The sharing economy concept emerged in Europe almost five years ago and has been gaining momentum globally ever since. It was only a matter of time for this economic model to enter the Caribbean marketplace disrupting smaller destination tourism sector.
The word “share” used in this hybrid economy enable consumers to access physical assets from owners in exchange for money, through digital platforms. For instance, owners are sharing physical under-utilized assets or temporary idle capacity such as cars, unoccupied home or villa, spare rooms, even office spaces and resources. Whilst this is not truly a new phenomena, the digital age has opened it up for increased micro-entrepreneurs in the service industry in various areas: Peer to Peer Accommodation; Transport Sharing; Peer to Peer Dining; and Peer to Peer Tours and Experiences.
The two leading players in sharing economy are Uber and Airbnb, with a myriad of new apps designed almost every day for our smartphone devices. Even the more familiar online travel agencies, such as Expedia and Booking are trying to strengthen their online monopoly by breaking the barriers to absorb Airbnb market share.
In 2016, a study was conducted in Texas on the effects of P2P on the tourism sector. The results showed that hotel earnings declined significantly mostly affecting motels and small hotels, whilst, car sharing platforms increased competition against car rentals and tour companies. Because P2P is still in its infancy, studies are still on-going to determine the potential effects on the supply and price of housing if home sharing becomes widespread. It will also be interesting for a study to be conducted on the effects of sharing economy on the tourism sector in Caribbean destinations, especially when many owners survive on the classic tourism model.
This online connectivity routed through infrastructural networks and software have given consumers buying power directly from service providers who offer flexibility and good price ratios. These platforms are sophisticated, accessible and easy to use which incredibly generates a level of trust from the consumer. Even pragmatic consumers, are now making purchasing decisions on these platforms based on reviews, photos and videos.
Evidently the classic tourism model which existed for over fifty (50) years would be threatened by P2P platforms, more-so in smaller destinations. P2P economies will also have a significant impact on the destinations economic taxation system and policies as technology through these channels will continue to disrupt with unfair competition, taxation burdens; health insurance or other coverage; safety standards and other rules of compliance. Thus, this presents to the regulatory authorities two major challenges on dealing with the issue: One is related to the service itself; and the second issue is related to platforms. The issue with platforms is that it changes so rapidly making it more challenging to determine what will be the “new norm” in digitized markets.
The only way government can address sharing economy platforms is through a sound regulatory framework which fortunately for Trinidad and Tobago, consultations are presently being addressed. The current draft posted on the website under Ministry of Tourism (Dec, 2017) seemed to be bench marked on older frameworks from other destinations that is in existence years ago. As it is often said “one size does not fit all”!
Interestingly, one of the states in America included a CAP structure, which created boundaries between registered operators under the state and incidental providers who are aligned to unofficial channels. The logic was simple as they expected to get information from the platforms which they would monitor to determine if tax should be enforced. This measure however could not be sustained as these platforms has privacy laws making it difficult for the government to access data, and secondly it requires an arm of monitors which is a very costly exercise.
Is it that far fetched for government to review their policies now to be able to explain their relative success in light of technological advancements? Since, there are no benchmarks for digitized P2P, it would be worthwhile to address the future of technological threats to economic and financial structure to classic economic models. Again, let’s use the opportunity at this time to make things right for the viability of the sector.
Author: Lisa Shandilya, MBA.(Specialized), CEM., B.Sc., 20 years Practitioner in the Hospitality and Service Sector, Member of THRTA, International Hospitality and Service Industry .
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