May 16th, 2023
The Sharing Economy and the Shifting Landscape of Tourism
Amir Shani and Simon Sarevski discuss the impact and the future of the sharing economy, the changing trends in the tourism industry and more.
Amir Shani is an associate professor in the Department of Hotel and Tourism Management at Ben-Gurion University of the Negev.. Amir was touring with the Free Market Road Show in 2023 where our Simon Sarevski sat down with him to discuss the impact and the future of the sharing economy, the changing trends in the tourism industry and more.
Simon Sarevski: As we reflect on the past decade of the sharing economy, it’s clear that there have been both successes and failures. Looking ahead, do you believe that the sharing economy was simply a fleeting trend, or can we expect to see continued growth and evolution in the years to come?
Amir Shani: The sharing economy is an ancient human phenomenon, which stems from people’s desire to improve their well-being by leveraging their unused assets. Nowadays, thanks to accessible and widespread digital platforms, the sharing economy enables person-to-person trade on an unprecedented scale. Fundamentally, though, this is a natural human activity that is not expected to end, but rather to adjust to new and changing circumstances.
Apart from the fact that the sharing economy is an integral part of the spirit of human entrepreneurship and not passing hype, it is very difficult to predict its future trends. As in any other entrepreneurial field, predictions are usually destined to fail. At the same time, the popular opinion is that the sharing economy will continue to disrupt traditional sectors. The popular prediction today is that the sharing economy will deepen its influence on the financial sector. You can already see sharing economy ventures in the banking and financial services fields, such as person-to-person loans and insurance, and the expectation is to see more innovative initiatives in these fields in the foreseeable future.
What specific institutional conditions are necessary for the sharing economy to thrive and reach its full potential?
As in other sectors and the economy in general, the best way to realize the full potential of the sharing economy is not to interfere with it. Government regulations, often influenced by pressure from interest groups, stifle sharing-economy ventures. The classic examples are the ongoing attempts on the part of local authorities to limit Uber and Airbnb. Directed at the sharing economy companies themselves, and harming them and the many micro-entrepreneurs who operate through their platforms, these attempts also harm the wider consumer public, who receive a narrower variety of products and services of poorer quality.
It is important to note that the sharing economy helps consumers not only in diversifying the products and services provided to them, but also positively affects the service quality provided by businesses from traditional sectors. For example, studies indicate that in places where Uber X operates, and other similar digital platforms that connect a passenger with a local (nonprofessional) driver, the service quality provided by traditional taxi companies operating in the same area has significantly improved. Competition works wonders in all fields, and here too.
In recent years, many European cities have struggled to manage the influx of tourists brought about by the sharing economy, leading to a disproportionate impact on local residents. Can you provide examples of situations where institutions have failed to address this issue, and offer insights on how these challenges can be overcome?
Your question is directed at what is known as overtourism – the overcrowding of tourists in popular destinations. Overtourism creates frustration and anger among local residents who protest disruptions in their daily lives.
There is no doubt that this issue is complex and creates real conflicts, but it is also inflated and manipulatively used by various parties. Often the protests against overtourism are led by interest groups who have something to gain from the panic surrounding the issue. For example, local business owners can organize protests against new malls and hospitality facilities opening in tourist destinations, simply because they threaten their livelihood. Of course, the real reason for the struggle cannot be presented to the public, so it is portrayed sterilely as a struggle to preserve the “real” character of the city. Even the major airlines sometimes have an interest in fueling the atmosphere against overtourism, since one of the factors attributed to it are the low-cost airlines, their staunch competitors. So one must be careful when talking about the attitude of local residents to tourism in their city, since it is not always an authentic grassroots protest but sometimes simply campaigns on behalf of interested parties.
At the same time, there are certainly local residents who honestly do not like to see their city change its appearance and character due to the touristic popularity it is experiencing. But this is not a fundamentally different phenomenon from other changes that have occurred in the world and that have caused anxiety or frustration among many. You cannot expect your neighborhood to freeze and remain forever as you know and are used to. Mainly it is not fair to forbid your neighbors from using the assets they own to benefit their well-being (for example by renting out their apartment through Airbnb, or hosting tourists for dinner in their apartment through Eatwith), just because you have an unrealistic fantasy that things will stay as they are forever.
In contrast to overburdened tourist hotspots, how can under-appreciated destinations take advantage of the opportunities presented by increased demand from tourists?
I’m not sure I understand what an “under-appreciated destination” is. Some destinations are simply not popular with tourists, and that’s perfectly fine. Destinations should focus on economic activities in which they have a comparative advantage. Many countries and cities around the world are convinced that they have a tourist treasure in their hands, and the only thing missing is the right investment in development and marketing. Unfortunately, the tourists don’t always come and sometimes a huge investment goes down the drain. Here too, as in any economic issue, it is better to let the free market do its thing and avoid top-down decisions on tourism development that involve large public expenditures with low returns.
With the advent of the sharing economy, how has the traditional tourism model been transformed?
Unfortunately, for the most part the traditional tourism and hospitality industry fights the sharing economy through political, legal, and regulatory means, instead of welcoming the competition and coming up with improved products and services. As I mentioned earlier, the sharing economy has a positive effect on the quality of services and products provided by traditional tourism and hospitality organizations, and the consumer public benefits from this as well.
One notable impact of the sharing economy on the tourism industry is in creating expectations among tourists for authentic experiences and direct encounters with local residents at the tourist destination. For example, a growing tourist trend is visits to home-based commercial hospitality ventures. As part of this activity, local residents host visitors in their private homes for experiential meetings on a variety of topics such as food, art, culture, folklore, and various workshops. The tourists get an authentic experience that goes beyond institutionalized mass tourism, the hosts get supplemental income and an empowering and rewarding occupation, and the local community as a whole benefits from an improvement in the touristic image of the destination.
In order for the tourism industry to continue to benefit from such developments, the local authorities must reduce regulation to a minimum and not make it difficult for these businesses, which as mentioned deviate from the traditional characteristics of tourism businesses.
The COVID-19 pandemic has had a significant impact on the tourism industry. Moreover, for many, remote work became a reality. What has been the effect of these changes on tourism, and how can businesses adapt to the shifting landscape?
The Covid-19 pandemic has indeed had a profound impact on the tourism industry. In the short term the effects were catastrophic, but time also brought with it adaptation and the rise of new trends. Even in the most difficult moments, you can always count on the spirit of human entrepreneurship, and indeed it did not disappoint this time either. Some of the prominent trends are “staycations” – vacations close to home, the quest for open-air experiences, an emphasis on family reunions and “friendcations,” and a desire for meaningful and authentic tourist experiences as possible. Tourism businesses must understand these trends and adjust their offerings accordingly.
Finally, even though not directly related to the general topic of today’s conversation, I always end my interviews with this: How to find freedom in an unfree world?
I’m not sure I would call the world “unfree.” There are many positive elements in our reality that we should appreciate and cherish. If I only look at myself personally as an Israeli Jew, then without a doubt I feel that I am living in the golden age of my people in terms of freedom and prosperity. On the other hand, my country still needs a serious shakeup when it comes to a free economy, as well as various civil liberties. So I think one should be optimistic, but also realistic with a constant aspiration to improve and move forward.
The views expressed on austriancenter.com are not necessarily those of the Austrian Economics Center.
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