Is limiting rental days the best way to regulate short-stay homes?


  • Travel
  • Saturday, 06 Apr 2019

Airbnb's Mich Goh

The glitzy ballroom on the 15th floor of Sunway Resort Hotel & Spa is uncharacteristically crowded for a weekday morning. The Short Stay Summit – billed the first of its kind in Malaysia – is taking place, and many stakeholders have flocked to the hotel in Selangor for a piece of the pie.

In attendance are representatives from government agencies, homestay operators, hotel associations, travel booking platforms and other relevant industry players.

Organised by HostAStay, a local startup that connects home owners to professional hosts, the summit comes at an especially important time in Malaysia. The Tourism, Arts and Culture Ministry has recently urged all short stay operators in the country to register immediately.

Short-term accommodation (STA) refer to apartments, houses and rooms that are rented out, like hotels. The service is usually booked through online providers such as Airbnb and Agoda. Bookings vary from days to months.

If anything, the regulation of the industry is at the back of everyone’s mind during the full-day event. It’s an observation corroborated by the packed attendance during a panel discussion on short-stay regulation.

“We are currently at the stage of being an unregulated self-regulated industry,” HostAStay founder and chief executive officer Jordan Oon announces with a hint of irony in his voice.

The man alludes to initiatives taken by short-stay operators to address matters such as safety and public nuisance with the relevant authorities.

HostAStay founder and chief executive officer Jordan Oon says the short stay industry is a self-regulated one at the moment.

Last year, Airbnb signed a memorandum of collaboration with the Malaysia Productivity Corporation (MPC), aiming to share data and best practices with the Government on short-term rentals and its policies in the country.

With the summit, Oon hopes stakeholders will work together to prevent the industry from being banned.

“If the short-stay model were to be banned, what would happen is that there will be a lot of vacant properties out there,” he explains.

Limiting rental days as a regulatory approach

The MPC, a statutory body under the International Trade and Industry Ministry, is submitting a regulatory framework proposal to the Government by the end of this month.

One approach is to limit the number of rental days for a maximum of between 90 and 180 days in a year.

There’s usually a rental cap in places where short-stay homes are regulated such as in New York, Los Angeles and Japan.

Real estate observer Dr Alan Poon notes that a cap on the number of rental days might be a bone of contention for investors.

“At the end of the day, the issue goes back to the return and yields of the property for investors. The regulatory body needs to look at how attractive the returns are for stakeholders in the industry,” he says.

According to Poon, STAs do contribute to tourist footfalls in the country. A rental cap would lead to investors shying away from the market and this would subsequently be detrimental to the tourism industry.

The arrival of Airbnb in Malaysia and its subsequent boom has brought new income for property owners and agents, who encourage clients to consider renting out their units on a short-term basis, instead of letting them be vacant.

The Star last year reported that some developers even build smaller apartment units to cater to the short-stay segment.

Airbnb public policy head (South-East Asia) Mich Goh says home-sharing helps resolve the property overhang issue in the country.

Airbnb's Mich Goh

“In certain cities around the world that has a uniquely constrained housing supply, we have implemented policies that limit the number of nights a listing can be rented out.

“Malaysia has the opposite challenge, where the current residential overhang results in more than 30,000 unsold or unoccupied properties in Kuala Lumpur alone, worth almost RM20bil. We believe our community model can help create a win-win scenario,” she says.

According to Goh, Airbnb utilises these unoccupied homes to create economic opportunities for the locals.

Oon revealed that the short-stay model can be a lucrative business with properties listed around the KLCC area fetching up to RM25,000 a month. On the other hand, long-term renting may yield about RM6,000 per month for the same area.

Many owners fear a regulatory framework might threaten that revenue.

Booking.com senior account manager Branavan Aruljothi doesn’t think a rental cap would affect tourism nor reduce a property’s revenue.

“Among all the regulatory approaches, limiting the number of days is actually very successful. Hosts and operators might think that the move will cut their yielding capabilities or damage their revenue forecast, but it doesn’t,” he explains.

