Tuesday, September 29, 2015

Airbnb – Part 10

PAII provided input to the subcommittee for their hearings on the Sharing Economy held on Tuesday 29, September 2015. 
25 September, 2015
To: The Honorable Michael C. Burgess, MD, Jan Schakowsky, and Committee members, U.S.    House Energy and Commerce Subcommittee on Commerce, Manufacturing & Trade

Subject:  The Sharing Economy
The Professional Association of Innkeepers International (PAII), the largest association of B&Bs in the United States, is pleased to provide input and information to the Subcommittee on Commerce, Manufacturing & Trade about the so called “Sharing Economy”, and specifically about Airbnb.   Our organization’s position on Short Tern Rentals is very clearly stated in our 2013 Policy Statement.  What we want is simple – level the playing field! 

The major concern for our members is that thousands of these small businesses are being severely damaged by the Airbnb behemoth who's member facilities do not have to deal with the expense of compliance with Zoning Ordinances, Heath Department Regulation, Building Codes, Fire and Safety Codes, ABC Regulations, Commercial Liability Insurance and Federal, State, and Local Taxes that all legal B&Bs (and Hotels) must comply with – yet they serve the same consumers our members do.  
Likewise, the traveling public has no idea that many of Airbnb member facilities may be uninsured, do not meet basic fire, safety and building requirements, and could be downright unhealthy because they do not meet rudimentary food preparation or cleanliness standards.  

While no one likes taxes, and we would all like to see taxes reduced or eliminated, it is grossly unfair to those that play by the existing rules to carry the burden for those that don't.  Either everybody pays them - or no one should pay them.  

We think the idea of a "Sharing Economy" is great - as long as it is fair and "Sharing" for all.  

PAII representatives attended a Federal Trade Commission (FTC) Workshop on June 9, 2015 about the so called “Sharing Economy”.  We were disturbed that the FTC, that has a mission to protect consumers and competition, seemed to be supportive of Airbnb, Uber and similar companies that clearly do not adequately protect consumers and that have put thousands of legal small businesses throughout the United States in jeopardy. We are encouraged that your Subcommittee is taking the effort to seriously look into the inequities presented by some elements of the “Sharing Economy”.  

Airbnb frequently presents themselves as a simple group of entrepreneurs and the protector of poor and Grandma and Grandpa’s mortgage by stating that they allow their members to get some additional income by renting out an available room.  Airbnb proposes that their member properties certainly should not have to adhere to the same “old” rules, regulations, taxes and laws that the hotel chains or legal B&Bs have to.  They emphasize that the consumer does not need all the regulatory protection currently available, that these old “Public Regulations” are being overtaken by “Private Regulation” (rating sites, like TripAdvisor) and that applying decades old regulations and taxes to new entrants into the market (like Airbnb) inhibits innovation.. 
  • Airbnb frequently calls themselves a “Platform” or “Application” for peer to peer interactions that allows consumers and sellers to interact without traditional encumbrances that most of today’s businesses must adhere to.  They stress that a Free Market Economy is good and “meaningful” and that the Sharing Economy is the “natural next step”.  While this is a great sales pitch it is based on false premises and creates substantive inequalities in the marketplace:
  • First, Airbnb is not simply a benevolent entity for the triumph of innovative startups over old, evil, businesses.  Airbnb is a $25 BILLION Dollar Corporation that had over 25 Million bookings in a single year and expects almost three times that number in 2015.
  • The majority of income from their rentals does not go to Mom and Pop operations, the money goes to Airbnb and landlords renting multiple rooms, or in many cases, multiple rooms or apartments in multiple buildings. 
  •  By using the term “Platform or “Application” Airbnb often appears to be nothing more than an inanimate object, but in reality they are a huge Company bent on dominating the market. The sheer size and profit making power of this multi-billion dollar BUSINESS is essentially swept under the table because they are a “Platform.”  While the terms “Platform” or “Application” are not, by themselves incorrect, their use creates an interesting dynamic because a “Platform” is a thing and is devoid of sellers and customers (people) who may be pleased or injured or unhappy with what the “Platform” does to them.        
  • The oft heard contention that “Rating Systems” or “Platforms” are better at policing sellers and protecting consumers than are Government Regulations is full of fallacies.

a.      The fact is that these “Platforms” or “Apps” are also BIG BUSINESSES, who want to make big profits and who often charge sellers to list on their sites or charge a transaction fee – or both.  That these systems do not always present a “neutral” view of a seller seems to be ignored.  Because it is a “thing” or “system” does not make it trustworthy.  Airbnb is BOTH a listing and selling platform and a rating platform – and a BIG BUSINESS.
b.     The assumption that use of “rating systems” to replace laws and regulations designed to protect guests from harm is both scary and ridiculous.  When was the last time you saw a rating system ask the customer if they saw a Smoke or CO detectors, if their food was properly prepared and was safe to eat, saw an escape plan for their room or saw an ABC License.  The average guest at a hotel, legal B&B, Airbnb property or any other short term lodging facility doesn’t even think about safety, building codes, security, health and food issues or the properties insurance because they believe these are covered by various laws and regulations.  Likewise, they would never think to ask if the lodging facility pays taxes – they assume everything is legal.  To the unsuspecting guest – everything is covered - by the same “decades old regulations” they have relied on in the past – in reality it is definitely “buyer beware”.           

  • The issue of “fairness” (compliance with taxes and laws and regulations) is essentially ignored by Airbnb and many of its listing members.  Airbnb encourages members to be in compliance with local laws and regulations but does not require compliance.  Legal B&Bs provide a mandated legal, tax paying insured, safe, healthy, sanitary and secure guest environment and cannot discriminate because they are governed by government regulations.  Airbnb properties may or may not comply and, according the Harvard and other studies (*), both guests and owners can and do discriminate.  
  • Being compliant with Government regulations and paying taxes is not cheap – which means that legal B&Bs are put at a significant financial disadvantage when competing with Airbnb facilities. While Airbnb has repeatedly indicated that they want their member properties to be safe and compliant in reality they “talk the talk” and don’t “walk the walk”.   Airbnb could easily enforce compliance for their member properties – but they only “suggest” or “recommend”, and many properties, if not most, ignore the laws, codes, regulations and taxes.  Legal B&B’s don’t have an option. 
  • The rapidly increasing number of Airbnb properties in big cities (there are thousands of them) is having a detrimental impact on available public housing at a time when affordable housing is desperately needed.  Landlords, owners of apartment buildings or just ordinary house or apartment owners are pulling houses and units off the affordable renters market and listing then in Airbnb.  Is this “Sharing”?  Is this “Fair”? 

Finally, and again, PAII thinks a "Sharing Economy" is great - as long as it is “Fair” and "Sharing" for everyone.  

Respectfully Submitted,

John C. North
PAII, Board of Directors
Innkeeper, Mayhurst Inn
540 672-5597


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