The global mahjong winner's curse

Like mahjong: The current world situation is like the Chinese game of mahjong which has four players with a limited number of chips. If one player is the persistent winner, he or she ends up with all the chips and the game ends.

Winners and losers in the global economy of 2025

 Winners and losers in the global eco

There is grave concern that the world economy is slipping into what Harvard professor and former US Treasury Secretary Larry Summers calls the global secular deflation. In simple terms, growth has slowed without inflation, despite exceptionally stimulative monetary policy. Larry’s view is that the advanced countries can use fiscal policy to stimulate growth, using massive investments in infrastructure. If needs be, this can be financed by central banks.

Central bank financing fiscal deficits is technically called “helicopter money”, named by the late monetarist economist Milton Friedman as the central bank pushing money out of the helicopter. Strict monetarism thinks that this would cause inflation.

The simple reason why the world is moving into secular deflation is that the largest economies are all slowing for a variety of reasons. Unconventional monetary policy applied since the 2007 crisis has brought central bank interest rates to zero or negative terms in economies accounting for 60% of world GDP.

Most economists blame current slow growth to “lack of aggregate demand” or “excess of aggregate production”. The rich countries are mostly aging and already heavily burdened with debt, so they cannot consume more. After the 2007 global financial crisis, the emerging market economies have slowed down, as demand for their exports have slowed. We are in a vicious circle where global trade growth is now slower than GDP growth, because the US economy is no longer the consumption engine of last resort. China, which has been a huge consumer of commodities, has slowed. Japanese growth has been flat due to an aging population. European growth has not recovered, partly because the leading economy, Germany, calls for austerity by its southern partners.

The Brexit shock threatens to weaken global confidence and send growth down another notch.

Former Bank of England Governor Lord Mervyn King famously called the global monetary order a game of sodoku, in which national current accounts in the balance of payments add up to a zero sum game. This is because in the global trade game, one country’s current account deficit is another country’s surplus. In the past, if the US runs larger and larger current account deficits, world growth is stimulated because everyone wants to hold dollars and has been willing to supply the US with all manners of consumer goods. This has been called an “exorbitant privilege” for the dollar.

The present global monetary order or non-order is a result of the 1971 US dollar de-link from gold, which gave rise to a phase of floating exchange rates and rising capital flows, which some people call Bretton Woods II. The old order, set at the Bretton Wood Conference of 1944, centered around a system of global fixed exchange rates, based on the US dollar link with gold price at US$35 to one ounce of gold.

But flexible exchange rates has resulted in a system where everyone seems to be devaluing their way out of trouble. Has the global secular deflation something to do with Bretton Woods II?

My answer must be yes. The reason lies in what I call, instead of sodoku, the mahjong winner’s curse. The Chinese game of mahjong has four players with a limited number of chips. If one player is the persistent winner, he or she ends up with all the chips and the game stops. Since the global game of trade cannot stop, the winner has both an exorbitant privilege (of being funded by the others) and an exorbitant curse (of bearing the loss if the others won’t or refuse to pay). To keep the game going, the winner has to give or lend the chips back to the other players, who play with the hope of winning the next round.

Indeed, if the winner is generous, the game can be made bigger, because the winner can issue more chips (defined as a reserve currency), which the others are more than willing to borrow and play.

The current world situation is that the Winners are the four reserve currency countries, the dollar, euro, yen and sterling, all of which have interest rates near zero or even negative. Until recently, the Winners blame China and the oil producing countries as having too high current account surpluses. But recently, after the huge European cutback in expenditure, Europe as a whole is the world’s largest current account surplus group of nearly 5% of GDP.

Herein lies the winner’s curse. The emerging markets should be able to stimulate global growth, but are unwilling to run larger current account deficits because they cannot get financing. The richer economies can stimulate global growth, but they are unwilling to do so, because they either feel that they already have too much debt or because they worry that stimulus would lead to inflation.

However, reserve currency countries have an advantage. As long as they are willing to run current account deficits, there will be little inflation because the world economy has huge excess capacity and surplus savings. If emerging markets run higher current account deficits, they will have to depreciate, which is exactly what Brazil, South Africa and others have done.

The winner’s curse is that if Europe is now unwilling to reflate and spend, the world will continue to slow. Indeed, in a world of greater geo-political risks, money is fleeing to the US dollar and the yen, causing both to appreciate.

What these capital flows into the reserve currencies when their interest rate is zero and they are unable to reflate imply is that the dollar and yen play the deflationary role of gold in the 1930s. As more and more mahjong players hold gold and don’t spend, the world global trade and growth game slows further. The mahjong winner’s curse requires the winners to stimulate and spend, bearing higher credit risks. That’s the privilege and responsibility of winners in the global game. If not, look out for more global secular deflation.

By Tan Sri Andrew Sheng who writes on global issues from an Asian perspective.

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Airbnb and other Home-sharing businesses have Hotels worried in US

Airbnb, the most popular of the home-sharing sites, has an estimated 2 million listings worldwide, with revenue of about $2.4 billion in the U.S. last year. Above, Echo Park Airbnb host Jonathan Entler, top left, and his daughter Ruby, top right, talk to guests James Green and Camille Smithwick in 2014. (Damian Dovarganes / Associated Press)

Tired of "sterile hotels," Brooklyn resident Kelly Dwyer turned to home-sharing site Airbnb three years ago when planning a Southern California trip, finding a Silver Lake apartment that came with two roommates: a dog and a cat.

"It was such a good experience that it sort of pulled me in," said Duncan, 40, a pet owner and musician. "I can't remember the last time I stayed in a hotel."

Hotel executives have long shrugged off Airbnb and other short-term rental websites. The home-sharing businesses weren't considered a threat to the $176-billion hotel industry because they were believed to primarily serve penny-pinching millennials.

