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Battle Of The Beds - Hotels vs Holiday Lets

Friday February 27, 2015

Battle Of The Beds - Hotels vs Holiday Lets

Ladies and gentlemen. In the blue corner, fighting out of their large corporate headquarters, I give you, the big hitting Spanish hotel chains. And in the red corner, we have the challenger, fighting for their basic economic survival in straitened economic circumstances, the local homeowners trying to make a living by renting out their property.

Many holidaymakers are blissfully unaware that the vast majority of privately owned holiday apartments and villas available for rent in the Canaries are currently deemed by local law to be operating illegally.

But if you’re concerned that you could be summarily evicted from your holiday property by the local Guardia stress not. As these laws are rarely, if ever enforced and this whole sector could more accurately be described as unregulated, with legislation pending in the wings to introduce licensing and impose standards for local rental properties.

Indeed this sector has rapidly grown to become an integral part of the overall tourist economy over the last decade or so and on Lanzarote there are estimates that there up to 10,000 unregulated properties.

This sector has mushroomed because the business model of the large hotel chains has become stale, whilst demand for a more authentic holiday experience has grown. Many tourists no longer want to lounge around the pool at an anonymous and impersonal hotel with hundreds of other guests when they could instead be experiencing local life with a degree of privacy away from the main resorts.

Some island residents have also had it tough in recent years. Unemployment and job instability has increased since the Crisis hit Spain in 2008 whilst wages have fallen in real terms. Leaving many to do whatever they can to make a living, whether that’s renting out a room or their entire home.

However some of these holiday lets on Lanzarote are also owned by foreign based investors, attracted by the year round rental returns and buoyant tourist numbers. And often their profits never even see a Spanish bank account, let alone an official tax return. So the local authorities are obviously keen to end that practice and will be aided in doing so by the introduction of the new information sharing arrangements between Spanish and British banks that were introduced last year.

However the big hotel chains aren't happy, despite the fact that they don’t even have sufficient capacity to cope with the additional tourist numbers currently opting for private rental accommodation. Tourism in Spain is the largest sector of the economy and these chains carry real clout, enabling them to employ expensive lobbyists whilst also influencing local politics via large party donations.

In Barcelona for example, the regional Catalan government fined US based Airbnb 40,000 dollars last year for failing to list their rentals with the local tourist board and even went as far as to threaten to block their website. As a result Airbnb have entered into discussions with local governments in Spain, resulting in compromises, such as a ruling in Madrid that Airbnb stays are allowed for a minimum of five nights only, leaving the hotel chains to pick up the shorter break business.

Whilst in Paris, the French Hotel Union are currently lobbying the government there to ‘level the playing field’ as they lose business to sites such as Homelidays, Housetrip and Airbnb.

Some observers have billed this is a clash between new and old economic models, with car sharing apps such as Uber also coming under attack in these cities from enraged cab cartels.

According to David Cordova, Madrid IE Business School’s government relations expert, "In a few short years the growth of platforms such as Airbnb and Uber has been exponential, but it's also been disruptive. Traditional vendors weren't prepared for it and they've reacted harshly. The trick is to prevent that from paralyzing this new 'share economy."

On Lanzarote it’s currently commonly accepted that rental owners are immune from prosecution unless denounced by another party. And even then some of the few cases that have reached court have been overturned by local judges. But until legislation is passed to lift the uncertainty property owners remain in legal limbo.

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