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Regulating The Sharing Economy Won’t Kill The Travel Industry

Though many welcomed these changes with open arms, regulators are now taking aim at the purveyors of the sharing economy.

5Apr

For many years, a large portion of the population seemed to want more from the travel industry. Some people were simply dissatisfied with the service of the taxis. For others, the hospitality industry was stagnant and lacked innovation. But these days, the travel industry is growing and evolving to meet its customers’ needs.

You can now find and pay for a ride easier than ever with a transparent payment system. You can rent space in homes in nearly every major city around the globe, and feedback is transparent by a community of users.

Though many welcomed these changes with open arms, regulators who long kept the taxi and hotel industries in check are now taking aim at the purveyors of the sharing economy. Two-sided marketplaces face tax and insurance obligations set to squeeze margins for drivers and sublessors alike.

Undercutting the Old Guard

Services like Airbnb and Uber introduced new economical alternatives by leveraging technology. Much like all things in tech, this was an industry disruptor.

Traditional services have been forced to innovate within existing regulations to compete. Most of those innovations have involved collaboration with companies similar to Airbnb. Hyatt Hotels Corporation, for example, invested in onefinestay, which allows tourists to rent upscale homes in a handful of major cities around the world.

Meanwhile, sharing-economy services face accusations of scams and other insurance liabilities. They also have been forced to implement changes necessary to comply with federal, state, and local regulations in countless countries.

These increasing operational costs mean increased prices for the services that have until now been below industry standards.

Government Intervention

Increasing rules and requirements are nothing new for sharing-economy services.

Airbnb faces strict regulations in nearly every city it operates in. In Paris alone, the company collected about $5.3 million in tourist taxes. The Parisian government is still seeking stronger tax regulations to ensure it gets a cut of the rental income.

In New York, the state attorney general released a report concluding that 72 percent of Airbnb’s rentals violate zoning regulations and other laws. San Francisco passed an Airbnb-specific tax law in 2014, and Berlin has similarly attempted to crack down on the service.

Much of this regulation can be attributed to concerns over shorter supply of affordable housing, as well as reports of disruptions from condo unit owners. Meanwhile, some players in the taxi industry claim companies such as Uber increase liability, lower wages, and create unnecessary accident risks.

These shared marketplaces operate in a legal gray area. Finding a balance between the sharing and traditional travel industries is the key to a solution that works for everyone.

Future Growth Opportunities

Still, the sharing economy is growing despite setbacks, and cities worldwide are largely supportive of the burgeoning industry.

A recent survey showed 71% of more than 245 city leaders wanted to see this growth. Although various laws have been enacted everywhere the companies expand, most disruptive organizations deal with similar growing pains.

I remember when such companies first burst onto the scene. Many of my peers were apprehensive because the service involved interacting with strangers. The potential cost savings of a sharing economy weren’t compelling enough for them to make the leap.

This may be why governments are stepping in to regulate the sharing economy — to normalize the new practice. To that end, transparency is key. Airbnb and Uber already have a two-way review system. I see this being adopted across the industry. Safety and trust are the primary concerns of travelers, and this can certainly help.

Peer-to-peer is quickly becoming a buzzword in the general population, and businesses that enable people to generate an income and access a convenient service are poised to win. Although reports consistently show it’s difficult to make a full-time living through a service such as Airbnb or Uber, the companies have proven it’s incredibly lucrative to connect strangers for transactions.

It’s inevitable that another disruptor — whether it’s chatbots, artificial intelligence, or mixed reality — will surface at some point in the travel industry. Until then, society will continue to grapple with the peer-to-peer services that have provided new ways to help people get from point A to point B.

Sources

Tony Tie is a numbers-obsessed marketer, life hacker, and public speaker who has helped various Fortune 500 companies grow their online presence. Located in Toronto, he is currently the senior search marketer at Expedia Canada, the leading travel booking platform for flights, hotels, car rentals, cruises, and local activities. Connect with Tony on Twitter@tonytie.

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