Commercial hosts yield greatest Airbnb profits: study
Hotel association wants government to level playing field
Most of Airbnb’s revenue comes from people renting entire homes they don’t live in, according to a study, which suggested “hosts” are getting a tax break compared with the traditional lodging industry.
A study released Wednesday by real estate company CBRE, and commissioned by Ottawa-based Hotel Association of Canada, which represents more than 8,000 hotels, motels and resorts, says 83 per cent of Airbnb’s total revenue comes from hosts renting entire home units where the owner is not present.
“That’s people who are renting multiple homes or multiple units across the city. They are really running a business and because they are running it through a platform they are able to skirt the rules,” said Susie Grynol, president of the association.
The hotel market is worth $18.4 billion annually, and directly and indirectly employs 304,000 people across the country.
The study looked at a 12-month period from April 2016 to March 2017 and found there about 70,000 Airbnb host owners with more than 100,500 listings in Canada that generated $500 million in revenue. The number of Airbnb hosts, units and revenue has nearly doubled over the past year.
About 70 per cent of units listed on the Airbnb platform in Canada are entire home rentals — guests have complete and sole access to the entire unit during their stay, according to the researchers. Hosts renting out two or more entire-home units generated more than $238 million in revenue in the past two years. Based on the past 12-month period, multi-unit hosts make up seven per cent of all Airbnb hosts in Canada and account for 19 per cent of units and more than 30 per cent of the revenue.
“What we are shining a light on here is the increase and the dramatic growth in commercial activity and calling on the government at all levels to level the playing field,” Grynol said.
Airbnb cast doubt on some of the data in the report.
“The big corporate hotels are at it again, peddling lies about home sharing to protect their ability to price gouge consumers, and preserve antiquated business models,” said Lindsey Scully, spokesperson for Airbnb.
“Vacation rentals have always been an important part of Canada’s tourism economy. Today, regular people in communities large and small are making some extra money sharing their space, too — but the hotels have made it clear they won’t back down until they eliminate their competition.”
The CBRE data was created from the analytics platform AirDNA, which scrapes data from the Airbnb website. Airbnb’s Scully said AirDNA is “known for faulty data.”
At the core of the dispute the hotel industry has with Airbnb is a complaint about an uneven tax structure.
One of major tax disadvantages the hotel industry faces is the harmonized sales tax, which is not applied to Airbnb rentals. That percentage depends on jurisdiction but in Ontario it is 13 per cent. Various local jurisdictions across the country also levy local fees or taxes on rooms.
“From a tax perspective, we are calling on the federal government to update the tax law to incorporate digital enterprises,” Grynol said. “You run a business in Canada and you pay tax, it shouldn’t be an option because you are digital.”
Some jurisdictions are cracking down on Airbnb. In 2016, Quebec began to require that hosts have a business licence and, after 31 days of consecutive rentals, a permit and payment of the province’s hotel tax. The province has stepped up enforcement of the law because of low compliance.
Both Toronto and Vancouver are also looking at an “Airbnb tax” to counter the growth of the industry that some complain is taking away housing from both markets and making them less affordable.
Steve Gupta, chief executive of Easton’s Group of Hotels, which is the largest private hotel company in the country with 5,000 units, says all his industry wants is a level playing field.
“Our hotel, as compared to a residence, pays two and a half times more in property tax,” he says, pointing to a small condominium that pays $3,000 in tax in Toronto and would face a $7,500 bill if it were a similar-sized hotel room.
Labour leaders also complain about the competitive advantage Airbnb has over hotels, with wages often much lower for housekeepers. “I would assume we are (losing jobs). Airbnb is a significant part of the hospitality industry and the labour involved in it is a grey market where we have no understanding of what the labour conditions are,” said Lis Pimentel, president of Unite Here local 75, which represents 8,000 hospitality workers in the Greater Toronto Area.
What we are shining a light on here is the increase and the dramatic growth in commercial activity.