But eight years after Airbnb launched with a single air mattress for rent in a San Francisco loft, the hotel industry is starting to worry that short-term rental sites may pose a serious problem. Not only is the company expanding, there is evidence that competition from rental sites is holding down hotel rates in some areas.

Airbnb, the most popular of the home-sharing sites, has an estimated 2 million listings worldwide, with revenue of about $2.4 billion in the U.S. last year. The business has been valued at $24 billion, higher than the $21-billion valuation of hotel giant Marriott International.

Even more concerning for hotel managers is Airbnb's torrid growth. In Los Angeles County, Airbnb listings increased 42% in the seven months ended in January, a Times review found. In some neighborhoods, the increase was much larger.

"Hotel companies are going to start paying a lot more attention to Airbnb now that their numbers are as big as they are," said Jamie Lane, a senior economist for the hotel research arm of real estate firm CBRE.

The industry came out firing recently with a study contending that a growing number of Airbnb landlords are really running "illegal hotels" in major cities, including Los Angeles, which lets them avoid taxes and regulations that hoteliers pay.

If Airbnb is impacting hotels in any way, it's in the ability to raise rates. — Brandon J. Feighner, director, CBRE hotel valuation and advisory services

That study, by the Pennsylvania State University School of Hospitality Management, concluded that nearly 30% of Airbnb's revenue in 12 big cities comes from people who rent out their properties at least 360 days a year, drawing an average of more than $140,000 annually.

Traditional hotels welcome competition, said Vanessa Sinders, a spokeswoman for the American Hotel & Lodging Assn., the trade group for the nation's 53,000 hotels, which commissioned the study. But she added that the growing number of Airbnb properties operating year-round aren't required to meet the health, safety and cleanliness standards that hotels must maintain.

"Competition in our industry thrives because everyone plays by the same set of rules designed to protect homeowners, guests and communities," she said.

Airbnb rejects such contentions, saying most of their hosts live in the homes they rent.

"In Los Angeles, 82% of Airbnb hosts in L.A. share the home in which they live, and furthermore, 80% of entire home listings in L.A. are rented for less than 90 days a year," Airbnb spokeswoman Alison Schumer said.

Hotels and online travel sites clash over booking scams Hotels and online travel sites clash over booking scams

Nationwide, Airbnb lists about 173,000 units, equal to about 3.5% of the more than 5 million rooms rented out by traditional hotels — not enough to pose a serious threat to the hospitality industry, according to a study by CBRE's hotel research arm. The study analyzed Airbnb's operations from October 2014 to September 2015.

The study goes on to say that Airbnb properties have started to pressure hotels to keep rates low in a handful of cities where home-sharing units are plentiful, including Los Angeles, San Francisco and New Yorks.

In Southern California, Airbnb may be keeping hotel rates from skyrocketing in areas such as Santa Monica, Hollywood, Beverly Hills and Marina del Rey, according to CBRE.

For example, hotel room rates around Los Angeles International Airport rose nearly 13% in 2015 over the previous year while rates in the Santa Monica and Marina del Rey area increased only 5.6%, CBRE found.

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In Santa Monica and Marina del Rey, Airbnb has one bedroom listed for every two hotel rooms, the report said. Around the airport, Airbnb has one room listed for every 4.4 hotel rooms.

In addition, Airbnb's rates around Santa Monica and Marina del Rey are nearly 30% lower than the hotel rates in the same area, according to the CBRE report. Around LAX, the Airbnb rates are 8% cheaper than hotel rates.

"If Airbnb is impacting hotels in any way, it's in the ability to raise rates," said Brandon J. Feighner, director of CBRE hotel valuation and advisory services.

Another area in Southern California where hotel rates may be held in check by Airbnb is Venice, where the home-sharing site had 1,741 listings in early January, according to data collected by Inside Airbnb, a site that tracks the company's short-term rentals.

That figure was 25% higher than the number of listings in May 2015, a Times analysis shows. The tourist-friendly area leads all Los Angeles County neighborhoods for Airbnb listings, ahead of Hollywood and Santa Monica.

Mark Sokol, an owner of the 120-room Hotel Erwin in Venice, said he feels pressure to keep his rates low because too many short-term rentals in Venice have turned into illegal hotels that operate year-round and don't pay the fees and workers' salaries of traditional hotels.

"When you have that much supply, it definitely has price pressure," he said.

Some hotel owners say they don't worry about competition from Airbnb because only hotels can offer guests the assurance of a clean room, with amenities such as a coffee maker, a television and a comfortable bed.

"Hotels are going to provide a standard hotel experience whereas Airbnb can be an adventure or a nightmare," said Ken Pressberg, owner of the Orlando, a 95-room boutique hotel near the Beverly Center.

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As young travelers advance in their careers and earn more money, he said he believes they will eventually abandon Airbnb for traditional hotels.

A survey of 1,650 adults by the travel search site Hipmunk found that 74% of millennials have stayed in a home-sharing property for a business trip, compared with just 38% for Gen Xers and 20% for baby boomers.

To lure young people away from short-term rentals, many hotel owners are investing in their properties, such as upgrading Wi-Fi speeds in the lobby, adding electronic tablets in the rooms and offering meals and drinks that are unique to their hotels.

"Airbnb is just another competitor that you have to keep your eyes on," said Phil Anderson, general manager of the DusitD2 Constance Hotel in Pasadena.

But for many young travelers, the quirky extras found at Airbnb properties are what attract them — extras they won't find at traditional hotels.

Tasmin Lofthouse, a 22-year-old marketing assistant from Blackpool, England, said she has booked an Airbnb property for her trip to Los Angeles in June because she wants to avoid the "commercialized and touristy" setting of a hotel.

