Friday, June 12, 2015

Airbnb's David Hantman Discusses Competition in the Lodging Market

The Federal Trade Commission (FTC) hosted a stimulating workshop on the “sharing economy” on Tuesday, June 9, 2015. The workshop offered a variety of perspectives from regulators, academics, and industry executives on the sharing economy’s emerging and innovative business models.
I found the third panel particularly interesting because its participants included industry executives associated with emerging sharing applications and incumbent business models. Specifically, the back-and-forth conversation between David Hantman, Head of Global Public Policy for Airbnb, and Vanessa Sinders, Senior Vice President and Head of Government Affairs for the American Hotel and Lodging Association, was very informative.
Ms. Sinders argued that Airbnb should abide by the same set of rules and regulations that hotels abide by. She said that without these regulations there is a possibility that Airbnb consumers could experience unsafe and/or unhealthy conditions. She claimed that hotel consumers have a consistent expectation about what they will experience when they walk into their rooms while Airbnb users do not. But Mr. Hantman stressed that the reputation feedback mechanism within Airbnb’s application has created transparency and accountability for every transaction, which enables trust between the hosts and the guests. He also mentioned that Airbnb has a $1 million insurance policy that protects users in case any unforeseeable incidents arise.
Among her concerns, Ms. Sinders stated that many hosts are using Airbnb as a business enterprise and renting out entire apartment buildings. She said: “If it looks like a hotel and acts like a hotel, it should be treated like a hotel.” But Mr. Hantman agreed with her that the hosts who use the Airbnb platform to essentially run a hotel operation should be required to get business licenses just like hotels. He stated, however, that the overwhelming majority of Airbnb hosts only share their homes a couple times a year, and many do it in order to make ends meet. Mr. Hantman said these are the people that the Airbnb online platform targets as hosts.
Interestingly, Mr. Hantman declared that, in his view, he and Ms. Sinders are actually in agreement on most things, even though Ms. Sinders refuses to acknowledge it. They both do not want consumers to experience unsafe or unhealthy conditions, and they both think hosts who rent out their spaces in the same fashion as a traditional hotel should obtain a license.
In response to Ms. Sinders’ claim that Airbnb listings are “illegal hotels,” Mr. Hantman reported that Airbnb has tried on many occasions to pay lodging taxes in New York (where it has received a substantial pushback from Attorney General Eric Schneiderman), but, curiously perhaps, the lobbying efforts of the American Hotel and Lodging Association, thus far, have helped prevent Airbnb from doing so.
In an FSF blog from October 2014, Randolph May and I analyzed the New York Attorney General Eric Schneiderman’s report in which he characterized Airbnb listings as “illegal hotels.” We argued that, aside from disputable legal characterizations, all the data in the report shows that these so-called “illegal hotels” benefit consumers and New York’s economy. If they were not meeting the demands of consumers, then Airbnb’s economic activity in New York would not be increasing annually.
As Mr. Hantman stated at the FTC’s workshop, if the lack of tax payments was the only reason for questions about the legality of Airbnb listings in many cities, then these concerns would have been worked out because Airbnb is willing to comply. Instead, lobbying pressure from the hotel industry to local governments (presumably based on fear of competition) has resulted in legal or regulatory threats to Airbnb listings in many cities around the world.
As Randolph May and I stated in our July 2014 Perspectives from FSF Scholars entitled “The Sharing Economy: A Positive Shared Vision for the Future:”
If the laws or regulations applicable to the existing incumbent businesses no longer make sense today, they should be changed. It always harms consumers when public policymakers attempt to “level the playing field” by subjecting entities to regulatory restrictions that are not needed. The proper way to respond to “level the playing field” claims is to remove unnecessary regulations wherever they apply, not to expand them to new entities.
In Mr. Hantman’s concluding remarks, he stressed that he is optimistic that mutually satisfactory agreements will be reached in the cities where Airbnb’s compliance with legal requirements is called into question so that it can continue to serve consumers. He said Airbnb wants to work with local governments around the world to provide them with anonymized data so they can monitor the activity that is occurring in their jurisdictions, while also protecting the privacy of Airbnb users.
This was just one of the many informative topics discussed at the FTC’s workshop on the sharing economy. I anticipate posting a blog in coming days about the key takeaways from the discussions at the workshop.