Council passes bill to regulate Airbnb: Aids hotel industry

CJS News

By Kinga Rajzak

NEW YORK – The City Council has voted to force Airbnb to disclose host names and private information to curb leasing of apartments in bulk by realty companies, a ruling that will indirectly help bolster hotel revenues.

“Without Airbnb, the supply chain will be thinner, so it will benefit the hotel industry,” said David Richter, senior real estate portfolio manager and hotel equities specialist at APG Asset Management. “But it is impossible to say whether it is only Airbnb that has caused a downward trend in recent hotel pricing, since there are many other factors to consider.”

In 2017, the city saw over 60.5 million travelers, a number that has grown by half a million since 2016. In the 2015 fiscal year, hotels contributed to the city over $1.8 billion in tax revenue, more than twice the 2006 amount. This figure is growing as occupancy rates rise and hotel supply chain grows. However, the price of an average daily rate per room (ADR) has been fluctuating since 2014, and until the beginning of 2018 has seen a downward trend – something the hotel industry attributes to Airbnb’s competitive pricing, said Liz DeBold Fusco, a spokesperson for Airbnb.

On July 18, the City Council unanimously voted to crack down on Airbnb, and obliged the San Francisco-based home-sharing company to disclose host information to identify real estate companies that are abusing the platform, and sublet apartments in bulk. The council’s argument for policing Airbnb draws on the City Comptroller, Scott Stringer’s report which found, that the extensive use of the home-sharing website across the city took away affordable housing, drove up prices in previously inexpensive areas, and caused gentrification across the five boroughs, pushing out low-income families.

The comptroller’s report was based on AirDNA’s statistics and McGill University’s research findings, the latter project being initially commissioned by the Hotel Trades’ Council.

“Airbnb says that we ruled against them, because we want to help the hotel industry grow,” said Jeremy Unger, a spokesperson for Councilwoman Carlina Rivera, co-author of the bill. “But, this is not true.”

In the city, hotel supply has grown 4-6 percent yearly since 2013. In 2017 alone, more than 42 hotels opened across the five boroughs, adding 7800 rooms to the city’s hotel supply. The mayor’s report indicates that by the end of 2018 the city will add 13 000 more hotel rooms, which is a 4 percent increase in rooms this year. Other popular city destinations like San Francisco or Miami see a maximum 2 percent hotel growth per year.

Hotels had no competition in the city prior to 2010, until Airbnb arrived.

“Hotel business has been under a lot of pressure recently,” said Richter. “Airbnb has made things more difficult, because it now provides about 10-15 percent room supply in the city.”

Hotel revenues have been rising over the years, but room prices have been fluctuating since 2013, and have seen a downward trend from 2014, despite growing hotel revenues. The average daily rate per room (ADR) in 2017 for a night during May high season cost $360, as opposed to $393 in 2013, while the rates in September cost on average $398, compared to $423 in 2013. On average, 2017 ADR compared to 2016 turned out to be at $255.54 for the year, down 1.4%, driving a 0.3% drop in the revenue per available room (RevPAR) to $221.60.

“It is not only Airbnb’s influence,” said Richter. “Hotel profitability has been very ugly because of rising real estate taxes and operating expenses, though this year we have seen an overall better revenue flow.”

The downward trend for hotel room revenues reversed around the fourth quarter of 2017, near the winter holidays, when RevPAR managed to creep higher for the first time in more than two years, thereby kicking off an upward trend that continued into the first quarter of 2018 with RevPAR increasing to 3.6-4.8 percent, reports PriceWaterCooper and analytics firm STR.

Despite the recent increase in hotel room prices, the average hotel stay will still cost less than in 2013.

But, not every traveler can afford the median hotel room rate of $288.

“I couldn’t have afforded to see NYC,” said Anna Seiwerth, 29, businesswoman from Hungary. Seiwerth came to visit the city with four friends, and immediately ruled out staying in a hotel. “Hotels were expensive, and Airbnb was much cheaper.”

Johnny Christ, senior sales specialist for the Bowery Hotel said, that distinctly boutique hotels with special services and unique designs have not been affected by Airbnb’s presence in the city.

“Airbnb does not interfere where it is a privilege to be a guest,” he said. “Probably it hurts less distinguishable, branded properties.”

Christ said, it was impossible to quantify Airbnb’s impact, because the hotel he works for sells a “personal product”, an experience that “excludes Airbnb mentality.”

DeBold Fusco said, that despite growing hotel revenues, hotels have been lobbying against Airbnb for years, meanwhile giving away big donations to council members. “The hotel industry has elected officials lined up, especially the council.” she said. “They made it their mission to force out Airbnb.”

However, city officials disagree. Unger said, that Airbnb’s talking point about the city council having some kind of gains from the hotel industry was simply preposterous. He said that Airbnb had been “completely disingenuous”, and unwilling to discuss regulations with the council before the legislation passed.

“We tried to negotiate, and proposed to regulate rentals ourselves,” said DeBold Fusco. “But the city refused to hear it.”

In 2016, New York Mayor Andrew Cuomo implemented the “one host, one home policy” across New York State, but the council said that Airbnb had not honored this ruling.

DeBold Fusco said, Airbnb acknowledged that there was a small percentage of actors in its system that still rented out apartments in bulk, but after the implementation of Cuomo’s legislation, they have removed over 5000 hosts, and proposed to work together with the council to further regulate rogue entrepreneurs in the city.