As in other parts of the world, New Zealand has seen a significant growth in the P2P (Peer to Peer) accommodation sector in the last few years. These operators compete directly with the commercial accommodation providers and are now taking a considerable share of the overall market. Click here to read more….
The impact on revenue and profitability for motels is no doubt felt throughout the country, however more keenly in some areas than others. For example, the environment for accommodation providers in Christchurch is one of the more challenging in New Zealand at this time. The city still lacks infrastructure to attract visitors and keep in here for a few nights. Whilst we remain optimistic that the city has fantastic prospects and will be one of the most attractive destinations in the not-too-distant future, the P2P affect is very noticeable for now.
In June 2016, active P2P listings in Christchurch and surrounds were approximately 283 properties. By August 2019, the number had increased to 4230, nearly 15 times as many in a little over three years. Approximately 50% of those listings were for whole properties which did not have a host on site. They are reported to be taking nearly $53 million annually from the accommodation industry revenue, just under 30% of the estimated total.
Local bodies throughout New Zealand will have slightly different district plans, however much of those will be in common. Where the home-share accommodation offered is hosted, district schemes will usually have a bylaw which allows this essentially bed-and-breakfast operation to continue. Commercial accommodation providers accept this. The remaining un-hosted properties in Christchurch of which there are over 2000, in mostly residential locations, will be in direct breach of the district plan. To operate a commercial short-stay accommodation business in a residential area would usually require resource consent, which if applied for is unlikely to be granted. The Council is failing to enforce its own district plan, which arguably could be in breach of the Resource Management Act.
Despite the fact that so-called home-share accommodation providers do not usually attempt to comply with fire regulations, health and safety and access requirements, pay commercial rates and insurance, usually not GST or income tax, there are other good reasons why local and central government should be addressing the situation.
The Christchurch City Council is the first local body in New Zealand to call for public submissions on the matter, these submissions closed on 2 March. We expect it will take some time for the process to reach any conclusions.
Whilst it is accepted that the Council cannot take commercial competition considerations into account, the financial impact on the commercial accommodation sector must be considered. This is in light of the serious impact on profitability and hence value of commercial accommodation businesses. The viability of current operators in Christchurch is sorely tested and therefore the construction of new accommodation in the future is likely to be severely curtailed. This may leave the industry generally reliant on peer-to-peer providers, who may exit the market any time given that their entry-level investment has been relatively small, at least compared to commercial operators.
The government is very aware of the shortage of housing in many parts of New Zealand. There appears to be a great deal of politicking around the issue. However one wonders why they are not addressing the drastic reduction in residential property availability in many areas due to the owners electing to earn potentially significantly more by taking their properties out of the residential rental market. Even in locations where the reduction in residential supply is not critical, surely the reduced supply will increase rentals.
The reduced supply of residential accommodation apart from other impacts, leaves many business operators (in a wide range of businesses), unable to obtain staff in popular tourist destinations. Staff are not able to either find nor can afford accommodation in such areas.
Home share accommodation can also have negative effects on neighbourhood amenity, caused by increased noise, traffic and late-night activity – coming and going. Also a reduction in the community ties in neighbourhoods where a large proportion of dwellings are used as home-share accommodation.
This is a challenge for local bodies. The registration and regulation of home-share accommodation providers is no easy task, it will come with a cost. There are a number of overseas precedents however which could be followed. Regions and cities in other parts of the world have successfully curtailed this activity and surely some of those examples could be tailored to suit New Zealand circumstances.
Kelvyn Coffey
Principal
© 2020