"From what I've seen so far, Airbnb hosts are willing to go the extra mile, and some even let you help yourself to any homegrown vegetables or fruit they may have," she said. "I doubt you'd see that at a hotel."

Hotels and online travel sites clash over booking scams

The websites for Expedia and Orbitz Worldwide are seen next to each in a photo illustration. Hotels and online travel sites like Expedia are feuding over the real danger of booking scams. (Joe Raedle / Getty Images)

A battle is heating up between online travel sites and U.S. hotels over the best way to book your hotel room.

Like most things in business, the feud comes down to money.

The American Hotel and Lodging Assn., the trade group for hotels in the U.S., is pushing for legislation to crack down on fraudulent online booking sites that trick travelers into paying for hotel rooms but have no relation to the hotels. The group says the scams cost travelers up to $1.3 billion a year.

A coalition of online travel sites isn't buying it. The sites say the hotel industry is exaggerating the online scam problem to push travelers to book directly on hotel sites so that hotels can avoid paying sales commissions to the online booking sites.

“It's just a veiled attempt at trying to scare consumers to book directly with the hotel chains themselves,” said Philip Minardi, a spokesman for the coalition of online sites, including Expedia, Priceline and Airbnb.

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The stakes are high in this feud. Travelers make an estimated 480 online hotel bookings per minute in the U.S. Hotels pay third-party booking sites commissions of up to 25% of the room price. Hotels also want travelers to book directly from them so they can pitch future deals and packages and develop guest loyalty.

Hotel industry officials reject suggestions that they are using the scams to scare travelers away from outside booking sites.

“The fact is online scams are hurting consumers and jeopardizing their confidence in the online booking process, while also harming the reputation of hotels,” said Katherine Lugar, president and chief executive of the hotel trade group.

BY Hugo Martin/Los Angeles Times

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Homestays, a booming business: Homes vs hotels, a study of the industry

Homestays, a booming business HOMESTAYS, once popular in rural areas, have now become big businesses in towns and cities nationwide...

Homestays, a booming business: Homes vs hotels, a study of the industry

Homestays, a booming business

HOMESTAYS, once popular in rural areas, have now become big businesses in towns and cities nationwide.

Thousands of homeowners have discovered how to make money with their properties and avoid paying taxes.

They have joined global home-sharing marketplaces, and just like how Uber has made life for government-regulated taxi drivers difficult, the home-sharing phenomenon is shaving off hotel revenues.

By paying a mere 3% service fee per booking, homeowners – also called hosts – can connect with over 60 million travellers worldwide through online giants like American company Airbnb and Singapore-based HomeAway.

Airbnb’s website has a tool to help homeowners gauge their expected weekly income and according to this, the country’s chart-toppers are those in Langkawi who can make RM2,801 a week, followed by those around Malacca’s Jonker Walk (RM2,495 a week).

Close behind are Penang home-shares in Tanjung Tokong (RM2,494) and Pulau Tikus (RM2,449). In Bukit Bintang in Kuala Lumpur, they can expect to earn RM1,676 weekly, while those near Taman Pelangi in Johor Baru can expect RM2,287 a week.

The above estimated earnings are for apartments or houses catering to groups of five travellers.

There are homeshares even in the hinterlands. They can make an average of RM923 a week in Kota Baru, Kelantan. In Kangar, Perlis, homeshares can expect to collect RM1,619 a week.

Unlike hotel occupancies, the government has no knowledge nor way of tracking these check-ins.

All the payments are transacted via the home-sharing portals’ overseas payment gateways and the earnings are transferred to homeowners through international money wires, PayPal or direct deposits.

Their guests are also “exempted” from the RM2 per room per night heritage tax fee in Malacca and Penang’s local government fee of RM3 per room per night for four-star and five-star hotels, and RM2 per room per night for three stars and below.

“They don’t have to pay corporate or income taxes. They don’t need to collect GST or report their occupancy rates.

“They don’t need to install fire doors or water sprinkler systems. If this goes on, budget hotels can just take down their signboards and become home-share operators,” said Malaysia Budget Hotels Association president P.K. Leong.

He said his association had raised the issue of home-sharing with the government several times and urged them to regulate this business but no action had been taken.

“We estimate about 15% of our business is being siphoned into the home-sharing market. And it’s not really sharing,” he said.

“People are buying residential properties specifically to start short-term rental businesses. We believe this is growing at an alarming rate but we don’t have any way to track them.”

In 2014, Airbnb was reported to have over 800,000 listings worldwide. Now, the company declares on its website that it has over two million.

Five-star resorts contacted, however, do not feel threatened by the home-sharing operators.

Managers in two five-star hotels, who declined to be named, said these setups target budget travellers who come to Penang on business or already know what to do when they come to Penang.

“Our hotel offers a level of service not found in home-shares. It’s a different market,” said one manager. - By Arnold Loh The Star

Homes versus hotels

 

Home-sharing services like Airbnb are becoming a hit among Malaysians. But hotels are urging the Government to regulate such services, claiming that rental of private apartments and studio units is illegal. Noting such calls, the Government is currently discussing how to address the matter.

LIVING rooms instead of hotel lobbies. Apartment units instead of hotel suites. This is the trend today.

More Malaysian holiday-makers are choosing to rent private properties as accommodation on their trips, instead of booking hotel rooms.

They do this using home-sharing services like Airbnb and Singapore-based HomeAway, which offer travellers the option to stay in a local host’s property.


Ranging from single rooms to entire apartment units, guests can book their accommodation from hosts, who list their property on such websites to be leased out for a fee.

Sometimes, the fees are even lower than the room rates offered by hotels.

