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Boutique Hotels Are Now Listing Rooms on Airbnb - The company’s recent NYC data release on rentals reveals relatively few “illegal” hotels, and a fair number of real ones.
Source: Bloomberg / Laura Bliss / 15 December 2015 

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Is Airbnb getting away with running illegal hotels?

Renting out air mattresses in their San Francisco apartment to make their monthly rent in 2007, is now worth a staggering US $24 billion! Of course, I’m talking about Airbnb. A company worth more than the Hyatt and Hilton hotel chains combined. The stunning rise of Airbnb is leaving some questioning whether the online giant made its way to the top in an entirely fair fashion. Indeed, some of its critics are speculating that Airbnb is running illegal hotels.

What are illegal hotels? – I hear you ask.

Also known as “ghost units”, illegal hotels are apartments and rooms available for rent on the Airbnb platform 356 days a year. The practice of buying up apartments to be exclusively used as premises for rent on Airbnb is most common in the major metropolitan cities. It’s not the case that someone usually lives in these apartments and is simply making way for travellers to stay there in their place at different times of the year. No, illegal hotels actually take real estate stock off the market and resultingly drive up rents in those areas.

Leaving many residents, hotel owners, and authorities unhappy.

Is Airbnb guilty of facilitating illegal hotels?

The company has gained a bad rep of late due to the claims made by New York Attorney General Eric Schneiderman. His misgivings centred around the belief that Airbnb’s presence in New York amounted to a relatively small number of hosts earning millions while driving affordable housing further out of the reach of New Yorkers. His evidence? Data from the company’s own website seemed to indicate that over two-thirds of Airbnb listings in New York were illegal.  

The AG’s report examined the 35,354 private, short-term listings available in New York on Airbnb.  Schneiderman claims that 25,532 of these violate the state’s Multiple Dwelling Law and/or zoning laws. He points to the statistic that the Airbnb hosts in question generated over $300 million in revenue from these listings. He also alleges that Airbnb benefitted to the tune of $40 million from these properties listed on its site.

But is all this true?

Airbnb asserts it is not responsible for helping the flourishing trade in illegal hotels. It counters the Attorney General’s report with the fact that 90% of New York Airbnb hosts actually share their own homes with guests.

Indeed, a spokesperson for the company recently told the New York Post how it is working to stamp out the practice of illegal hotels.

“We do not condone these large commercial enterprises, and continue to call for stronger regulation of illegal hotels,” the spokesperson said.

In response to the criticism directed at Airbnb, the company has recently put plans in place to verify the hosts on its site in crowded and popular markets are in fact renting out their permanent residences.

Final thoughts

Airbnb rose to prominence by innovating an insightful solution that allowed it to disrupt the global hotel industry. And it seems that certain hosts on the platform are now disrupting local laws and zoning regulations for their own benefit. Rather than seeing this as something inherently wrong with Airbnb, the hotel industry should see it as a chance to reimagine how they do business. People obviously want cheaper, more personalised, and unique hotel experiences. Rather than pushing Airbnb under the bus, we should be looking at how they have brought a new model of service provision to the hotel sector, as well as how they are trying to clean up their act. I think there is something in all that for all of us.

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