Laws Protect Hotels from Competition

Last week, a court in New York City ruled that the popular short-term rental website Airbnb is illegal. For those not familiar with the website, Airbnb connects travelers with residents that are willing to rent out their couch, spare room, or entire apartment or home for short-term stays.  It’s become extremely popular for travelers for a variety of reasons. Travelers often get to meet new people in new cities who can offer a guide to what’s cool and what to avoid; they get to experience living like a local in a comfortable apartment rather than a stuffy hotel; and most often, Airbnb users find that renting someone’s apartment or room for the night is significantly cheaper than a hotel. If a complaint is filed against a user, residents could now face significant fines.

 

The ruling cited NYC’s law that says rental properties can’t be rented for less than 30 days at a time. Enacted in 2011, the law was meant to target illegal hotel operators and leasing companies trying to skirt the cities hotel regulations. But there’s also been a movement amongst hotel industry lobbyists to quash this burgeoning, disruptive trend. As you can imagine, the perceived loss of income to Airbnb users could be substantial. So much so that, according to Business Insider, many countries have seen calls from business interests to ban the service. And it appears that many cities and countries are playing ball with the lobbyists.

 

The positive economic impact to these cities, however, shouldn’t be overlooked. According to Crain’s New York, there are around 30,000 NYC residents on Airbnb, which generated $1 billion in local economic activity in 2013 alone. And according to Crain’s, 87% of the listings in NYC are outside of the main tourist corridors, meaning neighborhoods usually unseen by tourists are finally getting some of those tourism industry dollars. The savings realized by consumers on the cost of lodging is certainly factoring into the money spent in and around the city. Think of the economic impact such a service could be having around the country, and world, if left to flourish.

 

We’ve seen this same story of stifled innovation and disruptive technologies running into bureaucratic roadblocks before, and very recently. Uber, the car-service hailing smartphone app, has faced many of the same problems with the entrenched taxi industry using city laws to attempt to shut down their business. The battle rages on for Uber–especially in DC, where a new proposed law could end certain portions their service. It looks as though Airbnb might be in for much of the same scrutiny that Uber has faced.

 

Society needs these kinds of disruptive technologies. It’s good for consumers, as it widens choices, provides more convenience and often lowers prices for everyone. And although it may seem harmful to certain industries, it’s a necessary part of capitalism. Many thought the Internet itself would be harmful to business, but we’ve seen it change how companies and consumers do business, and they’re better off for it, creating an entirely new economy. These technologies make cities a better place for consumers to spend their money, something everyone should embrace. Cities should embrace these disruptive new technologies to make cities a better, more enticing place to live and do business.

 

Zack Christenson writes on digital tech issues for the American Consumer Institute Center for Citizen Research

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