This is one of the factors that drive the popularity of such services, with the San Francisco-based Airbnb having over two million property listings for rent from local hosts in about 191 countries around the world.

In Malaysia, home-sharing services are also gaining traction among travellers and homeowners, who want to earn some income from offering short-term rentals.

However, the hotel industry in the country is claiming that such services are eating into their business, with some estimating about 5% to 15% of their business being diverted.

Hoteliers are also saying that consumers are not fully protected under such arrangements.

Likening home-sharing services like Airbnb to Uber in the taxi business, hoteliers claim that the hosts are not subjected to the same regulations imposed on hotels and do not need to pay taxes or collect the Goods and Services Tax (GST).

As the industry calls on the Government to regulate such services, the Tourism and Culture Ministry says discussions are ongoing to address the matter while the Urban Wellbeing, Housing and Local Government Ministry is open to feedback on the issue.

Malaysian Association of Hotels president Sam Cheah sees the growing popularity of such home-sharing platforms like Airbnb as a threat to the hotel industry.

“It isn’t a level playing ground because the hosts who are offering their properties for rent are not subjected to the same requirements, including safety standards,” he says.

Cheah points out that the hosts can afford to offer lower rates because their operating costs to run their businesses are smaller.

“They pay domestic usage for quit rent and utility bills. They are not required to adhere to safety requirements such as installing proper fire protection,” he adds.

Cheah explains that hotels also have public liability insurance and protect consumers in the event of negligence or fire.

“We are obligated to protect our customers. But there is no such policy for home-sharing hosts,” he says, urging consumers to be aware of such risks.

Cheah also points out that it is illegal for homeowners to operate a business for tourists and travellers when the property is meant for domestic dwelling.

“It is unfair for residents who are neighbours of such hosts as they will have strangers walking in and out of the premises,” he says.

These tourists will also be using the swimming pool, gym and other facilities meant for residents.

However, Cheah says the association, which consists of 881 member hotels, cannot discount or prevent such a business model from being practised.

“But the Government should regulate such businesses to protect tourists and make it an even playing field for hotel operators,” he says.

If left unchecked and unregulated, Cheah foresees the Government will have a problem dealing with the projected 36 million tourist arrivals by 2020.

“If we do not regulate Airbnb and other home-sharing services, we wouldn’t be able to monitor the industry. We wouldn’t know if we have an oversupply or over-development and businesses may lose out.

“It is just like Uber and GrabCar in the taxi industry. You cannot stop them but you have to regulate them. Then it makes sense,” he says.

Echoing Cheah’s call to the Government to impose regulations, Malaysian Association of Hotel Owners secretary Anthony Wong calls such home-sharing services illegal as hosts are not licensed to provide lodging and insurance for guests.

“It is amounting to making private arrangements and guests who are hurt during their stay are unable to claim insurance for any mishaps.

“As legal entities, hotels have permits to comply with. Our operating costs are expensive and we pay taxes,” says Wong, adding that hotel rates are also competitively priced.

He claims that the emergence of such services and illegal homestays have caused hoteliers to lose about 5% in revenue.

Acknowledging the concerns by hotels, Tourism and Culture Ministry secretary-general Tan Sri Dr Ong Hong Peng says the ministry has received complaints from the industry on the emergence of home-sharing platforms.

“This issue has been acknowledged and discussed extensively by the Special Task Force on Service Delivery and its working group.

“This working group is represented by government agencies such as the ministry, Malaysia Productivity Corporation, the Urban Wellbeing, Housing and Local Government Ministry and the police,” he tells Sunday Star.

Dr Ong adds that the question of regulating home-sharing platforms and conducting enforcement on homeowners under such services comes under the purview of local councils.

In the meantime, the ministry has its Malaysian Homestay Programme, which offers a unique experience to tourists.

“The programme enables tourists to stay and interact with local families who act as hosts.

“Under this programme, families and their houses register with the ministry after completing the homestay training module and following the guidelines,” he explains.

But Dr Ong points out that this is different from merely offering accommodation as it is a community-based tourism programme which offers tourists a lifestyle experience of rural villages.

In 2015, Malaysia attracted 25.7 million tourist arrivals, a decline of 6.3% compared to 27.4 million tourist arrivals in 2014.

For the first quarter of 2016, Malaysia registered an increase of 2.8% in tourist arrivals, which Dr Ong perceives as a positive outlook.

“A strong growth in arrivals is expected for the remainder of this year,” he says.

Former Urban Wellbeing, Housing and Local Government Minister Datuk Abdul Rahman Dahlan, who was just replaced in a Cabinet reshuffle on Monday, says it is still too early to decide whether to regulate homeowners involved in home-sharing services.

“This will require extensive discussion. The ministry welcomes feedback from stakeholders on this matter, including hoteliers, and will be more than happy to listen to their concerns,” he says.

The issue of regulating or even banning Airbnb and other home-sharing marketplaces is of growing concern.

Recently, it was reported that New York State in the United States may make it illegal to advertise apartments on Airbnb if a Bill is made into law by Governor Andrew Cuomo.

Meanwhile, the German capital of Berlin has stopped tourists from renting entire apartment units using Airbnb and other similar websites. The move bans homeowners from leasing their property to tourists without a city permit.

Japan released national guidelines for home-sharing services, making properties only available for rent if guests stay for a week or longer.

Other places are more receptive towards home-sharing platforms, including London, which amended housing legislation that makes it legal for locals to rent out their homes through websites like Airbnb. -  By Yuen Meikeng The Star

Airbnb: Malaysia is a really ‘exciting growth market’ 

AS more Malaysians open their homes to tourists, Airbnb describes Malaysia as an “exciting growth market”.

Nevertheless, the world’s leading community-driven hospitality company also encourages hosts to familiarise themselves with regulations in their area.

