While hotels all over the world are twiddling their thumbs waiting for guests, or rather biting their nails, the home-sharing website Airbnb turned out to be a formidable COVID-19 survivor.
While reservations in hotels dwindled to zero during the outbreak of the pandemic, bookings on the California-based rental platform have taken a much smaller hit.
With international flights suspended and big cities turned into quarantine zones, Airbnb’s turnover has admittedly halved to $2.2 billion – but not stalled. Stays in rural areas have even increased. Many town dwellers decided to work from home away from home, rather than suffer the inconveniences of empty stores, stay-at-home orders and cramped confines of the metropolis. For those who could afford the escape, staying put in rural greenery was certainly more attractive then closed parks, locked playgrounds and indoor soccer matches.
With the most severe lock-down measures lifted, local tourism is springing back to life. Many still hesitate to travel abroad yet crave for a break or a change of scenery. People started to shop around for holidays or just a long weekend, reachable safely by car rather than public transport.
Gozo has never looked more idyllic than now – nor have the Cotswolds, Martha’s Vineyard, Sylt or Austria’s countless lakes. As the masks come off, crowded hotel lobbies and crammed pools feel less alluring. Intimacy is the new essential item on the wish list.
When we talk about e-commerce and the ‘new economy’, genuine progress tends to be overestimated. After all, Uber is just a taxi, Tesla a car and WeWork an office landlord. Yet the way Airbnb has impacted the hospitality industry is profound. It has changed tourism more radically than at any time since Thomas Cook had brought foreign travel to the masses almost 200 years ago. It has also changed cities and communities, the prospects of young home owners and the possibilities of budget travellers in ways which fostered excitement and protest in equal measures. Legislators are still struggling with the fallout.
To the detriment of hotels and pensions, Airbnb facilitated accommodation in private homes. It provided travellers with cheaper places to stay and homeowners with an unexpected, additional income. By renting out a spare room, or letting one’s own apartment for a short while, onerous mortgage obligations became easier to service and the life of the squeezed, just-about-managing middle classes became more bearable. The young had the prospect of owning a place without penury. The old could better their meagre pensions.
Other than traditional hotel businesses, these newly-minted landlords had the competitive advantage of disregarding the cost of investment. They owned or rented the property already. They had acquired the place to live in it, not to yield a return. Rental income was a lucky bonus, not calculated profit. In a regulatory vacuum, these lay lessors were not burdened by fire or hygiene standards, like hotels. They did not have to pay tourism levies, licensing fees or business rates. And many did not even bother to pay VAT or cared to declare their additional income to the taxman.
Airbnb provided the anonymous environment to dodge tax obligations with impunity. Within a short period of time, Airbnb became a hospitality behemoth, listing more than seven million properties in 220 countries.
It took local and federal authorities quite a few years – and quite some lobbying from the hotel industry – to realise the size of the problem. Not only were traditional hotel operators suffering from unfair competition but tax revenue was lost.
Airbnb’s turnover has admittedly halved to $2.2 billion – but not stalled
Communities in city centres were suffering unforeseen hardship too. Residents lost their familiar neighbours to tourists moving in and out on a daily basis with little regard and care for those who had lived there for a lifetime. High streets started to cater for tourists, rather than the needs of locals. And rents became soon unaffordable.
€90 per night for a flat in the centre of Paris or Amsterdam may not sound much, yet it translates to a monthly rent of €2,700 which only very few people can afford. Soon long-time denizens started to relocate, or had to do so, to make space for a business which was a hotel operation all but in name.
Eventually alarmed regulators started to fight back. In many countries, maximum rental periods were decreed, illegal sub-lettings scrutinised, professional landlords and rental businesses curtailed, protected areas created. Eventually, tourist fees became payable as well as VAT. In many jurisdictions, data on potentially taxable income became reportable. It was hard to argue that banks had to submit their customer details to tax authorities while Airbnb was claiming data privacy protection. The playing field became more levelled.
In difference to booking platforms or price comparison websites, Airbnb has created a new market which can earn money (even in a more regulated, and more scrutinised environment) despite the fact that the commission it demands for its services from guests and hosts is more competitive than most booking aggregators. The larger part is paid by the guest.
A pied-à-terre in Siġġiewi for €26 a night? Or a twin room in Gżira for €22? Or better, the ancient farmhouse in Gozo, with three bedrooms and infinity pool for €120 per day?
In Malta only 300 properties are so far listed on Airbnb. The business is still in its infancy. Hopefully, meaningful regulation will be in place to avoid the sordid outcomes seen in other countries.
Handled in the right way it could bring the hospitality business to all Maltese, not just to the few hotel investors. It could make our housing more affordable, our tourism more humane, large-scale disfigurement of our land unnecessary and support local communities. It could also protect our tourist business from the economic consequences of future epidemics.
Sadly, as retail investors, we have so far been bypassed by the success story of Airbnb. The company, cautiously valuated at $26 billion, is still in the hand of private investors and early creditors. A planned public offering in spring this year had to be postponed, as the fallout of the coronavirus lockdown made a full valuation of its business model – and a juicier pricing of its shares – difficult. It stands to fear that when the planned IPO will take place, later this year or in 2021, stocks will be so dear that little upside can be expected.
I would look carefully at valuations and observe the first weeks of trading. Perhaps, for once, exuberance will not ruin the day and we can snatch a piece of the hospitality future.
The purpose of this column is to broaden readers’ general financial knowledge and it should not be interpreted as presenting investment advice or advice on the buying and selling of financial products.
andreas.weitzer@timesofmalta.com
Andreas Weitzer, Independent journalist based in Malta