Legal issues divide hosts and hoteliers
 
Legal issues divide hosts and hoteliers
10 FEBRUARY 2014 9:42 AM

While hoteliers say shared-housing sites take revenue from local municipalities, executives at Airbnb and HomeAway say hosts are encouraged to abide by appropriate tax structures.


REPORT FROM THE U.S.—Hoteliers aren’t so much worried about direct losses in demand and revenue to shared-economy hosts as they are about detrimental effects negative experiences could have on repeat travelers, sources said.
 
Residents who use Airbnb and similar sites to rent rooms to incoming travelers degrade the quality of life for neighboring residents, take revenue from local municipalities and jobs from local employers, and could deter travelers from returning, according to Lisa Linden, a representative for the Hotel Association of New York City. 
 
However, executives from both HomeAway, which encourages homeowners to “turn your second home into a second income,” and Airbnb refute those claims, stating instead they provide online marketplaces for travelers looking for alternative accommodations and therefore expose more people to unique destinations around the world. 
 
And as far as municipalities collecting taxes on overnight stays, HomeAway and Airbnb representatives said while they are simply the marketplace connecting buyers and sellers, they encourage hosts to remit the appropriate taxes and even offer some guidance on how to do so. Executives from both companies told Hotel News Now they are actively working with municipalities to determine the appropriate tax structures.
 
“We offer assistance and guidance to municipalities to craft fair and appropriate regulations, which include the obligation to collect and remit taxes,” said Brian Sharples, co-founder and CEO of HomeAway, via email. “However, HomeAway is not responsible for the actual collection of taxes as HomeAway serves as a marketplace and not a merchant of record. Vacation rental owners and property managers are responsible for meeting city or state compliance.” 
 
Chip Conley, founder of Joie de Vivre Hotels and head of global hospitality for Airbnb, said there are some restrictions regarding how much advice Airbnb can give hosts on legal matters. However, “we are in the process of working with local municipalities regarding occupancy taxes and safety code restrictions,” he said in an email. “You could imagine that, being in 34,000 cities in 192 countries with each city having different regulations, it's challenging to create a set of common pieces of advice that we can give our hosts.”
 
Vijay Dandapani, president and COO of Apple Core Hotels and member of the Hotel Association of New York City, said shared-economy sites are “willfully violating” New York State laws. 
 
“They call themselves disruptive. I would call them subversive because they are fully cognizant of the laws of New York State, but are willfully violating it,” he said. “They have taken on an Astroturf campaign by taking on all the moms and pops who were victims of the last recession and doing this to better themselves.”
 
The legal issues
Before Airbnb was even founded, New York Mayor Michael Bloomberg’s administration in 2006 began fighting transient occupants in Class A residential dwellings. Because of an unclear state law, New York state residents appeared able to rent out their apartments. 
 
After four years of lobbying and debate, in 2010 the New York state senate voted 32 to 28 to change New York’s multiple-dwelling law, making it illegal to rent out unoccupied apartments for less than 30 days in multiple-dwelling entities, which was defined as buildings with three apartments or more, according to Linden.
 
It was a quality-of-life issue, and the issue of tax was secondary at the time, she said. 
 
“It was protection of our neighborhoods and tenants,” she said. 
 
Today, there are efforts underway on behalf of Airbnb to repeal that law. Airbnb lists approximately 40,000 rooms per night in New York City, Linden said. Some are legal because the host is actually on premises. Others are illegal because they are second homes and the host is never present, hoteliers argue. 
 
Additionally, the hotel association claims the majority of these residential buildings don’t have the proper ingress and egress. Hotels must meet strict building and fire codes, specifically that there must be two ways to get in and two ways to get out of a commercial building. These codes do not apply to Class A buildings. In addition, Class A buildings are not required to be furnished with a sprinkler system like hotels and other commercial buildings.
 
“The Hotel Association of New York City is comprised of legitimate hotels that comply with building codes, including all relevant fire safety and labor laws,” Linden said. “Airbnb has encouraged the proliferation of unsafe, unregulated business.”
 