“These can differ from council to council and even street to street, all over the world,” Airbnb tells Sunday Star in an email.

Despite the growth of Airbnb across Malaysia, the company says the traditional hotel sector continues to do well too, with growth in occupancy and room rates.

“We’re proud of the economic benefits Airbnb provides to families, communities and local businesses that otherwise wouldn’t benefit from the tourist dollar,” it says.

Overwhelmingly, Airbnb says its hosts are renting out their homes occasionally, earning a little extra to help supplement their income.

“The vast majority of our hosts across Malaysia are everyday people renting their spare room or home occasionally, not commercial operators,” it adds.

Airbnb also says it has a good working relationship with the Malaysian Government and have partnered with it in the past.

In December last year, it was reported that a pilot project was being conducted in Malacca involving 130 homestays in 11 villages to help them market their business using online listings.

The programme was a collaboration between the Multimedia Development Corporation, the International Trade and Industry Ministry, the Tourism and Culture Ministry and Airbnb.

Airbnb says over 80 million guests have had a safe, positive experience using the platform.

“We help promote positive experiences through a global trust and safety team available 24/7, authentic reviews, verified profile information, and the $1 Million Host Guarantee,” it says.

A check on its website showed that the Host Guarantee will reimburse eligible hosts for damages up to A$1mil (RM3.06mil).

“The Host Guarantee should not be considered a replacement or stand-in for homeowners or renters insurance,” read the website.

Airbnb also has a refund policy for guests if the host fails to provide reasonable access to the booked listing, the listing booked is misrepresented or isn’t generally clean or unsafe, among others.

“Airbnb’s community operates on the principles of trust and respect. Our host and guest review systems demonstrate our commitment to responsible behaviour,” it says.

Meanwhile, some local Airbnb hosts in Malaysia have mixed views about the idea of having the Government regulate their business.

A full-time Airbnb host in Malacca, known only as Chen, says she welcomes such a move as long as it is done fairly and does not overly restrict the business.

“It can be beneficial for both the hosts and guests.

“If we are given licences by the Government, we can even put up signages to advertise our business. And for guests, they would have more protection,” says the 30-year-old lass who rents out one apartment and two townhouses.

Chen, a former marketing manager, quit her job two years ago to become a full-time Airbnb host, calling it her “interest and passion”.

She denies having any opposition from her neighbours in renting out her properties to tourists.

“I informed my neighbours before doing this. While they were initially doubtful, they are now happy I have guests,” Chen adds.

And in the event the Government decides to ban such services, Chen says hosts like herself will transform and adapt to the situation.

“This is the global trend and many are using this business model now. It is important to stay competitive and adapt to the times,” she says.

Another full-time host, Ridzuan Effendy, 29, hopes the Government does not impose regulations on Airbnb.

“Home-sharing services aren’t the same as hotels. Many tourists use Airbnb because the prices are cheaper compared to hotels.

“It is a case of having a willing buyer and seller. It shouldn’t be illegal,” says the former engineer, who lists his properties in Kuala Lumpur.

Related: Travellers drawn to cheap prices 

 

Home-shares annoy neighbours   

 

BE nice. Buy fruits for your guests or colouring books for their kids and potentially make RM8,000 or more each month renting your apartment or house to short-stay tourists.

Unofficial hotel: At one time, nine of the 28 units of one of the blocks in Halaman Pulau Tikus were available for short-term rentals by medical tourists.>>>

The key performance indicators for home-share operators are the guest reviews on their listings in global marketplaces like Airbnb and HomeAway.

“My guests and I review each other. It’s like Uber (global ride hailing app). You will know your guests’ reputation and your guests will also know yours.

“If anything bad happens, the guests or I can report it to Airbnb and we can be banned,” said an operator in Penang who only wants to be known as Sue, a housewife.

She rents out a house in Batu Ferringhi (RM320 a night) and a condominium unit in Pulau Tikus (RM400 a night) as a host on Airbnb and said her properties were now rated four-and-a-half stars.

The location may seem to be a secondary consideration, with one three-bedroom low-medium cost apartment in Air Itam having a five-star rating on Airbnb.

“It may look like a low-cost apartment from the outside and parking is limited. But it is lovely inside. Love the design and everything,” wrote a reviewer.

From the photos on this listing, the owner had decorated the place with a profusion of wallpaper and the furnishings and paintings within can rival a plush hotel room. There is bed space for up to eight guests and it is only RM150 a night.

But the surge of home-share operators may have inconvenienced neighbours.

Halaman Pulau Tikus management corporation chairman Khoo Boo Eng said his block in Lengkok Berjaya had become the haunt of medical tourists looking for a place to stay while seeking treatment here since several years ago.

He said he had seen medical tourists arrive who were truly sick.

“They shouldn’t be allowed to stay in our residential area. Some of my neighbours are worried that if they had contagious diseases, we would all be at risk,” he said.

He said at one time, nine out of 28 apartments in his block were rented out this way and many unit owners complained about the constant flow of strangers.

“Ours is a small, exclusive residence. We had to install extra security cameras and have a security guard 24 hours a day for our residents’ safety.

“They are making commercial use of their residential properties. We are planning to take them to court and seek injunctions to stop them from renting to short-stay guests,” he said.

Earlier in the week, officials from four departments of the Penang Island City Council (MBPP) carried out a spot check and four unit owners in Birch Regency Condominium in Datuk Keramat were fined RM250 each for operating a business without licence.

They knocked on the doors of 15 units believed to be available for rent on a short-term basis and found four being occupied – two units by Singaporeans, one by Australians and another by Canadians.

Tanjung MP Ng Wei Aik, who was present, said the officers spoke to the foreigners who confirmed they were here on holiday.

