FHTA Tourism Talanoa: The New Economy in Paradise

FHTA Tourism Talanoa: The New Economy in Paradise

Fiji Hotel abd Tourism Association, 19 October 2023 – Amidst the picture-postcard landscapes in Fiji and the demand for internet-based technology and all things digital, is the growth of the inevitable “new or sharing economy”.

Described as new, high-growth industries that are on the cutting edge of technology and believed to be the driving force of economic growth and productivity; these businesses, often growing eventually into industries, have become popular because they use usually already available products, spaces and materials and therefore reduce the use of new resources.

Over the last decade, the increasing demand for accommodation in our little island paradise was ignored or under-appreciated through the usually expected development supply lines through investments in new resorts and hotels. Higher than usual taxes for tourism industry operators, less than welcoming investment policies, and prohibitive ease of doing business climate amongst other elements, pushed the focus elsewhere and new investors simply walked away.

But where demand for rooms kept increasing, sustained by a determined little national airline that was expanding its fleet, flights and frequencies, and that has consistently pushed its boundaries as a small Pacific Island Country national asset; supply flowed in from another direction – as these things tend to do when you take your eyes off the supply and demand pendulum.

Airbnb supplied accommodation filled the gaps, offering a supply backed by a huge and increasingly hungry demand; providing a welcome revenue earning capacity to homeowners and driving the “new, sharing economy” with its minimum demand on new resources to somewhat plug Fiji’s accommodation inventory gap.

There are now around 1,000 rooms available on Airbnb alone, spread around Fiji.

Does tourism need these extra rooms? Absolutely!

After all, we are only now just catching up to the required room inventory of 4,000 more rooms for which we might only start seeing around 300-500 or so delivered every 6 – 12 months over the next year, then around 1,000 rooms every 2 years for the next 6 years.

If we’re lucky – meaning that developers will be able to overcome the current roadblocks to access energy (doubtful), and water (perhaps), get more efficient EIA turnarounds (maybe), and manage to get over construction, labour and work permit issues (that we are working behind the scenes on); then Fiji might see around 5,000 more hotel and resort rooms come on line before 2028.

While we are a generally positive lot in tourism; this is getting harder to sell.

If not, we can expect the Airbnb phenomenon to grow exponentially because it is currently unregulated, requires no licensing or health and safety oversight, pays no taxes and if the owner lives overseas then all that revenue is probably not being retained in Fiji.

At the same time, Fiji’s available stock of rental housing options for locals becomes more limited, and what is available becomes more and more unaffordable to the point
that affordable rental options are driven further and further out of the more popular inner-city suburbs. This puts pressure on the transport industry which is already challenged with lower than global average bus and taxi fares that open the door to more non-tax paying illegal transport providers.

In other countries around the world, this has also resulted in changing the diversity and stability of neighbourhoods and impacting social services and infrastructure that depend on permanent (local) residents.

The issue of unlicensed accommodation providers openly hosting guests that are broadly included as visitors or tourists, while seemingly circumventing crucial regulations expected of every licensed hotel and resort, is not just one of concern for the apparent ease of bypassing regulatory process; but also raises the question of accountability where guest safety is concerned.

As representatives of a sector supportive of ensuring a positive visitor experience, we are deeply invested in preserving the reputation of Fiji as a world-class tourist destination. We support, remind and create awareness for compliance with regulatory requirements including abiding by Fijian laws and tax expectations, along with expecting our members to abide by the FHTA Code of Ethics.

Our apprehension stems from the apparent disconnect between the regulatory framework and the enforcement mechanisms in place, where outdated legislation in these areas has left a gaping hole that is being quietly capitalized on. This is apart from a loss of revenue for the Government through license fees, taxes or even local municipality commercial rates.

The Hotel Licensing Board (HLB) based out of the Attorney General’s office is tasked with issuing licenses to local and overseas investors who wish to provide accommodation operations in Fiji. Once the HLB approves licenses, a certain level of comfort, security, and overall experience for guests is expected from the licensee, who if then applying for a liquor license is given a whole new level of hoops to jump through to prove his or her “good character” as the Act currently requires.

We doubt that those hundreds of liquor outlets that have suddenly mushroomed all over Fiji have had to prove their “good character” to anyone before being granted a license to sell liquor and that no one is monitoring who they sell that liquor to. But every resort and hotel general manager or owner must do so.

The list of registered accommodation providers, maintained by the HLB, serves as an indicator to the industry of who is fully licensed and following the laws of the land and the supposed minority who are not. But what can be done to ensure they too comply especially when numerous complaints from guests discuss the nightmarish conditions of some lodgings within this minority, that for the most part is passed between the many regulatory bodies to determine who exactly should address the issue and enforce the vague laws at hand.

The gaps discussed and the lack of clarity regarding enforcement responsibilities have added to the already significant challenges in an industry that has very rapidly outgrown the outdated laws that regulate it, despite years of bringing these to the
attention of the many Government agencies responsible for the compliance, industry support and economic growth.

This situation raises questions about the effectiveness of the licensing processes and highlights the necessity of establishing a comprehensive system that not only issues licenses but is also aware of the growth and development of new operations in the accommodation space, and monitors and enforces regulations through more effective oversight.

We have observed with some alarm that several new accommodation providers in just the Suva area alone are not on anyone’s official radar, yet we receive with regular concern, complaints from visitors who are both local and international. Many of these guests noted their expectation of lodgings of a good standard and that the marketing of that accommodation was nowhere near the actual experience.

And while Airbnb’s impact on Fiji’s tourism industry might be deemed relatively modest at around 1,000 rooms and counting; it is worth noting that Fiji is benefiting from these options, given the current shortage of quality lodging.

Nonetheless, there is a significant disparity: while traditional lodgings follow the rules when it comes to regulations and taxes, many Airbnb properties avoid these obligations because the regulatory bodies have left that door open for now.

Airbnb users are happy to be supporting a growing movement that is playing an important role in sustainability by growing economic activity without using more resources. But we need to be mindful of the impacts this has on the local economy given our response to local, affordable housing options is behind by at least a decade, and if you add the tourism industry’s current challenges to grow its accommodation base, there is no doubt that the responsible agencies tasked with finding solutions for more affordable housing programs have these same challenges plus the historical issue of making housing more affordable to the Fijian population.

A complex conundrum that is a mix of both a welcome solution to available short-term accommodation, while driving the affordable local housing problem to even more critical levels.

If we consider that the sharing economy exists in an “economy sandwich”; a grey area located somewhere between less-regulated private ownership and highly regulated public commerce – in the Pacific Island context, long-term solutions may need to be tailor-made for us. What might work in first-world countries cannot simply be adopted outright here.
Because let’s face it – many other inter-connected and (outdated) legislative frameworks would have to be factored in and therefore reviewed.

Fantasha Lockington – CEO, FHTA (Published in the Fiji Times on 19 October 2023)