Public debate often frames short-term rental (STR) regulation as a clash between “disruptors” and “dinosaurs”. The reality for South African hospitality is simpler and more urgent. The City of Cape Town’s move to impose commercial property rates on STRs isn’t an attack on innovation. It’s a long-overdue fix to a problem that has been ignored for far too long.
It is vital that we do not confuse the two issues at play here — the urgent need to tax and regulate STRs as commercial entities and the broader housing crisis in Cape Town. While they occupy the same geography they must be treated as distinct challenges; solving the tax parity issue does not inherently solve the housing shortage and conflating them only muddies the policy waters.
For years some STR operators have been operating like hotels — marketing nightly, professionally managing properties, chasing profits — while enjoying the perks of residential zoning. This isn’t “sharing economy” idealism. It’s a gap in the system that puts the rest of the tourism industry at a disadvantage.
Why the playing field isn’t level
From a hotel asset management perspective the present situation just isn’t fair. Formal hotels don’t just “run rooms”; they operate as complex economic engines. They pay commercial insurance premiums, contribute the 1% Tourism Levy used to promote South Africa abroad and meet strict health and safety requirements mandated by global travel operators. By contrast, many STRs are only accountable to the subjective expectations of an individual free, independent traveller guest.
Furthermore, hotels are big employers, sustaining a high staff-to-guest ratio that drives job creation. STRs operate with a fraction of that workforce. When a commercial hospitality business is registered only as a residential property, it avoids the tax and VAT obligations required of commercial entities. This isn’t innovation; it’s a hidden subsidy that leaves compliant operators carrying the cost of national infrastructure and global marketing while others reap the benefits.
Long-term risk to SA cities
We must also look at the global precedent for unregulated STR growth. This isn’t just about hotel profits, it’s about the soul and functionality of our urban centres. History shows that unchecked proliferation causes long-term damage to cities, often hollowing out neighborhoods and eroding the local tax base.
Because of this, many major global tourism hubs have been forced to take drastic measures — either banning STRs entirely or implementing strict minimum stay requirements (often two weeks or more) to ensure properties return to their intended residential use. If we don’t act now, we risk a similar decline where cities provide commercial-level services — water, waste, policing — while only collecting residential rates. The maths doesn’t add up.
Pressure on formal hospitality
South African hoteliers are already under pressure. The latest Hospitality Asset Management Company report shows more than half are delaying upgrades because rising costs — from labour to utilities — are eating into flat profits. Asking these operators to compete against lightly regulated, lower-cost STRs isn’t just unfair; it’s economically unsustainable. Every guest diverted to an unregulated property is a loss to the fiscus and an extra strain on businesses that actually create jobs and train skills.
From discussion to action
The solution isn’t banning STRs; it’s creating fair rules. Clear, enforceable regulations give investors the confidence to commit for the long term. South Africa doesn’t lack studies or plans — we’ve had years of consultations — what’s missing is execution.
A proper regulatory framework should bring STRs out of the shadows, ensuring they they are taxed and VAT-registered as commercial businesses and meet the same rigorous safety standards as the formal sector. By formalising the market we protect guests, workers and the reputation of South African tourism while giving compliant operators the level playing field they deserve.
If we want a strong, competitive tourism industry we have to treat accommodation as serious economic infrastructure, not a hobby. The policy direction is clear and the formal sector is ready. What’s needed now is the political will to move from discussion to decisive action.
The longer we wait, the costlier the fix will be and the more we put our hotels and cities at risk. If hotel owners are treated differently, the question will be asked, “At what stage should hotel owners stop paying ancillary levies?”
• Gillis is cofounder and CEO of the Hospitality Asset Management Company.
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