Hotels and Governments Gang Up Against Airbnb

In a familiar story after the growing pains Uber and Lyft have experienced around the globe, it appears hotel lobbyists are doing everything in their power to convince governments from city, state, and federal levels to impede the growth of Airbnb and similar start ups (HomeAway, VRBO). This blog post at Reason.com comes on the heels of this article by The New York Times.

The hotel lobby and trade groups exist solely to further the interests of the hotels and motels, so it makes perfect sense that they would use all available means to lessen competition. I have no problem with them existing, nor with them using every legal option they can. The governments being used as a tool to stunt competition, and the best interests of the consumers, are where I take issue with what has been happening.

4-19-17 Airbnb-versus-chart

Should Airbnb hosts be subject to the Americans with Disabilities Act (ADA) and local/state fire safety standards equal to what the hotels and motels are required to meet? To me, this is the most complicated issue presented. In a perfect world, the ADA and government-controlled fire regulations would not be necessary, as enterprising businesses would use disabled access as a selling point, courting those customers, while safety would be an easily-marketed selling point to the masses. “ACME Hotels are ABC Safety Certified, so you can enjoy your stay worry-free!” We do not live in a perfect world, and I cannot give you a perfect answer about whether or not such rules should apply to Airbnb. I can, however, point out that traditional bed & breakfasts are much closer in structure and resources to the people sharing their homes on Airbnb. Perhaps requiring standards and taxes equal to those met by the local bed and breakfasts is the way to go.

I am a believer in the “sharing economy” and in letting it evolve as far as consumers want it to evolve. Protectionism in any industry hurts the consumers and constrains the flow of capital. If the lack of competition (in this case due to impediment of Airbnb) leads to higher prices, some consumers will decide they can’t afford it, others will pay that higher price and sacrifice either using that money to buy something else or saving it (building capital), and the current providers of the service will avoid a major reason for delivering quality service.

4-19-17 Airbnb spending

If people are using Airbnb (and they are), it is because there is a demand for that service, and the alternative it provides to what it is competing with. Now, if the hotel companies are smart, they will recognize this demand and the money they could make by satisfying it instead of fighting to deliver a cubed gadget to a consumer who wants a ball gadget. Use those big company resources to research the in-demand locations and styles, buy small properties that fit the consumers’ desires, and provide the Pepsi to Airbnb’s Coke. Another option is for hotels for intensively focus on people who would never stay at an Airbnb, because they want the experience of a hotel. A steak house and a vegetarian restaurant can happily coexist right next to each other, because each has its own client base, and some people will frequent both, depending on the occasion.

The hotels and motels do not deserve to exist solely because they have existed up until now. They certainly don’t deserve special protection from governments at various levels to limit competition against them. Do I think Airbnb will destroy the hotel industry? No. They can both coexist, but as Airbnb claims market share, some weaker hotels and motels will probably fold. This is painful, but natural, and eventually good for the consumers, who have voted with their dollars for the services that provide best what they want. This is capitalism working.

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About Chris Fountain

Start small, but think BIG.
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