In recent months, stakeholders within the local hospitality and tourism sector have voiced concerns that Airbnb in particular is operating with an unfair advantage (and therefore inhibiting industry growth).
For one, the Federated Hospitality Association of SA (Fedhasa) has pressurized government to crack down on Airbnb and take legal action.
In response, the Tourism Amendment Bill was gazetted on Friday, 12 April – stating that ‘short-term home rentals’ will now be legislated under the Tourism Act.
Notably, the bill enables the Minister of Tourism to determine the ‘thresholds’ regarding these short-term home rentals.
This kind of crackdown is unsurprising, particularly given the hostile global reactions we have seen to industry disruptors such as Uber and Airbnb. Indeed, as in any business environment or ecosystem, competition will always evoke negative reactions from established players.
In this case, the negativity is coming from hotels, bed and breakfast owners (B&B), lodges and other short-term rental providers.
Arguably, while placing rules and regulations around local Airbnb hosts might look good from a legal perspective, the cap of limited rental stay per host is too stringent and will potentially affect wealth creation plans for entrepreneurial property owners.
That said, one could also argue that the new restrictions give other Airbnb hosts the chance to generate profits – but the service offering as a whole could suffer.
Industry bodies and regulators should always protect the consumer’s freedom of choice, while simultaneously protecting industry service providers and stakeholders.
Admittedly, this is always a tricky balancing act.
Stifling the entrepreneurial spirit
Having closely watched the emergence of Airbnb as a platform for wealth creation in South Africa, it is clear to see that it provides an attractive route for entrepreneurs looking to harness property ownership.
Successful hosts work hard on their business, invest into marketing, provide good service and are rewarded by positive reviews on the platform.
Now, if regulators give new players the notion that they can ‘have a piece of the pie’ without putting much effort into their business model and offering, the overall standard on Airbnb will suffer.
Today, if a customer decides to stay in an Airbnb instead of a ‘traditional’ B&B, it 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/her choosing.
Moreover, 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.
With regards to taxes, it seems fair that taxes should be imposed for trading purposes.
Harnessing Airbnb as a property owner
Despite the negative media news and recent regulatory developments, Airbnb remains a great tool for entrepreneurial property owners and landlords. The platform can be leveraged to either cover monthly expenses or to make extra cash (or both).
This strategy empowers ordinary people to become entrepreneurs and also stimulates economic growth by creating new job opportunities.
According to Airbnb, the platform has boosted the South African economy by generating up to R8.7 billion in profits while creating 22,000 jobs – with hosts keeping 97% of the prices they charge to rent their space.
Beyond short-term rentals, there are many other wealth creation opportunities for savvy property owners. Another area to look at, and one we teach in our mentorship program, Think & Grow Rich, is the viability of investing in student accommodation.
Today, there is a huge shortage of student accommodation in SA, reported to be well over 500 000 beds. Often, property owners like the idea in theory – but usually give up on it, thinking that they will need to deal with students on an individual basis (and perceive them as being less reliable than other tenants).
Arguably, this is not necessarily the case. Most universities have rolled out an initiative that accredits private accommodation within the vicinity of their campuses. This is one way of ensuring that students are staying in safe and secure surrounds – while providing opportunities for both developers and homeowners.
Moreover, rental agreement structures can be developed directly with NSFAS, and in most instances, rental payments are paid upfront.
Ultimately, wealth creation through property ownership is a smart strategy in any economy – it simply depends on one’s level of commitment, ability to withstand macro challenges as well as learning and implementing the right strategies.