Associate Feature: New legislation risks £133 million hit to Scottish tourism economy

The Scottish tourism economy faces a potential £133 million hit and more than 7,000 job losses if local authorities pursue the most complex version of legislative changes introduced to regulate the short-term lets sector.

That’s according to BiGGAR Economics research commissioned by Airbnb. The study finds that the choices made by local councils will have a knock-on effect on their tourism economy, and could create disproportionate barriers to entry for casual homeowners.

The typical Host on Airbnb in Scotland shares their entire home for fewer than three nights per month and earns less than £6,000 per year.  The Hosts surveyed said the cost of living crisis is making them more reliant on the income they earn from Airbnb. Nearly half said hosting helps them to afford the rising cost of living and over one-third rely on the additional income to make ends meet. 

The Scottish Government’s new Licensing Order will require all short-term let operators to apply for a licence from their local authority – regardless of the type of space being shared and for how long.

The licence is projected to cost between £300 and £1,000 and will require renewal every one to three years, depending on the local authority. Furthermore, the cost of meeting the mandatory conditions of the licensing order is estimated to be an additional £300 per year, excluding one-off and long-term costs. Implementing the most stringent rules risks discouraging local families that rely on additional income from hosting on Airbnb to help make ends meet. The subsequent reduction in the number of available properties would see accommodation prices rise and reduce the competitiveness of Scottish tourism, putting at risk crucial guest spending in beleaguered sectors like hospitality.

Our research finds that the new legislation will significantly decrease the contribution that Hosts and guests on Airbnb currently make to the Scottish tourism industry. Even the lowest level of additional regulation could potentially result in a £32 million reduction in gross value added (GVA) and a loss of 1,740 jobs across Scotland.

If local authorities impose even stricter regulations, the industry could see a £71 million reduction in GVA and a loss of 3,830 jobs. And the most severe restrictions could create a £133 million hit to the Scottish tourist economy and 7,190 jobs being lost.

The research also predicts large disparities in the scale of the losses for local authorities in Scotland. The Highlands could suffer the most, with maximum potential losses of £33 million GVA and 1,780 jobs, followed by the City of Edinburgh with potential losses of £26 million GVA and 1,390 jobs.

These scenarios will depend on the cost and processes of the new licences and how they affect guest and Host decisions. They also don’t account for the potential impact of the control area legislation, which would likely further reduce the supply of short-term lets.

At a time when tourism is recovering from the pandemic and people are increasingly looking to Scotland as an option for a short break, the choices local councils make could hugely affect both their economies and residents. Implementing the most complex and costly version of these rules risks further delaying the recovery of Scotland’s tourism sector and preventing ordinary families struggling with the rising cost of living from earning a much-needed additional income.

This article was sponsored by Airbnb.