Insider Australia article by Hunter Walker, published 12:47AM on 22/05/2014. NEW YORK'S ATTORNEY GENERAL IS GETTING HIS HANDS ON AIRBNB'S RECORDS New York Attorney General Eric Schneiderman has scored a major victory in his quest to investigate Airbnb hosts who are breaking state law. Schneiderman and the roomsharing startup issued a joint statement Wednesday announcing they reached an agreement for Airbnb to hand over host records to the attorney general’s office so he can attempt to identify users who are violating a 2010 New York law that prohibits renters from subletting entire apartments for less than 30 days at a time. “Airbnb and the Office of the Attorney General have worked tirelessly over the past six months to come to an agreement that appropriately balances Attorney General Schneiderman’s commitment to protecting New York’s residents and tourists from illegal hotels with Airbnb’s concerns about the privacy of thousands of other hosts. The arrangement we have reached today for compliance with the OAG subpoena strikes this balance,” the statement said. Schneiderman’s office has claimed illegal listings on Airbnb are widespread. The company had been fighting a subpoena issued by Schneiderman for host records. On May 13, a judge threw out the subpoena Schneiderman initially issued Airbnb due to what the attorney general’s office described as a “narrow technical issue.” However, the judge’s ruling noted it appears a “substantial” number of Airbnb hosts are violating the New York law. Schneiderman’s office served the company with a new subpoena the next day. Airbnb has consistently maintained it was willing to work together with Schneiderman to eliminate illegal listings on its site. The key to the agreement reached Wednesday seems to be that the initial user information given to Schneiderman’s office will be anonymized with identifying information for hosts redacted. That data set is due to be given to the attorney general within thirty days. Though the initial records given to Schneiderman’s office will be anonymous, for the next year, the company has agreed to give the attorney general identifying information for users who become targets for “investigation or potential enforcement action.” 12 7. Appendix B PROPOSED RESOLUTIONS The U.S. Conference of Mayors 81st Annual Meeting June 21-24, 2013 Las Vegas Resolution No. 87 Submitted by: The Honorable Ed Lee Mayor of San Francisco The Honorable Michael A. Nutter Mayor of Philadelphia The Honorable Antonio R. Villaraigosa Mayor of Los Angeles The Honorable Rahm Emanuel Mayor of Chicago The Honorable Francis G. Slay Mayor of St Louis The Honorable Jonathan Rothschild Mayor of Tucson The Honorable Charlie Hales Mayor of Portland, OR The Honorable Thomas M. Menino Mayor of Boston The Honorable Carolyn G. Goodman Mayor of Las Vegas 87 IN SUPPORT OF POLICIES FOR SHAREABLE CITIES 1. WHEREAS, economic instability has led to increased unemployment in U.S. cities, where income and wages have stagnated for most Americans while productivity has surged; over the past thirty years the median US family income has only grown at an annual rate of 0.36%, while the overall economy has grown at a rate of 2.66%; and 2. WHEREAS, the number of Americans living in isolation has doubled since 1985, particularly amongst the elderly, as the strength of neighborhood community relationships has declined in both urban and suburban areas; and 13 3. WHEREAS, an emerging Sharing Economy is redefining the ways that goods and services are exchanged, valued and created amongst citizens by enabling affordable access as an alternative to ownership; and 4. WHEREAS, the placement and monetization of underutilized assets into Sharing Economy marketplaces empowers citizens to find new ways of providing jobs, housing, transportation, food, and improved lifestyles for themselves; provides additional income for households and local businesses; makes city living more affordable; and generates reinvestment in communities; and 5. WHEREAS, this access to new economic opportunities promotes greater entrepreneurship and the creation of new small enterprises, two aspects of urban life in which cities have invested significant resources to date; and 6. WHEREAS, various forms of sharing amongst residents, neighbors and colleagues can strengthen community ties which leads to greater resilience in times of economic and environmental stress; and 7. WHEREAS, many cities have pioneered the Sharing Economy over the past several decades with great success through models such as car- and bicyclesharing, ridesharing, co-working, consumer cooperatives, home-swapping and sharing, and tool lending libraries, thus providing access to items and space that previously might have been prohibitively expensive to some citizens; and 8. WHEREAS, new technology platforms and social tools have enabled even more citizens to connect with each other in order to access new economic opportunities by monetizing and sharing their underutilized assets; and 9. WHEREAS, Sharing Economy companies have proven to be engines of innovation and job creation, driving economic development in the hearts of American cities, where joblessness is still most pervasive; and 10. WHEREAS, the Sharing Economy can improve and make more cost-effective traditional approaches for managing overall growth and urbanization, integrating transportation solutions, reducing crime, designing urban spaces, creating jobs, and providing a variety of public services for citizens; and 11. WHEREAS, balanced, equitable and clear regulation of the Sharing Economy will ensure greater compliance and benefits to a broader, more diverse population, 12. NOW THEREFORE BE IT RESOLVED, that The United States Conference of Mayors urges support for making cities more shareable by (1) encouraging a better understanding of the Sharing Economy and its benefits to both the public and private sectors by creating more robust and standardized methods for measuring its impacts in cities; (2) creating local task forces to review and address regulations that may hinder participants in the Sharing Economy and proposing revisions that ensure public protection as well; and (3) playing an active role in making appropriate publicly owned assets available for maximum utilization by the general public through proven sharing mechanisms. Projected Cost: Unknown 14 Level 11, 30 Makerston Street Brisbane QLD 4003 E [email protected] P (07) 3236 1445 W qtic.com.au 15