Short-term rentals in a sharing economy

A study conducted by the Central Bank of Malta and made public yesterday reveals that there were 8,761 properties listed with AirBnB in May, which could generate - on average - as much as €2,400 a month for their 3,856 hosts.

AirBnB, which offers shortterm rentals in 81,000 cities in

191 countries, does not publish much information so a Bank researcher obtained the data from what was actually listed online on the CBM platform in May. The data does not cover other websites and having a single observation means that the results may be affected by seasonal availability and pricing.

The impact of these listings is considerable. They can potentially offer as much as 8.0 million nights. Taking the most likely occupancy rate of 70% would lead to an average price of €80.20 per night, generating revenues of €111.1 million, the report says.

While, on average, hosts would be able to earn €2,400 a month, the research indicates that the top 10.0% of hosts would earn around 59.5% of the revenues. This makes the distribution skewed, such that many hosts make significantly less than the average estimate, but some earn substantially more.

Most of the hosts offer whole dwellings for short-term lets, with the bulk being concentrated around the traditional tourist areas and resort towns, although they also spread into areas like Cottonera, Rabat and other rural areas of Malta and Gozo, which do not typically host tourists.

The fact that so many whole dwellings are on offer gives rise to one of the main policy concerns, namely the impact of taking thousands of properties off the longterm housing market. The study says that research shows that using a significant part of the housing stock for short-term rents is estimated to increase real house prices by 2.8% in the long-run.

The amount generated for the hosts is comparable with the market rate for the long-term rental of a large property in an area with high demand. And the figures are also based on conservative assumptions as the actual revenues could be much higher, as the study excludes extras such as cleaning and utilities. Taken all together, this makes short-term rentals significantly more lucrative than long-term rental alternatives.

Apart from the impact on house prices, the impact on more traditional forms of accommodation such as hotels and guesthouses also has to be looked at. AirBnB hosts offered 36,222 bed places in May 2019, compared with - for example - the 42,927 offered by collective accommodation in August 2017.

The 8.0 million nights that these listings can theoretically offer have to be seen in the context of the 10.1 million nights stayed in collective accommodation in 2018. In the first quarter of 2019, around a third of tourists who stayed in rented accommodation opted for private residences. However, in recent months, collective accommodation establishments experienced a slowdown, and the numbers of nights stayed in collective accommodation actually declined somewhat, in spite of overall arrivals growing modestly in the first three months of the year.

Over half the AirBnB hosts have three or more listings, and the duration of the availability indicates that many are being run as quasi-commercial operations. The top four hosts control 3.4% of the total listings ¬- one host has 110 listings - although this may indicate the use of property management companies. It appears that while AirBnB may serve as a secondary source of income for around a third of hosts, many listings are run by semi-professional or commercial operators.

The study stresses that shortterm rental concentrations ought to be avoided, as the long-term effects on communities and residents may affect the character, ambience and ability of communities to persist over time. Policymakers in some countries and cities have started to limit either the number of days that a property may be rented, or levying fees and charges on hosts.

"Short-term rentals may affect communities' quality of life, as well as neighbourhood residential prices and availability of housing. Policymakers ought to assess and study the implications and benefits of this industry. Such studies ought to assess if these short-term rental revenues are being taxed, how they ought to be taxed - both for income and eco-contribution purposes - as well as whether the revenues generated from such taxation is devolved towards authorities tasked with addressing the pressures generated by such rentals, or towards the communities and local councils most affected by the short-term phenomenon," Reuben Ellul, the principal economist in the Bank's Economic Analysis Department who authored the policy note, said.

Would you have guessed?

• Of the 8,761 listings, 5,532 are whole dwellings, 2,905 are private rooms, and 324 are shared rooms.

• Two out of every three listings are apartments, followed by houses and townhouses, and villas.

• The top 10 localities are Sliema (1,053), St Paul's Bay (994), St Julian's (781), Mellieħa (448), Valletta (434), Gżira (433), Msida (355), Swieqi (340), Żebbuġ - Gozo (327) and Marsascala (275). • The most expensive locality is Għargħur, while the cheapest is Sta Luċija.

• A pool puts the final price up by 21.0% and a seaview by 14.0%.

• The bulk of properties are available for most of the year: 6,700 say they are available for more than 120 days a year.