Hotel CEOs Weigh In On Airbnb Abuses

Airbnb launched eight years ago and has grown rapidly over the past two years, earning a $25.5B valuation in December and reportedly doubling its 2014 booking total last year with about 8 million nights booked. Major hotel CEOs, who will speak at the fifth annual Bisnow Lodging and Investment Series in Washington, DC, on Sept. 21, say the room-sharing company can co-exist with the hotel industry, but condemned those who abuse the service and avoid lodging regulations. 

Airbnb can work well in areas with seasonal demand where there is not enough hotel supply, Interstate Hotels CEO Jim Abrahamson (above) says, but he adds that too often people abuse the service. 

"When I look at Airbnb and other home-sharing businesses, where the host is in residence and in full compliance with the law, I believe there’s a place for them when licensed, taxed and regulated in a legally compliant manner," Jim, who will speak at BLIS, tells Bisnow.

"What we’re really negative to as an industry," he continued, "is the so called 'illegal hotels' and those that choose to skirt the law by running multiple-unit businesses that aren’t in compliance with local zoning, disrupt neighborhoods, and don't take guest safety and security seriously."  

A Penn State study released in January found that in 12 major cities, 17% of Airbnb hosts rent out two or more residential properties year round, claiming these "multi-unit operators" take in nearly 40% of the Airbnb revenue in those cities. 

Airbnb admitted the service can be abused in April when it promised to remove listings it believes "are offered by hosts with multiple entire home listings or are offered by unwelcome commercial operators." 

Cities worry owners who use Airbnb to rent their places out full time are effectively taking that property out of the housing market, reducing the available supply in areas already suffering housing shortages.

One of those cities, San Francisco, passed a law in June imposing heavy fines on any Airbnb listings not registered with the city. The company then sued the city claiming the law violated its free speech rights.  

For the hotel industry, these illegal hotels cause the most concern in cities where hotel prices are most expensive, like San Francisco, New York and Miami, DiamondRock Hospitality CEO Mark Brugger, above, tells Bisnow.

"The worry and focus of the legislative efforts is illegal hotels," Mark, who will also speak at BLIS, says. "Someone who aggregates six or 12 units that would be apartments and turns those into hotel rooms through Airbnb, that will have an impact. If it grows, it will have a big impact."

The impact of Airbnb on the hotel industry can be amplified when cities host major events, Host Hotels & Resorts CEO Ed Walter, BLIS' keynote speaker, tells Bisnow.

"When a market has a big event, like the DNC in Philadelphia, you see the supply of rooms available on Airbnb increase," Mark says. "We generally believe that the fact that more units are available on Airbnb is having some effect on our ability to increase prices at the same rate that we might have in the past. When those big events come in, we're still seeing significant occupancy and rate growth, but intuitively it might have been a little bit better if Airbnb didn’t exist." 

Ed joined Jim and Mark in condemning illegal hotels, saying he supports cities' efforts to regulate the service.

"A lot of cities are now sort of saying, it's one thing if you want to do it yourself but if you want to create a virtual hotel and be in the business you have to follow the rules," Ed says. "We're seeing legislation seeking to level the playing field a bit and have some sensible regulations around people's access to Airbnb."  

There's no way Airbnb won't be a hot topic of conversation at BLIS on Sept. 21 at the J.W. Marriott in Washington, DC.