The rise of AirBnB.com and the illegal, short-term rental
Written by Jay Karen on August 3, 2011 – 10:09 pm
Nearly three years ago, I first noticed AirBnB.com and questioned many professional innkeepers about the site. Did they feel threatened by it? Did they feel we should expose them for the obvious issues of supporting and promoting businesses that did not pay taxes and that had no concern for safety? I sent an email to the owners, questioning them on some of this, and of course never received a reply. Plus, I was ticked off that they co-opted our industry’s brand in their name – “BnB”.
Since then, the site has skyrocketed to internet fame, rounding up major funding and moving on the fast path to IPO (I suppose the brass ring for most internet start-ups). All the while, I’m wondering when…just when will something terrible happen at one of these apartments that are advertised on the site? When will someone question the sustainability of a web site that supports illegal businesses? When will someone cry foul on the tax evasion? Many cities have rules against property owners renting out rooms by the night or week without being either a licensed hotel or B&B of some kind. Looking back, I suppose I should have cried foul a lot louder and a lot earlier.
I have been talking about AirBnB at meetings of innkeepers all across the country for two years. My reference to them had to do with how ridiculously easy it now is for anyone to rent out a room in their pad to travelers, and we should pay attention to them as a new competitor. Many innkeepers would dismiss it and tell me that this really isn’t our competition; travelers looking to stay in someone’s apartment are not interested in staying in a bonafide, professionally-run B&B. I will concede that the typical AirBnB customer is not likely a perfect demographic match of the typical B&B customer. But, I have also told innkeepers that they need to do a better job to capture the Gen X and Y generations, or they will bypass us for something like AirBnB. If you go to their web site, you’ll see some pretty darn attractive places. Very seductive, although I wonder if they only showcase the nicest of the nicest properties on their homepage. Are many of the rest average apartments or worse?
I’m not anti-competitive by any means. I strongly believe in healthy competition, but I also believe in a level playing field. Innkeepers have toiled and invested hard-earned dollars to navigate (and even change) city hall to be recognized as legitimate businesses in communities across this continent. Between unfriendly zoning regulations, fire inspections, town council votes, food safety licensing, commercial kitchen requirements, occupancy taxes, etc, etc, etc – many in our industry worked tirelessly over the past three decades just to be allowed to open a professionally-run, four-bedroom B&B. Then you see how easily thousands of people are now offering lodging in unsafe, unregulated environments? I probably sound like sour grapes to many reading this – and that’s not my intent. I think there are legitimate concerns here.
Take the case that made national news last week involving a young woman who rented her apartment on AirBnB to someone who vandalized and robbed her. And the founder of AirBnB had the gaul to say thereafter that safety is a top concern of theirs? I couldn’t believe what I was reading. What exactly was AirBnB doing up to that point to ensure the safety of both the traveler and the person renting the room or apartment? Unless they were conducting background checks, how could they really do anything? Worse yet was a case in 2009 where a traveler was raped by someone who offered lodging through the site CouchSurfing.com. CouchSurfing and AirBnB are not quite the same breed of lodging (one is closer to vacation rental, while the other is closer to staying on a couch with a stranger - oh wait, that’s actually what it is), but both sites are only relying on traveler reviews and the wisdom of the community to provide some semblance of safety and trust.
My opinion, for what it’s worth, is that everyone should follow the law, and no web site should be allowed to propagate illegal products or services. If the law is wrong, outdated or unfair, then get the law changed. (Side bar – the NYC anti-short-term-rental law that passed in NY was terrible legislation, as it also outlawed legitimate, professionally-run B&Bs that have been paying taxes for years and years to the city – innkeepers are working hard on getting the law amended.) Vacation rentals, overnight sublets and the like are good and necessary options in our market. Think of Mardi Gras in New Orleans. Do you think such an event could thrive without all the illegal renting that goes on during such festivities? Same for the Masters in Augusta. You get the point. But when such lodging options are available every night of the year? It’s time for communities to step up and either go after these illegal rentals, or welcome them with regulations and taxation that are equal to what B&Bs must go through and pay. They benefit from the hard work of all the local people, businesses and agencies working to bring in tourists and travelers, but don’t contribute back in any way.
