Why Is The Hotel Industry More Focused On Harming Airbnb Than Improving Their Own Product?

Innovation

from the innovate-and-compete,-guys dept

Wed, Apr 19th 2017 9:27am — Mike Masnick

It's no secret that the hotel industry hates competition from Airbnb. Hell, politicians have even admitted to crafting anti-Airbnb policies to keep hotels from being disrupted. But, now, the NY Times has got its hands on a specific plan from the hotel industry to basically hamper Airbnb and burden it with legal and policy challenges (I should note, by way of some sort of disclosure, that I'm typing this while sitting at a desk at an Airbnb apartment in Washington DC -- and, similarly, that it's much nicer and significantly cheaper than comparable hotels, but I digress...).

Last year, Airbnb underwent a rough regulatory patch.

The short-term rental company became a Federal Trade Commission target last summer after three senators asked for an investigation into how companies like Airbnb affect soaring housing costs. In October, Gov. Andrew M. 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.

Years back, we wrote about writer Andy Kessler's concept of political entrepreneurs v. market entrepreneurs, which (loosely defined) were those who basically used policy making to lock up markets for themselves and restrict competitors as opposed to entrepreneurs who innovated and created more value in the market by serving customers. In more traditional economics, it's rent seeking v. market innovation and growth. Most people recognize how rent seeking is bad: it's using the levers of regulations and politics to limit competition and innovation, in order to extract a greater share of the revenue/profits (since there's less competition, if any) while similarly limiting innovation and economic growth that improve people's lives.

And the hotel industry seems like a prime example of this right now.

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 already made against Airbnb, and described how it planned to rein in the start-up in the future.

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

The NY Times report has many more details, but all of it is basically summed up as "annoy Airbnb and limit their ability to grow as much as possible." There doesn't appear to be anything in there about "providing a better experience to our customers so they might prefer us to Airbnb." There doesn't seem to be anything in there about "better competing with Airbnb." Nope, it's entirely about trying to undermine Airbnb. I've noted in the past (and in this post!) that I've used Airbnb a bunch, and have found it almost universally better than hotels. The experience is more unique, but also just... better overall. And I've spoken with many Airbnb hosts. It's true that some are running "businesses" renting out multiple units on Airbnb, but isn't opening up more people for running successful small businesses a good thing?

And, yes, I know lots of people like to claim that Airbnb is driving up rent -- even if the data doesn't currently support that claim. But even if true (and, again, it's the hotel lobby that has mostly been pushing this narrative, though plenty of well meaning folks have picked up on it), that's an issue to deal with in other ways (such as increasing housing stock, rather than limiting it with other regulations) rather than shutting down a useful business that opens up new opportunities, and can also increase tourism and local business.

Again, it's perhaps no surprise that the hotel industry has been fighting Airbnb, but with the NYTimes getting its hands on the actual strategy documents from the hotel industry, that industry has made it clear that it's seeking to shut down and limit competition, rather than innovate themselves.

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Filed Under: competition, hotels, innovation, political entrepreneurs, rent seeking, startups
Companies: airbnb

41 Comments

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Ninja (profile), 19 Apr 2017 @ 8:13am

The thing is, these 'paid regulations' will still be valid after this document exposed they are the polar opposite of something that represents the people and seeks balance and general welfare. Much like the telco sector. When it's revealed that private companies or groups are working in some promiscuous partnership with the government to screw others from doing their magic via laws and regulation then said laws and regulation should be rendered invalid until there's a public discussion over them.

The strategy is so effective that the losers are the ones that try to compete in the market instead of hiring lobbyists and most companies start going the political entrepreneurship once they get more mature. This can only be bad in the long term.
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JoeCool (profile), 19 Apr 2017 @ 9:30am

Why?
Because it's easier to destroy than create. Making your product better is hard and requires actual works. Destroying your competitors is easy and usually only requires throwing a little bit of money at lawyers and politicians.
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Mason Wheeler (profile), 19 Apr 2017 @ 9:34am

but isn't opening up more people for running successful small businesses a good thing?

