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Should You Worry About Airbnb?

Should You Worry About Airbnb?

The lodging industry isn’t alone in its concerns regarding the regulation of online room rentals. “There are a lot of stakeholders interested in this issue—affordable housing advocates, disability groups, organized labor,” Sinders says. “We want to make sure all players are being treated fairly by the law.” Besides the issues of ADA compliance and staying up to code when it comes to guest safety, a big problem with the short-term room rental business is how it makes housing less affordable in big cities by restricting supply.

“Intentionally or not, Airbnb has propagated what has become an entire industry of illegal hotels throughout the city that are unregulated,” Spinnato says. “One particular consequence is that hundreds, possibly thousands, of housing units have been taken off the market in a city that desperately needs more housing.”

That’s one of the many reasons why New York City has become a battleground in the fight between the industry and peer-to-peer room rental services, of which Airbnb is, in fact, just one. Additionally, sites like onefinestay.com and other VRBO (vacation rental by owner) marketplaces have risen up to draw the ire of hotel brands and management companies.

“We are not sitting still,” Vijay Dandapani, CEO of Apple Core Hotels, told Crain New York Business. “These people [who rent out their apartments] don’t pay taxes. The websites may tell them they need to pay all taxes, but they don’t require it. They are violating the law, and we are the affected class.”

Dandapani, also director of the Hotel Association of New York City, argues that the government should compel sites like Airbnb to prove that their hosts are paying taxes appropriately. “Along with their ascent in the marketplace have come numerous problems,” Dandapani says, “which can only increase unless they are regulated.”

That regulation starts by complying with the 2010 New York State law targeting illegal hotels. In effort to enforce the law, State Attorney General Eric Schneiderman issued a subpoena to Airbnb in 2013 for information on its more than 15,000 New York City hosts. The company mounted a defense against the action, supported by amicus briefs from both the Electronic Frontier Foundation and the Center for Democracy & Technology.

Working against Airbnb is the risk that a majority of its revenue comes from activities or transactions that are on shaky legal ground. As New York State Sen. Liz Krueger put it in a statement, “Illegal hotels aren’t an aberration in Airbnb’s business model, they are Airbnb’s New York business model.”

On the other hand, the fate of the Airbnb model could also be decided not on tax law grounds but on Internet privacy grounds—something The Internet Association highlighted when it filed its own amicus brief in November 2013, saying, “If the New York attorney general’s power to engage in such a fishing expedition were upheld, it would have enormous implications for the Internet.”

Meanwhile, Mishelle Farer, a Brooklyn resident and Airbnb host, launched an online petition in October 2013 to stop the subpoena. “The reason this is happening is because of a poorly written law originally designed to stop slumlords from running illegal hotels with dozens of rental apartments,” Farer writes in the petition. “As a New Yorker just trying to pay my bills, I don’t understand why they think I’m a slumlord.” Today, the petition has nearly 240,000 signatures.

Still if Airbnb represents the rise of the peer-to-peer marketplace, the groundswell of public interest behind it means this marketplace will be here a while.

Speaking on a panel in March at the Cornell/AH&LA Women in Senior Leadership event, Christie Hicks, senior vice president of Starwood Sales Organization, Starwood Hotels and Resorts Worldwide, said that companies like Airbnb are disrupting the lodging industry in a way no one could have seen coming, and there will be someone after them and someone after them. “That change means we have to really adapt and understand what’s in the mind-set of the consumer and who is satisfying that need.”

“They’re going to find ways to satisfy the regulators or still continue to grow off of product,” said Kate Henriksen, SVP of portfolio management, RLJ Lodging Trust, at the same event. “I think we can push back as an industry as much as we can but at the same time find ways to embrace it and incorporate it into our business model. I don’t think it’s going away.”

Additional reporting by Sean Downey and Megan Sullivan.

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