“Impact has also been felt on the housing and rental markets where the entrepreneurs buy or rent stock suitable for Aibnb-style operations”. (Photo: airbnb.com)
Three months ago the Phuket Provincial Land Office sent a notice to 234 registered condo projects, encompassing a total of 26,000 rooms on the island. It claimed that daily renting of these rooms was a violation of the Hotel Act 2004. This local edict claimed that it was a criminal offence with a fine of 20,000 THB or a year in jail on offer.
So far it’s caused a lot of discussion and hand wringing; that’s about all. There’s no doubting that Airbnb, added to the proliferation of new condo rooms coming onto the Phuket market in recent years, has had an impact on the traditional accommodation model. Of course, it’s not just Phuket and Thailand hotels that have been feeling the heat from the success of Airbnb. It’s happening around the world.
You get the impression that ‘someone’ spoke to ‘someone’ a bit higher up and that the edict was made – perhaps before all the legals were checked and the impact of such a clampdown was fully assessed. There is still a lot of uncertainty from the local police and people ‘in the know’ if the Thai Courts would interpret the Hotel Act 2004 in the same was as the Phuket Provincial Land Office. There have been no protections so far. In the past the very same provision, being turned against the Airbnb model now, have been used to exempt small guesthouses and homestays from having to comply with the additional rigours of the Hotel Act. Condos who want to be ‘legal’ in regards to the Hotel Act are well-entitled to apply but few have done so. Most current condominium projects would fall short of compliance due to lifts and car parking not reaching the standards required in the Hotel Act (as well as properly staffed receptions, concierge, tour services, etc)
But the Hotel Act specifies that you are not a hotel if you don’t have more than four rooms. Very few owners own more than four rooms within a condo project so claim that they are therefore exempt. And on it goes… loopholes, exemptions, legal anomalies.
Two facts remain. The Aibnb, peer-to-peer online marketing approach isn’t going to go away and the marketeers selling condos in Thailand continue to flagrantly offer generous rental returns and even offer ‘hotel-style’ management for the purchased rooms. It would seem the current Hotel Act is sufficiently out of date (pre-Airbnb) to be able to cope with the changes in the accommodation and holiday booking market over the past ten years. The internet continues to get broader and smarter and hotel rooms continue to offer, well, hotel rooms.
The impact is not consistent across the hotel sector. Luxury hotels, where branding and the visitor experience are the peak attraction, have so far held off the Airbnb-style competition. The impact on 2 and 3 star hotels, where price competition is key, is much more apparent. Airbnb keeps saying that its service, and the 1.5 million rooms on offer worldwide, increase the overall size of the pie and doesn’t cut into their market.
Impact has also been felt on the housing and rental markets where the entrepreneurs buy or rent stock suitable for Aibnb-style operations. This pushes up prices and lowers the available stock.
So where to from here? On one hand you have the hotel industry worried that its business model is being undermined by a lightly regulated, ad hoc service that doesn’t need to comply with all those pesky regulations imposed on hotels. On another hand there’s the middle-class residents who are worried about all these transient tenants in their buildings and neighbourhood. On yet ANOTHER hand (if that’s possible), we have the Thai authorities who are being urged to ‘do something’ by the other two groups. The authorities worry about the potential damage caused by unlicensed businesses, tax leakage and security concerns.
As of now, most condo developers around Thailand’s hot tourist areas are still engaging in marketing with a strong emphasis on investment and guaranteed rental returns. This flies in the face of the shot across the bows last July from the Phuket Provincial Land Office (an edict that hasn’t been followed in other provinces around the country). Airbnb, and others offering the same sort of service, continue to thrive and flourish and the traditional hotels are putting pressure on local authorities to clamp down on, what they see, as a threat to their business model.
Watch this space.