Hotels vs. Airbnb: The battle has begun

The lodging wars have begun in America. However, this battle is not between hotel behemoths. This is not a brand war, no IHG versus Marriott knock-down drag-out. Instead, U.S. hotel chains and brands are joining forces against a common enemy: Airbnb, the new kid on the block.

This means that the entire U.S. industry, with more than 54,000 properties—along with their national and local lobbyists, lawyers, and law enforcement agencies—are neither passively confronting nor ignoring Airbnb. Instead, they are collectively waging an all hands on deck, all fronts offensive in individual cities and across entire states. The carefully strategized offensive is being led by the American Hotel and Lodging Association (AHLA), which claims to be the “singular voice representing every segment of the hotel industry.”

One might argue that the hotel industry’s courtroom legal affairs have not seen this much action since right before the passing of the Civil Rights Act of 1964, which prohibited discrimination in hotels and other public accommodation sites. Today, the AHLA―and its $5.6 million yearly budget for regulatory issues―is focused on resolving this issue for its members. The ancient proverb, “The enemy of my enemy is my friend,” is seemingly apropos as this ever growing legal and political battle is taking place in cities such as New York, Miami, Chicago, and Asheville, and states including Idaho, Florida, and Hawaii.

Hotels vs. Airbnb map

Looking at the numbers alone, one might believe that this isn’t even a fair fight. Why pick on the little guy? But Airbnb is not the typical newcomer or start-up company. Mark Twain said, “It’s not the size of the dog in the fight, it’s the size of the fight in the dog.” Standing alone, with only individual residential property owners who wish to rent and advertise on the website, Airbnb is one dog that seems ready to face the hotel industry in the middle of the battlefield. This scrappy and unlikely contender is prepared to engage the hotel industry in hand-to-hand combat in both the courthouse and behind closed doors with its own lobbying and political efforts. Armed with a bevy of wealthy investors, multi-media platforms, advertising, and its own political cachet, Airbnb is positioning itself not just to survive, but to thrive, in the robust hotel market in the U.S. and abroad.

A 2008 start-up company based out of California, Airbnb is an innovative business model adopted by many a new start-up company in recent history. The premise is based upon the combining and repositioning of small and solo enterprises, and then flipping them into a national corporate model. Uber and Lyft are doing the same thing with hired personal transport. In fact, these companies have basically created multi-million dollar entities that provide well established individual consumer services under one umbrella.

Airbnb hosts a webpage that is user-friendly both for homeowners to advertise and customers to search for rentals. The concept of renting out a room, or even your entire home while on vacation, has been done, well, probably since the first homes were built by humans. Asking who thought of the idea of renting out your home is akin to asking who discovered fire. Yet, Airbnb saw an opportunity and subsequently created a digital platform that they report is being used by 150 million travelers, in more than 3 million homes, in more than 191 countries across the world.

And Airbnb seems ready to take on the big dogs. According to the research firm CB Insights, to date Airbnb has raised $3 billion and received a $1 billion line of credit. The company may be ready to go public in less than 12 months, and its market value may be around $30 billion. For comparison, Hilton Hotels and Resorts’s market capitalization is $19 billion. Now, with the lines in the sand having been drawn, the two sides are engaged in lobbying efforts and court battles around the county regarding advertising, taxes, and other regulations.

The entire U.S. industry, with more than 54,000 properties—along with their national and local lobbyists, lawyers, and law enforcement agencies—is collectively waging an all hands on deck, all fronts offensive in individual cities and across entire states.

Registration for both property owners (hosts) and consumers on Airbnb’s website is a relatively simple process. The lure of Airbnb is evident in the widespread adoption by consumers, based in part on the ease of use, broad range of rates, and diversity of housing options. It is possible to choose a rental that is in just about any price range and equipped with features one might find in their own home or a dream vacation house (if you’re lucky.) For instance, millennials might find it attractive to be in a neighborhood like Park Slope Brooklyn, which has limited hotel options but offers a neighborhood and cultural experience one might not get from staying in the hotel-concentrated Times Square area. Additionally, the opportunity to save money by renting an entire apartment or house, as opposed to several hotel rooms, when traveling with a group of people may entice patrons to use Airbnb. Finally, Airbnb’s residences might offer unique accommodations, at no additional charge, that hotels rooms either do not have or charge a premium for, including access to free Wi-Fi, full kitchens, and even video game consoles, Netflix, or Apple TV.

But it’s not all a sunshine-and-roses utopia. There have been widely publicized cases of Airbnb rental arrangements gone bad, with guests committing such violations as destruction of property, ransacking, and drug use. Just do an online search for “Airbnb horror stories” and see what pops up. And then of course there are the cases of hosts rejecting or mistreating guests on the basis of race or ethnicity. This may be a violation of the federal law prohibiting discrimination on the basis of race, color, religion, sex, or national origin and has led to Airbnb banning some hosts and hiring advisers to enact a nondiscrimination policy.

Armed with a bevy of wealthy investors, multi-media platforms, advertising, and its own political cachet, Airbnb is positioning itself not just to survive, but to thrive, in the robust hotel market in the U.S. and abroad.

