15 11 15/11 2018

GNI

ReformBnB A conference for politicians, industry associations, activists, and academics unifying stakeholders in a call for reform of the short-term rental industry

A conference for politicians, industry associations, activists, and academics unifying stakeholders in a call for reform of the short-term rental industry

19th of November, Intercontinental Barclays Hotel (111 East 48th St : New York , New York ,10017-1297, United States : +1-212-7555900)

Over the last ten years, the short-term rental industry has grown in a hot-house of low-regulation. The near total lack of rules in the industry has allowed the short term rental platforms (hence platforms) to grow rapidly, and with unprecedented and rapidly rising profits. AirBnB, in particular, the biggest player in this wild west of the STR industry, has benefitted from this environment with rapidly rising revenue, a pre-IPO valuation in excess $50bn, and (most rare for a modern tech unicorn) large and rapidly growing profits.

However, this friendly environment is coming under increasing pressure. In cities and town across the world the growth of the platforms has led to a massive numbers of apartments and homes being turned into un-regulated hotels. The un-regulated hotels near total lack of compliance with numerous safety and other regulations allows them to offer rooms at a low price, drawing customers from law-abiding businesses. These low prices, however, come at a massive social and economic cost.

This meteoric growth of the platforms has had a massive social costs in terms of housing affordability while also disrupting societal pillars like schools and hospitals as touristic city centers are emptied of regular citizens. The hotel industry, which has long been a stable middle-class employer, has had to endure steep losses as illegal hotels on platforms steadily erode market share. Neighbors and property owners have been enraged at seeing their properties and shared common areas turned into illegal hotels, often with quite offensive guests. Local councils have been horrified to see entire neighborhood turned into open-air hotels. 

The backlash against these problems has created a loose coalition of hotels, housing groups, public advocacy groups, and elected officials coming together to fight for reform of the industry. The results of this fight will not only determine the shape of the trillion dollar tourism industry but also the ability of many cities to cope with an existential affordable- housing crisis.

If the platforms institutionalize their regulatory and tax advantages they will continue gaining market share from the hotel industry, possibly reaching 20,30, or 40% of the market, costing jobs and causing other societal ills. However, if the hotels, local governments, and other reformers prevails the platforms, losing their regulatory advantages, will see their market share stabilize or even fall. Tens of billions of dollars, millions of jobs, the cost of housing, and the way humans travel for work and play will turn on the outcome. 

Each side has its allies. The platforms have their hosts, who make significant money from renting their properties and regularly mobilize to defend it. Many politicians, viewing the platforms as “innovative” and “cool”, are also quick to come to their aid. The hotel industry, in contrast, has allied itself with local governments concerned by distortions in the housing market, landlords and neighbors angry to see residential properties turned into permanent short-term lets, and tax advocates concerned that platforms making billions are only paying thousands in tax. In many cities the political battle has been joined, with victories and losses for both sides. 

However, the P2P platforms have been much more unified in their struggle against regulation. Like all oligopolies, they know exactly what they want and are pursuing it effectively across the whole world with an identical playbook and a singular refrain against “outdated” laws. What they want is the current system of de-facto no regulation for the STR industry. A system which has allowed them to grow rapidly, free from the regulations which constrain other sectors. 

For the hotels, things are more complicated. The hotel industry knows that STR is here to stay. They also know that, when faced with disruption, calling for government help is not ideal. Far better to focus, as many are, on developing their own competitive advantage. Finally, many hoteliers don’t want a political fight with a well-resourced opponent like the P2P platforms (who have the budget to outspend their opponents, in some cases 16 to 1). Historically, then, many hoteliers have not fought actively against the STR sector. 

However, the hotel industry increasingly realizes that, whatever they do internally, in the current regulatory environment they will struggle to compete with the STR industry. The hotel sector is heavily regulated, highly taxed, and subject to strict labor, planning and safety rules. The STR sector, either de jure or de facto, is not. 

Under these conditions, it is extremely difficult for hotels to compete. There is no level playing field between the two sides. For this reason, the hotel industry is increasingly uniting to push for a new regulatory settlement over the STR sector, one focused on creating a level playing field and preventing the commercialization of housing.

The meeting in New York is a step in this unification. It is the first time the global hotel industry, represented by nearly twenty associations from four continents, has come together to plan a common response to the STR industry. Information will be shared, reports and statements released, strategy and concerns discussed. Natural allies of the industry will also participate, including politicians from the US, Chile and the UK, who will discuss their independent concerns. Each group will bring their own unique perspective. 

This event heralds a global effort to shine a light on the glaring gaps in regulation that has revived outdated and unsafe lodging practices using technology to enrich a handful at the expense of society at large. It will enable the global hotel industry to be more united, informed, and prepared to win, as we enter AirBnB’s eleventh year eventually ensuring a fairly regulated STR industry.