However, owners argued that there were no laws prohibiting them from renting out their units for any length of time.

One hurdle they had to go through is the complaints from other condo owners.

“We get many complaints from our fellow residents about these short-stay guests. We’re just doing our duty to maintain the peace in our condominium,” said a condominium committee member.

When contacted, Penang Island City Council Building Department director Yew Tung Seang said there could be a legal loophole that would make it hard for authorities to stop residential property owners from offering short-term rentals.

“Property owners have the right to earn rent and there is a grey area over short-term and long-term rentals.

“But when apartments or houses become like hotels, their operations can become a nuisance for neighbours.

“The council is planning a machinery to control this sort of activity,” he added.

In January, Johor Tourism, Trade and Consumerism committee chairman Datuk Tee Siew Kiong was reported as saying that homestay operators at housing estates in the urban areas in the state would no longer be allowed to use the word “homestay” to promote their accommodation.

He said there were plans to regulate and standardise the homestay segment in Johor.

He said many home owners in the urban areas had converted their properties into homestay facilities to cater to customers looking for a short stay.

In the United States’ New York State, legislators tabled a bill last month to ban the advertising of short-term home rentals of less than 30 days, with fines of up to US$7,500 (RM30,000).

“Every day I hear from New Yorkers who are sick and tired of living in buildings that have been turned into illegal hotels through Airbnb because so many units are rented out to tourists, not permanent residents,” Manhattan assembly-woman Linda Rosenthal was reported as saying last month.

It was reported that New York City has over 40,000 home-share listings and each earns an average of US$5,700 (RM23,300) a month.

Study the homestay industry

 

I REFER to the reports “Home versus hotels” and “Travellers drawn to cheap prices” ( Sunday Star, July 3) and “Govern home-share under new laws” (see above).

It is well known that homestay is popular not only in Malaysia but also all over the world now. I have used both types of lodgings and find pros and cons in both.

Homestays are likened to the Airbnb concept which was launched in 2008 and has experienced rapid growth since then. Statistics show that at the end of 2015, Airbnb hosted eight million guests, chalked up three million nights of cumulative booking, were used by 50,000 renters per night and has a market capitalisation of US$2.5bil. This demonstrates the effectiveness and popularity of the concept used by Airbnb. However, in the US where this concept began, there is concern among the traditional hospitality industry that it is a threat to their business. There is pressure on the government to either put a stop to Airbnb activities or regulate them. According to a report commissioned by hotel associations in the US, some of the financial effects of Airbnb (focused in New York city but gives a strong indication of what may be happening in other parts of the world too) are:

i) Airbnb is growing because it is less labour intensive and requires lower level of service;

ii) There is no marginal cost for such services as new rooms can be added incrementally (or removed) and overheads are negligible compared to hotels;

iii) Hotels were losing revenue due to loss of room nights. This also had an ancillary effect on other services offered by the hotels such as F&B outlets and business centres; and

iv) Hotels in areas where Airbnb is established have responded to increased competition by reducing their prices.

I also looked up issues of competition in this market which may be a cause for concern. If we look at the homestay concept, what it offers is the opportunity for consumers on the supply side to supplement their income by providing a service via a peer-to-peer platform. It also offers travellers a chance to live like the locals and take part in cultural exchanges.

It is also basically a connection where supply meets demand and other needs such as budget constraints, personalised service, easy accessibility and homely atmosphere and all are rolled into one. Airbnb portrays itself as “a platform that allows the little guy to build up a complimentary industry, one that increases the size of the hospitality pie rather than take a slice from existing business.”

Applying this concept in Malaysia, it is a wonderful way to not only expand our hospitality industry especially in areas where hotel rooms are limited or extremely expensive but also allow locals to interact (people from the peninsula going to Sabah and Sarawak and vice versa, for example) or foreigners a chance to live like the locals.

This would in turn generate a multiplier effect on the local economy as other services such as restaurants, laundry, cleaning or transport would be required to support the homestay service. Besides all these, it would put money in the pockets of local residents and also support small businesses outside the hotel districts.

Will the homestay industry be a threat to the hotels? From a competition point of view, there may be some concerns (especially to budget hotels) but these could easily be overcome with careful formulation of policies and guidelines.

As consumer demand has shifted, the markets are or may be different, and it is ultimately up to the consumer to choose where he wants to stay.

Hotels are mainly located in the city or town centres and offer better services, amenities and standards. On the other hand, homestays and Airbnb serve up lodging options that cater to a more local and less touristy experience. Hotels and Airbnb/ homestays operate differently so there is room for both to coexist as long as they are after different customers.

Having said that, regulators and policy makers in Malaysia need to carefully study the implications of introducing regulations to homestay or Airbnb users from the supply side. Many countries have taken steps to address the issues emerging from the rapid rise of Airbnb and homestays. It would be useful for the Malaysia Competition Commission (MyCC) to commission a study on the effects of such concepts on the hospitality industry in Malaysia. This will then give the policy makers some empirical studies to formulate the required guidelines or regulations.

Competition is always threatened when there is a threat to the sharing economy (as in Uber versus the traditional taxi service). The sharing economy is where industry can collaboratively make use of under-utilised inventory via fee-based sharing. The market is always uncertain and nervous when a new marketplace is created, which in turn increases the difficulty of defining the market in competition law. The way businesses are being done and change in consumers’ tastes all merit a thorough study before any action is taken to manage a growing industry.

Two factors have arguable given rise to the rapid growth of peer-to-peer platforms – technology innovations and supply side flexibility. A win-win situation is always possible. If competition is distorted, as in when people buy into residential property to turn it into a business venture, that is when the authorities could step in.