As of right now, these are my own opinions – not an official position of PAII. But that might change soon. My suggestion to innkeepers – if you are moved by the fair playing field argument and have concern for the safety of people visiting your town or city – is to alert your tax collectors, fire inspectors and zoning officials about properties on sites like AirBnB. I feel it necessary to reiterate – I’m all for vacation rentals (love staying in them, by the way) and other forms of short-term rentals, but not if they are breaking the law or evading their responsibilities to be regulated and taxed. Spread the word, folks.
Tags: AirBnB, Illegal, Vacation Rentals
Posted in Uncategorized | 19 Comments »
Jay Karen, President & CEO of the 
September 17, 2011 at 11:46 pm...
Dear Jay:
The first question I have for you is this: How old are you? It seems as if you are not aware of the fact that “renting a room in someone’s home” is how B&B got started and is in many areas the way it is still operated throughout the UK and on the Continent. The fact that such B&Bs in the USA started receiving horrible press in the 1980s is directly responsible for the formation of state groups, such as OBBG in 1988-1989, which instituted regulations and criteria designed to inform the traveling public (and the irritated travel writers who consistently gave a thumbs-down review to B&B travel due to poor accommodations, lies about quality, safety concerns, etc., etc., etc.) and promote/restore confidence in our industry as one offering lodgings of high quality (some UK and Continental folks think we have completely overdone that aspect and “ruined” the “homestay” experience of the original). My late husband and I were charter members of OBBG at Palmer House in Lincoln City, Oregon, and I have continued that membership now as R Rose Cottage B&B first in West Linn and subsequently in Portland. I think you are supersensitive to the subject and overreacting in your response. There is room for all of us. We don’t see the hotel/motel industry evincing a huge concern about being in the same publications/categories as those who offer more modest lodgings so, as an industry, why should we? It is up to the traveling public to be discrminating, and certainly price has to be one deciding factor. In this day of Internet reviews and whatnot, the public has ample opportunity for making selections based on their criteria without our intervention. As far as flouting regulations is concerned, yes, it would be better if the “authorities” would clamp down but, as I remember it from having dealt with a number of state and county licensing agencies, the squeaky wheel gets the grease (and this is certainly ever more the case these days when local jurisdictions are perennially short of funds for nearly everything much less policing the B&B industry, a nearly zero concern compared to some others) so checking on unlicensed B&B operations probably gets a yawn and not a whole lot else. And we are not really “subsidizing” their clandestine operations, are we? Our lodging tax in Oregon (by the state) goes for tourist promotion activites, and the counties (mine at least) delegate at least part of their part of that money towards that pursuit.
I think of it this way: If the younger generation can afford to travel and to do this it means staying in accommodations of modest means (in my youth that meant “hostel”), then the “bug” will have been planted and, as they can afford better places, they will migrate towards them. Let’s consider those simple lodgings stepping stones to future reservations at establishments which have our approval and support. Of course, if there is some truly blatant example of a really big operation passing itself off as a “homestay,” just to avoid taxes and regulation, blowing the whistle on that particular operation is certainly in order.
I think we need to emphasize what sets us apart by promoting our local industry memberships, licensing, whatever, and not do the negative thing against other types of lodging. Actually, Jay, I think you are a bit of a snob about all of this, but do forgive me for saying so.
In 2000, I attended a conference of OBBG in Ashland at which one of the conference speakers (Scott Crompton) said that within 10 years the small B&Bs (such as mine) would be out of business. Well, he is almost correct. It is very difficult to continually satisfy all of the requirements of an Internet-centered advertising scheme either financially or in expenditure of time. I would never, however, consider as a means of promoting my product the denigration of someone else’s efforts. I think that is the wrong approach to take. Everything positive is what I believe is the best way. When I receive a phone call for a reservation that I am not able to accept, I steer the caller directly to PMIA, our local group, or to OBBG, if the caller is also traveling throughout Oregon, and always say why I am doing that, because of inspections, licensing, etc., and also say (when asked to comment on some other B&B operation the caller may be considerating for accommodation which is not a member of any B&B organization)that we can only recommend B&Bs and inns who belong to an association which has high criteria for membership, an inspection program for compliance, and is licensed.
