Getting a room, but not at a hotel

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Getting a room, but not at a hotel


Mr. Jeong, a 33-year-old who works for a securities firm, has started a lucrative sideline: renting out rooms to budget travelers through the online platform Airbnb.

The online marketplace matches travelers with people who have spare rooms to rent.

Jeong used Airbnb to travel cheaply during his summer vacations abroad.

“I actually rented these kind of rooms while I traveled and I got the idea it would be a good business to run back home,” Jeong says.

Jeong currently rents five small apartments near Hongik University, western Seoul and in Jongno District, central Seoul, and sublets them to Airbnb travelers.

“I earn 4 million won ($3,912) out of that,” Jeong says. “And I don’t need to do much because I hired a cleaner and she manages everything that has to be done.”

Jeong’s success story, however, reveals some of the tricky issues surrounding the online accommodation business. Since those rentals are in a grey area between private ownership and public commerce, the hosts are so far not required to pay the kind of taxes hotels charge or comply with various government regulations including basic safety rules.

The safety issues have become more controversial after the sinking of the Sewol ferry in April, which killed nearly 300.

For example, under the law, hotels and other forms of accommodations must use fireproof materials for curtains to prevent accidental fires. Airbnb landlords don’t have to follow the rule.

In case of accidents, there is no specific compensation regulation for the hosts to comply with, though the owners are protected by their own insurance if their premises are damaged by guests.

The website of Airbnb advises tourists to buy traveler’s insurance on their own.

A 23-year-old college student is renting six small units in Gangnam District and subletting them on Airbnb. He started his business with 10 million won put up by his parents.

That’s a small amount of startup capital compared to other businesses.

“I just think of the rentals as means to earn tuition and some pocket money,” the student says.

“I hired a cleaning company to take care of the rooms, so I don’t actually need to spend any time or effort operating the rooms.”

“If I owned the rooms, I probably would care about them more but that’s not the case,” he says. “I just rent them for the business.”

Hotel industries worldwide are complaining about Airbnb because they are undercut by cheaper rentals that don’t have to pay tax or get licensed.

In Seoul, there are 1,008 properties registered on Airbnb - the Gangnam District has the highest number of 188, followed by the area around Hongik University.

Busan and Jeju Island have around 200-300 hosts each. The total amount of revenues each year for all Airbnb accommodations in Korea is loosely estimated at around 50 billion won.

“Many travelers want to stay in areas that are bustling with tourists,” said the college student.

“People typically choose Gangnam but other places such as Insa-dong or Itaewon are also popular.”

A government official admits there are unresolved grey areas associated with Airbnb but said it’s difficult to regulate those services.

“For someone who uses their private house for the hospitality business, there is no specific set of rules they are subject to,” says an official at the Ministry of Culture, Sports and Tourism, which regulates the hotel business.

“If we are to regulate these new types of rentals, there are lots of laws to be revised. And I doubt if we have the legal foundation to regulate and do safety checks on entities that don’t belong to the hospitality industry.”

“But the government is becoming aware of the problem,” he says. “We will keep working on coming up with new measures to protect the users.”

The city of New York introduced a law prohibiting people from renting out properties for fewer than 30 days if they aren’t living in them.

Airbnb has argued that the law is meant to crack down on its hosts.

Airbnb has become very popular among travelers who want to save money on hotels and also get a more dynamic experience capitalizing on local people’s knowledge. It has prompted the term “sharing economy.”

Europe is the largest market for AirBnB’s Web site, which lists everything from furnished homes to spare couches.

Other sharing business includes car-sharing providers like Zipcar and I-Go, and accommodation-rental services Zotel, which connects travelers and hosts through a so-called “lodging circle.”

“Lodging businesses like Airbnb are new,” says an official from the tourism division of the Seoul City Government, “so there are some hosts who try to take advantage of that. We are taking notice of that and are thinking about measures that are needed.”


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