How should we understand Airbnb? Good or Bad?

The Airbnb consumer proposition is appealing to significant market segment, but by no means all. Garry Wilson Managing Director – Product & Purchasing, TUI Group pointed out at WTM this month that operators like TUI are in a different market place offering a different fully integrated product to consumers. Nathan Blecharczyk, one the founders of Airbnb, argues that the willingness of people to stay in the home of a stranger demonstrates the demand for personal connections while travelling and that Airbnb enables travellers to “experience a place like you live there”  What we’ve demonstrated is there’s an immense appetite to travel more authentically and immerse yourself in culture… as opposed to having a commoditised experience.. ” Airbnb offers a significantly differentiated product and they are extending that differentiation, bringing hosts and guests closer together: “….going for a bike ride on their favourite bike route or doing a game of Frisbee, something as simple as that …. connecting with real people having a good time, that’s something not currently available in the professionalised world of hospitality.” more

In November Airbnb launched Trips. Tourists will be able to create itineraries as well as book accommodation via the Trips upgrade to the Airbnb app. more 

This year’s Industry Report for WTM London included the results of a poll of 1,145 British holidaymakers, all of whom had taken at least a seven-day summer holiday overseas, or in the UK, in 2015. Only 12% of UK holidaymakers reported that they had used Airbnb and of those only 60% said that they would use it again. Of those who have not used it 30% have no intention of doing so. This does not suggest that Airbnb has been as disruptive as some commentators have suggested. more

From a resident’s perspective, it is more complicated.

The experience of a neighbouring homeowner or tenant having occasional house guests, whether they are paying for the privilege or not, is very different from living next to a licensed or unlicensed property wholly let for significant parts of the year – particularly if your neighbourhood is perceived as a great place to party. If the property is owned by a non-resident even the rental income will almost certainly not enter the local economy and it is highly unlikely to be taxed. Unlicensed property rentals are in some cities and resort areas a significant part of the black economy.

If you are running a business and successfully avoiding tax on your income you are likely to favour Airbnb as your route to market. As you are unlikely to be present at the same time as your paying guests you do not suffer the noise or the unruly behaviour experienced in areas like Barconeleta or Kreuzberg.

If you are a local person with noisy and disruptive neighbours you are likely to protest and demand that the local authorities act to protect the quality of your life in your neighbourhood – and ensure that the property owners who are making significant money from letting out whole properties are paying tax.

A resident may be more sympathetic to a neighbour who has friends to stay or paying guests. Your neighbour is there to ensure that their guests treat the shared neighbourhood and its residents with respect. Income earned from housing paying guests may enable people to pay the rent and stay in an area where housing costs are rising. If you like your neighbour and his or her guests are not disruptive, you are likely to be sympathetic.

However, if the number of people sub-letting in your neighbourhood is growing and if more and more properties are being wholly let for weeks at a time, with mounting levels of disruption and inflation in rental costs you are likely to be hostile.

Airbnb is growing fast and its “implied valuation at its most recent funding round was $30 billion; the market capitalization of Hilton Worldwide Holdings is $22 billion. Airbnb’s 2.3 million-room inventory is bigger than the three largest hotel chains — Hilton, Marriott International Inc. and InterContinental Hotels Group Plc — combined.” source

Cities are developing new forms of regulation to differentiate between whole property lets through Airbnb or other distribution channels and the occasional renting of spare rooms to guests to provide a supplementary income and help out with the rent – that is the sharing economy. Unlicensed properties rented out for large part of the year are not. These properties may or may not be licensed and if the owner is never or rarely resident there may be health and safety issues.

Cities will respond to regulate those renting out property through Airbnb in diverse ways, dealing with the issues which arise in particularly cities and neighbourhoods, planning, zoning, licensing, taxation, building regulations and a host of other regulation and management strategies are available and are likely to be deployed when issues arise. The major driving force in most cities is the housing shortage and rising rents.

