Diversifying tourism facilities
Mr Mangion is a senior partner of PKF an audit and consultancy firm, and has over 30 years experience in accounting, taxation, financial and consultancy services. He can be contacted at firstname.lastname@example.org or on +356 21493041.
Over the years, ownership changed hands as owners capitalised on the accreditation in property values. They had a Midas touch and when the industry cycle dipped they disposed of hotels at a time when property market was on an upward trend.
Naturally one cannot begrudge their zeal to make a fast buck. Others believed the industry would grow and continued to invest adding more rooms and embellished amenities. Nevertheless, pioneers such as these, assisted by government grants, have built a tourist industry which in its infancy saw our beaches populated by a few hundred thousand, mostly the bucket and spade variety. These included ex-services personnel who were stationed here during the war. Fast forward to 2015; NSO statistics show a record arrival of 1.8 million tourists exceeding four times the local population and with excellent results as regards cruise liner vessels entering Grand Harbour. The tourism minister appeared buoyant saying that the upward trend is continuing and nearly 40,000 cruise liner passengers arrived in Malta in the first quarter of this year, an increase of 90 per cent over the same period of 2015.
This all looks hunky dory as more hotels are expected to expand and build more rooms while older ones like St George Corinthia and adjoining Radisson Blue will be pulled down to make way for a six-star replacement. The long-awaited privatization of the extensive White Rocks development is in the final stages of adjudication and when completed is expected to be a mix of residential and tourist accommodation. All this flurry of construction is certainly keeping MEPA and architect firms busy while one expects a shortage of beds during the time it takes to pull down or renovate such properties.
More development is expected in the Paceville area. What makes developers act so bullish about the future? Certainly they are all busy touring financiers and overseas banks to secure sufficient capital for such luxury properties. The future beckons bright as the demand for rooms is buoyant.
The fly in the ointment seems to be the proliferation of Airbnb facilities which is spreading like wild fire and has provoked the ire of the Malta Hotels and Restaurants Association. There are currently over 1,000 Maltese listings on its website, ranging from spare rooms to whole apartments, farmhouses and luxury villas. The association insists that private accommodation is currently being given an unfair advantage by not being required to abide by the same safety and licensing requirements as hotels. MHRA has protested with the authorities that Airbnb properties (now rumoured to include hotel rooms) need to be fully licensed and taxed to have a level playing field and fair competition with the legacy hoteliers. Airbnb can offer competitive accommodation and this causes a drop in occupancy for the licensed members of MHRA. Reliable sources indicate that such accommodation is popular and accounts for 25 per cent of beds utilised by tourists; and while a number of unlicensed properties do exist, the vast majority of Airbnb listings are fully above board.
Such rooms are being registered to comply with Malta’s regulations for rental through the Holiday Premises Regulations and pass muster with the Host Family Accommodation Regulations. Fearing competition, hoteliers brand Airbnb as an unregulated blunder which exploits economies of scale through its vast database of satisfied customers and prides itself on unparalleled ease of booking. It has upset the cosy applecart of traditional operators. At this juncture, it is useful to quote Thomas Cremona, who runs a property management company with a number of listings on Airbnb: “Today, I’d say the majority of my bookings come through there.”
What is this marvellous website that started eight years ago as a teenage prank in California and is a now a Unicorn worth over $10 billion? It started in 2007, when its founders had just graduated from the Rhode Island School of Design, and destiny has it that they were sharing an apartment in San Francisco. Penniless, they struggled to pay the rent. Then they had a stroke of genius when a major design conference was coming to town, and they decided to rent out a number of air mattresses in their apartment to visitors for $80 a night. They also called and emailed every major design firm in San Francisco, asking if anyone else had a room for rent. They struggled to build a web site, airbedandbreakfast.com, to connect hosts and guests. They even persuaded conference organizers to email attendees about it, linking to the site. It was a modest beginning but they never looked back - they even managed to borrow money from business angels, venture capital and later on financial institutions.
Simply put, Airbnb, allows travellers to find and rent private accommodation for their trips, a system which has been rapidly gaining in popularity in recent years. According to the company, the booking service is now available in 34,000 cities spread over 190 countries. Its founders Brian Chesky, Nathan Blecharczyk, and Joe Gebbia, have convinced many visitors to foreign countries to book their holidays and reside in private homes. Thus they can enjoy the hospitality of locals inviting them to partake of home cooking in a family atmosphere. So far this is a fairy tale of three teenagers who in a spirit of adventure and innovation created a friendly website which surpassed 800,000 listings worldwide. The trio proudly state that they now offer more lodging than Hilton Worldwide or InterContinental Hotels Group beating any other hotel chain in the world.
So what is Airbnb? It is a phenomenon that has changed many travellers’ lives for the better. What makes this company so noteworthy is that it has moved beyond building a disruptive business to battling entrenched interests. As can be expected it was not always an easy journey since Airbnb has also repeatedly found itself to be on the wrong side of the law.
To conclude, according to its founders, Airbnb is about much more than just renting space. They proudly brand it as a lifetime experience as it is all about meeting people. At the end of the day, they owe its huge popularity to this motto of trying to bring the world together. The sexy slogan says you are not hiring a room; you’re getting a sense of belonging. Naturally, the narrative does not bode well for hotel owners particularly in the second and third class category who complain about transgressors in their market, accusing them of not registering with the authorities. They also insist that the government should lobby to collect the seven per cent VAT due on rentals directly from the website, rather than leaving it up to individual landlords as is currently the case. In the end authorities tend to respect the choice made by travellers. This is a modern trend that has taken the world by surprise and in the process started a social movement bringing different cultures to learn to live together and share unique traditions.
Airbnb co-founders: Joe Gebbia, Nathan Blecharczyk and Brian Chesky