Home-Sharing Market Disrupted By Coronavirus

The coronavirus outbreak may cause travelers to avoid staying in big cities like Taipei, and instead explore surrounding areas such as Yilan County, pictured above. Photo: Matthew Fulco

The virulent contagion illustrates the need for the sector to be regulated, but pressure from industry incumbents could delay the process indefinitely.

Home-sharing giant Airbnb has been operating in Taiwan for more than seven years without a physical presence in the country. Business has grown steadily during that period as both Taiwan and Airbnb’s style of accommodations have surged in popularity with travelers.

Yet Airbnb exists in a gray area here because most of its hosts are not licensed to operate hotels or homestays, and they cannot become licensed unless the Taiwan government changes the relevant laws. In the face of intense pressure from the hotel industry, the authorities have not acted to draft regulations to legalize Airbnb’s business model. That pressure could now further intensify as hotels already suffering from a saturated market lose business due to the novel coronavirus outbreak.

The contagion that originated in China in early December has sickened around 92,700 and killed over 3,100 globally. As of the beginning of March, Taiwan has the fewest confirmed cases in Northeast Asia, with just 42, compared to 100 in Hong Kong, 979 in Japan, 5,186 in South Korea, and 80,150 in China.

Still, Taiwan’s hotels will take a hard hit from the coronavirus outbreak as people postpone non-essential international travel to minimize their chances of infection. This will be especially true for Northeast Asia, which accounts for the majority of Taiwan’s inbound tourism. Occupancy rates are already plummeting at hotels and B&Bs.

“Many tourists will not come to Taiwan under the current circumstances,” says Ping Lee, head of research for property consultancy CBRE in Taiwan. “All types of tourist accommodation will experience a sharp fall in occupancy rates.”

For Airbnb, the challenge is multifaceted. On the one hand, its business in Taiwan will be adversely affected. Hosts who rely on Airbnb for income could see those revenue streams slow to a trickle for as long as the COVID-19 outbreak rages. At the same time, the Taiwan government will concentrate on supporting industry incumbents, not changing regulations for the benefit of upstarts.

“There is no chance that the government will relax restrictions on home sharing anytime soon,” says CK Cheng, chief executive officer of AsiaYo, a Taipei-based travel accommodation booking platform.

The coronavirus outbreak has aggravated the pressure the government already is facing from hotel industry lobbying groups, Cheng observes. Those groups allege Airbnb competes unfairly. They say the company provides hotel accommodation illegally, while skirting the fees – from taxes to investments in safety – incurred by licensed hoteliers and homestays. 

An Airbnb spokesperson told Taiwan Business TOPICS that the company couldn’t currently comment about its business in Taiwan or how the novel coronavirus outbreak is affecting occupancy rates here, citing the sensitivity of the matter.

The home-sharing giant’s many listings in Taipei City – normally a competitive strength because of Taipei’s popularity as a travel destination – could turn out to be a disadvantage during the COVID-19 outbreak. “People who are traveling during this period want to avoid big cities – they want to avoid large crowds of people, where it’s presumably easier to be exposed to the coronavirus,” Cheng says.

Bookings on AsiaYo for rural destinations in Taiwan, especially in Yilan, Hua-lien and Taitung counties, are rising even as those for Taiwan’s major cities fall, he notes.

A need for compromise 

Taiwan has been fortunate to have very few serious accidents in Airbnb properties. But without regulating the platform, Taiwan is taking a big risk. The current novel coronavirus outbreak illustrates that point. Licensed hotels have standard operating procedures to deal with public health crises. They also have a physical presence in Taiwan and people on the ground to communicate with the government.

After consulting with the government, a hotel could swiftly make the decision to partially or fully suspend operations in the event an infected guest was discovered to be on the property. Hotels also have the manpower to thoroughly disinfect the grounds of the property.

It would be another situation entirely if a guest in an unlicensed accommodation were to be infected with COVID-19 and spread the virus to others in the property. Such a scenario is not hard to envision in a typical Taipei City high rise, especially as the disease is highly contagious. In February, health officials partially evacuated residents from a Hong Kong apartment block where they feared the coronavirus may have been spread through the building’s pipes.

Were the same thing to happen in Taiwan, residents of the apartment building might have to stay in a dedicated quarantine facility for several weeks. And that’s a best-case scenario, assuming the effects of the virus are mild. The possibility that someone becomes seriously or terminally ill is real.

Ensuring the safety of Airbnb guests and residents of the properties where they stay cannot happen if the platform remains unregulated. In the past, the main safety concerns focused on fire hazards, gas leaks, and other common issues, not an infectious disease pandemic.

Taiwan has not faced this type of public health crisis for many years. The SARS (severe acute respiratory syndrome) outbreak – which is also caused by a coronavirus – hit Taiwan 17 years ago. According to the World Health Organization (WHO), Taiwan had 346 SARS cases and 37 deaths directly attributed to the disease. There were an additional 36 deaths related to SARS but not directly caused by it. At the time, the tourism sector was much smaller. Unlicensed hotels existed but did not enjoy the popularity that Airbnb does today.

The scale of Airbnb’s business shows that alternative accommodation models are both here to stay and need to be integrated into Taiwan’s regulated hospitality market. According to Airbnb’s data, local hosts and guest communities generated over NT$16 billion (about US$533 million) in estimated direct economic impact in Taiwan in 2018. On average, Airbnb guests say 46% of their spending on a trip occurs in the neighborhoods where they stay.

Airbnb emphasizes the popularity with the local market of alternative accommodations. An online survey of 1,200 Taiwanese by Havas Group cited in a September Airbnb press release found that 85% of Taiwanese people have stayed in alternative accommodations. Of the respondents, 79.7% support legalizing home sharing, 71.2% support it “with proper and reasonable supervision and regulations, and 8.5% support an immediate, free openness.”

With that in mind, Airbnb has proposed regulatory principles for what it calls “diverse accommodations” in Taiwan. The guidelines call for a consistent industry-wide approach to regulation that differentiates among the different types of alternative accommodations, such as a dedicated commercial vacation rental and a host providing a room in his or her home. The company also recommends developing effective safety requirements for ordinary homes, which would differ from those in commercial buildings, tough but fair rules for bad guest behavior, and centralized registration that is simple and efficient.

“Airbnb wants to be a good and responsible partner to government and do what we can to help Taiwan achieve its tourism objectives such as reaching 20 million inbound guests by 2030,” said Brent Thomas, Airbnb’s regional director of public policy in the Asia-Pacific region, in a November press release.

To be sure, Airbnb’s proposed regulatory principles are a good concrete step towards resolving its uncertain status in Taiwan. But it could be some time before the government is willing to evaluate them. How the novel coronavirus outbreak develops in the coming months – and the severity of the impact on the tourism industry – will likely determine the government’s approach to Airbnb in the near term.

“We think the impact [on the tourism industry] will be short-term. That’s the one thing we can be optimistic about,” says CBRE’s Lee.