Sharing a Level Playing Field

By David Kong

Friday November 13, 2015
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Have you noticed what’s happening to Uber overseas? A whole host of countries now have full or partial bans and suspensions in place, including Thailand, Malaysia, Japan, Italy, Romania, Brazil, Germany, Belgium, Spain, Australia and South Korea. And China, the world’s largest economy, stands on the cusp of implementing historic regulations, which will impose taxi-like restrictions on all private ride-sharing services, whether Uber or Didi Kuaidi. Throughout much of Asia, Europe and South America, governments and businesses are standing together to level the playing field, ensuring that upstart ride sharing services are regulated and taxed in the same manner as licensed, safe taxi businesses that have served tourists and citizens in those markets for generations.

As I look at the strong headwinds Uber faces internationally, however, it’s interesting to note that Airbnb and other accommodation sharing sites have remained relatively unscathed in these very same markets. Indeed, aside from a handful of cities outside of the U.S. ─ Paris, Berlin and Quebec, which have imposed regulations on private room-sharing businesses or have some in the works ─ Airbnb, HomeAway and others have been allowed to continue business as usual. So what’s going on here? Why the regulatory disparity between ride-sharing and room-sharing?

The primary cause is structural. The $11 billion global taxi market represents a unique and united segment of the broader business community that has brought a real fight to Uber. Recent news reports point toward Transdev, a taxi company that operates more than 10,000 vehicles in over 100 cities, as leading the corporate charge against ride-sharing services. Transdev is a key player in the TLPA (the Taxicab, Limousine and Paratransit Association), a powerful, well-funded trade association representing more than 1,000 taxi and limousine firms worldwide. Over the past year, TLPA has been pouring funds into a coordinated, global PR blitz, taking on Uber, Lyft and other ride-sharing services in major cities around the world. They’ve created a simple and powerful website and campaign, titled, ‘Who’s Driving You?’, which highlights the threats to public safety that come with unregulated, untrained and uninsured drivers, whether sexual assaults, kidnappings, deaths or assaults.

By contrast, the global hotel industry is diverse with many different brands, owners and operators. There is no single and coordinated entity that can fight Airbnb effectively ─ we’re an incredibly fragmented $162 billion industry. We have different industry groups and trade associations for nearly every region or major country in the world. Some are focused on hotels, others on motels, resorts, cruise lines or convention centers. Other groups serve unique demographics of property owners and managers, whether Latinos, Asians or African Americans. It’s easy to understand that our industry’s narrative on this topic can also be inconsistent.

Here in the U.S., the American Hotel & Lodging Association (AH&LA) remains our greatest voice and ally in the fight against Airbnb. But, if one considers the work needed at every state and municipality, AH&LA simply does not have the funds required to wage this battle at the level victory demands, and their PAC, while influential, needs to be substantially larger, as well.

What the AH&LA does have, however, is the right message and vision for this fight, which highlights the unsafe and black market underbelly of sharing economy ventures. “Our issue is not with the many good people who use Airbnb to list their vacation homes or spare rooms to make extra money and help their families,” says Katherine Lugar, President and CEO of AH&LA. “What we care about is one of the fastest growing segments on Airbnb ─ commercial operators and landlords using the service to rent out multiple units and flout local laws and regulations, reducing housing supplies, driving up rents and creating dangerous and unsafe environments for citizens, not to mention an unfair and unequal business environment for the hotel industry.”

Lugar’s right. Increasingly, commercial operators are buying large-scale condo development projects and hotels, converting them to condos, and then renting out on Airbnb. These commercial operators have increased the hotel supply in major cities, but are skirting the law and not paying taxes. It’s business as usual with no regulatory oversight and hundreds of millions of dollars in potential tax revenue uncollected.

And, you can see this trend playing out in cities throughout America. Just last week, San Francisco put up a brave and important fight against Airbnb and black market room sharing. As the volume of illegal Airbnb listings in the Bay area swelled to over 94 percent and home prices skyrocketed, Senator Dianne Feinstein and a cross-section of area business and advocacy groups fought hard for Proposition F, which would have limited short-term rentals like Airbnb to 75 nights per year. But voters rejected the measure at the polls by 55 percent to 45 percent.

So what’s behind the defeat of Prop F? The same thing that’s behind Uber’s losses overseas: money and organization. To tip the polls in their favor, Airbnb spent over 16 times more on advertising, lobbying and local awareness initiatives in San Francisco than the hotel industry and aligned business and labor groups — that’s $8 million versus $482,000.

There is no doubt that the sharing economy is here to stay and provides options for today’s consumer. A prime example of its continued expansion is the acquisition of HomeAway for $3.9 billion by Expedia. In fact, Airbnb remains on track to grow 40-50 percent in bookings over the next year alone.

We’ve got to learn from San Francisco. Now more than ever, the hotel industry needs to clearly articulate the issue and be united under AH&LA. Our industry welcomes competition because it makes all of us better. Offering choices to consumers is a good thing. Likewise, the sharing economy is a good thing. So what are the issues we should fight for?

Back in 2000, there were only a few OTAs. How many OTAs are there now? Back in 2000, we paid a 10 percent commission to OTAs. How much do we pay now? Back in 2000, the OTA commission was a small expense line on a hotel’s P&L. What is it today?

When HomeAway first started, there were no commercial operators/landlords. Today, these operators/landlords account for 40 percent of the total Airbnb inventory in some cities. Is this a problem? Left unchecked, would this problem worsen? Please consider the recent HVS report commissioned by the Hotel Association of New York City which states Airbnb now captures nearly 8 percent of NYC demand.

We should fight for the big commercial landlords and operators to abide by the same rules as us. Our industry is taxed and regulated, and guest safety is the top priority for any hotel. Meanwhile, only a handful of cities levy hotel and accommodation taxes on short-term rentals, and tremendous gaps remain in regards to health, safety, and disability compliance standards. We should take a page from the TLPA’s playbook and help consumers understand the dangers of a lack of regulatory oversight. We need to help municipalities throughout the world understand the huge tax revenues they are not collecting. We need to call attention to the reduction in rental units and higher rents because of these commercial operators/landlords.

Together, let’s support AH&LA’s leadership with the necessary funding and resources. This situation will only get worse with our inaction.

Please join the conversation by connecting with me on LinkedIn. Or you can send thoughts directly to itspersonal@bestwestern.com.