The competition between hotels and Airbnb is at an all-time high, and the gloves are off. As reported by The New York Times, Nick Papas, a spokesman for Airbnb, came out firing last year when he said, “The hotel cartel is intent on short-sheeting the middle class so they can keep price-gouging customers.” He went on to say that Airbnb has more than 250 government partnerships and is very serious about fair play.
The hotel industry has responded in kind, and several cities and states have either passed laws or are considering legislation to regulate, shut down, or, alternatively, to even expand the services of Airbnb. In the foreseeable future, as Airbnb continues to grow, advertise, and offer myriad unique lodging options, the battles will continue, city to city and state to state. In Tennessee, Nebraska, Maryland, Michigan, Ohio, Colorado, Louisiana, West Virginia, Georgia, and North Carolina, the lines are drawn. Airbnb is clearly taking this fight seriously.
So, what are you prepared to do?

WHAT’S HAPPENING AT THE FRONT

Pro-hotel: State of New York

With the help of lobbyists, the hotel industry is gaining some traction at limiting Airbnb’s availability. In 2010, the New York state legislature considered and passed an amendment to the “multiple dwelling law,” which prevents tenants from renting their entire homes for fewer than 30 days. The same law is also in effect in many other states and means that any apartment (not a single room) in a building in New York may be considered illegal if rented out for less than 30 days. Then, on October 21, 2016, New York State made it illegal not only to rent a home for less than 30 days, but also illegal to advertise to do so. This had the effect of making all Airbnb listings in New York illegal, with a potential fine of up to $7,500 for listing on the site. In fact, the Associated Press reports that the state has already begun fining individuals for posting on Airbnb in New York City.

Hotel Industry

With the help of lobbyists, the hotel industry is gaining some traction at limiting Airbnb’s availability. Many states have laws on the books to prevent people from renting their entire homes for fewer than 30 days.

Battleground: City of Chicago

The city of Chicago became a place of contention last year, when they enacted laws against Airbnb type residences that included new taxes, allowing resident’s homes to be inspected by officials at any time, and also granting discretion to landlords and condo associations to decide whether or not to effectively ban Airbnb type rentals.

Pro-Airbnb: State of Florida; Pro-hotel: City of Miami

The state of Florida passed legislation seemingly favorable to Airbnb in 2011, which prohibited municipalities in Florida from enforcing ordinances that prohibited or over-regulated vacation rentals. However, in March, the Miami City Commission just voted 3–2 to uphold the City’s zoning laws. This put Airbnb hosts on notice that several thousand listings may be in violation of zoning laws prohibiting short term rentals. And last month Airbnb hosts of Miami persisted, filing a lawsuit of their own against the Miami ordinance. The case is still pending.

Pro-Airbnb: State of Idaho

In Idaho, Governor Butch Otter signed the “Short-term Rental and Vacation Rental Act,” similar to the Florida legislation of 2011, ensuring that homeowners are able to rent their properties freely, and only allows for regulation when “public health, safety, and welfare” are of concern.

Airbnb

Registration for both property owners (hosts) and consumers on Airbnb’s website is a relatively simple process

Pro-hotel: City of Asheville

In Asheville, North Carolina, the city recently hired an employee solely dedicated to searching for violators of the state’s short-term rental ban, which like many other states restricts rentals for less than 30 days. The city also increased fines for violations from $100 per night to $500 per night. (The Los Angeles Times reports that Newport Beach, California has also contracted with a company in an effort to crack down on potential violators of local laws regulating short-term rentals.)

Battleground: State of Indiana

The Associated Press reports that Indiana’s House Bill 1133 was recently voted down, 50–46. It needed 51 votes to pass. The bill seemed to favor short term rental options by eliminating city and towns bans on short-term rentals, similar to the Florida legislation. House Bill 1133 would have required residents to “maintain primary liability insurance for third party claims for death, bodily injury, and property damage occurring during a short term rental period.” The bill had earlier passed in the Indiana Senate, but was eventually rejected.

Battleground: State of Hawaii

Hawaii is currently considering two bills related to short-term rentals by residents. According to the Associated Press, the bills are designed to allow companies like Airbnb to collect state taxes on behalf of individuals who rent their houses out. However, like previously mentioned states, Hawaii already has laws preventing short term rentals. Therefore, it appears that the proposed bills will be strenuously contested.

WHERE THE OTHERS STAND

Pro-Airbnb:

States of Texas, Arizona, Tennessee, Nebraska, Idaho, Florida, and Indiana

Pro-hotel:

States of Virginia, New York, and Utah; Cities of Miami and Asheville

Battleground states where they are fighting it out town by town or have pending legislation:

States of Maryland, Michigan, Ohio, Colorado, Louisiana, West Virginia, Georgia, North Carolina, Hawaii, Indiana; City of Chicago.

By Jerry Canada

ABOUT THE AUTHOR:
Jerry Canada is former trial lawyer and intellectual property litigation specialist. He is the author of two novels and several legal articles. A graduate of SUNY Stony Brook and UC Berkeley School of Law (Boalt Hall), he spends his time writing and consulting biotech start-up companies.