In fact, Branavan says such a move will spread out the business for more operators in the country. In a building that has several hosts, this will allow more operators to flourish.

Oon is equally upbeat about a rental cap and believes that this approach will ultimately benefit tourists.

“Instead of a price war, we will have a war for quality among hosts. All operators should compete in a healthy environment to provide better service to our tourists,” he says.


ALSO READ: The importance of regulating short-stay homes in Malaysia


Is Japan’s Minpaku Law suitable in Malaysia?

Thus far, Japan is the first country in the Asia Pacific region to legalise the home-sharing model.

The Minpaku Law, which came into effect in June 2017, allows proprietors to rent out their properties for up to 180 days a year.

Branavan remembers that particular period to be quite nerve racking for stakeholders such as Booking.com.

“At that time, we thought we would have to close operations for all our hosts and operators in Japan. Fortunately, it was a very smooth process. There was no closure and it was business as usual,” he recounts.

Branavan adds that the regulation process in Japan is simple and the authorities here should emulate the move. As part of the law, short-stay hosts are required to register their listing and display a licence number on their listing page.

However, Tujia chief business officer Jennifer Li is more apprehensive of governmental involvement in the home-sharing industry.

“In Japan, the hosts collect all the relevant data and pass the information to the government. But one problem with government agencies is that they usually don’t have a system,” she says.

Launched in 2011, Tujia is a Chinese homestay platform – often compared to Airbnb – with more than 1.4 million homes.

Li also brings up the legalised home-sharing model in Kyoto.

At the major city in Japan’s historic Kansai region, rentals are only allowed during low tourism seasons, between mid-January and mid-March. Critics have slammed this move, calling it overly strict.

(From left) HostPlatform general manager Jayden Lee, Booking.com senior account manager Branavan Aruljothi, Tujia chief business officer Jennifer Li, MDEC chief operating officer Datuk Ng Wan Peng, HostAStay chairman Datuk Seri How Kok Choong, CEO Jordan Oon and SuperiorWealth Resources CEO Dr Alan Poon at the official launch of HostPlatform at Sunway Resort Hotel.


ALSO READ: How short-stay homes could be regulated in Malaysia


Call for registration

As far as the Tourism, Arts and Culture Ministry is concerned, registration of short-stay operators is the priority at this point.

Minister Datuk Mohamaddin Ketapi says delays in registering would possibly see operators receiving stern action from the ministry and local authorities.

“The ministry is also actively tracking down operators who are unlicensed and we are advising them to register with us,” says Mohamaddin.

Airbnb’s Goh says the company supports any innovation that will allow tourism to thrive.

“We’re committed to working with the Malaysian Government to further strengthen communities through sustainable, healthy tourism that benefits everyone. That’s why we support the collection and remittance of a broad-based tourist tax at a national level.

“Airbnb will continue to work with the Government towards progressive rules and regulations that ensure respectful and responsible home sharing in Malaysia,” she adds.

Mohamaddin’s announcement was lauded by the Malaysian Association of Hotels (MAH), one of the biggest critics of the home-sharing business.

In a statement, the association says this is in line with the industry’s call for the home-sharing model to be regulated with limitations similar to laws that had been enforced in various cities and countries.

“Many of these laws were drawn up with the intention to protect local residents as home-sharing businesses had in fact driven property prices up. (This is at) the disadvantage of locals, displacing them from main cities and indirectly raising the cost of living, as well as causing disturbance and nuisance at residential areas,” MAH states.

But during an event announcing the country’s tourism industry performance, newly appointed Tourism, Arts and Culture Ministry secretary-general Datuk Isham Ishak took on a more amiable tone.

“What we are planning to do now is to get operators to register – it hasn’t come to licensing yet. We would like to know who they are, have a dialogue with them and see how we can facilitate them,” he says.

The facilitation of the home-sharing model is also part of the preparation for Visit Malaysia 2020.

“We want to make sure the tourists who visit our country and use these home-sharing facilities are well taken care of. The contribution of this new way of providing accommodation is something new to us, and we are going to try understand it,” Isham concludes.

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