In general, yes. In every specific case, no.

In this specific case--pulling high-traffic, disruptive commercial activity into residential-zoned neighborhoods--that'd be a huge no.
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trish, 19 Apr 2017 @ 9:41am

Isn't it business 101 to manipulate government to get your way? It's "legal" so it must be right.
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Anonymous Coward, 19 Apr 2017 @ 9:44am

Re:
Why would this draw more traffic in residential neighborhoods? It's not as if the owner of the house is staying in the house with the people renting it. Then you could claim that the number of people in the neighborhood is increasing.

But the reality is that the houses are often empty until someone rents them out.

The amount of traffic is the same more or less. How are the people renting the house any different from someone who lived in the house every day.
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Anonymous Coward, 19 Apr 2017 @ 9:45am

Have you registered as a lobbyist? I believe it's the law if you are financially compensated, directly or indirectly, for your efforts at influencing lawmakers.
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That Anonymous Coward (profile), 19 Apr 2017 @ 9:45am

Because history repeats itself.

When they tried to replace iceboxes, there was moral outcry about the evils of the refrigerators.

They have grown big & bloated. They have swatted away anything that might cause them to change anything about their systems. We've always done business this way & we will always do business this way.

They dominate the room to stay in for a bit market & no one should dare challenge them. They are sure they can totally crush these upstarts & stay the course they have been on for hundreds of years.

Old men like to cling to how it was always done, having surrendered any ideals of changing the world to more profits.

To make any changes to compete with these insects, might scare shareholders & shake confidence. They will stand on the deck as the band plays because the ship is unsinkable, despite the water rushing across the deck.
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Anonymous Coward, 19 Apr 2017 @ 9:56am

Cat O Nine Tails
The most feared weapon of all is the red tape of the law being used to oppress new business competitors. When laws start to be used for personal gain, the government is doomed to be replaced.
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Anonymous Coward, 19 Apr 2017 @ 10:08am

regulations
This is the VA code:

2014 Virginia Code
Title 35.1 - Hotels, Restaurants, Summer Camps, and Campgrounds

This is the Definition of a hotel:

§ 35.1-1. Definitions
7. "Hotel" means any place offering to the public for compensation transitory lodging or sleeping accommodations, overnight or otherwise, including but not limited to facilities known by varying nomenclatures or designations as hotels, motels, travel lodges, tourist homes, or hostels.

The code doesn't specify the volume of the accommodations.
So why are Airbnb's covered under business licenses, which are required if you advertise, and zoning, housing, and health?

The amount of work running a one-man business can be just as astronomical as running a larger business, as many people find out, let alone all of the other categories.

Under Virginia's landlord tenant law, if a landlord doesn't correct a code violation, the tenant can contact the code inspectors, the inspectors contact the landlord, and if it isn't corrected then the city or county has to correct it and send the bill to the landlord or take them to court.

Under zoning for lodging, for example, if you put an outside lock on a bedroom door, then you can be cited for operating a place of lodging, and officials can make you take the lock off.

How can hotels improve their product if they are saddled with these regulations which are not being followed by bnb's?

Should a hotel be built without a business license, zoning permit, building permit and inspection, advertising and health inspection, in order to save money and compete?
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JoeCool (profile), 19 Apr 2017 @ 10:10am

Re:
Yeah, for the last few decades, business 101 has mostly been

1 - Greed is good.
2 - NOTHING matters but the (short-term) bottom line.
2a - If it's cheaper to pay the fine than follow the law, pay the fine.
2b - If it's cheaper to buy politicians, buy yourself laws that are favorable to you.
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Anonymous Coward, 19 Apr 2017 @ 10:10am

correction
Correction

Should be: So why are Airbnb's "not" covered under multiple regulations?