Berlin: since May 2916 private tourism rentals are being limited by a new law Zweckentfremdungsverbot – prohibiting improper use. Homeowners are permitted to rent out only spare rooms rather than entire homes. more

Barcelona has fined homesharing websites Airbnb and Homeaway 600,000 euros ($633,600) each for advertising and renting out apartments to tourists without a license. Airbnb and Homeaway were identified as repeat offenders having illegally advertised 3,812 and 1,744 properties respectively. An additional nine rental sites are expected to also face fines up to 30,000 euros for failing to follow regional tourism laws. The Mayor argues that “It shouldn’t be possible that thousands of apartments are operating without a license, illegally, without paying tax and at the peril of neighboring residents,” Airbnb is appealing. more

Dublin:  there are reported to be 2,000 Dublin properties available on Airbnb’s website alone. Frank McDonald, chairman of Temple Bar Residents’ Association, cited one instance where a two-bedroom apartment advertised for sale through Daft.ie for €425,000 had a declared income of €79,000 through Airbnb in the previous year. Rising rents are making families homeless and the city is accommodating them in hotel rooms. “… if you look up the Daft.ie website, you will find that there’s only 1,200 to 1,300 apartments for letting to live in in the city at the moment. … And yet there’s well over 2,000 available for short-term holiday use. That is something that is, in my opinion, a deeply antisocial phenomenon at a time when the city has a housing crisis.” more

London: Sadiq Khan, Mayor of London, has raised the possibility of an ‘Airbnb law’ over “concerns” that the rental service may be affecting the availability of long-term rentals in the capital. In his letter to MPs, the Mayor  said that he “supports the right of people to benefit from renting out their homes for short periods” – but this “must be balanced against the need to ensure that Londoners are not adversely affected”. “If boroughs are finding that the legislation needs to be revisited to make sure that we find a better way of balancing the benefits of the sharing economy with the protection of local residents and the retention of housing for long-term use, then I will be happy to work with them and discuss with Government whether any changes may be needed.” more

The Residential Landlords Association (RLA) claims that landlords are taking their flats off the open market, and advertising them instead on holiday websites like Airbnb. The RLA says 41% of properties advertised on Airbnb in the capital are multiple listings – involving one owner advertising several properties. “Given the pressures faced in the capital it is important that properties advertised as being available for more than 90 days a year are genuine holiday lets with appropriate planning permission,” said RLA policy director David Smith. “Otherwise, as well as taking rental stock off the market for those looking for somewhere to live, they are also putting tenants in a vulnerable position without all the protections offered by a tenancy agreement.” more

 

New York: Airbnb is contesting new legislation which would enable the state to fine people who advertise vacant apartments in a multi-unit building for 30 days or less. Fines could be as high as $7,500 for repeat offenders, threatening Airbnb’s operations in the state. Residents are allowed to rent out a room in their house or apartment as long as they are also staying there. more

San Francisco: Airbnb started in the city, there is now conflict between the city and Airbnb over enforcement with city moving to fine Airbnb for all the unregistered properties it markets. Airbnb denies that it should be responsible for checking that all the properties it lists are registered. more and the detail

Nathan Blecharczyk co-founder of Airbnb argues that it is part of the solution to rising rents because it helps make them affordable: “Airbnb can make it more affordable to have an apartment in London by making sure it’s fully utilised, whether renting your extra bedroom, or when you’re away on a trip and getting extra bucks to subsidise your rent.” more

Airbnb, good or bad? It depends on the circumstances and the ability of local authorities effectively to regulate.

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WTM November 2016 Disintermediation and Destination Management   Video

The growth of budget scheduled airlines, Airbnb and a host of other intermediaries enabling travellers and holidaymakers to engage directly without the services of a tour operator or registered and regulated accommodation provider in the destination is the latest ‘revolution’ in travel. How much has really changed? What are the implications for hotel companies and registered accommodation providers? How can these tourists and new tourism service providers best be managed in the destination?

Interviewer: Martin Brackenbury
Garry Wilson, Managing Director – Product and Purchasing at TUI Group
James McClure, UK & Ireland General Manager, Airbnb
Anja Hartung Sfyrla, Head of Business Development, VisitDenmark
Jordi William Carnes, General Manager of Turisme de Barcelona.
Nikki White Wright Director of Destinations and Sustainability at ABTA

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Possible deregulation of property rentals in the UK 

There have been reports in Spain about the protests against Airbnb in New York

Reviews of Tom Slee’s What’s Yours is Mine: Against the Sharing Economy  trenchant critique of the sharing economy. more 

 

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Harold Goodwin