Impact of Airbnb on the UKs Economy

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The hospitality industry has proven to be critical for economic growth and development across the world economies. In the UK, the hospitality business contributes significantly to the gross domestic product. Before the coronavirus pandemic emerged, such businesses as cafes, pubs, bars, catering, campsites, hotels, and other accommodation generated an estimated £59.3 billion in Gross Value Added, which is approximately 3.0% of the overall UK economy (Hutton and Foley, 2021, p. 3). These are important statistics, especially at a time when businesses are experiencing setbacks from the pandemic. The focus of this essay is on establishing how the hospitality industry impacts the UK economy. Specifically, the essay explores the role played by the accommodation business with case examples derived from Airbnb. This company operates in a novel economy dubbed home-sharing, which has been described by Bivens (2019, para. 1) as a constellation of mostly Silicon Valley-based firms using the internet as the main interface for selling and renting services. Therefore, the impacts of Airbnb on the UK economy are addressed, mostly those that are positive.

Airbnb can be described as the epitome of the sharing economy, especially because very few other accommodation businesses in this industry can match its reputation and popularity. The implications for the UK economy are largely positive based on the assumption that the growth of new businesses means more revenues for businesses, incomes for people, and an upsurge in employment. According to Destefanis et al. (2020, p. 3), the sharing economy allows people to utilize assets that would otherwise lie idle. Airbnb may be a disruptive innovation that allows house owners to charge lower prices than the hotels, but it remains critical for the hospitality industry. The argument is that more economic activity can be recorded, especially among consumers who are sensitive to prices. In other words, Airbnb and similar businesses are not necessarily a threat to the hotel businesses but a supplement. The fact that even the hotels can take advantage of Airbnb and the sharing economy means that business growth in the UKs sharing economy can be expected.

The UK can be described as a top tourist destination. Airbnb has had the effect of boosting the rise of the informal tourism accommodation sector. Airbnb comprises a trusted marketplace where people list, discover and book unique accommodation. In this case, the processes are extremely simplified, which means clients can save costs and make their travels simple. The informal tourism accommodation sector in the UK is rapidly growing, which means that the country has a new source of revenue. It means that more tourists can manage to visit the UK, including those with relatively lower incomes. This is why Airbnb has been termed a tool for inclusive tourism by Kadi, Plank, and Seidl (2019, p. 1). The argument is that Airbnb allows all people to access easy and cheap accommodation across the country. The costs involved in travel and tourism could be a major hindrance to tourism. Therefore, inclusive tourism means anyone can travel across the world with the guarantee of affordable accommodation.

The accommodation sector in the UK and across the planet often serves tourists, which explains why Airbnb is often a subject tied to tourism research and literature. Therefore, tourism is one of the elements that are most affected by the emergence of Airbnbs disruptive business model. In some studies, it has been expressed that Airbnb is highly rated by tourists because it allows them to experience the local culture by residing in local homes and participating in local events (Dalir, Mahamadaminov, and Olya, 2020, p. 5). In the UK, the promotion of local tourism experiences is a top government agenda held by national tourism bodies, including Visit England and Visit Britain. According to Watson (2019, para 1), these two entities have partnered with Airbnb to achieve this goal through a £500,000 match-funded arrangement. The partnership seeks to broaden the range of experiences available, which explains why Airbnb is a critical part of the equation.

The partnership described above has attracted media attention in the country. This is warranted considering that the UK government is keen to promote not only local cultural experiences for international tourists but also encourage local tourism. The government, through Visit England, has identified a potential market in the gap year, which can be converted into a short break. Airbnb is the key driving force for this economic activity because of the conveniences it offers its customers. Additionally, Airbnb has become a critical promotional tool for Visit England, especially with a campaign dubbed #MicroGap, which will be posted across the online platforms for Visit England and Airbnb. With this arrangement, the government hopes to create an additional 83,000 overnight stays in the country (Davies, 2019, para 4). This is an example of how the accommodation industry in the UK helps in the exploration of new markets.

In the partnership arrangement, Airbnb will be promoting local experiences, which include educational workshops, tours, and handcrafted activities. Visit Britain will be seeking to offer businesses an opportunity to generate fresh streams of revenue (Stevens, 2019, para. 3). Therefore, it can be argued that even the government considers Airbnb critical to the countrys economy as signified by the tremendous amount of trust the government bestows Airbnb as a primary tourism partner.

