By Dr. Chris Gibbs (left) and Dr. Daniel Guttentag
Dr. Chris Gibbs and Dr. Daniel Guttentag are Assistant Professors in Ryerson University’s Ted Rogers School of Hospitality and Tourism Management. Both of them are currently focused on research about Airbnb. Contact: firstname.lastname@example.org; email@example.com
Over the past few years, home sharing platforms like Airbnb, VRBO, HomeAway, and Flipkey have experienced explosive growth. For example, according to a recent presentation by Airbnb’s head of global policy and public affairs, Chris Lehane, Airbnb has benefitted from 111 per cent year-over-year growth in Canada.
The driving force behind this growth has been a network effect with 70 per cent of guests learning about the service from friends and family.
From a hotel perspective, Airbnb accommodations represent 2-5 per cent of the overall lodging market in major Canadian cities like Toronto, Vancouver, Calgary and Ottawa.
The emergence of Airbnb has occurred at a time when the Canadian hotel industry has been experiencing revenue growth, with a 5 per cent increase in revenue per available room from 2015 to 2016.
The impact of Airbnb on the hotel business is difficult to measure due to the countless factors that affect hotel performance, and different reports have reached varying conclusions. Airbnb-sponsored reports suggest there is only a marginal impact on hotels, whereas lodging industry-sponsored reports suggest the opposite.
Indeed, Tony Elenis, the chair of the Hotel Association of Canada’s Airbnb Committee and the president and CEO of the Ontario Restaurant Hotel & Motel Association, warns that “a downward economy could significantly increase the impact of Airbnb on hotel performance, which would further reduce hotel revenues and lead to job reductions”.
In many Canadian cities, local city councils have either recently approved or are in the process of considering regulations and/or taxes on sharing economy platforms like Airbnb.
The discussions are being driven by a variety of concerns, including the prevalence of multi-unit operators on the Airbnb platform, Airbnb’s potential impact on local housing markets, and Airbnb’s failure to collect and remit taxes in many jurisdictions.
However, while some hotel owners are hoping regulations will slow Airbnb’s growth and reduce its impact, most existing regulations have proven ineffective and difficult to enforce.
For example, in April 2016 Quebec became the first Canadian province to regulate home sharing, yet after four months, fewer than 500 permits had been issued to the more than 10,000 units listed in the province.
According to the Quebec Hotel Association, the laws lack teeth and prosecutions take too long. Nonetheless, stricter policies taking shape in cities like San Francisco and London may set a precedent for more stringent regulations in some Canadian cities as well.
The debate and regulation of home sharing will be in the public eye across Canadian cities this year. New regulations may slow supply marginally, but probably will not eliminate the threat posed by this new disruptive form of competition for hotels.
Hotel owners and managers are well advised to monitor both local and national developments and react quickly to the rapid changes affecting the industry.