August 20, 2015
Week In Review: Woman Fined $15K For Renting Airbnb Without Permit
This Week in Airbnb (and Beyond) is a weekly podcast from Beyond Pricing. Each week, they discuss the top news in homesharing and vacation rentals with featured industry experts. This week, Andrew McConnell, sharing economy expert and CEO of Rented.com, and Stephanie Krieg, Founder of OurbnbSD, gave their thoughts on new regulation on short-term rentals. Here are highlights from the interview:
With the sharing economy increasing in popularity, there has a been a rush to establish regulations on short term rentals. Just this week, Airbnb has been set to be legalized in Quebec and Mill Valley (north of San Francisco). In Mill Valley, they are implementing a typical registration system that is common in beach and ski towns. On the other hand, however, Sacremento is considering a 30-day limit, and Barcelona’s mayor announced a potential complete ban on Airbnb. This kind of extreme legislation is a trend that’s common in traditional vacation markets and urban city markets.
McConnell criticized the rush to create extreme regulations, stating, “If the fight is only between two extremes, you’re going to get terrible legislation or terrible non-legislation on both sides. You need to find that compromise…Prohibition doesn’t work. Sensible regulation does.” Not only is outlawing vacation rentals highly detrimental to property values, it is also a declaration of war on tourism and nearly impossible to enforce. The better answer is to have a system based on data and demand that is sensible and easy for people to understand.
Hotels Speak Up Against Airbnb
With short term rentals making up 1.2% of accommodations, hotels are speaking up against Airbnb and similar companies.
Just last week in San Diego, a retired teacher was ordered a hefty fine of $15,000 for renting out a room on Airbnb without a permit.
McConnell argued that while hotels are speaking against Airbnb as the enemy, the hotel industry’s true enemy is its failure to provide what its customers actually want. When a hotel fails to deliver a product and service that its customers demand, customers will inevitably find better ways to meet their needs. Rather than hotels pushing to curb the short term rental market by funding NIMBYs (Not in My Backyard), hotels need to adjust to new demand. McConnell stated, “The majority can often not get what they want if there’s a tyranny of the minority with deep pockets. It’s going to take other deep pockets helping support the majority to give homeowners, renters, vacationers, and travelers everything that they want. If you leave it to hotels, we’ll stay back in the 1960s. We’ll never progress.”
Hotels in the Sharing Economy
Hotels that perceive Airbnb as their primary threat are not only wrong in their portrayal of their enemy; they are missing a part of the larger opportunity. McConnell compared today’s backlash against the sharing economy to the music industry’s Napster moment and the horse and buggy manufacturer’s reaction to the invention of the car. Manufacturers of buggies who tried to ban cars weren’t seeing the broader picture: In terms of transportation, cars are a simply a better way to get from A to B. The buggy manufacturers’ failure to see themselves as a part of the transportation industry (as opposed to the buggy industry specifically) is what ultimately led to their inability to innovate and grow with new demand. While Airbnb is taking some market share from hotels, it is also growing overall demand for accommodations.
To hear more of the podcast, be sure to listen to the full 50-minute interview here.