Dandapani of Apple Core said he knows people are “setting up shop full-time renting apartments in places where it is not legal.”
 
“As an operator, we can underscore the selling points Airbnb will never have, which are that our rooms are all fire-rated. We are fully compliant with not only national standards but also New York City standards,” he said. “And, of course, security issues, which you get from the kind of key locks we have, whereas Airbnb has teamed up with neighborhood coffee shops as a repository for people taking keys.”
 
The tax issues
Linden said the New York City hotel industry contributes more than $500 million in taxes annually, including a New York state sales tax, city sales tax, occupancy tax, $1.50 per night that goes toward the Jacob K. Javits Convention Center and a Metropolitan Transportation Authority tax. Those taxes amount to about 15% to 16% of a hotel’s revenue, she said.
 
Linden said peer-to-peer hosts aren’t required to pay those same taxes. 
 
Kyle Lawrence, sales and marketing manager at the 80-room Americas Best Value Inn and Suites Tukwila/SeaTac Airport in Tukwila, Washington, said he lists his property on Airbnb. He said the staff is diligent and calculates what taxes they need to take out when rooms are booked from the site.
 
“As hoteliers, we have to make sure we do our due diligence and also pay our taxes,” he said.
 

1 Comment

  • benbethel February 11, 2014 5:53 AM

    Wow... I really couldn't disagree with this more. As a hotel owner, and an airbnb.com host, I feel that there's plenty of room for both in any city. I think people have turned to airbnb because of a few reasons: first, they love the experience of feeling like a local... second, they may not be able to afford hotel rooms in an expensive city or a city where there's a lot of compression... third, it just goes to show that chains have made a huge mistake in creating an image that's so stale and boring that you could be in Paris, France or El Paso, Texas and not know the difference by the way your room looks. Cities should absolutely be in favor of sharing sites because of a few reasons: more people in a city at a given time means more money being spent on retail shops, bars, restaurants, cafes, clubs, cultural venues, etc., etc. and this means more sales tax revenues. Neighbors should not be as concerned at all, their fears are really unfounded, and isn't it better (especially in a condo situation) to have part-time visitors than constant tenants/residents, as this has less wear-tear on the building, lower utility usage, and people are more likely to keep their homes in magazine-quality condition, spotlessly clean, and care about how the rest of their building appears. Also, if you own a condo in a building where airbnb use is allowed, you'll see that property values are much, much, much higher than in buildings where short-term rentals are allowed due to capitalized valuation of property based on income. I shouldn't have to explain this, but more income=more property value, plain and simple. We seem to forget that there was a time when there were small houses and inns, and people called innkeepers... then the telephone came out and the chain was born... shouldn't 500-5000 room chain hotels be the real culprits here? They practically kill an entire city block, rendering it useless to a local... unless you're a local who likes to go hang out at a chain hotel. If this type of sharing is deemed illegal due to the reasons cited, then restaurants shouldn't be able to deliver food to people's homes, nor should people be allowed to have their friends/family come visit them when they're in town, nor should people be allowed to have a gathering at their home for Thanksgiving or any other holiday (hey that's as short-term as short-term use gets), nor should corporations be allowed to lease condos and use them for their business travelers when they're in town. Where are the rights of the private property owner here? And if something happens, doesn't the responsibility fall on them? We need to face the fact that the sharing economy is here to stay... be it airbnb, flipkey, homeaway, vrbo, craigslist, etc., etc. Then there's Uber and Lyft and Relayrides... and with Uber starting to get into sharing more than rides (laundry service, tool rental, ice cream trucks and food trucks to your door, restaurant/store delivery and more coming this year), there are just some pretty amazing things about to happen. These services also allow people to live a life that they normally wouldn't be able to live, and this is a good thing.... if you start to claim that this takes jobs away, let's ponder this for a moment: if someone can make enough from airbnb to *not* work or not have to have a 2nd job, or not have their spouse work while trying to raise a child, doesn't this free up a job for someone else to take, therefore reducing unemployment?

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