Airbnb renters have an unfair advantage, hoteliers argue
Short-term rentals don’t follow the same rules or pay hotel taxes
When it comes to keeping a close eye on the competition, Toronto hoteliers say they have little choice but to watch as the short-term rental business scoops up lodgers right on their downtown doorsteps.
With Airbnb making its first forays into the full-service travel industry and possibly prepping for a run at the long-term rental market, hotel operators warn they are already at an unfair disadvantage from short-term rentals.
The situation is particularly galling for the CEO of the Silver Group, which owns the 92-room Pantages Hotel and Spa. Like a lot of newer hotels, the Pantages shares space with residential condos.
Deepak Ruparell says there are about seven suites in the hotel tower being used as short-term rentals in the prime tourist location near the Eaton Centre.
There are another 35 or 40 shortterm rentals in the Pantages’ sister tower, operating as a de facto hotel, Ruparell said.
He is not impressed by Airbnb’s recent claim that it brings $417 million into Toronto each year. If shortterm rentals were taxed at the commercial property rates his company pays, Ruparell figures the revenue would go a long way to solving Toronto’s budget challenges.
“They’re paying $1,500 per residential unit in taxes whereas I’m paying $3,000 for commercial,” he said.
Airbnb says it welcomes regulation and it wants its community to pay a fair share.
“Airbnb has agreements in more than 200 jurisdictions globally to collect and remit hotel taxes on behalf of our hosts and guests. We are committed to working with the city of Toronto on creating fair, sensible rules for home sharing, including a fair and reasonable tax solution,” said spokesperson Christopher Nultyin a statement on Thursday.
“The majority of Airbnb hosts in Toronto, more than 80 per cent, only share their primary residence, and do so three or four nights a month to earn modest, supplemental income. We would like to see a system that doesn’t pit our hosts unfairly against big, corporate hotels,” he said.
Hoteliers are among the Airbnb critics who say they have no issue with real home-sharing, where someone rents out a room or they rent out their home while they’re on holiday themselves. But traditional hotels don’t want to be undermined by scenarios in which one owner or long-term renter sublets multiple condos, often in the same building.
“What we’ve got is people buying condominiums and renting them out, renting out apartments for 12 months a year and then re-subletting them for two-, three-night stays,” said Terry Mundell, president of the Greater Toronto Hotel Association.
A report by a hotel workers union group called Fairbnb says that 52 per cent of Airbnb revenue is generated by a disproportionately low 16 per cent of hosts. It also quotes research by financial services firm Morgan Stanley that shows 49 per cent of Airbnb users worldwide would have rented a traditional hotel room if they weren’t using the short-term rental platform.
Airbnb says its Toronto business more than doubled last year to about 10,000 hosts. Canadian policy lead Alex Dagg told the Star the average host earns about $5,000 a year.
The city estimates that hotels contribute $32 million annually in property taxes. They also pay HST.
Soon, they will likely pay more, because council’s recently approved budget includes a 4-per-cent hotel tax. It also sanctions, in principle, a 10-per-cent tax on short-term rental revenue. Both those taxes still need to be approved by the province. City staff estimated a tax of 10 per cent on short-term rentals would generate $6 million annually.
“The taxation issue is just one of equity,” Mundell said.
“(Short-term-rental landlords) want health care and education, I’m assuming, and all the other services your tax dollars provide.”
In the same way they don’t contribute to tax-funded services, they also don’t create hospitality jobs, nor are they subject to the same health and fire regulations, hotel operators say.
It’s not that the hotel industry isn’t accustomed to technological change and new competition, Mundell says, citing the introduction of electronic booking sites that had some observers anticipating that traditional hotel rates would plummet.
“We learned how to increase the value of our online presence, we learned how to deal with customer loyalty programs. We came a long way and we’re continuing to evolve,” he said. “We’re seeing some of the existing (hotel) product being redone into boutique (hotels). Part of it is to compete against that Airbnb.”
At the Pantages, a flood in one short-term rental unit damaged 11 others, including four hotel suites, said Ruparell, who is sympathetic to the neighbouring condo residents.
“What happens in a condo board meeting (is) residents are really (annoyed) because they have an uncontrolled environment — people living next door to them, not knowing who they are,” he said.