Is Airbnb benefitting from “illegal” hotels?

By | January 21st, 2016

Is the fastest-growing travel site taking short cuts to the top? It might be, according to a new Penn State University analysis of Airbnb bookings.

The study was funded by the American Hotel & Lodging Association (AH&LA), a trade group that is in direct conflict with Airbnb. The report found that nearly 30% ($378 million) of Airbnb’s revenue in in 12 of the nation’s largest metropolitan statistical areas came from “full-time operators,” with rentals available 360 days a year. Each of these operators averaged more than $140,000 in revenue during the period studied, the research concluded.

These units essentially amount to an “illegal” hotel — and one that puts traditional hotels at a competitive disadvantage, according to Katherine Lugar, AH&LA’s president. “Our industry thrives on competition each and every day, operating on a level and legal playing field,” she says, claiming these gray market hotel operators are using Airbnb as “a platform for dodging taxes, skirting the law and flouting health and safety standards.”

The research comes on the heels of fresh numbers that suggest Airbnb is the fastest-growing travel site on the Internet. The survey, released by SimilarWeb, found Airbnb rose 339 places in rankings over a year and is now “an established star” in the travel sector. The online accommodation community racked up an average of 94.9 million monthly visits last year, engaging users for an average of 11 minutes per session, visiting an average of 13 pages. It was also last year’s fastest-growing site, according to SimilarWeb.

“The Penn State study shows that the hotel industry gets what it pays for, which in this case is a specious study intended to mislead and manipulate,” said Airbnb spokesman Nick Papas. “Airbnb is succeeding for the very simple reason that our hosts — the vast majority of whom are middle-class people sharing their homes in order to create supplemental income — provide guests authentic, transformative experiences.”

There’s a bigger picture here. Trade organizations typically fund studies like this when they have a long-range goal — in this case, probably regulation at the federal level that would rein in sharing sites like Airbnb. It’s legislation that Airbnb, currently valued at $24 billion, will no doubt fight with its considerable resources, not to mention the tens of thousands of satisfied customers and hosts.

Among Penn State’s findings:

  • The cities with the largest number of full-time operators include New York and Miami on the East Coast and Los Angeles and San Francisco on the West Coast.
  • Individuals or entities renting out two or more residential properties on Airbnb account for 17% of hosts in the twelve cities studied, and this rapidly growing segment of “multi-unit operators” drives nearly 40% of the revenue in those markets, which equates to more than half a billion dollars a year.
  • The growth in what it calls Airbnb “mega-operators” (those renting out three or more units) was the largest, increasing from $16.1 million in September 2014 to $29.2 million in September 2015, an 81.4 percent increase. Airbnb mega-operators increased from 1,171 in September 2014 to 2,193 in September 2015, an 87.3% increase.

“The study shows an explosion in activity among multi-unit hosts and the rise of full-time operators in each of the 12 markets we analyzed,” said John O’Neill, director of the Center for Hospitality Real Estate Strategy at Pennsylvania State University, who directed the research. “Operators renting out three or more units represent a disproportionate share of revenue with only 7% driving more than $325 million in the period studied.”

Papas, the Airbnb spokesman, sad the report uses misleading data “to make false claims and attack middle class families who share their homes and use the money they earn to pay the bills.”He added that “the overwhelming majority” of Airbnb hosts are middle-class people who occasionally share only the home in which they live. “While Airbnb hosts keep 97% of the price they charge for their listings,” he adds, “hotels take most of the money they earn out of the community.”

In the lodging sector, cities have been slow to react to the sharing economy. Two of the most prominent standouts include San Francisco, which recently asked Airbnb for help in cracking down on illegal hotels, and New York, with which Airbnb agreed to share booking data in an apparent effort to prevent further regulation.

Is Airbnb benefitting from "illegal" hotels?

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Posted January 21, 2016
  • Lee

    Of course they are benefitting; they wouldn’t be doing it if they were not. Airbnb is working hard in NYS to actually change our law re: short term rentals. People are keeping apartments off the market for actual residents so they can make money by illegally renting out apartments.

