A Deeper Look into Regulating AirBnB in South Africa

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According to a City Press report, major entities in the hospitality industry in South Africa have called for government to step in an regulate hospitality app, Airbnb. New regulations being introduced by the Department of Tourism to clamp down on short-term home rentals like Airbnb have been met with wide criticism and labelled anti-competitive and draconian.

Airbnb has seen impressive growth in South Africa, and local hotels are concerned that the unregistered accommodation establishments listed on the platform are taking away business from established bed-and-breakfasts and hotels. The Federated Hospitality Association of SA (Fedhasa) called for government to crack down on Airbnb, and smaller organisations have echoed this call.

But when one looks at the bigger picture, the regulations demonstrate that the government has no idea how business or wealth generation works, according to Free Market Foundation researcher Chris Hattingh, who says that the department has wildly overreached, giving the minister too much power, and limiting income-earning opportunities.

The Tourism Amendment Bill, gazetted on 12 April 2019, states that ‘short-term home rentals’ will now be legislated under the Tourism Act.

Under the amendments, the minister of tourism will have the power to specify certain ‘thresholds’ when it comes to Airbnbs and short-term rentals in South Africa, which could include limits on the number of nights that a guest can stay or even how much income an Airbnb earns.

According to the department, this would ensure that ‘everyone gets their fair share’, and that both private users of Airbnb and hotel groups get to enjoy a shared economy.

“To presume that a government department must ensure that each bed and breakfast earns their ‘fair share’ indicates a fundamental lack of understanding of the nature of business, and of wealth, which is: Each person is not entitled to a slice of the economy; wealth is created by each person, for himself,” Hattingh said.

“Each person’s wealth is his own pie, to increase or lose based on his own decisions and choices. For the department to place itself in the role of wealth ‘granter’ clearly shows that the officials who work there are completely ignorant of the concept of wealth; wealth is made, not granted or given.”

Stifling competition

According to Airbnb, it is in discussions with government on regulation, specifically on how to help hosts share their homes, follow the rules and pay their fair share of tax. The group works with 500 governments across the world and welcomes ‘clear and progressive’ rules and regulations.

Airbnb says it has boosted the South African economy by R8.7 billion and created 22,000 jobs – with hosts keeping 97% of the prices they charge to rent their space.

Hattingh said that the government regulations are putting this lucrative and successful tourism segment at risk.

“Airbnb has enabled people previously unable to do so to make a living for themselves. Just as Uber opened up a whole new market for people in transportation, Airbnb has the same transformative potential in tourism,” he said.

“If a customer decides to stay in an Airbnb instead of a ‘traditional’ B&B, that is because they think they can get more value for their money at the Airbnb. It is each customer’s free, voluntary choice to trade with the establishment of his choice.

“And it is up to each Airbnb host and all other establishments to make their product as alluring and competitive as possible. Every business, whether it is an Airbnb or any other, must stand or fall on its own merits, without government favour.”

Japan introduced private lodging regulations in June that affected Airbnb. Major cities such as Chicago, New York in the US, and Barcelona in Spain, have also introduced regulations that tighten the leash on Airbnb.

He also warned that the regulations can cut both ways, adding that the government can very quickly turn its expanded regulatory powers on any target it deems ‘too big’ or ‘earning too much’ – which includes the traditional hotel groups who are welcoming the regulations.

“You do not encourage economic growth by imposing regulations; you encourage economic growth by removing as many regulations and restrictions as possible,” Hattingh said.

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