Why Airbnb has more problems in New York than in Amsterdam
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Airbnb is in the midst of a legal battle with New York State to fight a new law against short-term rentals. It follows an invoice, recently signed by New York Governor Andrew Cuomo, which will fine tenants or landlords for renting their apartment for less than 30 days. The aim is to prevent people from converting their apartments into hotels without paying tax.
In its defense, the short-term rental platform provided evidence that the vast majority of its New York hosts list their apartments at most once a month, not every month. It’s fighting judgment with a trial.
Despite the high-profile nature of this case, legal action is not the company’s normal recourse for success worldwide. In fact, aside from the infamous New York cases, Barcelona and BerlinAirbnb has been well received around the world thanks to its collaborative approach.
When Airbnb enters new markets, it communicates quickly with local authorities and the community. He is known to approach the city authorities as soon as he enters a new city to start working together for his success. The comparison even was done with the ride-sharing platform Uber, which prefers to let its service develop independently.
In its work with municipal authorities, providing useful information is also an integral part of Airbnb’s strategy. In London, for example, Airbnb provides the mayor’s office with information on tourism growth in the city’s outlying areas to help distribute economic benefits across the city, rather than keeping it centralized. In other cities like Paris or Amsterdamthe partnership with local authorities has become much more formalized, with Airbnb beginning to collect the tourist tax from its users on behalf of local authorities.
Airbnb is also known for giving back to the communities it enters. As part of its goal to have a “win-win” relationship with the local community, for example, Airbnb organizes regular events for hosts. It’s about providing them with information and helping them on a variety of issues, from fire safety or taxation to how to provide better service to customers. These get-togethers are usually held at local museums or other cultural institutions, which helps hosts learn about their neighborhood attractions and convey their first-hand experience to guests.
A complementary service
Airbnb’s main argument for defending its position as a complement rather than an opposition to hotels is that its average host provides this service in the accommodation they live in, and only when they are away. In London, for example, Airbnb described its average host as someone who opens their home for around 50 nights. and earns £3,500 a year by doing this. Moreover, almost three-quarters of the ads are outside the main tourist areas and in places where there are not enough hotels.
In a recent survey, which we developed jointly between the University of Warwick and Imperial College in the UK, Mark Kennedy, Antoine Vernet and myself examined people’s attitudes towards the economy of sharing, using a large representative sample of the UK population. Our findings confirm that the majority of UK sharing economy users and providers have an average income of less than £40,000 and use or offer these services once every few months.
Thus, these people are not timeshare owners trying to evade taxes. A modification of local legislation in 2015 means Londoners don’t have to declare tax for renting their rooms or houses for up to 90 days, earning up to £7,500 a year.
On the other hand, when we asked people who had heard of sharing websites like Airbnb, but hadn’t used one yet, the one thing they said they needed to get started to share was a formation. With this as the main reason not to share, Airbnb’s complementary approach in local communities has helped the company do well in many cities, making controversies in New York, Barcelona and Berlin rare occurrences.
Airbnb’s experience in New York also highlights that the degree of friction it faces also depends on the extent to which hotels launch an offensive against these new services. In New York, for example, the New York Hotel Association announced in 2015 that Airbnb had caused a $2 billion loss to its business, urging its members bring a class action against the company. This led to enormous pressure on municipal authorities to ban the service.
As we show in another research project on how start-ups can enter highly regulated markets, Airbnb’s collaborative approach with city authorities and local communities is the only reasonable route for a business that depends on local regulations. But it will always be weighed against the voice and collective power of the incumbents whose revenues they threaten, as is the case in New York.
Pinar Ozcan is professor of strategy at Warwick School of Business, University of Warwick.
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