Thursday, August 9, 2018

Why Tanzania hoteliers should eye the vacation rental market


By Khalifa Said @RealKhalifax

Dar es Salaam. Vacation rentals are changing the hospitality industry globally.

Although data in Tanzania’s hospitality industry is hard to come by, the vacation rental market is growing.

Vacation rentals or villa rentals are furnished apartments, houses or professionally managed resort-condominium complexes which are rented temporarily to tourists and guests.

Tanzania’s hosts on Airbnb have been welcoming guests into their homes since 2011 and there are 2,300 local listings available on the platform.

A typical Tanzanian host rents their home for 17 nights a year and earns $1,000, according to Airbnb. Almost 40 per cent of Tanzanian host income is earned by women.

In 2017 alone, 24,000 guests used Airbnb to visit Tanzania, a growth of 90 per cent from that of the previous year. Twenty per cent of guest arrivals are from the US.

Tanzania is the fifth African country in total guest arrivals.

The most wish-listed listings on Airbnb in Tanzania are available in Zanzibar and Arusha.

These include Utupoa Lodge, Zanzibar Grand Beach Villa, Attractive Stay Stone town Zanzibar and Villa Bahati, which are based in Zanzibar and Arusha Palm House in Arusha.

Airbnb spokesman Bernard D’heygere says Tanzania’s rentals are unique and spread benefits beyond tourist hotspots to more families, communities and local businesses. “We encourage everyone in the country to support the growth of innovative and sustainable forms of tourism.”

HomeAway, - another marketplace for vacation rentals - entered the Tanzanian market in 2006.

The home-sharing platform has grown to contain more than 120 staying places in 2017, a 25 per cent increase from the previous year’s and the demand is growing.

Among the most popular types of rentals are beachfront villas where the most-booked homes on HomeAway are located in Zanzibar.

These are Mwendawima Villa, Ocean Front Private Beach Villa, Casa Habari, Kipepeo Lodge and Beachside Villa.

Unique experience

The HomeAway vice president for Europe, the Middle East and Africa, Mr Christophe Pingard, says travellers who stay in vacation homes often want a different experience other than that available in hotels. They want to cook meals, do laundry or enjoy a private pool while on vacation.

“Our owners love providing a great experience for their guests while earning income from homes that would otherwise be empty for much of the year,” he says. Vacation rentals can play an important role in stimulating Tanzania’s tourism growth.

He says the steady increase of visitors to Tanzania’s attractions represents a significant economic opportunity for local homeowners who are interested in renting out their homes to travellers.

Between 2016 and 2017, the company saw demand for Tanzanian rental rising by 138 per cent.

“It’s a strong indication that visitors to the country are interested in staying in vacation homes as they explore everything from Mount Kilimanjaro to the islands and beaches around Zanzibar,” he says.

Threat to hotels

The proliferation of vacation rentals is likely to pose a threat to hotels.

Accommodation and hospitality consultants think hoteliers should rethink their business models and see how they can retain their competitiveness in the market.

“Hotels can either enter the vacation rental market or rearrange their hotel environment to sound home-friendly.What vocational rentals do is to offer alternative and an unconventional accommodation to the needy while they are away of their homes,” says Fransico Juma, one of the consultants.

Ms Eunice Ulimi, another consultant, explains why people prefer vacation rentals to hotels.

In vacation rentals, people cook for themselves, go to supermarketand get all other home experiences, she says.

“They are also affordable and that is why they threaten hotels,” says Mr Juma.

Some hoteliers agree that they need to change the way to do things to cope with the development.

Peacock Hotels operations director Daniel Mfugale says the cost and home-like environment are major factors for popularity of vacation rentals.

“In the near future, we will have to change the way we work and include personalising the experience so that we can cope with the trend,” he says.

He himself once used the vacation rental service.

He says the trend poses no serious threats to hotels, at least for now but “deserves consideration. May be we will wake up when we start losing”.

Nothing beats local knowledge

A belief that travel agencies should be optimistic following the rise of vacation rental business sounds a little bit unconvincing to most players in the hospitality industry.

Some think they are also threatened by the popularity of vacation rental portals and bookings on the internet.

“There may be TripAdvisors [an online booking portal] and the like, but still visitors will need locals for their experience in the local surroundings,” accords to Mr Juma.

But Mrere Company Limited managing director Jerry Marandu says: “Our capacity to compete with these portals is low…So, we have to come up with innovative solutions. For example, apart from having a website that can connect us with potential visitors in the country we also thought of having agents across various parts of world.”

The company deals in tours, safaris, hotel reservation and city tours.

Mr Marandu believes vacation rental portals and booking on internet, like Airbnb, Home Away, and Trip Advisor pose a big threat to their businesses.

He has not yet felt the real impact of the innovations to their business but he anticipates it to be “massive”.

‘Dark side’ of vacation rentals

Companies that rent rooms or homes through the platforms like Airbnb and HomeAway have been reportedly escaping to pay taxes, something which the hotel industry says makes it unfair competition.

Ms Ulimi refers to this phenomenon as the “dark side of the vacation rental business”.

“Those who own the vacation rentals need to follow the country’s rules and regulations regarding tourism and hospitality,” she says.

One possible tax that can be lost in the vacation rentals is the tourism development levy, charged to every person using the hotel services.

“This is not just detrimental to hoteliers but even for the national economy of a particular country,” notes Ms Ulimi.

On top of being aware of the concerns, D’heygere terms the allegations “disappointing”.

He is surprised to see the hotel industry attacking innovative forms of tourism that spread benefits beyond hotels to families and their communities. He says there is a clear difference between someone sharing his home for a couple of weeks a year and someone running a hotel.

“Rules should differentiate professionals from non-professionals.”

He reveals that Airbnb hosts keep up to 97 per cent of the fees in their respective home countries and the overwhelming amount of money generated stays with locals and their communities and is subject to local tax. However, the company, says D’heygere, wants to help hosts pay their fair share of tax.

“We’ve implemented a number of features to simplify the tax process for hosts, including annual tax reminders and downloadable transaction history,” he says.

He says Airbnb has also entered into agreements with over 340 jurisdictions and collected and remitted more than $510 million in hotel and tourist taxes throughout the world.

“We ask all hosts to certify that they have permission to list their space and remind them to check and follow local rules before they list and throughout the year. This is made clear in our terms of service.”

Mr Pingard says private owners who occasionally rent out their vacation homes remain responsible for paying the relevant personal taxes on their rental income.

“At HomeAway,” he notes, “we are committed to continuously improving the way we are providing our partners with all relevant information regarding national legislation in the destination of their vacation home as well as facilitating them to comply with their legal obligations.”