HOTEL INDUSTRY USING GOVERNMENT TO CRUSH AIRBNB

[4/18/17]  Whenever an entrepreneur enters the marketplace, one can be certain that established firms in the same industry will try to use the power of the state to crush their upstart competitor, particularly if he begins taking market share from them. Such is the case with Airbnb, which has seen a significant increase in opposition from all levels of government thanks to a concerted effort on the part of the hotel industry, reports the New York Times.

The Times obtained copies of documents recently presented to the board of the American Hotel and Lodging Association, a trade group that includes such juggernauts as Marriott International and Hilton Worldwide. “In the documents,” writes the paper, “the group sketched out the progress it had already made against Airbnb, and described how it planned to rein in the start-up in the future.” The November board meeting’s minutes said the plan was a “multipronged, national campaign approach at the local, state and federal level.”

That the industry would want to put Airbnb out of business is quite understandable. According to Hospitality Net, a hotel-industry website, a report commissioned by the Hotel Association estimated that Airbnb costs hotels about $450 million in direct revenue per year, with additional losses in the form of lost food and beverage sales and other service fees. The Times says Airbnb, which enables people to rent out unused living space on a short-term basis, “has raised more than $3 billion and secured a $1 billion line of credit” and is valued at about $30 billion. In addition, the increase in the supply of lodging has naturally depressed its price, even during peak periods such as holidays, which has also cut into hotels’ bottom lines.

Government, meanwhile, resents the fact that Airbnb isn’t subject to the onerous taxes it levies on hotel rooms. Hospitality Net reports that local, state, and federal governments miss out on (i.e., are unable to confiscate) $226 million in tax revenues per year from the reduction in hotel stays in New York City alone.

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