Why guesthouse owners are feeling like taxi drivers

August 06, 2015 15:01
Airbnb lets homeowners rent out spare space from one night to one month or more. That puts the service in direct competition with hostel and hotel operators. Photo: HKEJ

After Hong Kong taxi drivers denounced Uber for stealing their business, it didn't take long for hostel operators to condemn Airbnb for the same reason.

For those not in the know, Airbnb is an app that lets people rent out spare space from one night to one month or more.

It could be a spare room or an entire house or apartment.

That means Airbnb competes directly with existing operators such as hostels and hotels using technology as Uber does with transport companies. 

Transients like the idea because it gives them more choices for less money.

But in Hong Kong, as in many parts of the world, Uber and Airbnb are stuck in a legal conundrum -- they may be illegal. 

Leung Tai-wai, founder of the Hong Kong Guesthouse Association tells the Hong Kong Economic Journal that Airbnb rooms have hit 3,500, double the number in licensed guesthouses.

Guesthouse operators have to wait up to two months for a license. At the same time, guesthouses have to comply with all sorts of regulations, Leung says.

"Take a 10-room guesthouse, for example. We have to spend HK$1.3 million in order to comply with regulations. The rent per room per night in a guesthouse is about HK$350."

"Airbnb rooms in ordinary residential properties can make HK$250 a night. It's totally unfair to us.”

Association members and their taxi counterparts are planning a protest to press the government to take action.

Guesthouses have their own challenges, mostly from unlicensed operators. 

Lawmaker Yiu Si-wing, who represents the tourism industry, says it's hard to prosecute illegal guesthouse operators.

Direct evidence such as witness testimony and physical proof are required to convict an illegal operator.

Yiu suggests amending the law to allow circumstantial evidence.

But that is not likely to resolve questions regarding the legal status of Airbnb in Hong Kong.  

The seven-year-old San Francisco-based company acts as a middleman and there is no direct transaction between owners and guests, except when dealing with reservations.

The Home Affairs Department says the number of unlicensed rooms leased out through the internet and mobile apps has been rising.

It has started to monitor them for any illegal activity.

Operating an unlicensed guesthouse is a criminal offence. The offender is liable to a maximum penalty of two years in prison and a HK$200,000 fine.

However, analysts say the "sharing economy" concept benefits consumers and the economy, so the government should consider changing the law rather than banning related businesses.

Dr. Dominic Chan, an assistant adjunct professor in the Chinese University of Hong Kong, says the phenomenon is having a great impact on the licensing system similar to that of private kitchens on the traditional catering industry years ago.

But the conflict can be resolved if the government is determined enough, he says.

"Now private kitchens are co-existing merrily with restaurants because they have different customers."

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EJ Insight writer