A recently signed bill in New York that imposes steep fines for advertising illegal short-term rentals is pitting Airbnb against a company that operates four hotels in New York City.
Last week, LaSalle Hotel Properties CEO Michael Barnello told investors that the law would be “a big boost in the arm for the business, certainly in terms of the pricing” if signed into law, according to transcript of the call. A week later, the company’s CFO, Kenneth Fuller, clarified the company’s position, stating that “it’s not about price or competition, it’s about a level playing field. It’s about the fact that these have been illegal hotels, essentially,” he told New York City-centric blog Gothamist on Thursday.
Now, in a letter sent on friday to LaSalle, Airbnb head of global policy Chris Lehane asks Barnello several pointed questions about his and the company’s stance on the matter, according to a copy of the letter obtained by Fortune.
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“What are you current policies as they relate to compression pricing, commonly referred to as price-gouging?” Lehane asks, along with whether Barnello knowingly mislead investors and analysts when he said the new law would boost his company’s business pricing strategy.
He adds: “If you agree with your chief Financial Officer and now believe that the New York law is ‘not about price or competition,’ will you unequivocally pledge to ban any and all price-gouging at your hotels?”
The recently passed law imposes fines of up to $7,500 for advertising short-term rentals that don’t comply with New York City’s regulations, which ban rentals of certain types of housing for less than 30 days without the host being present.
In his letter, Lehane also asks Barnello what percentage of the revenue his company earns from its New York City hotels is routed back to its headquarters in Maryland, in reference to Airbnb’s argument that the money its hosts earn help their local community. Airbnb takes a 3% cut from host earnings.
Lehane’s letter then addresses Barnello’s comments praising the American Hotel & Lodging Association’s regulatory efforts around short-term rentals, which Airbnb characterizes as opposing home-sharing, for obvious business reasons. Given Fuller’s comment that his company supports the rights of property owners to occasionally rent their homes for extra money, Lehane probes Barnello on whether he plans to ask the AHLA to modify its position on home-sharing or resign from the organization if it doesn’t, and how much money his company has contributed to the AHLA.
“If the big hotel industry really cares about middle class consumers, they’ll immediately and publicly answer these questions,” a company spokesman told Fortune.
Reached by phone, Fuller told Fortune that he isn’t yet aware of Airbnb’s letter to Barnello, but emphasized that Barnello was speaking hypothetically as the bill hadn’t yet been signed by Gov. Cuomo. And until the new law is enforced, LaSalle won’t know the true impact it will have on its business, he added.
It should be noted that following the bill’s signing into law, Airbnb said that most of its listings in New York City comply with regulations, so the impact will likely be minimal.
Fuller also said that the new law is “common sense” and that Airbnb could have avoided it by removing home listings that don’t comply with New York City’s regulations. This is something Airbnb has been largely resistant to do in general, though it did quietly remove about 1,500 listings last fall before it published data on its activity, and recently said it will begin to automatically bar hosts from listing more than one property in an effort to curb commercial listings. It has a similar policy in San Francisco.
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From the beginning, Airbnb has characterized the bill in New York as stemming from “backroom deals” between state legislators and the hotel industry. The company proposed to New York legislators policy and product changes it says would both address concerns around illegal rentals while allowing the company to operate, though they seemingly did nothing prevent Gov. Cuomo from signing the bill into law.
However, proponents of the law argue that it simply enforces existing regulations on short-term rentals, and not an attempt to keep the middle class from earning additional income.
Last Friday, Airbnb filed a lawsuit against Mayor de Blasio, Attorney General Eric Shneiderman, and the city of New York over the new law. In June, the company filed a similar lawsuit against its hometown of San Francisco after its Board of Supervisors passed new rules for fining websites that advertise illegal short-term rentals.
