The UK Short Term Accommodation Association’s (STAA) is lobbying the government for an emergency support package to help the short-term rental sector weather the storm of the coronavirus pandemic.
The STAA is in conversation with the government requesting that certain measures are introduced to provide some protection for the sector, especially inlight of the fact that many companies operating in the industry have said that they would have to consider making some employees redundant. The measures include:
Amending domestic legislation to allow the provision of refunds and price reductions as vouchers and credit notes instead of cash
The biggest issue facing short-term rental businesses is cashflow. That’s because they’ve had to issue refunds to guests cancelling bookings which drains them of cash to cover ongoing operating costs. Plus, the demand depression caused by the COVID-19 outbreak means that businesses have no guaranteed income in the near future, meaning they may struggle for viability in the longer-term due to reduced bookings.
The STAA believes that the European Union’s Directive 2015/2302 on package travel and linked travel arrangements - which covers pre-arranged package holidays and also self-customised packages - should be amended, as it forces all companies to give cash refunds if travel is restricted. It suggests that it is better to allow companies to issue refunds in the form of vouchers or credits for future use, instead of cash refunds, as this will both satisfy the consumer, and keep liquidity in the market. Moreover, it is a solution which is essentially free for the government, as it does not require payments to businesses or costs in terms of rebated taxes.
Implementing temporary solutions to address cash drainage arising from the chargeback mechanism under credit card schemes
Under current credit card schemes, property management companies bear the full financial risk exposure for services that have already been delivered by online travel agencies (OTAs) and where payment for the service has already been transferred to the short-term rental owners. This could result in a cash drain on property management companies, with the real possibility of collapse for many of them within weeks if chargebacks continue to increase and are not prevented.
Altering the Coronavirus Job Retention Scheme to keep people working through the crisis
The STAA believes that the requirement outlined in the Coronavirus Job Retention Scheme to ‘furlough’ employees and keep them on the payroll rather than making them redundant, can encourage businesses to reduce activity at a time when the industry needs to be, managing customer cancellations, providing meaningful work for people and preparing for the recovery.
It suggests that the Employment Retention Scheme should, instead, be directly applied to companies that are facing a significant drop in revenues to ensure that their staff are able to remain in work through the duration of the crisis and help with the speed of recovery.
Issuing guidance to ensure that company directors are not obliged to personally guarantee loans
Under the Coronavirus Business Interruption Loan Scheme, small and medium sized enterprises can access up to £5m in government-backed loans. Whilst the STAA welcomes this, it remains concerned by widespread reports that banks are insisting on personal guarantees for the loans from business owners, including, but not limited to, property such as second homes and savings.
According to the STAA, this policy puts business owners in a very difficult position as it potentially puts their family’s financial security at risk.
Many business owners may choose not to access the Business Interruption Loan Scheme for this reason and thereby face the risk of closure. The STAA calls for government guidance to be issued to lenders stating that personal guarantees for emergency loans should not be required.
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