Airbnb: Unregulated hotels or financial lifeline?

SHARE Airbnb: Unregulated hotels or financial lifeline?

Former Chicago Ald. Will Burns (4th) talks to 1871 Chief Operations Officer Tom Alexander about the booming “home-sharing” market in Chicago. Burns resigned his council seat in February to take a job at Airbnb, a home-sharing website. | Andy Grimm/Sun-Times

A hospitality industry group released a stinging report on Tuesday that contends the “home-sharing” website Airbnb is running an unregulated hotel marketplace that dodges local taxes, endangers neighbors and dries up the already tight rental market.

But a former alderman, now working for Airbnb, countered that the business has provided a financial lifeline for many homeowners renting out their property to help make ends meet.

The study was released as the City Council prepares to consider Mayor Rahm Emanuel’s newly revised plan to regulate and tax the burgeoning home-sharing industry.

The mayor wants to slap a 4 percent surcharge on Airbnb and use the estimated $2 million in revenue to bolster city services aimed at combating chronic homelessness.

The hospitality industry report was prepared for the American Hotel & Lodging Association by John O’Neill, director of the Center for Hospitality Real Estate Strategy at Penn State University’s School of Hospitality Management.

It argues that Airbnb and other home-sharing services are dominated not by middle-class homeowners renting out rooms or their entire homes to supplement their income, but by commercial operators trying to skirt city regulations and avoid paying local taxes.

After examining Airbnb activity from October 2014 through September 2015, O’Neill argues that:

  • Nearly 75 percent of Airbnb operators listed their units for rent for more than 30 days a year, generating $47.6 million or nearly 96 percent of the company’s total revenue in the Chicago area.
  • $28.8 million or nearly 60 percent of Airbnb’s revenues were generated by commercial operators who listed their units for rent for more than half the year.
  • Nearly 25 percent of Airbnb’s revenue, or $12 million, came from full-time operators who listed their units for rent 360 days or more each year.
  • 40 percent of Airbnb’s local revenue came from operators listing more than one unit for rent.

In an emailed statement, Airbnb spokesman Christopher Nulty dismissed the hotel industry’s study as “factually inaccurate.” He called it “the latest example of the industry’s attempt to mislead and manipulate instead of accepting that an increasing number of consumers and cities are embracing the tremendous benefits of home sharing.”

Nulty said the hotel association’s analysis was based on the number of days listings were shown as available for rent, not the actual number of days rented. Only about 3 percent of Airbnb listings were rented out more than 180 days, Nulty said. Even before the city imposed surcharges on short-term rentals, the company paid hotel taxes to the city. Nulty argued in a statement:

  • Airbnb has been collecting and remitting hotel taxes on every transaction on our platform in Chicago since February 2015. AHLA’s claim that the city has lost ‘millions in hotel taxes’ is not based on fact.
  • 82 percent of Airbnb hosts in Chicago are sharing their primary residences. During the same time period as AHLA’s study, the typical annual earnings for an entire home listing was $5,800, and the typical nights hosted was 37.
  • When a guests stays in an Airbnb listing 97 percent of what the host charges stays with the hosts.

Vanessa Sinders, senior vice president of governmental affairs for the American Hotel & Lodging Association, argued its study underscores the need for Chicago to rein in the illegal operators.

“Home sharing and occasional home rentals have been going on for decades. It’s something we support. That practice is not our focus,” Sinders said during a conference call with local reporters. “The disturbing trend is the commercial operators who use Airbnb to rent out multiple properties year-round while avoiding taxes. . . . These are not just occasional renters and individuals making occasional money by renting their homes . . . It’s clear that a significant and growing part of Airbnb’s inventory [are running] illegal hotels and not adhering to the same laws that even the smallest B&B’s do.”

Meanwhile, at a question-and-answer session at the city’s 1871 tech entrepreneurship hub, former Ald. Will Burns, who stepped down from his seat as 4th Ward alderman in February to take a job with Airbnb, said he hopes his former colleagues on the City Council can find a way to support home-sharing sites despite fierce opposition from the hotel industry, realtors and others who say an influx of short-term visitors could harm the city’s neighborhoods.

“Our No. 1 objective is we want people to be able to host, we want people to be able to earn money,” Burns said Tuesday.

“And we want an opportunity for this company to be legal,” he said. “And we want for the people that are doing this work to do it without someone trying to know that they are going to do this, without someone trying to shut them down or ticket them or arrest them.”

Near West Side resident Valerie Landis said at the presentation that renting out the second bedroom in her two-bedroom condo to visitors is a financial lifeline.

Airbnb rentals “are paying my mortgage most months,” said Landis, who said she overspent her budget remodeling her condo and took a pay cut to work for a tech startup. The more than 60 guests who have stayed with her since last July have added about $15,000 to her bank account, allowing her to pay off an over-budget remodeling project and absorb a pay cut she took when she hired on at a medical device startup.

“I’m worried. I want to make sure the city gets it right,” Landis said.

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