MIHM302 Sharing Economy: Hospitality Business in Global Context Assessment 2 Answer
There has been the growth of the platform businesses due to the growth of internet use and mobile technology and rapid advancement in artificial intelligence and Analytics. The emergence of the platform business is has been related to fulfilment of emerging customer needs such as transportation, meals, accommodation and investments (Wirtz et al. 2019). This has led to the growth of pipeline businesses and platform services to cater to new business models for diversification of revenue generation. The emergence of sharing platform is not just related to consumer demand but also to the interest of the investors about the profit potential and optimism in sharing platform businesses. The emergence of the sharing economy and the sharing business platforms such as Uber and Airbnb has been related to the emergence of new technologies and peer-to-peer economic activities based on cooperation and sharing of consumption of goods and services (Wirtz et al. 2019). Significantly the key socio-economic factors that have fuelled the emergence of the sharing platform have been the innovative digital technologies and the rapid growth in the volume of the sharing activities due to portfolio diversification of services and tourism (Cesarani and Nechita, 2017). With the emergence of the cities in Europe to become the centres for sharing practices, factors such as the need for reduced working hours, the decline in the necessity and opportunity for full-time employment and sharing practices for underutilized properties and resources have also facilitated sharing economy (Schor, 2016).
Critical cases in industry-relevant to jurisdiction change
There are incidents in which issues have been noted in considering Airbnb as licence or sublease. This is because of lack of legal jurisdiction around the agreement, consent and laws governing short term rentals. Issues have been raised by the Australian Tax Office (ATO) against Airbnb on account of tax evasions such as GST and Capital Gains Tax (CGT). The use of the personal property for earning income such as through rent makes the landowner liable to payment of CGT that is being avoided in Australia (Legal Vision, 2019). The presence of regulatory issues had been noted on account of the websites of Airbnb. This is because regulations have not been developed regarding the websites of such rented platforms. Airbnb Host Protection insurance protects the host against the claims of injury or property damage by the third-party claims up to an estimated $1 million (LegalVision, 2019). However, there are no effective regulations for managing the insurance and protection of the third party.
Economics and Statistics Administration in the US had attempted to define and state the boundaries of the emerging sharing economy and had labelled Uber and Airbnb as “digital matching firms.” The emergence of such businesses as part of the sharing economy had been hailed for adding more opportunities but has also been to criticised for displacing traditional jobs. According to a paper published in 2014, it was noted that although such organisations as part of the sharing economy have increased independent workers, yet there are also risks of job insecurity. In 2014 a report had been released by New York State Attorney General stating that 72% of the rentals of the site had violated the regulations of states zone (Penn and Wihbey, 2016). Short term rentals had also been banned in Berlin without permission taken from authorities. In 2014 a law had been passed in Paris to allow checking of rental homes in which there is a suspicion of owners renting their houses to visitors illegally. There are also examples from other cities in the world suggesting a fractious relationship between such organisations in the sharing economy and regulators. Resultant Amsterdam had passed a law in 2014 called the “Airbnb friendly” legislation to declare that permanent residents in San Francisco could give their house on short term rent but had to pay taxes and follow other regulations (Penn and Wihbey, 2016). An initiative was also launched by the British government that is the Global Centre for sharing economy amidst protests from traditional operators.
Analysis and evaluation of the impact of the jurisdiction changes on the hotel industry
Airbnb has made changes in access to accommodation. However, there have been cases to state that the current laws have failed in keeping up with platform such as Airbnb that are being considered as new disruptors in the hotel industry. It is noted that homeowners are not following appropriate legislation in renting there on such shared platforms. The laws that regulate Airbnb rental vary with every state and in some states, there are differences between the state laws and the government laws that create issues for the third party sites. With the growth of economic power such as technology-driven organisations; there have been noted cases of policy and regulatory skirmishes in towns and cities in Europe and the United States. Many regions and municipalities have considered the growth of sharing platforms to be inevitable for providing new efficiencies and facilities to the consumers in comparison to the hotels.
Based on the cases above, the need for jurisdiction changes in the sharing economy can be advocated. Jurisdiction changes would lead to the formation of appropriate regulations and laws for controlling, managing and supporting the operations of the sharing business platforms. Due to cases of foul of local housing, regulations, many hotels operating in the hotel industry had to undergo price-cutting to compete with cheap accommodations available in the desirable locations under Airbnb (Coldwell, 2014). Moreover considering that such platforms do not abide by adequate accommodation regulations, is the hotel industry is directly impacted in their efforts for attracting customers and maintaining their revenue.
The hospitality industry would be benefited with jurisdiction changes for regulating the sharing economy. There would be level play and fair accommodation practices due to jurisdiction changes in the future in the sharing economy that can further facilitate positive changes in the accommodation sector. The consumers can pick their accommodation based on set prices in a regulated sharing economy market. There would also be adequate regulations for the working hours, payment of employees. The property owners shall not be engaged in a violation of tax laws and any foul rental practices. Moreover, jurisdiction changes would also give more legislative and regulatory support to the sharing economy and the hotel industry.