Much of the impacts of Airbnb discussed above focus on the tourism sector, a critical component of the UKs economy. Besides the revenue generated from tourism, it is also important to acknowledge the revenues for the hosts. Improved incomes for individuals will also reflect in the countrys GDP statistics. Additionally, Airbnb has offered an alternative business idea for homeowners. Homeowners in such cities as Belfast, Cardiff, Manchester, Newcastle, bath, and Brighton are best suited to this model of business. Cardiff has emerged as Airbnbs most profitable city where homeowners earn an estimated 86% more through Airbnb than through traditional renting (Da Silva, 2020, para. 5). The financial benefits are also experienced by ordinary landlords through the boosted incomes.

The booming of Airbnb and similar accommodation businesses in the sharing economy means there are other economic benefits in other sectors. Some of these include the construction and housing industries in the UK. From a theoretical perspective, growing tourism leads to a rise in demand for accommodation, which then causes a higher demand for homes by landlords. The high demand for houses can mean that housing prices go up and the construction industry experiences a boost. Some studies have explored how the housing prices are affected, including Shabrina, Arcaute, and Batty (2021, p. 3) who state that the London housing market has never experienced a balanced demand and supply. The argument is that supply has been insufficient with the construction of houses experiencing a dip over the past few decades. However, where it is possible to build new houses, it can be argued that homeowners are likely to invest in more buildings. Increasing commercialization of houses has been observed across the world, which has meant higher demand for housing (Todd, Musah, and Cheshire, 2021, p. 3). An effective response from the construction industry should cause a more balanced supply of housing.

Another key aspect that should not be ignored is the competition in the hotel industry. This is because the hotels offer services similar to Airbnb in the form of accommodation. When hotels feel threatened, they will find mechanisms to cope, most of which will involve better services. The UK can benefit from greater competition in the industry due to the economic benefits involved. However, it is important to acknowledge that luxury hotels offer more than just accommodation and may not feel as threatened as lower-quality hotels do (Aznar, et al., 2018, p. 8). It can also mean a paradigm shift for the hotel industry since partnering or joining the Airbnb platforms can help them survive.

In conclusion, Airbnb is one of is UKs most important developments in the accommodation industry. Many of the benefits associated with Airbnb in the UK are experienced in the tourism sector, where travelers are constantly in search of affordable short-term accommodation. Inclusive tourism means that people with lower incomes can easily travel, which sees a growth in tourism revenues. Other benefits include more revenues for homeowners, improved housing prices, and a boost to the construction sector. Overall, the economic growth and development resulting from growing business activity and the revenues generated are the main implications for the UK and its adoption of Airbnb.

Reference List

Aznar, P., Sayeras, J., Segarra, G. and Claveria, J., (2018) AirBnB Competition and Hotels Response: The Importance of Online Reputation, Athens Journal of Tourism, 5(1), pp. 7-20.

Bivens, J. (2019) The economic costs and benefits of Airbnb.

Da Silva, M. (2020) UKs most profitable city to be an Airbnb landlord revealed .

Dalir, S., Mahamadaminov, D. and Olya, H. (2020) Airbnb and taxation: developing a seasonal tax system, Tourism Economics, 27(2), pp. 1-14.

Davies, P. (2019) UK tourist activities to be promoted via VisitBritain-Airbnb collaboration.

Destefanis, A., Neirotti, P., Paolucci, E. and Raguseo, E. (2020) The impact of Airbnb on the economic performance of independent hotels: an empirical investigation of the moderating effects, Current Issues in Tourism, pp. 1-31.

Hutton, G. and Foley, N. (2021) Hospitality industry and Covid-19. London: House of Commons Library.

Kadi, J., Plank, L. and Seidl, R. (2019) Airbnb as a tool for inclusive tourism?, Tourism Geographies: An International Journal of Tourism Space, Place, and Environment, pp. 1-23.

Shabrina, Z., Arcaute, E. and Batty, M. (2021) Airbnb and its potential impact on the London housing market, Urban Studies, pp. 1-25.

Stevens, P. (2019) Airbnb partners with Visit Britain and Visit England.

Todd, J., Musah, A. and Cheshire, J. (2021) Assessing the impacts of Airbnb listings on London house prices, Environment and Planning B: Urban Analytics and City Science, pp. 1-7.

Watson, I. (2019) Airbnb and VisitBritain team up to promote local tourism experiences.

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Impact of Airbnb on the UKs Economy

Reference List