Airbnb: Should Cities Regulate Private Landlords?

23/11/2018By Derek Picot
Trouble has been looming this year for Airbnb as more governments are waking up to the complaints of various global hospitality associations.  Derek Picot examines the efforts around Airbnb regulations, as major cities around the world attempt to ‘control’ the giant short-term letting platform.
airbnb on iphone

In recent years, Airbnb regulations have been put in place in some major cities across Europe and the US.  In June this year The Telegraph reported on How the world is going to war with Airbnb.  This was followed by Conde Nast Traveler, in Octobers piece entitled Twelve places cracking down on Airbnb

This can only be good news for hoteliers who have for some time pointed out the uneven playing field between the online operator who profits at arm’s length, and the regulatory regime hotels work within.

To understand how the new market of ‘home sharing’ primarily threatens established hotels, here are the facts.  Anyone can offer accommodation to anyone, anywhere, with no specific inspection, rating or regulatory control.  Airbnb places the sole responsibility on the property owner to ensure that incoming guests are offered appropriate lodging in accordance with what has been booked.

This means that landlords (or ‘hosts’ as they are euphemistically referred to by Airbnb) must provide safety and comfort as well as insurance for whatever might occur.  In providing accommodation, Airbnb have no costs beyond the servicing of their website.

When guests do not receive what they believed they had booked, Airbnb undertakes to carry out an investigation and refund monies paid where complaints are justified.  They also promise to blacklist the landlords. But this may not be sufficient protection for employers who book their employees into private accommodation.  As an example, the case of the guest that found his midnight dip with friends in the Jacuzzi had been recorded by a hidden camera, something Airbnb strictly forbids but is difficult to control.  The pictures went viral and the employees considered that as their employer had made the booking it was the employer’s responsibility to compensate for the embarrassment caused, at a rate well above the refund offered.

So whilst hoteliers take out insurances, vet staff, ensure that the environment is safe and pay tax on the profit’s made, Airbnb works simply as an agent. They charge the landlord in the region of 3% commission on each booking’s revenue, and the incoming consumer pays an additional 13% which may vary depending on the length of the stay.

In the United Kingdom, Airbnb reported 2016/2017 earnings of £657 million, and paid Corporation tax of around £200,000.  Not bad business considering they don’t have to launder the sheets or cook the breakfast.

Governments around the world are waking up to the level of profit that online companies like Airbnb are making, with a lack of regulation. In Japan this year significant steps were taken to ensure that let accommodation has the same safety standards as hotels.  The authorities are aware of the potential boom that will be created with the upcoming Rugby World Cup and the 2020 Olympics.

The number of nights that hosts can let out their homes or rooms is also being restricted.  In Paris it is 120 nights, 90 in San Francisco, 30 nights in Amsterdam, and in Palma Mallorca – none at all.  In February this year the Balearic Islands, of which Mallorca is one, said it would fine Airbnb 300,000 euros for advertising unregistered homes on its website.

In the United Kingdom the government has made an amendment to the letting regulations to ensure that landlords must be present in the same house for at least some of the letting period if they are to take advantage of the first £7,000 of private letting income which remains tax free.

Further moves have been mooted in the form of ‘stop and search’ or as referred to in America, ‘stop and frisk’.  Barcelona has introduced a team of inspectors to see that accommodation offered for rent is to the standard and the idea is being considered in New York.

While many of these initiatives are primarily being eyed with consideration to the ‘tax take’ by global treasury officials keen to reduce their country deficits, it must be encouraging for hoteliers to see that finally the tax balancing scales are moving in their direction – albeit that they are still considerably lopsided in favour of those that operate in the ether rather than terra firma.


Derek Picot

Derek Picot

International Consultant, Director of MRP Hotels Vienna, Non-Executive Director of MIC Ltd.

An international consultant based in London with experience spanning five continents. Primarily focused on helping independent hotel and serviced apartment businesses maximise their asset values and operating returns. Clients include international hotel brands, European banks, investment and securities firms, property developers and hotel owners. Well versed in luxury operations with a focus on business improvement, customer service and satisfaction. Proven track record of improving revenue generation, profit and quality assurance. Extensive network of associates and contacts both in hotel operations and the international travel trade.

Derek Picot holds non-Executive Directorships with MIC Ltd who own and operate the Wesley Brand of Hotels and the Hyde Park Residences. He is also Director of MRP Hotels Vienna.