The discomfort being felt by some sectors of the Tasmanian business community about the emergence of the sharing economy is curious. The things which have been prescribed for Tasmania’s economy to grow: new entrants, innovation, sustainability, reduction of red and green tape, survival without government support and the retention of youth and skills are all core to the disruptive business model that is the sharing economy.
The sharing economy for any sector, in any region, is built on three fundamental tenets - a community of users that want a product or service; the user experience being a key measure of value; and customer service being the differentiator for an authentic and customised transaction.
Interestingly, the complaints and concerns about services like Uber (transport), AirBnB (accommodation), EatWith (food), appear to be based on the very spirit of what the share economy embodies. One of the main complaints levelled against Uber is that it avoids the regulation that licensed taxi drivers are subjected to. That regulation returns funds to Government, however, this regulatory framework doesn’t ensure that the passenger experience is safe or pleasant, and provides no formal public avenue to reward or expose bad practice. Customers are stuck in a one way service provision model which no longer meets the expectation of individuals as consumers to have a two way conversation.
AirBnB is regularly accused of taking money from the pockets of traditional accommodation providers. In a city like Hobart, Tasmania, where there is a well documented lack of all styles and budget levels of accommodation, especially during peak seasons and events, the existence of additional beds enables more visitors to stay, and spend lavishly or moderately, in Tasmanian businesses.
Many in the hospitality sector would strongly argue that red tape around WHS and penalty rates for wages is significantly limiting the survival rates of small businesses to provide the scope of services that a 7 day a week customer demands. There is undoubtedly room for improvement in the regulation of that sector, none of which will be quick, or easy to implement as it is a complex mix of Federal, State and Local government regulations. If innovative, lower cost, new ways of bringing food and beverage experiences to visitors and locals can be provided, and still utilise local products and labour – like food vans did when they first appeared, this should be a positive and an alternative model to those who can’t afford or sustain the fixed and sunk costs of a traditional food business.
In the hue and cry about the sharing economy bypassing government regulation and therefore somehow being high risk, the impact of stringent regulation and review of actual performance by consumers is frequently missed. In a society underpinned by legislation and regulation imposed by Government and its authorities, to actually see businesses operate in an environment where the customer creates the regulatory framework can be disconcerting to some and wildly liberating to others.
In the case of chef-at-home sharing experience EatWith, Head of Global Community Joel Bevin’s outline of the stringent process that chefs go through to be certified during his presentation at the Startup Tasmania/TasICT event in Hobart demonstrated that meeting a quality of service and experience was the core of EatWith’s global success.
Uber Melbourne’s Simon Rossi discussed similar internal checks and balances for drivers and their vehicles. Additionally, there is review and rating for every journey taken, with any rating at or under 3/5 being investigated. Rossi spoke of the journey in an Uber car being one that started with booking and ended with review. This laser like focus on the trip being an end to end experience, rather than the commodity offering of transport and logistics, exemplifies the difference that the sharing economy is bringing to the way consumers use and define what they purchase.
At the heart of it all is this: competition makes for a better individual experience. Not every visitor to Tasmania wants to stay in an AirBnB room in someone’s house or order a car online. For those that do, that experience is available. For those that don’t, when their experience with traditional models is underwhelming, they now have a new choice. Both can co-exist and support the other in a market full of diverse desire driven demand.
For the new business models that create a transactional structure which bypasses the sluggishness of Government regulation, consumers have proven they vigilantly regulate quality, hygiene, comfort, experience and safety. For those who want to provide these services in a sharing economy, the collective power of review and rating on revenue ensures self-regulation far in excess of what the Government would ever have the resources to enforce compliance on.
Technology, innovation, entrepreneurship and a degree of chutzpah are what is required to grow the Tasmanian economy. The same qualities are inherent in the DNA of startups. We need more of both, with less criticism and fear mongering when the community is inspired to take the initiative – and the controls.
