Regulating the sharing economy to prevent the growth of the informal sector in the hospitality industry

Purpose - To tackle one of the main negative consequences of the sharing economy, namely, the growth of the informal sector, the purpose of this paper is to evaluate for the first time the impacts of the informal sector on the hospitality industry and then to discuss what needs to be done to prevent the further growth of the informal sector in this industry. Design/methodology/approach - To evaluate the impacts of the informal sector on the hospitality industry, data are reported from 30 East European and Central Asian countries collected in 2013 in the Business Environment and Enterprise Performance Survey. Findings - The finding is that 23 per cent of hotels and restaurants in Eastern Europe and Central Asia report competing against unregistered or informal operators, and 13 per cent view these informal competitors as a major or severe obstacle. The larger the business, the greater is the likelihood that the informal sector is considered their biggest obstacle. Practical implications - To prevent the further growth of the informal sector in the hospitality industry, regulation of the sharing economy will be required. To achieve this, it is shown that state authorities need to adopt both direct control measures that alter the costs of operating in the informal sector and the benefits and ease of operating formally, as well as indirect control measures that reduce the acceptability of operating in the informal sector. Originality/value - This is the first paper to evaluate the impacts of the informal sector on the hospitality industry and to outline the policy measures required to prevent its further growth with the advent of the sharing economy.