What’s next for the short-term rental sector in Asia?

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The home-sharing economy has already clashed with regulators, hoteliers and landlords in the region

mirtmirt / Shutterstock.com
mirtmirt / Shutterstock.com

The trouble with the short-term rental market, that much-maligned facet of the sharing economy, is that it is a disruptor twice over. By empowering households to host other people, platforms such as Airbnb have drawn the animus of both hospitality and real estate industries. Hoteliers want to clip the company’s wings for stealing business travellers, while landlords are twitchy about condominium unit owners who sublet their units on the sly.

American courts in particular have given Airbnb an upstream fight in recent weeks. A US judge on Tuesday rejected Airbnb’s move to block an ordinance, passed in June in the company’s native San Francisco, that fines hosts who have not registered with the city. Meanwhile, Governor Andrew Cuomo last month signed a law effectively banning Airbnb and other home-sharing sites in New York.

Asia is also fast becoming a focus for this discontent. Regulatory agencies are putting the heat on hosts in Japan, Airbnb’s fastest-growing Asian market. Earlier this year, Japanese authorities threatened a host with a fine 10 times the price of her humble listing, which was a tatami mat for JPY3,000 (USD28) a night. Her neighbours had complained about the number of foreigners showing up at her building.

In July, the Provincial Land Office in Thailand’s Phuket province sent formal notices to owners of registered apartment projects that they could face penalties of as much as THB20,000 (USD567) or even jail time if they were caught renting out properties by the day. The bone of contention: Thailand’s Hotel Act of 2008, which requires licences for properties being rented out for less than 30 days.

Yoshino Cedar House, an Airbnb listing in Japan where your booking fees will go towards the community. Image credit: Airbnb
Yoshino Cedar House, an Airbnb listing in Japan where your booking fees will go towards the community. Image credit: Airbnb

“It’s a general notification to the industry that the Thai government is unwilling to allow an unregulated hospitality business,” says Anthony Lark, president of the Phuket Hotels Association. “It’s in the interest of Thailand to see regulations that protect them in terms of safety standards and security and registration.”

Home-sharing platforms do remind hosts not to game the law in their localities. “We say in our terms and conditions that you have to make sure you comply with local rules and regulations in these countries,” says Anne Riana, marketing director for Roomorama, the Singapore-based short-stay platform with over 25,000 listings in Asia.

Still, horror stories exist. A Canadian backpacker allegedly died from inhaling carbon monoxide in an Airbnb rental in Taiwan in 2013.

As well as safety concerns that come with letting strangers share your abode, home-sharing is anathema to the generation of government revenue. Yoked to licences and taxes, Thai hotel owners are on “an uneven playing field” against companies like Airbnb, says Bill Barnett, founder of hospitality consultancy C9 Hotelworks. “There needs to be some degree of fairness for hotels that are expected to comply with regulatory environments.”

More: New Airbnb chief practices what he preaches

Asian resort destinations are particularly fertile ground for short-term rental listings due to their preponderance of second homes. Owners of vacation homes make an average of USD28,000 a year in rental income, according to a survey by short-term rental app HomeAway.

The need for better PR is not lost on Airbnb, now experimenting with its own listing called Cedar House in Japan, proceeds from which will go toward improving the community of Yoshino. The company has also negotiated deals in jurisdictions such as Paris, Chicago, and Portland, Oregon to levy occupancy taxes on hosts, while HomeAway last year partnered with Avalara MyLodgeTax, a web-based tax filing solution for hosts.

“In terms of the taxation element, I think the pressure point is not at individual properties,” Barnett says. “If you have an entire condominium, you have a lot of units that you’re trying to sell as hotel units.”

He adds that short-term rental services in cities such as Bangkok could find themselves in the cross-hairs of authorities: “The service is ultimately going to come under scrutiny, one way or another.”

The difficulty of identifying short-term leasers and landlords means however that policing the industry remains relatively unrealistic.

Inescapable as it is, the risk of condo owners subletting through Airbnb-like platforms bespeaks a “balancing act,” says Kipsan Beck, managing director of Mahanakhon, a luxury mixed-use skyscraper in Bangkok. “If you say outright, ‘no, we don’t allow,’ legally you’re correct but you’re restricting the freedom of some of your owners,” he explains. “Whether you can change the rules and regulations of the buildings to allow short-term rentals, this is questionable as well with the current legal structure. I think the industry has to face up to the fact that it’s like toothpaste coming out of a tube. Once it’s come out, you can’t put it back inside again.”

Ultimately, the dissonance between offering short-term rentals online and undergoing bureaucratic checks and balances may yet prompt another significant shift in the real estate market.

“I think there will be a trend in the future that some developers come out and actually create buildings to be rented short-term on platforms like Airbnb,” Beck adds.

“I believe this will happen at some stage in the future, maybe even in a few months’ time.”

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