22 October 2016
Hong Kong is virtually becoming more and more like a giant shopping mall tailored to suit the tastes of mainland tourists. Photo: HKEJ
Hong Kong is virtually becoming more and more like a giant shopping mall tailored to suit the tastes of mainland tourists. Photo: HKEJ

The Airbnb and the oversupply of hotel suites

In recent months Hong Kong has witnessed a slump in the number of tourists. While many in the tourism and retail industries urge the government to lift the control on the export of infant formula and expand the Individual Visit Scheme (IVS) to more mainland cities, some put the blame on anti-parallel trade protesters for the recent tourism slowdown almost like a knee-jerk reaction.

However, it really doesn’t take an economic expert to figure out that the root causes for the recent plunge in the number of mainland visitors are the economic downturn on the mainland and the sudden depreciation of the renminbi, rather than some small-scale protests and brief scuffles staged by a few local protesters.

Since its introduction in 2003, the Individual Visit Scheme was, at one point, commonly seen as the key to Hong Kong’s recovery after the SARS plague. Today, it is undeniable that the IVS is still bringing in billions of dollars in revenues for our economy, but at an increasingly high social price.

And over the past decade our economy has grown so dependent on mainland visitors that Hong Kong is virtually becoming more and more like a giant shopping mall tailored to suit the tastes of mainland tourists.

Isn’t it time for us to reflect on the IVS and look for another more sustainable growth engine?

On the other hand, huge uncertainties about the future of new online technologies are hanging over our city in the wake of the government’s high-profile crackdown on Uber, prompting many young entrepreneurs to have second thoughts about investing in tech startups.

It is quite likely that many of them may end up putting their capital and energy back into some more secure and conventional businesses and industries, and Hong Kong will once again miss the golden opportunities brought about by the latest global tech boom.

It is foreseeable that the continued decline in the number of tourists may trigger a new round of cutthroat pricing in the local hotel industry, and it is likely that the Airbnb, the highly popular website that provides cheap, private home accommodation (or bed and breakfast, B&B) for travelers around the world, will become the next target of government crackdown.

Founded in 2008, the Airbnb has taken the world by storm in recent years, and it is developing so rapidly that it is currently providing 500,000 rooms and units for rent in 300 cities across the globe.

It is estimated that more than 10 million travelers found their accommodation in their destinations around the world through Airbnb last year.

A few months ago Brian Chesky, the founder of Airbnb, gave an interview to Fortune magazine, in which he detailed his next big project: turning his hometown Portland into a “sharing city”, indicating that the 33-year-old world-renowned entrepreneur is already looking beyond the online B&B rental business.

In short, what Chesky has in mind is that he wants to develop a new culture of sharing by building a network of B&B providers in Portland, turning the city into a more travelable and livable place.

Apart from promising to take 10 percent of the commission to pay tax in order to prevent Airbnb from becoming a safe haven for tax-dodging property owners, Chesky has also pledged that a significant portion of the revenues of this project will be used to improve the living environment of the community, and that he will promote smoke-free culture in the rooms for rent on his website.

On the other hand, he is also seeking partnership with the Portland city government to organize local cultural tours in the city, introducing tourists to the more genuine and grassroots side of his hometown.

It remains to be seen whether the Portland project is just another publicity stunt pulled by Airbnb, but his bottom-up approach to neighborhood enhancement immediately reminds me of the “Bless HK” project launched by our Home Affairs Bureau, only that there is not much worth mentioning about this project apart from its fancy official website and TV commercials.

Why can’t the Home Affairs Bureau think outside the box like the Portland city government does?

After the blaze at the Continental Mansion in North Point in 2013, during which half a dozen of occupants in the unlicensed guesthouses in the building were severely injured, the authorities have adopted a tough stance on illegal guesthouses.

Yet their numbers are still continually on the rise, and the reason is simple: there is a huge demand out there and most tourists and backpackers still prefer them to tiny suites in 4-star or 5-star hotels that cost at least several thousand dollars a night.

As compared to illegal guesthouses, most of which don’t comply with fire regulation requirements, private homes can not only provide much safer accommodation, but also allow guests to get a first-hand experience of the everyday rhythms of life in our city and our local hospitality.

It is a quick and safe way to meet market demand instantly, and all it takes is appropriate regulation and government promotion.

In fact, the city government of Seoul has already been putting a lot of effort into promoting their local B&Bs through their official online platform. Many Hong Kong K-pop fans may probably have patronized some of these local B&Bs during their “pilgrimage” to Seoul.

If Seoul and Portland can do it, why can’t we? Our city already has all the necessary hardware for our B&B business to take off, the only thing that is missing is a new mindset of our policymakers.

This article appeared in the Hong Kong Economic Journal on Sept. 14.

Translation by Alan Lee

[Chinese version 中文版]

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It is estimated that more than 10 million travelers around the world found accommodation through Airbnb last year. Photo: Bloomberg

Member of the Shadow Long Term Housing Strategy Steering Committee, a non-governmental organization

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