Thanks for letting us comment on this topic!
Sally Palmer
Innkeeper/Owner
Rose Cottage Bed & Breakfast
http://www.rosecottagebb.com
(503) 292-5475 (local)
(877) 292-5475 (toll-free)
September 19, 2011 at 10:38 pm...
Dear Jay,
Thank you for a thoughtful, intelligent letter regarding short term rentals. You are correct when you state that short term rentals are being given an unfair competitive advantage over B&B’s due to their regulatory requirements. The marketing behind short term rentals is intense, and it will eventually end the bed and breakfast businesses that are more heavily regulated. As president of a neighborhood association, I would like to point out some of the differences between a bed and breakfast (B&B) and a short term rental (STR) in our city, and to discuss some of the concerns and experiences that neighborhoods are having regarding short term rentals.
First, the sheer number of short term rentals has taken over numerous neighborhoods to the extent that neighbors are now moving out of the downtown neighborhoods to get away from them. In one beautiful downtown neighborhood, there are approximately 39 STRs, and the middle school there may soon close because of the lack of children in that neighborhood now. Some neighborhoods are loosing their affordable housing stock because bulk properties are being purchased for STRs. Neighborhoods are very quickly becoming rental sites for STRs since there is no regulation regarding their density.
For anyone uncertain about why neighbors are moving, please allow me to explain. STR guests are not known for their neighborly behavior. They park on the front yard, leave garbage everywhere, block their neighbors driveway, party throughout the night, and ignore the agreement they signed to occupy the property. STR owner’s are also not known for operating within code and compliance regulations. Many owners ignore occupancy limits, and numerous STRs will allow over a dozen people to occupy a property. Properties have become party houses within the neighborhood, and owners ignore the neighborhoods requests to bring their guests within compliance. Illegal signs are placed in front yards of properties advertising their businesses, and illegal Airstreams are even used to add more rooms for rent.
In contrast, there are about 20 B&B’s in the city. They are required to be inspected, licensed, and the owner must live onsite. Distance regulations are in place to keep neighborhoods from being overrun with them, and they are very heavily regulated. To my knowledge, there have never been any complaints regarding a single B&B ever.
Unless neighborhoods and bed and breakfast associations work together, we will all be consumed by STRs and our quality of living within the neighborhoods will drastically change. I recently noticed that bedandbreakfast.com is now allowing short term rentals to advertise on the local bed and breakfast directory. Since HomeAway (directory for short term rentals) owns bedandbreakfast.com, I was not surprised. However, I wonder how they would react if every B&B in the USA suddenly decided to NOT renew their annual membership until they quit allowing short term rentals to pose as a bed and breakfast on their site. The attorneys for HomeAway (based in Austin) have been at every single short term rental/neighborhood meeting, and they are always requesting no regulations for short term rentals. Their matra appears to be, “We don’t want to be regulated like the B&B’s!”
Yes Jay, you are correct to bring this subject to everyone’s attention. I would recommend that B&Bs get out of the kitchen and into their Mayor’s office….fast. Short term rentals will be the end of B&B’s in our city and numerous other cities as well, and B&Bs will be a fond memory of our past.
September 21, 2011 at 3:07 am...
Hi,
I am running a hostel in Budapest, it goes pretty well.
I also list two properties on airbnb. My hostel guests are X and Y generation people. My airbnb guests are not… Not at all! They are mostly in their mid 40’s and 50’s. They could all afford to stay in a whatever star hotel or B&B. But they don’t… When I ask them, why they stay with me rather than a hotel, they mostly reply something like this: it is cheaper, they are tired of hotels and they want to live like a local. They want to try something new.
Security is an issue, but staying at my listings is just as safe as it would be if you were living here as anyone else. Tax is an issue, that is true. But why would’t anyone pay tax? You loose a lot more if you get caught by the authorities.
I recommend you to take this train and start listing your rooms or B&B’s on the site. It is free. Don’t miss it!
