Internationale de Football Association’s (FIFA) first-time decision to allow non-hotel accommodation facilities to be made available during the 2010 world cup has prompted many South Africans to consider renting out their homes in an effort to cash in on the expected 500 000 visitors. This unique opportunity to make money does not, however, come without certain risks and proprietors-to-be should be mindful of these.
With hospitality being an integral 2010 industry, accommodation, transportation and tourism services have benefited from an increased focus. Many of the larger hotel groups have undergone anticipatory ‘face lifts’, road and transportation infrastructures have received large upgrades and tourist packages extended to include a more comprehensive range of facilities.
“2010 income opportunities being offered to ordinary South Africans has, of course, sparked great interest,” says Helen Szemerei, director of insurance services at the IntegriSure Insurance Group of companies, an authorised financial services provider offering specialised short-term insurance and other products for niche markets, “but the need to conduct any form of related private business responsibly cannot be over-emphasised.”
The very understandable interest many of us have in the foreign currency associated with tourists and Murphy’s Law about ‘never stepping into something soft’ should definitely resonate together as, as the law implies, entering into ‘soft’ deals may bring with it a number of unforeseen difficulties and costly outlays.
If, for instance, you are a home-owner thinking about letting out a room to well-paying European clients, be mindful of the insurance implications as homes are insured as private dwellings. The moment a house is converted into a bed and breakfast facility, the class on insurance changes from private to business, invalidating standard household and homeowner cover.
This means, for example, that a guest’s expensive Rolex being stolen whilst on your premises, perishable foodstuffs ‘going off’ due to a power failure or the house being razed to the ground by fire, would not be covered. You as the business owner would be responsible for replacing the costly stolen item, replenishing lost stock and securing alternative accommodation.
Being personally responsible for liability claims could prove costly and force you to sell everything you own in an effort to cover claims. Be aware of the fact that guests may sustain an injury whilst being housed at your establishment and that associated medical costs are yet another aspect of cover not provided for under private insurance policies.
That may not be too much of an issue, you may think, given the fact that you should simply be able to change your insurance cover from private to business. The issue, however, is not that simple. A business needs to be registered before related cover can be obtained, necessitating a set of financials, separate bank accounts and registration with the South African Revenue Services (SARS) for income and value added tax (VAT) purposes.
A further consideration is that MATCH Event Services (Pty) Ltd, an events company hired by FIFA to secure a minimum of 55 000 rooms for the 2010 world cup in both the hotel and non-hotel industries, stipulates that facilities need to be officially graded in order to be contracted as accredited service providers. In order to be ‘contracted’, rooms in private homes would need to be made available for the entire period, without any form of a guarantee in terms of secured guests. Associated listing and advertising fees are also applicable.
One therefore needs to decide whether the benefits associated with making a few extra rand during 2010 outweigh the expense and possible risk. “Do some homework before making the decision to offer your home for accommodation during the soccer world cup,” concludes Szemerei. “If you do decide to do so, ensure that you know exactly what this entails business-wise and that you have the correct insurance cover in place.”