Or are they?
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Anonymous Coward, 19 Apr 2017 @ 10:10am

Re:
"The thing is, these 'paid regulations' will still be valid after this document exposed they are the polar opposite of something that represents the people and seeks balance and general welfare."

I'm starting to feel like "regulation" is the preferred tool of the corrupt politician. Every time I see this term used, something bad has happened.
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Anonymous Coward, 19 Apr 2017 @ 10:16am

Extinctions Follow from Failures to Adapt and Evolve
The hotel, taxi/limo, cable, movie, music, newspaper, book industries...all are experiencing the death throes of their entirely 19th and 20th century business models. Whether we conjecture meteors, comets, or vulcanism as the source of the climate changes that wiped out the dinosaurs, the Internet will be inarguably prove to have been the primary contributor to the "climate changes" that extinguished these saurian industries that continue consistently to fail to adapt and evolve.
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wayout, 19 Apr 2017 @ 10:22am

Re: Re:
"It's not as if the owner of the house is staying in the house with the people renting it" In a number of cases they are..

"But the reality is that the houses are often empty until someone rents them out." Where are you getting your info?..
That being said, I can only comment on the areas that I have worked in. (I have photographed listings for them for over 5 years now). Most of what I have shot is not empty...and quite a number of folks use it as supplemental income, some in fact, would probably be out in the street without the extra coming in...and some listings...well...I have turned down a few (we are given the option without penalty thankfully), not because of neighborhood, but because of what some folks will try and rent out..

As far as traffic...seriously, unless they are renting out 3 or more rooms constantly, the traffic is negligible..Whats the difference between that and say having family stay with you for an extended period of time...cause, that scenario NEVER happens right..
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Mike Masnick (profile), 19 Apr 2017 @ 10:35am

Re:
Have you registered as a lobbyist? I believe it's the law if you are financially compensated, directly or indirectly, for your efforts at influencing lawmakers.

What...? Airbnb hasn't paid me directly or indirectly. I've paid them every time I've used them to book a room, just like every other user.

Why is it that some people assume that any time someone has an opinion different than their own, they must be paid off.
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wayout, 19 Apr 2017 @ 10:35am

Re: correction
"Should be: So why are Airbnb's "not" covered under multiple regulations?" One word....MONEY..

The astute politician realizes that some money (i.e. taxes) is better then $0. By that I mean, allowing them quietly, is better than not having them at all. Lets face it, a certain number of folks would NOT be coming to spend money in their area, if they had to pay the price of a hotel room, folks most certainly do take into account the cost of lodging when planning trips, either for themselves, or family. And all other things being equal, the one with cheaper lodging usually wins..meaning, the winning area gets the benefit of taxes paid by said individual(s)...taxes, that they would not have seen otherwise. I have seen it play out that way in a second tier city that had a major event coming to town. The hosts were basically told, the city would only intervene if somebody complained, and even then, they would have 30 days...more than enough time for the event to come and go...All the rooms in the city and surrounding areas were expected to be occupied...so by quietly allowing AirBnb to operate, they effectively increased the tax revenue by having more folks than the hotels could handle...follow the green...
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SirWired (profile), 19 Apr 2017 @ 10:40am

I can see why the hotels are upset
I can totally understand why hotels are upset; they are subject to a very large pile of regulations, laws, and taxes that AirBnB (and their landlords) choose to simply ignore. Livery firms have a legit beef with Uber, et al, when they do the same thing.