September 25, 2011 at 8:03 am...
Agree with most of your points. As a B&B owner myself i would like to stay on the safe side of the law instead of facing and sort of legal trouble.
October 19, 2011 at 2:16 pm...
[...] just finished reading a post by Jay Karen on the PAII blog about why innkeepers should be worried about Airbnb. He has some rather compelling and legitimate points of concern, specifically about how [...]
January 17, 2012 at 4:56 pm...
It is also other UK apartment rental websites that are feeling slightly upset that airbnb do not charge or collect UK VAT on their 12% commission / mark up or the 3% they charge the owners. Many UK businesses already do the same thing as airbnb and have to include and pay 20% of their turnover to VAT, either that or they have to charge 20% VAT on to their commission. How are airbnb managing to have a UK Office and rent UK properties without accounting and paying VAT? It seems very unfair especially as they are not a UK company but taking businesses away from other UK companies that do pay VAT. Can anyone tell me how they are able to do this?
January 20, 2012 at 2:18 pm...
I think, somehow, somewhere along the lines, I understand where you are coming from, Jay. The issue with the Airbnb is the safety of the people who rent from those sites. Considering, having all of this in mind, The Multiple Dwelling law took effect May 1, 2011. I am aware of a blog that specifics details according to the law: Protect Vacation Rentals, (http://www.protect-vacation-rentals.com/). I find this web page to be informative and anyone who wants to learn anything about the laws should review it! Another thing is, it’ll classify what’s known as legal and illegal. But, what I don’t like about the law is that it places legitimate firms and bed & breakfast establishments in the same category as illegitimate online market places. This is something that I have noticed, which makes it a sad case to deal with. Basically it pigeonholes the companies who follow protocol.
February 2, 2012 at 9:42 am...
Dear all and especially dear Jay,
Thank you for your post. I cannot agree with you more Jay. And also with you ann. The amount of STR’s here in Amsterdam (The Netherlands) is enormous and I do have the feeling it is drying neighbourhoods out of local inhabitants. Airbnb is just an awful company (same as Wimdu). I tried to contact them to explain to them de rental rules in Amsterdam (which don’t allow most of the rental seen on airbnb). They don’t pick up or they don’t care.
I guess the only reason why they acted so quickly when someone was robbed is because of the threat to their multimillion investment.
They make rental seem like an easy way to make a quick buck (they even have a calculator on their site lol). But they don’t tell people that they are actually doing something illegal (tax evation and illegal rental).
Couple of weeks ago a girl was kicked out of her house by the housing corporation for renting on wimdu. Naive ofcourse but not nice if you’ve just been waiting for this house for 10 years! I think airbnb, wimdu, crashpadder, istopover etc should warn subscribers about the illegal activity they are getting into.
Ofcourse travellers want a local experience. But that’s what B&B’s are for. They don’t cause a drain as a B&B owner is obliged to actively live in the B&B itself. They are registered at the council and tax offices.
March 28, 2012 at 1:53 pm...
I think the state professional regulators should contact these Airbnb idiots and tell them they are doing something illegal. Perhaps they should all get a visit from their local regulator.
Better yet, get some public service time on their local tv stations to get the word out that these lodgings are illegal and unfair to those of us who got into business the right way and are following the rules – like collecting sales tax!
March 28, 2012 at 11:28 pm...
Instead of ruling out completely, I think websites that are ST oriented should become bnb friendly. BNB hosts can emphasize their licensing so that travelers can chose if they like to pay that premium. If anything, these companies are bringing in economic flow that may not have been possible previously. Are we regulating every transaction via craigslist (or even sales tax)? If anything AIRBNB, provides a safer, more legal conduit that just posting sublets in the newspaper.
October 17, 2012 at 7:42 pm...
Ann – are you seriously trying to tell us that 39 STR’s are closing middle schools? If the removal of 39 families from a downtown area is closing schools, imagine what 39 x ~100 tourists is doing to help your cities economy.
Personally I think the problem between B&B and STR rental laws (which vary state to state, city to city) is that most legitimate B&Bs have to jump through some seriously unrequired hoops to open up business.