By SHILA DORAI RAJ Founding and former CEO Malaysia Competition Commission

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Foreign captives: A file picture showing hostages Hall (right) and Sekkingstad in the southern Philippines. — Reuters

Abu Sayyaf Militants to behead another hostage

ZAMBOANGA CITY: The Abu Sayyaf has announced that it will be beheading its hostage, Norwegian Kjartan Sekkingstad, if Presidential Peace Adviser Jesus Dureza insists on the non-payment of ransom.

“There is no more ultimatum, we are going to behead this Norwegian anytime today,” said Abu Sayyaf spokesman Abu Rami, who called a couple of journalists here on Sunday night.

Rami said the beheading will be done following reports of Dureza’s pronouncement of the government’s no-ransom policy.

The Abu Sayyaf has been demanding 300 million pesos (RM25.5mil) in exchange for Sekkingstad’s freedom.

Rami said they were aware that ransom was already set for delivery, and they were just waiting for someone to deliver the money.

Sekkingstad is one of four victims who were taken from a marina in the Island Garden City of Samal in Davao del Norte in November last year.

Rami’s announcement came two days after the body of beheaded Abu Sayyaf kidnap victim, Canadian Robert Hall, was found in Sulu on Saturday morning.

Hall was beheaded by the Abu Sayyaf on June 13 after the bandit group failed to receive the ransom money they had demanded.

His head was found on the same day in front of the Jolo Cathedral.

Hall was the second kidnap victim the bandits had decapitated after fellow Canadian John Ridsdel, who was killed in April.

Filipino Marites Flor was freed on June 24. — Philippines Daily Inquirer / Asia News Network

Law-abusing tribunal to issue award on South China Sea arbitration

AN arbitral tribunal with widely contested jurisdiction will issue an award on July 12 on the South China Sea case unilaterally initiated by the Philippines, the Permanent Court of Arbitration (PCA) in The Hague said.

"The Tribunal will issue its Award on Tuesday, 12 July 2016 at approximately 11 A.M.," the PCA, acting as the registry of the tribunal, said in a press release.

"The Award will first be issued via e-mail to the Parties, along with an accompanying Press Release containing a summary of the Award," it added.

China has refused to participate in the proceedings and declared that it will never recognize the verdict, stressing that the tribunal has no jurisdiction because the case is in essence related to territorial sovereignty and maritime delimitation.

Beijing has pointed out that territorial issues are not subject to the UN Convention on the Law of the Sea (UNCLOS), and that as early as in 2006 it declared -- in line with UNCLOS -- to exclude disputes concerning maritime delimitation from mandatory dispute-settlement procedures. Some 30 countries have also filed declarations of this kind. - Xinhua

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China, next global hub for higher education

With its varsities gaining better rankings, the most populous nation is set to become the world’s leading learning destination.

HIGHER education in China can perhaps be traced to the establishment of a Taixue (the Imperial Academy) in the capital city of China during the Western Han Dynasty (206BC to 9AD).

Before this there were no formal organised institutions of higher learning. Only private education was available. Thus taixue became the highest educational institution in imperial China.

The earliest taixue education was based on legalist and Confucian ideals and philosophies, but later it evolved into one that was mainly Confucian-based when Emperor Wu (141BC to 87BC) decided to adopt Confucianism as the state doctrine. Imperial University was the first Confucian-based institution established in 124BC.

The taixue system later evolved into what was known as Gouzijian (Directorate of Education or National Central Institute of Learning). This occurred during the Western Jin Period (265 to 316).

Under the gouzijian system, higher education was stratified and segmented.

The system of admission and enrolment of students to these different levels and segments was based on social standing.

This traditional system of higher education was in place for the next 2,000 years before it underwent structural reforms into “modern universities” that we know of today.

In the late 19th century, several traditional institutions of higher learning sought permission from the Emperor to “modernise”.

However, Peking University is generally regarded as the first “modern university” in the country.

This was in 1898 and the term daxue for such institutions was adopted.

The university was first known as the Imperial Univer-sity of Peking before it became the present Peking University.

The reformation came about when events that took place in China in the mid-1800s opened up the country to the rest of the world.

Varsities closed

Even so, these new centres of learning experienced a period of great turmoil during China’s Cultural Revolution of 1966 to 1969.

In the early months of the revolution, schools and universities were closed.

Though the revolution was officially over by 1969, its activities however continued until 1971 and most universities did not reopen until 1972.

From the 1980s onwards, higher education in China underwent further reforms.

In 1995, Project 211 was initiated to raise research standards of about 100 universities by the 21st Century, hence the term Project 211.

Project 985 launched in May 1998 by President Jiang Zemin, initially targeted 10 universities. They were given the necessary support to make them all world-class institutions. The number of such universities has now gone up to 39.

The project has also resulted in the creation of what is known as the C9 League of universities. The aim is to create a league that is equivalent to the Ivy League of the United States.

The C9 universities are Fudan University, Harbin Institute of Technology, Nanjing University, Beijing University, Shanghai Jiao Tong University, Tsinghua University, University of Science and Technology of China, Xi’an Jiaotong University and Zhejiang University.

China spends about 4% of her GDP on education and currently spends about US$250bil (RM1.03tril) a year on human capital development.

There are about 2,900 universities and colleges in China with a total enrolment of some 37 million students. Close to 380,000 international students from 203 countries studied in China in 2014.

The bulk of them were from South Korea, the US, Thailand, Russia, Vietnam, India, Indonesia, France and Pakistan.

Currently only about 10% of foreign students receive Chinese government scholarships and the rest are mainly self-funded.

However this is expected to change as China aims to attract 500,000 international students by 2020 and providing more scholarships is a way to support the target.

The 2016 Higher Education System Strength Rankings (by Quacquarelli Symonds - QS), placed China at eighth worldwide with China’s strongest score being in the economy metric.