    The Attorney General’s office (and City Council, etc) is very aggressively pursing those illegally renting, tenants doing so have been evicted, they are being investigated for not claiming the rental income when filing taxes, landlords are being fined – it is a mess.

    On top of it, we have transients traipsing around our buildings with zero idea of who they are and they have access to our buildings – no one walks in off the street into NYC apartments. There is a either a door person or there is a lock on one, sometimes 2 doors. We go through intense scrutiny to secure an apartment (a few years of tax returns, credit checks, employment confirmation, salary confirmation, etc) – and, yet, a bunch of strangers are being granted easy access.

    Sorry – I feel very passionate about this given how much rents in this city cost and how many people are taking advantage of this new form of illegality and it is costing residents available housing. I don’t much care about the impact on the hotel industry – we have about 50 million tourists each year; I’m sure they are doing fine.

  • Jeff W.

    Of course they are. But AirBnb’s arguments are self-serving and if they do not help clamp down on the owners whose business is renting units as opposed to the casual user.

    Reminds me of garage sales. Few object to a person holding one. But then some took advantage of the “income” and would have one every weekend. Neighbors would complain about the extra traffic, risk of crime, and so on. Now in many places, it is either banned or highly regulated. Where I live, you need a permit and are limited to certain days and hours.

    AirBnb is looking at more regulations if they do not control the “serial” owners.

  • Rebecca

    You pay for your neighborhood. I grew up in Chicago and then lived in San Diego, where the cost of living is astronomical. I would be pissed if there were strangers in and out of my neighbor’s home. Really pissed. So I totally get this from your perspective and hope they do clamp down on it.

  • AJPeabody

    Figures don’t lie, but liars can figure. Having a relatively small proportion of “hosts” renting many apartments (illegally running virtual hotels) means that the majority of hosts are not, yet the illegal hosts provide a very large portion of the available rooms. Truth is what you make it to be.

  • BubbaJoe123

    “Airbnb is succeeding for the very simple reason that our hosts — the vast majority of whom are middle-class people sharing their homes in order to create supplemental income — provide guests authentic, transformative experiences”
    This is a very creatively phrased, and very deceptive statement. The vast majority of their hosts MAY in fact be these people. That doesn’t mean that they make up the vast majority of AirBnB’s listings, or of its revenue.
    If you have 90 people who rent their apartments out five days a year, and 10 people who rent them out 360 days a year, then 90% of your hosts are these “middle-class people,” but 89% of your inventory (and revenue) is from the 10% of the hosts who are running illegal hotels.

  • Extramail

    What is going on either with your site or my iPad? When I try to vote, my screen takes me to an ad. What gives?

  • Grant Ritchie

    Hi Ex,
    Thanks for letting us know. Chris has forwarded your comment to our IT folks to see what’s up. If something like this happens in future, we can get on it quicker if you let us know by way of a Letter to the editor,, or a private email to me,, or Chris,

  • Noah Kimmel

    I certainly think more can be done but I see the hotel industry going about this the same way the taxi industry went about Uber – rather than trying to limit number of open residences or other common sense ways of differentiating “mom and pop” operators from commercial operators, and rather than trying to get the city to impose the same taxes on airBNB, they spread muck and try to get the entire company shut down.

    As a New Yorker who travellers frequently for business, and owns my coop apartment, I would love the opportunity to rent it out and make some extra income that I could spend in the community. Granted, buildings may still disallow it per condo / coop rules, but the city shouldn’t be making a blanket decision. When I have family and friends come to town, it is embarrassing to tell them that the local hotels are $250 per night or higher, it makes it harder to see them.

    I think a lot of people here are unsympathetic and are clinging to “rules are rules” without realizing that enabling travel by providing discounted accomodations is a great thing. And for the arguments about it destroying neighborhoods, there are common-sense approaches to fix that like ensuring that the apartment is someone’s full time residence (which NYC asks on your taxes anyway so you can’t lie) or limiting number of units available and number of days, or requiring certain notices for occupants.

    AirBNB does require hosts to sign off that they can legally rent the unit. They could do more to stop people, but they are not ignoring the law. And a 3% comission on bookings for any and all bookings, is benefitting, but hardly highway robbery.