Sharing economy — when the chips are down

HK looks a tough nut to crack for sharing platforms as city regulators tighten the noose amid brouhaha

There's been much hype about how the sharing economy, propelled by the proliferation of the internet in recent years, is reshaping the future of the business world, but the real issue is: What does the future hold for this sort of economic dynamics in Hong Kong?

The door is long shut for sharing-economy flag-bearers like Uber and Airbnb in the Asian financial center, with no sign yet of a breather.

A classic case that spoke volumes about how Hong Kong's sharing economy industry is faring has been the recent abrupt closure of the city's first home-grown bike-sharing startup Gobee.bike, which had been struggling to gain a foothold for its cash-burning operation since April last year but ended up calling it a day in July this year.

Life isn't difficult only for the likes of the tiny money-losing enterprise. Even for household names like Airbnb and Uber, Hong Kong is a tough nut to crack too, with regulatory barriers hanging like the "Sword of Damocles" over their heads.

Just a few days after Gobee.bike went to the wall, some 28 Uber drivers in Hong Kong were slapped with fines of up to HK$4,500 for taking passengers without a hire-car permit.

It put the ride-hailing operator in the same boat with Airbnb, which found itself stuck in an uphill and protracted battle with a new amendment bill against illegal short-term rentals and unauthorized guesthouses that was tabled in the city's legislature for its first and second readings by the Home Affairs Bureau last month.

Their plight reinforces the notion that Hong Kong might not be the right place for the sharing economy to thrive in allowing people to rent underutilized goods and services from one another via internet platforms. A broader definition includes the short-term rental of almost everything with a "sharing" label — from phone chargers and basketballs to umbrellas and high-end designer dresses owned by various companies.

Nonetheless, opportunities do abound. A generous estimate by Airbnb in May this year found that about 9,000 properties from 5,000 hosts in Hong Kong were listed as temporary lodgings, mostly flats in apartment blocks.

On average, each host could earn about HK$25,000 in rental income per year.

Last year, as many as 450,000 visitors used Airbnb to secure accommodation in the city, generating HK$2.6 billion in economic activity, said Mike Orgill, Airbnb's Asia-Pacific public policy director.

During the decade from 2006 to 2016, overall visitor arrivals in the SAR soared 124 percent, with the number of overnight tourists having surged 65 percent. This compares with just 42.6-percent growth in the number of hotels and guesthouses during the period, noted Simon Lee Chao-fu, convener of the Sharing Economy Alliance Hong Kong.

The current occupancy rate for local hotels hovers at around 80 percent, but investors are reluctant to plow more money into new hotels, he said.

This underscores a non-negligibly growing market for short-term homestay accommodation, which looks at the unmet demand that's out of reach of hotel operators and offers foreign sightseers a window into the local community.

Having seen the sharing platforms muscle in on their turf, traditional hoteliers and taxi drivers could hardly sit still.

The Federation of Hong Kong Hotel Owners, which represents 90 percent of industry players, hit out at Airbnb in April this year, branding "home-sharing" as "sugar-coated poison" with "fancy wrappings".

Michael Li, the organization's executive director, took a swipe at the home-sharing operators, claiming they're contributing nothing to the local economy.

"For years, hoteliers have invested heavily in providing a mass of job opportunities and abided by the law," he said. "All of a sudden, these illegal sharing operators come from nowhere and try to grab our business. It's completely no different from stealing."

Under the current Hotel and Guesthouse Accommodation Ordinance, which has remained unchanged for years, premises that offer accommodation for a fee for a period of less than 28 days must be licensed.

But, almost all residential property owners renting out their homes on Airbnb and other home-sharing platforms are believed to be unlicensed.

The new amendment bill, if passed, would allow the authorities to begin criminal proceedings against owners if they had "circumstantial evidence" even in the absence of direct proof. It also proposes raising the maximum penalties for running an unlicensed guesthouse from a fine of HK$200,000 to HK$500,000, and imprisonment from two to three years.

"Unfortunately, under the proposed amendments, the benefits of tourism will remain concentrated in the hands of the few, at the expense of the local residents," warned Orgill, adding that it would be a "lose-lose" game if the home-sharing business is outlawed in Hong Kong.

"Whenever a new idea pops up, the first response is always to say 'no' just because it goes against the existing regulation. Such a mindset is not only seen across the local tourism sector. It also wields an awfully lot of influence over the city's technology sector," IT sector lawmaker Charles Mok Nai-kwong reckoned.

"If the issue of land supply can be up for public debate in Hong Kong, why not ride-hailing and home-sharing too?" he asked.

Lo Ming-hin, project manager of the Sharing Economy Alliance Hong Kong, believed that the sharing economy is an irreversible trend worldwide. The powerful hotel chains overseas are progressively changing their mentality to dabble in home-sharing and lure customers back.

Earlier this year, Marriott International joined forces with a local home-sharing platform Hostmaker in London to start offering short-term home rentals. Marriott is not the first hospitality group that looks to disrupt the disrupters in a proactive and collaborative manner.

French hotel group Accor acquired luxury home-sharing platform Onefinestay in a deal worth at least £117 million ($150 million) in 2016. Hyatt Hotels Group invested in home-sharing startup Oasis last year to ramp up its presence in the short-term lodging market.

"The sharing economy can be a well-regulated business. But, this comes on the premise that regulators could catch up with the trends and abandon the one-size-fits-all approach to regulate the disruptive things," said Mok.

Contact the writer at sophia@chinadailyhk.com