Hotels see more fights with Airbnb

Last year, Airbnb underwent a rough regulatory patch.

The short-term rental company became a Federal Trade Commission target over the summer after three senators asked for an investigation into how companies like Airbnb affect soaring housing costs. In October, Gov. Andrew Cuomo of New York signed a bill imposing steep fines on Airbnb hosts who break local housing rules.

The two actions appeared unrelated. But one group quietly took credit for both: the hotel industry.

In a presentation in November, the American Hotel and Lodging Association, a trade group that counts Marriott International, Hilton Worldwide and Hyatt Hotels as members, said the federal investigation and the New York bill were “notable accomplishments.”

Both were partly the result of a previously unreported plan that the hotel association started in early 2016

to thwart Airbnb. The plan was laid out in two separate documents that the organization presented to its board in November and January. In the documents, which the New York Times obtained, the group sketched out the progress it had made against Airbnb, and described how it plans to rein in the startup in the future.

The plan is a “multipronged, national campaign approach at the local, state and federal level,” according to the minutes of the association’s November board meeting.

The documents provide an inside look at how seriously the U.S. hotel industry is taking Airbnb as a threat — and the extent to which it is prepared to take action against it.

In the past, hotel executives typically played down the privately held company’s effect on the $1.1 trillion U.S. hotel industry. In December, a Marriott executive dismissed Airbnb as not “really making headway in the corporate environment, which is really our bread-and-butter business.” Yet there is now little mistaking that Airbnb is encroaching on the traditional hotel business. The San Francisco company was founded in 2008 as a way for people to easily list and rent out their spare rooms or their homes online. Since then, about 150 million travelers have stayed in 3 million Airbnb listings in more than 191 countries, according to the company.

Airbnb has raised more than $3 billion and secured a $1 billion line of credit, according to research firm CB Insights. Airbnb CEO Brian Chesky has said the company could be ready to go public in a year. Investors have pegged Airbnb’s value at about $30 billion; in contrast, Hilton’s market capitalization is $19 billion and Marriott’s is $35 billion.

All of that has hurt hotel operators. Airbnb has hotel pricing in many places during holidays, conventions and other big events when room rates should be at their highest and the industry generates a significant portion of its profits, said Vijay Dandapani, CEO of the Hotel Association of New York City, which works with the American Hotel and Lodging Association.

The industry’s plan against Airbnb shows “the hotel cartel is intent on short-sheeting the middle class so they can keep price-gouging consumers,” Nick Papas, a spokesman for Airbnb, wrote in an email. “With more than 250 government partnerships over the last year, we have shown our seriousness of purpose when it comes to putting in place fair rules.”

The national hotel association said its push against Airbnb is not about the company’s financial effect on hotels.

“Airbnb is operating a lodging industry, but it is not playing by the same rules,” Troy Flanagan, the American Hotel and Lodging Association’s vice president for state and local government affairs, said in an interview.

The main prongs of the association’s plan to constrain Airbnb include lobbying politicians and state attorneys general to reduce the number of Airbnb hosts, funding studies to show that Airbnb is filled with people who are quietly running hotels out of residential buildings, and highlighting how hosts do not collect hotel taxes and are not subject to the same safety and security regulations that hotel operators must follow.

The group said it would focus its efforts in key markets, including Los Angeles, San Francisco, Boston, Washington and Miami.

The efforts were spearheaded last year by Katherine Lugar, CEO of the American Hotel and Lodging Association. The trade group began to form alliances with politicians, affordable housing groups and neighborhood associations. The industry also forged relationships with hotel labor unions — which it typically faces off against on many issues — about dealing with Airbnb.

In total, the association has a $5.6 million annual budget for regulatory work.

The association also sought help from politicians in Washington. In its documents, the group said it had worked with Sens. Brian Schatz of Hawaii, Elizabeth Warren of Massachusetts and Dianne Feinstein of California. The three Democrats sent a letter to the FTC in July “raising concerns about the short-term rental industry,” one of the hotel association documents said.

Feinstein’s office referred requests for comment to Schatz’s office. Schatz’s office and Warren’s office did not respond to requests for comment.

The association also met with legislators and attorneys general in dozens of other states to discuss how Airbnb hosts often do not comply with rules imposed on hotels, such as antidiscrimination legislation, local tax collection laws, and safety and fire inspection standards. In some markets, the group said, Airbnb is dodging payment of local lodging taxes. In other places, it encouraged officials not to collect taxes from Airbnb hosts so as not to legitimize short-term rentals.

The association claimed legal and regulatory victories last year in Chicago, San Francisco and Los Angeles, as well as in states like Virginia, Tennessee and Utah, where laws were being passed to restrict Airbnb activity. The organization also funded research conducted by a professor at Pennsylvania State University to show that many Airbnb hosts were breaking the law.

“We are trying to showcase and bust the myth that Airbnb supports mom and pop and helps them make extra money,” Flanagan, of the American Hotel and Lodging Association, said. “Home sharing is not what this is about.”

This year, the association plans to fund more anti-Airbnb research and begin a testimonial campaign of people hurt by home sharing, “to provide a counterweight to Airbnb’s strategy of presenting a unified, working-class face.” according to the group’s documents.