In many ways, the gig and sharing economy has made life easier for millions of people in Australia. Thanks to this new business model, there are many services allowing for more options and greater convenience than ever. Whether it’s getting around, ordering takeaway food, or in the case of Airbnb, finding a place to stay.
Launched in San Francisco in 2008 by two former schoolmates, Airbnb’s first offering was breakfast and an air bed in the founders’ living room. The business was thus called AirBedandBreakfast.com, later shortened to Airbnb. The business expanded rapidly, and has since become a global platform for anyone to be able to easily rent out a spare room or an entire property for short-term stays, at more affordable rates than traditional accommodation.
However, these services have stirred a lot of controversy due to the legal and ethical issues involved with such businesses. Using Airbnb as an example, let’s look at some of the positive and negative impacts it has had in Australia:
Positives of Airbnb
Stirring up the hotel industry
The popularity of Airbnb in Australia has forced the hotel industry to adapt and evolve in order to cope with the increase in competition. The experience of staying in a “home-away-from-home” offered by many Airbnb stays has prompted many holiday-goers to seek out similar hotel offerings. More spacious apartment-style hotel rooms, with improved amenities such as kitchenettes and sitting rooms, have seen higher booking rates in recent times. A new trend of “co-living” style hotels has also emerged. These typically blend traditional hotel rooms with large common areas with shared amenities and lounge areas. Inspired in part by backpacker hostels, they offer a more social accommodation experience for the more outgoing traveller.
A new revenue source for homeowners
When Uber began operating, it allowed almost anyone with a decent car to earn money driving around other people, without the extensive costs associated with becoming a registered taxi driver. In a similar vein, Airbnb has allowed homeowners to earn money by sharing their property with those looking for accommodation. Previously, anyone wishing to open their doors to holiday goers would have had to endure the rigours of setting up an accommodation business, with all the associated costs and legalities. Airbnb has opened up a relatively easy way for people to create an additional income stream from their own home, without the commitment and hefty start-up costs.
Boost to tourism in typically non-touristy areas
Many suburbs – particularly in regional areas – have only a few hotels or motels. This can make it difficult to find accommodation during certain times of the year. The influx of additional short-term rentals through Airbnb makes it much easier for people to explore these areas. More tourists means more money for local economies, with many parts of the country experiencing a boom in overnight tourist stays in the last 5 years.
Negatives of Airbnb
Unfortunately, not all Airbnb operators declare the extra income from their rental, in an attempt to avoid paying additional taxes. This is obviously illegal, and likely to result in investigation from the Australian Tax Office. If even part of a family home is rented out through Airbnb, it is then classed as a rental home for tax purposes. Selling that home in the future may be subject to Capital Gains Tax.
Another issue relates to those using Airbnb to run a commercial enterprise. They may be renting out multiple investment properties through the platform, but not paying GST in an attempt to garner greater profits. If too many users are found to be avoiding their tax obligations, it may eventually result in a government crackdown that could ruin Airbnb for everyone.
There are many cases where renters have been illegally renting out their rooms whilst they are on holiday, without the permission of their landlord. This is usually in breach of a tenancy agreement, unless the landlord has explicitly permitted this in writing. This can be very risky to the owner of the building, who might not have the correct insurance for this activity. This can also be risky for apartment buildings with shared facilities, where Airbnb guests might copy keys and help themselves to gym and pool facilities indefinitely. There have been many incidents where illegal guests have damaged property, injured themselves or caused nuisance to surrounding neighbours, with disastrous consequences for both tenants and property owners.
Renting out an investment property through Airbnb essentially places all the responsibility of managing the property in the hands of the owner. Prospective investors need to think carefully about whether they have the time and resources to take on all the tasks that would often be left in the hands of a professional property manager. Some people may have bought property with the intention of listing it on Airbnb, but had not invested the time into researching and understanding the market first. For some this has resulted in low occupancy rates and insufficient profit, leading to a poor return on investment.
These are just a few of the positive and negative impacts Airbnb has had in Australia. As the market for short-term rentals evolves, so too will the regulations and legislation that govern it. In only a few short years, this one company has significantly disrupted multiple industries and changed the face of the short-term rental market. For better or worse, it remains to be seen what impact it will have in years to come.