And what's with "Why is the hotel industry more focused on harming AirBnB than improving their own product?" Holy False Dichotomy Batman! Who is saying they aren't? It's not an either-or proposition.
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mr. sim (profile), 19 Apr 2017 @ 10:46am

i always wonder how this type of behavior doesn't in fact constitute a criminal conspiracy and RICO act violations?
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Kaiser Basileus, 19 Apr 2017 @ 10:58am

Re: regulations
...all of which falls under de minimus until it reaches scale.
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Ninja (profile), 19 Apr 2017 @ 11:15am

Re: Re:
Congratulations Mike, now you are officially an Airbnb shill. Impressive curriculum I must say. Ahem.
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Designerfx (profile), 19 Apr 2017 @ 11:30am

I worked at a major hotel
I worked for one of the major hotels. They pretty much acknowledged they "can't compete with airbnb/boutique hotels". That was verbatim from a company status meeting for all employees.

This corporate lobbying needs to be prevented.
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That One Guy (profile), 19 Apr 2017 @ 11:36am

Re: Re:
Why is it that some people assume that any time someone has an opinion different than their own, they must be paid off.

Similar reason that you have people post on TD insisting that everyone who disagrees with them on copyright is only doing so because they are engaging in copyright infringement:

Because it's easier to dismiss what someone says by insisting that they absolutely must be being paid to say it than it is to actually address their points.
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DannyB (profile), 19 Apr 2017 @ 12:30pm

Re: Re:

Why is it that some people assume that any time someone has an opinion different than their own, they must be paid off.

Because they are assuming you would do what they would do.

If they are paid to have an opinion, then (they think) you must be also.
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DannyB (profile), 19 Apr 2017 @ 12:33pm

Why hotels don't improve their own product
They are in the Hospitality industry.

They misread it as the Hospital industry.

Therefore people who stay in their rooms should have to suffer.
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Ryunosuke (profile), 19 Apr 2017 @ 2:12pm

because THAT is the American way, instead of innovation and pulling oneself up by their bootstraps, Just outright buy senators and representatives and laws to keep yourself in power of your industry, whether it is Hotels/Motels, Automotive (John Deere, Tesla), Internets, TV shows and Movies (Axinar), and Games (anything from Nintendo).
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Anonymous Coward, 19 Apr 2017 @ 2:16pm

Re: Re:
I didn't say you were working for ABnB while in DC, did I?

You didn't answer the question.
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fred dref, 19 Apr 2017 @ 2:23pm

bedbugs, hygeine
I've been in hotel management and rented airbnbs. You miss a lot of important points shilling for airbnb. Do you know how common bedbugs are? Are the people cleaning those airbnb units taught how to safely deal with bodily fluids and blood so they or the next guest isn't exposed? Are people who clean the units paid a living wage, getting benefits and health insurance? Are they paid low wages under the table with no social security? Hotels are more expensive because they have to obey a lot of laws and regulations. take a good UV wand to your next airbnb and look for feces, sperm, etc.
in a good hotel this will be done by an inspectress or inspector and cleaning done to remediate.
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That One Guy (profile), 19 Apr 2017 @ 2:36pm

Re: Re: Re:
Ah, I see. The 'innocent question' about when Mike will register as a lobbyist, implying that he's being paid to influence lawmakers/speak, on the article talking about AirBnB had nothing at all to do with AirBnB.

Yes, that makes perfect sense.

If it wasn't in regards to AirBnB, pray tell, what were you referencing?
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Anonymous Coward, 19 Apr 2017 @ 4:01pm

Re: Re: Re: Re:
Not ABnB, that's for sure.

He said he was in DC, he should answer the question. It's not a difficult one, is it?
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That One Guy (profile), 19 Apr 2017 @ 4:38pm

Re: Re: Re: Re: Re:
So because he's in DC, that indicates that he's acting in the capacity of a lobbyist and therefore should register as one?

