The sharing economy is being hailed by many. But Lee Hayhurst says that senior figures are right to highlight the risks
With almost literally the last word at the Abta Travel Convention this week the association’s president Noel Josephides fired a well-aimed broadside at the growing peer-to-peer sector.
He’s not the first to point out that this new way of doing business, by creating a platform so that people can effectively organise to do business among themselves, has scant regard for local regulations and laws.
Taxi booking app Uber in London and spare room marketplace Airbnb in a number of US cities and other countries have had high profile brushes with regulators and will continue to do so.
There are some who believe this area does not need regulating and in a globalised world that empowers the individual why shouldn’t they be able to behave as they like as long as their intentions are honourable.
However, the case for acting needs to be made based on what the true ambitions are for these types of firms and the impact they will have on established companies who do play by the rules.
On the web the path firms often take from start-up to global giant is now well established and no secret.
They start with a clever, maybe rather limited, idea aimed at a niche often due to a bright, innovative individual having had an poor experience which they think should be averted.
They establish themselves in this niche, prove the model, educate a public about what is now possible, generate glowing, often totally uncritical, media reports and then attract the attentions of investors.
Once properly funded, these companies need to start making money, so they flip the model to extend their reach from the original niche they first operated in.
Think TripAdvisor, no longer just a review site but also a meta-search engine and even an OTA, Skyscanner, now not just delivering airfares but prices for all travel components, or lastminute.com which moved some distance from its original concept of offering five star hotels for three star prices at the last minute.
Airbnb, the company singled out by Josephides and the darling of the dot com world, won’t become the global powerhouse it wants to be based purely on people renting out their spare rooms.
It is already being used as a distribution platform by some hotels, and much of its recent growth has come from this sector, and has designs on other travel sectors like tours and activities.
This is the really scary part. All types of accommodation, including private houses, B&Bs and hotels, clearly ought to come with health and safety commendation have had a proper audit carried out.
But this sector is already relatively well aggregated.
Tours and activities is the last great area of travel that remains fragmented to a large degree and, in being so, is itself often difficult to properly regulate.
It is the tour operators that sell trips in their home markets vouch for these local suppliers, will usually insist on certain standards and even then things can go wrong, often tragically especially when the activity is particularly adventurous.
From the perspective of the traditional travel industry these models that cut out the middle men just look like tour operating on the cheap.
It’s almost exactly the same as tour operating, and certainly seems that way to the customer, but the retailer takes no responsibility for the delivery or safety of the product.
Regulation in travel – the Package Travel Directive in Europe and the UK’s Atol system – exists specifically to ensure customers with a grievance have a means to redress in their own country.
Josephides also pointed out that not only is there a lack of responsibility taken for the product, but often these types of firms enable the taking advantage of some very advantageous tax arrangements.
So the question is not if but when the regulators will get around to deciding how these companies ought to be dealt with.
Some, particularly Airbnb, are now no longer under the radar – a secret for those tech savvy early adopters online – but have their heads well above the parapet.
As usual the regulators have been slow to catch on with what is happening but that’s not likely to continue to be the case for long.
The question is how established will these firms become before they’re brought under regulations and how much ‘disruption’, or damage, will they do to the established players.