Diver­si­fy­ing tourism fa­cil­i­ties

Malta Independent - - BUSINESS & FINANCE -

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 gmm@pkf­malta.com 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

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