The Collaborative Economy 

by Dr Edward Zammit Lewis, Minister for Tourism

 

The advancements in technology are undoubtedly also leaving a marked effect on the tourism industry. Many of these are clearly beneficial, but others present us with challenges too.

The tourism sector is the main pillar of the Maltese’s economy representing directly and indirectly almost a third of our GDP. The growth of the collaborative economy is the result of an accelerated shift in business models and consumer behaviour in today’s digital era. It is within this context that, whilst acknowledging that the tourism industry has indeed undergone changes, we accept that a process of digitalisation is critical for better access by businesses and consumers to digital services across Europe and also for maximising the growth potential of the digital economy.

I am following closely the developments on the fronts of digitalisation and collaborative economy given their impact and relevance on the accomodation sector, through the extensive presence of digital platforms withn the latter.

While presenting the tourism priorities during the European Parliament committee on Transport and Tourism (TRAN Committee), I stressed on the full exploitation of the Single Market and the effective development of the Digital Single Market, that will bring tangible benefits to our economies, business and families, by removing remaining barriers and improving access to services for consumers. In the past years, novel technologies have brought about a revolution in the way people travel.  Building on the importance of the Single Market and the collaborative economy, this Presidency is working to ensure that consumers buying products and services, both online or otherwise within EU states, are not subjected to Geo-blocking. That is, they are not discriminated against based on nationality or country of residence in terms of access to prices, promotions, sales or payment conditions. In this regard, we need to work cohesively against unjustified Geo-blocking that is constantly hindering fair competition, for the benefit of all consumers, across the Union.

In the case of the accommodation sector, the model is rather simple: customers rent accommodation through an extensive global digital platform; they select their room/s of choice and pay for everything online. However, the actual service is provided by private individuals, rather than a hotel or any other type of ‘formal’ accommodation, where hosts and guests are connected thanks to this online, global platform.

Presently, many tourism destinations are concerned with the emergence and rapid spread of this alternative model, which is often developing in an uncontrolled and unregulated manner. Spain, for example, has declared that close to 50% of the bed capacity within the country’s urban areas is marketed through such peer-to-peer platforms. Even more significantly, within four of its main cities, irregular accommodation offered through such online platforms substantially exceeds the bed capacity offered by the regulated hospitality sector.  This is resulting in a lack of compliance with the rules and conditions that generally apply to the latter.

Commenting on the impact of the sharing economy on the travel and tourism sector, Taleb Rifai, UNWTO Secretary General, has recently stated that “While we welcome innovation and entrepreneurship, we must also underline the need for the sector to find progressive solutions to safeguard consumer rights and quality standards while ensuring a level playing field for all businesses.”

Undoubtedly, the application of the concept of a collaborative economy to accommodation presents an important challenge to the tourism industry. The expanding, mass conversion of residential property to tourist accommodation can also prove to be detrimental and has a number of implications. That of unfair competition is naturally a primary concern given hospitality operators are subject to various rules and regulations. Compliance with the latter comes at a cost, not to mention the onus of administrative obligations.

Moreover, licensed hospitality businesses are bound to ensure the health and safety of their guests and staff, while safeguarding the statutory rights of consumers in general. They also need to comply with employment regulations and many businesses also constantly invest in the development and training of their personnel, thus contributing to an ongoing, and I add critical, process of enhancing their quality of service offered. Operators of unlicensed properties are not bound by any of these considerations. We acknowledge that the increased offer of accommodation on a commercial basis through ‘sharing economy’ platforms may also lead to a rise in the undesirable black economy. A side-effect of this can also be a decrease in regular employment and the creation of irregular activity, which would, in turn, incentivise the growth of precarious and undeclared employment.

These are just some of the factors which are worrying European destinations and which have led my Ministry to monitor local trends related to short-term private accommodation rentals available through peer-to-peer platforms. We are also working at a wider national level to gather further accurate data on such activities, while measuring and assessing their impacts.

Recently, the Ministry for Tourism, jointly with the Malta Tourism Authority (MTA), launched an educational awareness campaign to step up efforts to curb unlicensed accommodation for tourists with the main objective of improving the overall quality of the Maltese Islands’ product whilst enhancing our already excellent reputation as a destination.  This issue is so critical to the future of tourism that it also features prominently within the agenda we have presented for the current Maltese Presidency of the EU.

Ultimately, we need to first understand this phenomenon, and evaluate the various opportunities, issues and implications related to such activities before taking any action. We are planning to discuss these thematic issues, contributing to the increasing the competitiveness of the European tourism product during the Tourism High Level Conference during its tenure of the Presidency of the Council of the EU and a joint conference with UNWTO in recognition of the 2018 EU-China Tourism Year which will bring together States in a common forum of discussion next May to be held in Malta in May.

Meanwhile, we are also working on updating the industry’s regulatory framework and we have proposed amendments to current legislation which we recently issued for public consultation. This includes the introduction of regulations that address many of the concerns I have mentioned earlier.

The dynamic nature of today’s travel and tourism industry cannot be ignored, nor its effects be understated. We form part of a globalised market, and we need to recognise, and respond to, new trends such as the collaborative economy in a proactive manner. We will therefore continue to be at the forefront in ensuring that our tourism industry can successfully absorb, adapt to, and exploit such important changes.

 

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