Airbnb Runs ‘Illegal Hotels,’ Hotel Industry Study Claims

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Is the fastest-growing travel site taking short cuts to the top? That’s the conclusion of a new Penn State University analysis of Airbnb bookings– funded by a major hotel group.

The study was funded by the American Hotel & Lodging Association (AH&LA), a trade group that is in direct conflict with Airbnb. The report found that nearly 30% ($378 million) of Airbnb’s revenue in in 12 of the nation’s largest metropolitan statistical areas came from “full-time operators,” with rentals available 360 days a year. Each of these operators averaged more than $140,000 in revenue during the period studied, the research concluded.

These units essentially amount to an “illegal” hotel — and one that puts traditional hotels at a competitive disadvantage, according to Katherine Lugar, AH&LA’s president. “Our industry thrives on competition each and every day, operating on a level and legal playing field,” she says, claiming these gray market hotel operators are using Airbnb as “a platform for dodging taxes, skirting the law and flouting health and safety standards.”

The research comes on the heels of fresh numbers that suggest Airbnb is the fastest-growing travel site on the Internet. The survey, released by SimilarWeb, found Airbnb rose 339 places in rankings over a year and is now “an established star” in the travel sector. The online accommodation community racked up an average of 94.9 million monthly visits last year, engaging users for an average of 11 minutes per session, visiting an average of 13 pages. It was also last year’s fastest-growing site, according to SimilarWeb.

“The Penn State study shows that the hotel industry gets what it pays for, which in this case is a specious study intended to mislead and manipulate,” said Airbnb spokesman Nick Papas. “Airbnb is succeeding for the very simple reason that our hosts — the vast majority of whom are middle-class people sharing their homes in order to create supplemental income — provide guests authentic, transformative experiences.”

There’s a bigger picture here. Trade organizations typically fund studies like this when they have a long-range goal — in this case, probably regulation at the federal level that would rein in sharing sites like Airbnb. It’s legislation that Airbnb, currently valued at $24 billion, will no doubt fight with its considerable resources, not to mention the tens of thousands of satisfied customers and hosts.

Among Penn State’s findings:

  • The cities with the largest number of full-time operators include New York and Miami on the East Coast and Los Angeles and San Francisco on the West Coast.
  • Individuals or entities renting out two or more residential properties on Airbnb account for 17% of hosts in the twelve cities studied, and this rapidly growing segment of “multi-unit operators” drives nearly 40% of the revenue in those markets, which equates to more than half a billion dollars a year.
  • The growth in what it calls Airbnb “mega-operators” (those renting out three or more units) was the largest, increasing from $16.1 million in September 2014 to $29.2 million in September 2015, an 81.4 percent increase. Airbnb mega-operators increased from 1,171 in September 2014 to 2,193 in September 2015, an 87.3% increase.

“The study shows an explosion in activity among multi-unit hosts and the rise of full-time operators in each of the 12 markets we analyzed,” said John O’Neill, director of the Center for Hospitality Real Estate Strategy at Pennsylvania State University, who directed the research. “Operators renting out three or more units represent a disproportionate share of revenue with only 7% driving more than $325 million in the period studied.”

Papas, the Airbnb spokesman, sad the report uses misleading data “to make false claims and attack middle class families who share their homes and use the money they earn to pay the bills.”He added that “the overwhelming majority” of Airbnb hosts are middle-class people who occasionally share only the home in which they live. “While Airbnb hosts keep 97% of the price they charge for their listings,” he adds, “hotels take most of the money they earn out of the community.”

In the lodging sector, cities have been slow to react to the sharing economy. Two of the most prominent standouts include San Francisco, which recently asked Airbnb for help in cracking down on illegal hotels, and New York, with which Airbnb recently agreed to share booking data in an apparent effort to prevent further regulation.


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