The Business of Tourism – The Disruptive Becomes The New Normal

By David Jessop

News Americas, LONDON, England, Fri. Dec. 2, 2016: The problem with disruptive technology is not just that it disrupts what we have become comfortable with, but that it has unpredictable consequences that can go far beyond what was intended.

Take Airbnb, a simple idea that is a form of matchmaking between travelers and individuals with a spare room or rooms. It offers a visitor somewhere that is cheaper than a hotel while providing a genuine sense of place and experience of the country they are visiting. So successful has this simple idea become that the company, which only started in 2008, now has around 2m listings globally in 34,000 cities and 191 countries.

Although still in private hands, analysts suggest that Airbnb is now worth around US$30bn, a figure close to the combined listed valuations of Hilton and Hyatt, the next most valuable hospitality companies in the world, at roughly US$30.5bn.

Airbnb’s growth in the in the short-term vacation home rental business in the Caribbean has been ‘explosive’ according to the Caribbean Hotel and Tourism Association. Earlier this year it reported that the company now has around 25,000 listings, with the greatest number being in the Dominican

Republic, Cuba, Puerto Rico, Guadeloupe, Jamaica, Cancun, Martinique and Barbados.

It has, however, created a political conundrum in the Caribbean. While governments recognize that it is enabling many citizens, as hosts, for example to pay off their mortgage or be able to improve their standard of living, it has raised new problems for both politicians and the industry.

Typically, Airbnb offerings do not pay taxes, are not regulated in the same way that hotels are, and do not participate in joint marketing programmes. They also present fiscal challenges to governments, which observe that by increasing visitor numbers they indirectly place pressure on public facilities that taxes pay for. In addition, there is evidence that they are reducing capacity on airlines for higher spending hotel visitors and suggestions, in some locations, that nearby property prices are being pushed up as investors, as opposed to owners, sense commercial opportunity. But whether tourism professionals and governments like what is happening or not, Airbnb and its

competitors, like budget airlines, have expanded the Caribbean’s tourism offering to increasing numbers of consumers, especially millennials, by making the Caribbean affordable. Moreover, according to most studies, Airbnb local visitor spend is significantly greater and has more impact

than that of hotel or cruise visitors, as they make purchases directly into the domestic economy.

In a response intended to embrace the disruptive, Aruba has recently established the first partnership between Airbnb and a Caribbean country. On November 7, the company and the Aruba Tourism Authority signed an agreement that enables the Aruba Tourism Authority and Airbnb to address a range of issues including taxation, host accommodation standards and regulations, to ensure that they are in line with Aruba’s tourism policy.

‘The goal is to remain competitive and create balance. A healthy mix of on-island accommodations is crucial to the success of Aruba,’ a statement from Rosella Tjin Asjoe-Croes, CEO of Aruba’s tourism authority, said. For its part, Airbnb, which reportedly hosted 13,000 international guests in Aruba and saw its hosts there earn on average US$4,400 in 2015, said that the collaboration will give those visiting Aruba ‘more travelling options while promoting sustainable tourism as part of the local economy.’

Jamaica is expected to be the next country to sign a similar agreement following recent meetings between the Minister of Tourism Edmund Bartlett and Airbnb officials in Kingston.

What these and other decisions being taken by cities and governments around the world indicate, in some cases through legislation without Airbnb’s involvement, is that the disruptive, consumer demand, and economic need in the shape of those owning the host properties, is causing tourism, a largely conservative and protectionist industry, to have to embrace the incomers.

David Jessop is a consultant to the Caribbean Council and can be contacted at david.jessop@caribbean-council.org. Previous columns be found at www.caribbean-council.org