That's some interesting logic there.
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wayout, 19 Apr 2017 @ 6:18pm

Re: bedbugs, hygeine
sorry, but not all hotels do the above either..ive seen enough hotels busted by news reporters for cutting some serious corners like not changing the sheets between guests etc (and they were 4 star hotels to boot)...so nice try...and as far as the people cleaning the units, you do realize that most do it themselves, they dont hire a cleaning service...so the whole "getting paid under the table" is based on facts not in evidence...got proof..or are you shilling for the hotel industry since you have a vested interest in the industries health
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Docrailgun, 19 Apr 2017 @ 8:15pm

Hopefully...
... AirBnB will go the way of Uber and Lyft. Evil is evil.
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David Clare, 19 Apr 2017 @ 9:20pm

Re: bedbugs, hygeine
I stayed in a motel last year and was eaten alive by bedbugs. I guess they knew how to deal with it...not say anything and take my money.
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Mike Masnick (profile), 19 Apr 2017 @ 11:27pm

Re: Re: Re: Re: Re:
He said he was in DC, he should answer the question. It's not a difficult one, is it?

Heh. I wasn't in DC to lobby. I'm not a lobbyist. I've never been a lobbyist. These accusations are cute, though.
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Anonymous Coward, 20 Apr 2017 @ 4:08am

simple. in the majority of cases, hotels are not the cleanest, nor the most hospitable/private places on the planet and they dont want to have to up their game to match what is already a better service with Airbnb!
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known coward, 20 Apr 2017 @ 6:33am

I am on the opposite end of this. hotels are regulated to a stricter standard in terms of safety that apartments. Fire exits, sprinkler systems, fire alarms are much better controlled in a hotel than a private residence.

Also a persons apt or home is just that, their apartment and home, they do not rent or buy to live next to a hotel filled with transients who have no long term interest in keeping the place up to standards or keeping the noise down during the night. Also the folks coming into the building are not the known residents or guests or known residents of the building.

Just as a note so i do not get called a luddite, (which to a point i am) I am fine with Uber as the cars, insurance regulation, and drivers, have to be up to the localities standards. AirBnb has no such requirements.
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Anonymous Coward, 20 Apr 2017 @ 8:44am

Re:

hotels are regulated to a stricter standard in terms of safety that apartments.

There is a good reason for that, in that a hotel can have many more people in it than an apartment building. This means it will take longer o evacuate the hotel than the apartment building. Also, in an apartment building, the exit of the apartment is usually visible whenever you exit a room, and the route from that to the exit of the building is usually very obvious. In a hotel on the other hand, you usually exit your room into a corridor, where without signage, the way to go to find the exit is not apparent.
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Coyne Tibbets (profile), 20 Apr 2017 @ 8:54pm

Anti-competition
Re the article title: Why does everyone keep asking whiny questions about why incumbent businesses always act to squash competition? What part of "capitalists despise competition" did you not understand?
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BernardoVerda (profile), 21 Apr 2017 @ 4:07pm

Re: regulations
Here in Vancouver, the concerns about AirB&B are more about the pressure such enterprise seems to be putting on a very tight rental (ie. not hotels/motels, but houses and apartments for long-term tenancy).

So over here, we figure that "the AirB&B problem" is not so much problem that the hotel chains don't like the competition, but more a problem that we're having too much trouble finding reasonably affordable homes, reasonably near our workplaces, etc. (Ironically, even the building trades/construction workers are having trouble finding suitable domiciles).
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BernardoVerda (profile), 21 Apr 2017 @ 4:13pm

Re: Re: correction
Some jurisdictions do appear to understand that the issue is one of striking a sensible balance among all parties concerned -- not just hotel/motel/AirB&B, but small and casual operators as well as the broader community -- rather than simply protecting a traditional monopoly on the part of the established short-term accommodations industry.
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sherinsingh (profile), 3 Apr 2020 @ 3:18am

Best Hotel in Madurai
The lodging options at Moskva Hotel include classic rooms, deluxe rooms, continental rooms and presidential suites. These air conditioned rooms are well-planned and thoughtfully designed. The in-room facilities comprise colour television, minibar, tea/coffee maker, telephone, writing desk and international plug points.

For more information call at +91-8489914838, +91-452 2348500/600 or visit our website http://www.moskvahotel.co.in/classic-room-madurai.php
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