The eighth place ranking is the highest for Asia with South Korea and Japan placed at the ninth and 10th position respectively.

The first seven places were taken by the US, UK, Germany, Australia, Canada, France and the Netherlands respectively. Malaysia is placed 27th, behind Taiwan, Hong Kong and Singapore.

This ranking is an assessment of the overall education system strength and flagship university performance, alongside factors relating to access and funding.

Also, according to the QS World University Rankings of 2015/16, of the world’s top 800 universities, four of the top 100 are in China.

They are Tsinghua University (ranked 25), Peking University (ranked 41), Fudan University (ranked 51) and Shanghai Jiao Tong University (ranked 70) with Tsinghua being third in Asia after the National University of Singapore and the Nanyang Technological University of Singapore (ranked 12th and 13th respectively).

Tsinghua is even ahead of universities in South Korea, Japan, Hong Kong and Taiwan. Xiamen University, placed 17th in China, fell in the 401-410 band.

For Malaysian public universities, Universiti Malaya (UM) is placed 146 while Universiti Sains Malaysia (USM) is ranked 289. Universiti Teknologi Malaysia (UTM) is at 303 while Universiti Kebangsaan Malaysia, 312 and Universiti Putra Malaysia, 331. None of Malaysia’s private universities appeared in the list.

According to the Times Higher Education World University Rankings of 2015-2016, two universities in China made it to the world’s top 100 out of the 800 listed.

The two were Peking University (ranked 42) and Tsinghua University (ranked 47), with Peking being ahead of universities in Japan, Hong Kong and South Korea.

Tsinghua was ahead of even the best in South Korea.

The best Malaysian university listed was UTM, placed in the number 401-500 band, similar to that of Xiamen University which has a branch campus in Sepang, Selangor.

Most of the British universities with branch campuses in Malaysia are within the world’s top 200.

Research performance

The Academic Ranking of World Universities (ARWU), also known as the Shanghai Jiao Tong World University Ranking, ranked 500 universities worldwide based mainly on their research performance.

For 2015, four universities in Japan did better than those in China.

The top university in Japan was the University of Tokyo (ranked 21) while the top four in China, according to alphabetical order, were Peking University, Shanghai Jiao Tong, Tsinghua and Zhejiang University. They were placed in the number 101-150 band.

Malaysia’s top university, according to ARWU, was UM, placed in the number 301-400 band, while USM, the next best, was placed in the number 401-500 band. Xiamen University was placed in the same band as UM.

In a span of about 120 years, from having only one “modern” university, there are now about 2,900 universities and colleges in China. Several are world-class and are ready to compete with the best in the US and the UK.

Within the next decade, two universities in China may be ranked among the world’s top 10.

To achieve this, the government is going to great lengths to attract leading scholars, especially overseas Chinese scholars, to take up academic appointments at its leading universities.

Many universities in China are not only focusing on developing technologies that are competitive, but are doing so in areas like business education. Improvements have been by leaps and bounds.

Under such a scenario, what effects would the above have on world higher education in general and the trend of higher education pursuits by the global Chinese diaspora in particular?

It is an open secret that China encourages successful overseas Chinese to return to China to help in its development.

Even though the country is now the world’s second largest economy, there are still many spheres that need to be developed before China can claim to be at par with developed nations of the West.

One strategy would be to attract the best foreign students to study in China.

Upon graduation, these students can then be enticed to stay on to help develop the country.

Even if the graduates decide to return to their home country, their positive experiences while in China and the local Chinese network of friendship (guanxi) that the students have established are assets that will to some extent, influence their home countriesfavourably in their dealings with China.

Having foreign students on campus also has the added benefit of excha-nge and enrichment of experiences and ideas between local students and those from different parts of the world.

Such a strategy is not new as it has been practised by countries of the West even though these countries have their own bright students.

That is one reason why the West is now so strong and advanced, especially in the area of science and technology.

This approach of attracting the best foreign students can only be successful if an excellent system of higher education is in place, and China is doing just that.

As a start, China is also increasing the number of scholarships for foreign students.

For example during the 18th ASEAN-China Summit held in Kuala Lumpur last November, China’s Premier Li Keqiang made a commitment that China will increase the number of government scholarships for Asean countries by a thousand over the next three years.

Incentives

On a global scale such efforts may not seem much, but China might introduce innovative incentives to attract the best foreign students to its shores.

The country might just be waiting for the right moment to do so.

Like all other projects launched, once a decision is made and the time is right, China would go all out to implement the idea in a big way.

The soft power strategy outlined above, if introduced, would have a greater impact in countries with a large overseas Chinese population - especially in countries where these students are marginalised with limited access to higher education.

Together there are close to 27 million overseas Chinese living in the Asean region. This is about half the total number of overseas Chinese worldwide.

China may have the edge over the West in attracting these overseas Chinese students as many of these students would be familiar with China’s culture and language.

However it must also be highlighted that presently in China, some university courses are already being taught in English.

From the economic perspective, the cost of higher education in China is relatively cheap compared to those in the West.

Depending on the programme of study, the location of the institution, the type of accommodation sought, and the food consumed, the cost can be as low as US$4,000 (RM16,000) per year.

However it can also be at US$10,000 (RM40,000) per year, making it less affordable to those from poorer nations.

Nonetheless, even now, , studying in China is already a good option.

Doing so not only allows one to receive a world-class education at an affordable cost, it also provides the opportunity for one to establish vast professional and business networks.

These networks are certainly beneficial in a world that has predicted that China would be the largest global economy and a superpower in the not too distant future.

By Dr Lim Koon Ong

The writer is a former Universiti Sains Malaysia deputy vice-chancellor, and is presently an emeritus professor there.

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