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Economic benefits of home-sharing: New industries, jobs

Robert Rosenstein
Robert Rosenstein

Co-founder and chairman of Agoda

Singapore  /  Fri, January 11, 2019  /  03:51 pm
Economic benefits of home-sharing: New industries, jobs

Local host rentals (LHRs) can help bring the economic growth that increased tourism promises, including job creation, but regulators must design policies that protect the interests of all parties. (Agoda/File)

The sharing economy is projected by 2022 to more than double its current revenue to reach US$40.2 billion, according to Juniper Research.

Along with transportation services, local host rentals (LHRs, also known as vacation rentals or short-term rentals) are among the biggest industries driving that growth.

LHRs are growing and bringing substantial economic benefits to local economies, from increasing household incomes to providing earning potential to a more diverse population. If you consider all the available LHR services, the economic boon becomes even more pronounced.

Among these benefits, the lower prices that LHRs offer may encourage longer stays and allow travelers to spend money on things other than just lodgings. Studies have shown that guests in short-term rentals in Montréal, for example, stay roughly 50 percent longer than guests in hotels. Likewise, HomeAway reported in its 2017 trend report on local host rentals that the length of stay among American travelers increased 27 percent from 2015 to 2016.

It’s not just hosts and local merchants that benefit from local-host-based travel. Even in these relatively early days, taxation of local host rentals is contributing substantial amounts to communities. These new tax revenues can be devoted to specific causes that will benefit the community, such as affordable housing (Chicago and Los Angeles), the arts (San Francisco), or destination marketing (France and Florida).

Local host rentals can help bring the economic growth that increased tourism promises. Japan already accommodates 24 million travelers a year and intends to have 40 million by 2020, with the potential of doubling the share of GDP provided by travel and tourism, reports Nikkei Asian Review. Additionally, 8 million homes in Japan are vacant, and these homes could help ease the coming accommodation burden. A well-developed local host rental industry could make a substantial difference on all these fronts.

LHRs also augment supply during peak events, helping municipalities manage tourism surges and channel more resources to the local economy.

For the 2018 Super Bowl in Minneapolis, some 67,612 people attended the game itself, and tens of thousands more were in the area for related activities. At the time, the city had about 40,000 hotel rooms, and 19,000 of these were snagged by the NFL years before the event, according to The Washington Post. In times like these, LHRs provide much-needed alternatives to traditional hotel options, which simply can’t meet the demand. Likewise, for the 2016 Olympics in Rio, Inc. reported that Airbnb promised to provide more than 20,000 accommodation options to help supplement the massive influx of visitors to Brazil.

Equally important, LHRs support a whole ecosystem of related employment. The World Economic Forum has stated that “for every 30 new tourists to a destination, one new job is created.” Many companies provide products and services to meet the needs of this growing industry. Take, for instance, property management services Urban Bellhop and Guesty, or consider professional photographers who are often tapped to take photos of rentals for hosts. Cleaning and laundry services are other simple and obvious needs for the industry.

Read also: Mid-tier hotels the future of hospitality: Veteran hotelier

Unlike hotels, LHRs do not have their own housekeeping staff, so can create an array of cleaning and maintenance jobs for people in need of employment. But when New York placed severe restrictions on LHRs that were passed in October 2016 and went into effect in January 2017, it put people in these roles out of work.

Fortune described the experience of one house cleaner in New York who was making her way out of poverty until the LHR laws changed: “With her earnings along with the income she received from public assistance, she was making enough to feel like she was on solid footing. But by November [2016], she was working only 25–30 hours a week. By January [2017], she was down to about eight.”

The upswing of the LHR market has created countless jobs. Agoda’s research found more than 75 other global businesses that either directly or tangentially relate to the LHR market, and that’s just at a glance. LHRs have emerged from, and subsequently inspired, countless other platforms that are putting connectedness at the forefront of what they do – all the while creating opportunities for a diverse range of people.  

If municipalities allow LHRs to grow, then guests, hosts, workers, local businesses and communities all benefit. To pretend that LHRs do not exist, or to stand against the tide and say “that can’t happen here”, may temporarily – but not indefinitely – delay the impact of this change, but it certainly will not benefit your constituents (and could potentially cause harm).

Like the sharing economy that fuels them, LHRs have transformed how businesses impact communities. Regulators need to design solutions that address real problems without stifling growth that offers long-term rewards to travelers, hosts and the communities in which they flourish. When properly supported and managed, LHRs can help fill vacant or underutilized housing, create jobs for the under- and unemployed, enhance cross-cultural understanding, and be a meaningful source of revenue for local businesses and tax revenue for the communities that host them.

Smart regulators will create policies that embrace change while looking out for the interests of all parties. Those who do so will see their neighborhoods grow and thrive. (kes)

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The writer is the co-founder and chairman of Agoda.

Disclaimer: The opinions expressed in this article are those of the author and do not reflect the official stance of The Jakarta Post.