"Besides, it’s easier and cheaper to lobby government to get rid of
competitors than it is to do the hard work of innovating and cutting
costs to compete in the marketplace."
HOTEL INDUSTRY USING GOVERNMENT
TO CRUSH "AIRBNB"
BY MICHAEL TENNANT
republished below in full unedited for informational, educational, and research purposes:
Whenever an entrepreneur enters the marketplace, one can be certain
that established firms in the same industry will try to use the power of
the state to crush their upstart competitor, particularly if he begins
taking market share from them. Such is the case with Airbnb, which has
seen a significant increase in opposition from all levels of government
thanks to a concerted effort on the part of the hotel industry, reports
the
New York Times.
The Times obtained copies of documents recently presented to
the board of the American Hotel and Lodging Association, a trade group
that includes such juggernauts as Marriott International and Hilton
Worldwide. “In the documents,” writes the paper, “the group sketched out
the progress it had already made against Airbnb, and described how it
planned to rein in the start-up in the future.” The November board
meeting’s minutes said the plan was a “multipronged, national campaign
approach at the local, state and federal level.”
That the industry would want to put Airbnb out of business is quite understandable. According to
Hospitality Net,
a hotel-industry website, a report commissioned by the Hotel
Association estimated that Airbnb costs hotels about $450 million in
direct revenue per year, with additional losses in the form of lost food
and beverage sales and other service fees. The
Times says
Airbnb, which enables people to rent out unused living space on a
short-term basis, “has raised more than $3 billion and secured a $1
billion line of credit” and is valued at about $30 billion. In addition,
the increase in the supply of lodging has naturally depressed its
price, even during peak periods such as holidays, which has also cut
into hotels’ bottom lines.
Government, meanwhile, resents the fact that Airbnb isn’t subject to
the onerous taxes it levies on hotel rooms. Hospitality Net reports that
local, state, and federal governments miss out on (i.e., are unable to
confiscate) $226 million in tax revenues per year from the reduction in
hotel stays in New York City alone.
Thus, it isn’t hard to see why the hotel industry and politicians would join forces to take down Airbnb.
Indeed, the documents obtained by the
Times list one of the
Hotel Association’s objectives: “Build on the success of 2016 efforts to
ensure comprehensive legislation in key markets around the country and
create a receptive environment to launch a wave of strong bills at the
state level while advancing a national narrative that furthers the focus
on reining in commercial operators and the need for commonsense
regulations on short-term rentals.”
In other words, use government to cripple, if not destroy, Airbnb.
The group’s efforts have already borne fruit. New York Governor Andrew Cuomo (D) signed
legislation
in October imposing fines of up to $7,500 on New York City apartment
dwellers merely for listing their apartments on Airbnb or similar
websites. Senators Brian Schatz (D-Hawaii), Elizabeth Warren (D-Mass.),
and Dianne Feinstein (D-Calif.) — like Cuomo, members of the party that
supposedly defends the little guy from big corporations — sent a letter
to the Federal Trade Commission in July “raising concerns about the
short-term rental industry,” according to the documents.
Furthermore, writes the
Times:
The association also met with legislators
and attorneys general in dozens of other states to discuss how Airbnb
hosts often do not comply with rules imposed on hotels, like
anti-discrimination legislation, local tax collection laws, and safety
and fire inspection standards. In some markets, the group said, Airbnb
is dodging payment of local lodging taxes. In other places, it
encouraged officials not to collect taxes from Airbnb hosts so as not to
legitimize short-term rentals.
The association claimed legal and
regulatory victories last year in Chicago, San Francisco and Los
Angeles, as well as in states like Virginia, Tennessee and Utah, where
laws were being passed to restrict Airbnb activity. The organization
also funded research conducted by a professor at Pennsylvania State
University to show that many Airbnb hosts were breaking the law….
This year, the association plans to fund
more anti-Airbnb research and roll out a testimonial campaign of people
hurt by home sharing, “to provide a counterweight to Airbnb’s strategy
of presenting a unified, working-class face,” according to the group’s
documents.
In short, as Airbnb spokesman Nick Papas told the newspaper, “The
hotel cartel is intent on short-sheeting the middle class so they can
keep price-gouging consumers.”
The industry, of course, denies that its efforts have anything at all
to do with declining profits. “Airbnb is operating a lodging industry,
but it is not playing by the same rules,” Troy Flanagan, the American
Hotel and Lodging Association’s vice president for state and local
government affairs, told the Times.
But if the problem is that there are too many rules unfairly
burdening hotel operators, why not lobby to relax those rules rather
than to impose them — and more — on Airbnb? Probably because, as with
most regulations, the ones governing the hotel industry exist primarily
to suppress competition. Large, existing firms can afford the cost of
complying with the regulations, while smaller competitors cannot.
Besides, it’s easier and cheaper to lobby government to get rid of
competitors than it is to do the hard work of innovating and cutting
costs to compete in the marketplace.