Regulating the sharing economy : a cost-benefit analysis for the accomodation industry in Malta

Abstract

The main aim of this study is to determine whether tighter enforcement of the regulation of the Airbnb sector in Malta is beneficial in economic terms to the whole Maltese economy. From a review of the literature in the field of the peer-to-peer accommodation sector, it was concluded that peer-to-peer accommodation platforms such as Airbnb tend to circumvent existing frameworks which regulate the traditional accommodation sector, thus putting the latter at an economic disadvantage. As a result, many authorities in various EU countries have taken steps to regulate the peer-to-peer accommodation sector. This research builds on a number of regulatory features adopted by other localities and combines them into two proposed regulatory scenarios. Feedback from two local tourism stakeholders – the MTA and MHRA – helped to rank and assess the two scenarios so as to then conduct a cost-benefit analysis on the preferred scenario. The preferred scenario used in the cost-benefit analysis assumes that Airbnb and the local authorities in Malta reach a co-operation agreement with Airbnb for the collection of the 7% VAT and the eco-tax on behalf of local authorities and that Airbnb will make sure that no listing will be posted on its platform unless a valid MTA licence number is provided. From this study‟s overall analysis, it emerges that the net economic impact of the proposed regulation in Malta is a positive one. This calls for more regulatory enforcement of the Maltese Airbnb sector. Thus, it is advised that authorities should consider the proposed regulatory approach utilised in this study and that to avoid any spill-over effects to other online platforms, more enforcement from the MTA is needed so as to make sure that short-term letting hosts who do not make use of the Airbnb platform but use other online platforms are appropriately abiding by the corresponding tax and licensing obligations.