November 4, 2012 at 3:51 pm...
I agree, short term rental owner should not break the law. All they have to do is to register their places at the local authorities and pay taxes after all rentals. It’s not a big deal, at least in Budapest. I guess it’s probably the same everywhere.
November 13, 2012 at 7:19 pm...
Bad things happen to guests and hosts due to Airbnb everyday. But Airbnb is a psychopathic predator wrapped in flashy packaging and social worker type customer service reps. When traveling people are more vulnerable and Airbnb seems to capitalize on that every day. They lie through their teeth, when you have a problem they offer you ridiculous options and say “the ball is in your court.” One option given me was to rip off the sheets, drive ten miles to get laundry soap come back and wash the sheets, clean the room of lots of trash and throw all the luggage in the room into the hallway. I was told by rep, they really can’t be mad at me for doing that since I paid for room. Yea, like she knows anything and Airbnb stands by nothing. When there is a problem they lie to both sides to play Judge Judy and esculate conflict. To make sure they can collect profit from at least one or both sides. They encourage lying when a host is flakey, because they play the blame angle. I have been in touch with the host, and he is more straightforward than Airbnb by a mile (even though he overbooked my room leaving me stranded at 10:30 without lodging in an expensive city. Air bnb promised me one thing last night and today have been calling the host over and over but avoiding my communication and have not issued the refund as promised. Seriously, their tactics are to wear people out and keep the money. They are very vile and despite the cool photos I would advise you don’t deal with such a unethical middleman. You are safer using your gut and validating identity of host/guest and just doing it alone via CL, Airbnb gives the illusion of authenticity and safety, but they are often the biggest wolf. Their policies lack a check in time/location when booking which is an avoidable bad site design responsible for many travelers frustrations.
December 23, 2012 at 11:32 am...
If B&B’s were priced more reasonably they wouldn’t have competition .
Simple market forces and play.
December 31, 2012 at 3:46 pm...
I’m not really sure where all this information is coming from (check your sources always), but I have been a host on Airbnb since December 2010 and pay taxes on every dollar I make through their site. I’m not sure why this article isn’t going after Craigslist members renting rooms out because they typically (I won’t generalize and say never) pay taxes on their sublets/rentals. Pulled directly from Airbnb host Dashboard: “The IRS requires that individuals and businesses declare their income. Airbnb will help individuals with this by issuing Form 1099 and/or Form 1042S at the end of the year. While we cannot provide you with specific tax advice, we recommend reading IRS Topic 415 – Renting Residential and Vacation Property (formerly Renting Vacation Property and Renting to Relatives), IRS Publication 527 and/or consulting your tax advisor.” Then we, as hosts, file our 1099 with the rest of our taxes. I do agree that Airbnb does NOT help hosts out with the exception of a friendly ear to hear their complaints, the guests are able to take advantage of the hosts in all aspects and ignore every rule in place by the hosts. It takes tough hosts to keep their guests in place and can often lead to confrontation. I have personally been screamed at, with spit flying because we asked guests to replace damaged goods at their fault. We have had people enter our home without permission (because another guest didn’t know what to do and let them in). We have had guests let other people (not registered through the site) enter our home. Etc Etc Etc I am on the hunt to find out more legalities, policies, ordinances, etc. to help protect Airbnb hosts from disrespectful guests in the future.
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March 15, 2013 at 3:19 pm...
People keep mentioning tax evasion from the privare owners but why do airbnb not pay tax in the UK? Surely they must have to pay some sort of UK tax or VAT? Does anyone know if they do?
April 16, 2013 at 10:53 am...
Apparently, airbnb have finally bitten the EU VAT bullet.
On their website they now state that they will add VAT to the ’service fee’ that a guest pays when making a reservation in accordance with the EU jurisdiction that the guest is booking in.
https://www.airbnb.co.uk/help/question/436
This is good news for airbnb’s EU based competitors, who have been suffering this unfair advantage for years as they either raise their prices by 20% or more, or absorb the VAT amount.
However, I wonder if EU tax collectors have knocked on airbnb’s door yet about the unpaid VAT from the past few years?
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