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Guilty By Association

AH&LA Again Takes Aim At Airbnb For Enabling Commercial Operators

Wednesday, May 11, 2016
Dennis Nessler
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The American Hotel & Lodging Association (AH&LA) continued its vigilance against online rental giant Airbnb as it relates to commercial activity, this time with a focus on the Chicago market on the heels of a newly released study.

The study examined activity on Airbnb in the city between October 2014 and September 2015 and was conducted by John O’Neill, professor of hospitality management and director of the Center for Hospitality Real Estate Strategy in the School of Hospitality Management at Penn State University. Chicago is the third of 14 cities profiled in a series of reports that make up a second phase of an analysis into the commercial activity being transacted on Airbnb’s platform.

The findings of the survey revealed that multi-unit operators generate nearly 40 percent, or $19 million, of Airbnb’s revenue in the Chicago region. In addition, 96 percent, or $47.6 million, of Airbnb’s revenue in the Chicago metropolitan area came from the nearly 75 percent of operators who listed their units for rent for more than 30 days per year. Furthermore, only 5 percent of hosts renting out three or more units drove some 24 percent, or $12 million, of Airbnb’s Chicago area revenue.

Vanessa Sinders, SVP of government affairs, AH&LA, talked about the challenge in front of the association and the lodging industry as a whole during a media conference call yesterday. “A significant and rapidly growing portion of Airbnb’s revenue in Chicago and other major U.S. cities comes from commercial operators who use Airbnb to rent out multiple residential properties year round just like a hotel, while avoiding the taxes and regulatory requirements with which hotels must comply to ensure the safety and security of guests and communities,” she said.

Sinders continued, “It’s clear a significant and growing part of Airbnb’s inventory is run by entities engaged in commercial activity. In many cases they are running illegal hotels and not adhering to the same laws that even the smallest of legitimate Bed and Breakfast’s do. This is an issue that is important to many stakeholders not just hotels. This is an issue that impacts every neighborhood and every community. Residents who live near illegal hotels have no way of knowing who is listing the property, much less renting it, and face chronic problems like excessive noise, unruly behavior, unhealthy living conditions and a revolving door of strangers next door. By flouting zoning laws these businesses disrupt communities and change the long-standing residential feel of neighborhoods.”

Marc Gordon, President and CEO of the Illinois Hotel & Lodging Association—which includes some 500 hotels and more than 40,000 employees—offered his perspective. “Since 2011 Chicago law requires short-term rental hosts to be licensed, but less than 200 of the more than 6,000 Chicago Airbnb units are currently licensed. This means millions of dollars have been lost in unpaid license fees, monies that could have been used for affordable housing,” he said.

The associations were asked what specifically they would like to see done in Chicago. “First of all we would very much like the law that exists in Chicago, the Vacation Rental Ordinance, to be enforced. We’ve been wanting that since it became effective January 1, 2011. We need these commercial operators to have a business license in Chicago like every other business, and make sure that that keeps a level playing field when hotels and Bed and Breakfasts have to compete with Airbnb,” said Gordon.

Sinders commented, “From our perspective at the national level we’re advocating for strong legislation across the country, in Chicago and other cities and states, that reins in illegal hotels.”

Also on the hand for the call was Kapra Fleming, owner of the House of Two Urns bed & breakfast, who was asked if she’d seen a financial impact from Airbnb. “I have seen a dramatic decrease in occupancy. In my small neighborhood in Chicago, where there are 20 guestrooms and three legitimate licensed Bed & Breakfasts, last summer we had over 450 rooms listed through Airbnb. Currently there are 320 listed for rent, and most of them are all under 100 dollars unless it’s an entire apartment. That has not only hurt our ADR, but this year I’m showing 25 percent decreases in occupancy per month,” she noted.

Sinders reinforced the ongoing message from the AH&LA. “The fact is Airbnb could take simple steps to crack down on illegal hotel operators and they have not. It’s been six months since we released our initial report and Airbnb has taken no serious steps to do this because illegal hotel operators drive a large and growing portion of their revenue. We believe that policymakers and the public deserve answers from Airbnb and we hope that the Chicago City Council addresses the unregulated behavior that is disrupting communities and undermining the pro-business climate that Chicago has worked so hard to cultivate,” she said.
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Dennis Nessler    Dennis Nessler
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