New lease of life

By J.J.C.

LAST week San Francisco finally passed laws legalising short-term property letting through platforms such as Airbnb. The laws will come into force in February, but come with restrictive ownership clauses, as Business Insider explains:

The new regulation only allows people to rent homes through these sites if they are San Francisco residents living in the unit for at least nine months a year. They also have to register as hosts with the city, promising under penalty of perjury that they meet those conditions.

The fact that cities are revisiting statutes reflects the growing influence of Airbnb. In just six years the firm has flourished, and now boasts over 800,000 properties in 34,000 locations with 20m users. The company was recently valued at $10 billion and reported revenue of $250m last year. This has caught hotel chains short. In February, Fast Company claimed that this year Airbnb would "usurp the InterContinental Hotels Group and Hilton Worldwide as the world's largest hotel chain—without owning a single hotel."

For business travellers there are obvious benefits. Booking may be less convenient than for hotels and prices are not always lower, but travellers benefit from more choice and, usually, space. For more seasoned road warriors, Airbnb's varied portfolio makes a refreshing change from the depressing homogeneity of hotel interiors.

But even as Airbnb claims victory in its home city the honeymoon period may be coming to an end. There are worries that speculative investment in buy-to-let properties, with a mind to renting them on Airbnb, is pricing out locals and creating a housing bubble. Meanwhile, hotels are now lobbying lawmakers, hoping to persuade them that Airbnb's practices are illegal, despite the firm’s offer to pay hotel taxes. Regulators remain divided, but New York in particular is under pressure to crack down, led by a dedicated opposition group called ShareBetter.

Part of the problem is the gold rush Airbnb has prompted. What began as a platform for homeowners with spare rooms to make a bit of pocket money on the side, is becoming overrun with property entrepreneurs looking for lucrative short term gains. The market is also getting more crowded with competition coming from upstarts such as Roomorama and HomeAway. Meanwhile success breeds exploitation. From trashed properties and wild parties to a multitude of scams, there are plenty of Airbnb horror stories circulating to put off prospective tenants (and landlords).

These kinks will be worked out over time and the outlook for business travellers is overwhelmingly positive. Hotels will have to up their game as Airbnb and its competitors grow. Scams might exist, but the biggest challenge comes from regulation, and San Francisco has already signalled a step in the right direction.