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For starters, speaking on behalf of the Tasmanian tourism industry we have absolutely no issue with Airbnb as a marketing service or distribution model. A number of established and legitimate tourism operators are using this service, and as a marketing and booking agent, seems to work for some and not for others.
Now, are we – as suggested by Greg Barns – protectionists, trying to restrict new operators from entering our industry and shift the market through a new digital solution, or any other type of effective market strategy.
Anyone who knows anything about tourism will know that it is perhaps the one economic sector above all others that absolutely relies upon – and, indeed, actively champions – innovation, entrepreneurism and new investment in order to stay fresh and contemporary in the market. Tasmanian tourism will live and die on the basis of new operators continuing to enter the market with interesting, different and exciting products and experiences appealing to different segments of the visitor market.
The issue is, whether we like it or not, there are existing regulations and lawful planning requirements and costs that existing operators comply with and absorb into their business every day of the week.
Land tax, fire permits, commercial power bills, public liability insurance, business insurance and the upfront capital cost of developing an accommodation business in a correctly zoned area are all costs that quality, committed accommodation operators must absorb into their business.
And we’re not just talking about the ‘big end of town’ hotels here, but the vast majority of our accommodation operators, who are small, owner-operator run hosted and self contained accommodation.
Rather than being some broad digital revolution for the masses, AirBnb in fact provides the capacity for only a relatively small group of new operators to avoid these costs, providing them with a direct competitive and financial advantage over their competitors. This is simply unfair.
The answer to this dilemma proposed by TasICT in their policy statement released this week – if I am reading it correctly – is basically to deregulate the established industries and sectors to enable the marked adjustment emerging from the new ‘shared economy’.
I’m not sure if this is just an ideological stake in the ground, or a serious proposition, because, too me, its just not realistic.
From an accommodation perspective, amending local government planning schemes to legitimate short-term commercial accommodation in residential zoned areas – which would essentially resolve the Airbnb issue – would provide for open-slather visitor accommodation everywhere.
But the unintended consequences of this will be when some entrepreneurial types start buying up the remaining affordable residential properties around Battery Point, Bingalong Bay and Bruny Island to be converted into high end commercial guest accommodation.
From my perspective, I obviously wouldn’t object to that outcome for tourism gains – but ask the local residents and communities about the ‘disruption’ this would cause to the neighbourhood they know and love.
In our planning system we have distinctions between residential zoned areas and commercial & mixed-user areas for a reason – and for any government or council to further blur the line will have implications much broader than any one industry.
Similarly with Uber and Taxis. We can all lament the closed market of the taxi industry, but the reality is it exists. Government controls the market through the sale of plates, and many people in that industry have equity in the plates they own. For many independent taxi operators the equity in their ‘plate’ represents the total value of their business, the sale of which they are banking on when they leave the industry.
Deregulating the taxi industry might seem like a perfectly rationale, practical and inevitable outcome for the benefit of the consumer. But the reality for the people engaged in that industry would be dramatic, as would the cost to government in compensating for the devaluation of the plates they have profited from over decades.
And with food. How does one maintain the integrity of the existing food handling regulatory framework that the overwhelming majority of the public still highly value for safety and peace of mind, if we simply turn a blind eye to entrepreneurial home chefs commercialising home cooked meals?
Where’s the distinction between a home chef using EatWith, and a home-based food producer marketing their products through their own website, where the market still ultimately expects some degree of quality assurance and safeguards?
The age of the shared economy might well be before us, and regulations will inevitably adjust to the shift being generated in the market. But from my end, the removal of existing regulations over these markets is the most difficult way to facilitate this.
Defining the scope of the shared economy, and answering the questions of where the new economy meets the established economic base is the challenge.
For accommodation, Councils can enable commercial accommodation in residential zoned areas through their planning schemes without allowing open-slather restructuring of our most desirable areas.
Ironically, we might find the most practical way to facilitate the adjustment for the shared economy in Tasmania might be through regulation!
Luke Martin
Tourism Industry Council Tasmania