Regulating Airbnb encourages anti-competitive behaviour

The Tourism Business Council of SA (TBCSA) has called on government to regulate Airbnb in South Africa. TBCSA claims that Airbnb is threatening the viability of conventional lodging providers such as hotels and could lead to job losses. Instead of examining potential areas of weakness, TBCSA has resorted to a base, immoral appeal to government to use its power to cut down on competition. If TBCSA members truly want to compete fairly with Airbnb, they would pressure government to lessen the regulations imposed upon them, so that they could innovate faster and draw more customers. Instead, the TBSA is pursuing an immoral course of action. 

There are numerous moral options open to TBCSA members.  To improve and try to attract new customers, they could decide to cut prices; offer new incentives; and even look at what Airbnb offerings consist of. That is the best, and only moral, way to fight against competition; be better than your competition.

On the one hand, TBCSA has called on government to regulate Airbnb; on the other, it has welcomed news that the government is looking into changing the visa regulations imposed in 2014. TBCSA should ride the wave of liberalisation and deregulation and put more pressure on government to do away with as much onerous red tape and regulation as possible. We want as many tourists to come to SA as possible – why then do we not aim at providing as many options as possible for them?

Like other industries which are being changed thanks to improved technology and connectivity, Airbnb hosts put their reputations, and their livelihoods, on the line when a customer stays with them. They make their offering as appealing as possible to attract new customers, and to live up to the level at which they advertise. Failure to do so means a bad review, which other potential customers will see. If there is a number of dissatisfied customers, that Airbnb host may well find his undertaking no longer profitable.

When we experience bad service at a hotel, we can lodge a complaint and hope that an improvement(s) will be made. But any serious threat to that hotel’s continued existence will take a long time to manifest. However, an Airbnb host has to address any problem almost overnight, if she wants a positive review from the new guest arriving the next day.

Those already in the industry have an advantage over any new players who want to enter the field. Why would anyone want to make it more difficult for new players to enter the tourism industry when we have an unemployment crisis on our hands in SA? If TBCSA members are concerned about job losses due to competition from Airbnb, they would be better served by appealing to government to repeal regulations on themselves so that they can lower their prices, attract more customers and employ more people. Increased regulations, too, always result in higher costs for customers, which means they may well decide to take their money elsewhere anyway.

We do not need more regulation to protect customers from exploitative hosts. Strong competition between hotels, lodges, and Airbnb hosts, is the most effective method for encouraging the relevant parties to either cut their prices, or to improve their offerings. With any product or service, the customer ought to be the focus of the business - a business has to make the best possible case as to why a customer should choose its services over those of another. The only proper way for a business to make a profit, morally speaking, is to attract and entice customers to voluntarily trade with them. If a customer decides that an Airbnb offering is the best option considering what she can afford and he wants to do, no one can blame her for her choice.

The call by TBCSA for regulation of Airbnb is a clear example of an organisation that does not believe its members can stand on their own feet in an open market; rather, it wants government to step in and do their work for them. TBCSA ought to place pressure on government to decrease regulation on the tourism industry as this will decrease the costs on them and their customers and will serve them better in the long run. Any appeal for regulation simply becomes a fight between entrenched players at the end of the day, for the imposition of measures that will never benefit the customers.

Chris Hattingh is a Researcher at the Free Market Foundation

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