Leading Meeting Professionals

Professional Convention Management Association

April 28 2014

This Lawsuit Holds Serious Implications For The Hotel Industry

By David McMillin
Airbnb

A few weeks ago, we questioned why the hotel industry didn’t seem too concerned about California-based hospitality company Airbnb. Now, it looks like the government is actually more worried about the peer-to-peer rental service, and it’s taking steps that could dramatically impact the start-up’s growth path.

Last week, New York Attorney General Eric Schneiderman and Airbnb executives squared off over whether more than 12,000 of the site’s New York City listings violate a state law that prohibits owners from renting their homes for fewer than 30 days unless they are also present. Schneiderman subpoenaed the information of the owners of all the properties in question. Based on Airbnb’s business model, it’s safe to say that there are plenty of names on the list that are breaking the law.

However, Airbnb public policy expert David Hantman questions whether that law is actually doing everyday citizens any good.

“We’ve heard from countless Airbnb hosts in New York who have been able to pay their bills and stay in their homes thanks to Airbnb,” Hantman recently wrote in a blog. “All told, 62 percent of Airbnb hosts in New York said Airbnb helped them stay in their homes, and the typical Airbnb host in New York earns $7,530 per year - a modest, but significant amount that can make a huge difference for families.”

Hantman adds that businesses feel the impact of the big difference, too. He estimates that Airbnb will generate $768 million in economic activity while supporting 6,600 jobs in New York City this year alone.

Looking And Acting Like A Major Hotel Chain

At an event for Crain’s readers in New York, Schneiderman called out Hantman’s stance of goodwill.

“I would urge all of you interested in what Airbnb is doing to look at the dramatic difference between what they’re telling the public about all these nice people trying to make ends meet and what they are telling people they are seeking investments from as they move toward an enormous IPO,” Schneiderman told the audience.

“What they are telling investors is, ‘We just passed Hyatt in the number of hotel rooms. We just passed Hilton,’” Schneiderman added.

SEE ALSO: 5 Ways Hotels Are Using Design To Make Meetings Better

Warren Buffett Booking An Airbnb Room Block?

While Airbnb is making plenty of headlines in the courtroom, many upscale hoteliers may still believe that the company is geared toward a demographic that might never book their rooms anyway. Here’s a name that might alter that perception: Warren Buffett. The second-richest man in America is a supporter of Airbnb. Buffett recently voiced his discontent with hoteliers in Omaha who raise room rates in the time frame surrounding the annual meeting of Buffett’s Berkshire Hathaway, and he actually recommended that attendees look for more affordable options on the Airbnb site. A report from The Wall Street Journal also suggests that Buffett is in talks with Airbnb to offer a block of rooms for the 2015 meeting.

The outcome of the New York lawsuit could set a precedent for other cities around the world. There is no word yet on when Judge Gerald W. Connolly will make a decision on the case.

SEE ALSO: 3 Trends That Will Redefine Hotels

The rise of new competitors such as Airbnb isn’t the only new concern for hoteliers. Click here to see some of the biggest challenges facing the industry today.

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