The recent local hotel occupancy figures from Hendersonville, Tenn.-based STR Inc. are solid, with accommodations in Howard and Anne Arundel counties reporting generally good news on their bottom lines.
As positive as that news from STR is for denizens of the local hotel industry, it’s still dealing with increased competition from a new type of player in the short-term rental market, in this case a big one that is changing the way room accommodations are made: Airbnb.
With clients that may be your family members, your co-workers, your neighbors and maybe even yourself, the founders of San Francisco-based Airbnb are recognizing that travelers are tiring of paying for a room at the often higher-priced area hotels, and that money easily can be made by temporarily renting a room in a local citizen’s home.
While few observers dispute that Airbnb and similar firms, such as HomeAway, have made a dent in the market, it’s tough to estimate just how much market share the company may be siphoning from hoteliers, or if Airbnb customers would have opted to rent a room in the first place if the service wasn’t available.
Of course, one attraction of Airbnb, as was the case in the earlier days of online shopping, is that taxes are not applied to the customer’s bill after the purchase in an area that has hotel taxes — which makes it hard to estimate its market share. What happens moving forward on that front remains to be seen, though representatives of Airbnb have publicly stated that they are willing work with government officials on legislation that’s acceptable to the parties that are involved.
As It Stands
It might seem like creating legislation for the hotel industry that would get Airbnb on the taxpayer rolls wouldn’t be overly challenging, but “It’s always more complicated than it appears,” said Connie Del Signore, CEO of Visit Annapolis & Anne Arundel County (VAAAC).
According to STR, occupancy rates in Anne Arundel County stand at 73.5% year-to-date, through July. “When I got here,” Del Signore said, “we were building many of the current hotels; then when demand and space matched, the recession happened. But now, occupancy is really healthy.”
With approximately 300 Airbnb rental properties available in the county (according to www.airbnb.com; more information can be found at www.airdna.co) around press time, Del Signore recalled a talk that she heard Airbnb’s Chip Conley make several years ago.
“He said that [the company] really wants to work with local destination marketers,” she said. “I contacted him the next day, and he put me in touch with [some of the] policymakers. I was excited to get something going legislative-wise, but we found out that Baltimore and Montgomery counties were working on their own legislation, so we stepped back to see how that plays out.”
Today, she said that the VAAAC is working with Marriott Corp. and the Maryland Tourism Council, “So we know that everyone supports some kind of legislation. We’re just all trying to figure out what that would look like,” Del Signore said. “People do want to talk, and we’re trying to get something pulled together so we’re ready for the session,” though adding that the state has “lost a year-and-a-half of collecting sales and hotel taxes.”
Anthony Cordo, Del Signore’s counterpart with Howard County Tourism (HCTP), said that while he “loves the idea” of Airbnb and noted that “it’s had a big impact” on the county’s market (which STR reports has a year-to-date occupancy rate of 66.9%), he, too, noted the need for “a level playing field.
“It’s a very complex situation. Airbnb poses some unique changes to the hospitality industry. The concept is brilliant, but in its execution, communities like ours are seeing some real issues crop up,” said Cordo, HCTP’s new executive director. “For example, many of the homeowners renting out their homes are skipping paying the room rental taxes that they’re legally obligated to pay. Neighbors are being disrupted by the parking issues, noise complaints from transients and other issues running a mini-hotel can create.
“And on the renter’s side there can be real issues of safety, because these unregistered properties aren’t being inspected for fire and other life safety equipment,” he said.
The issues that hotels and other hospitality companies have aren’t “with the home-sharing community. Competition can be healthy,” Cordo said, “but as [the situation] stands now, this lack of accountability and oversight doesn’t create a level playing field.”
Requests for comment on these topics from a representative of Airbnb were not returned in time for inclusion in this article.
Lou Zagarino, president and CEO of Whitehall Management, of Millersville, a VAAAC board member, is a 45-year-plus presence on the local hotel scene, having built and operated the first hotels in what is now known as the BWI Business District. He offered more in-depth observations concerning the recent local area occupancy figures.
“We’re running [about] mid-70% occupancy in Anne Arundel County,” said Zagarino. “That’s partially because Sundays are always very soft. Many travelers used to want to get into their rooms [by Sunday] to get ready for the week, but now many travelers fly in the early morning and still make it to their meetings.”
That trend isn’t new, he said. “That’s been happening nationally during the past few years. I suspect that trend is family-related, so it’s not a matter of lowering rates. They don’t want to stay that extra day. And then we have the slow winter months.”
While occupancy figures in the 80th percentile and above would be fantastic, Zagarino said that rarely happens.
“We’re not going to get 80%, but we can do better,” he said. “We just don’t know how much of an impact Airbnb is having, since there is little permitting, little documentation and few regulations to add to any analysis.”
And know that not all of Airbnb’s impact is necessarily bad, Zagarino said.
“I also think that part of this trend is that some people who wouldn’t have paid $400 a night for a room in D.C., for instance, but can now pay $99 a night [for an Airbnb property] in our area, will do so,” he said. “That creates a new market segment.”
Still, Zagarino, citing the findings of the recent year-long Penn State University School of Hospitality and Management study (see the sidebar below for the highlights) that was commissioned by the American Hotel & Lodging Association, calls what he sees occurring “alarming. There is no doubt that Airbnb is seriously affecting the hotel business to the point where it could be lessening demand in certain higher-priced markets — like ours.”
The next item on the agenda, Zagarino said, is to draw the various concerned factions together to sit down and discuss how all of the permits, regulations and tax collection processes can be legislated between the counties, the state and other interested entities.
“Some counties have already discussed opting out of any possible legislation because the majority want to make this a state law,” he said. “Then, it would have to pass Gov. [Larry] Hogan’s desk.”
While the industry and various government concerns get ready to discuss the issue during the next legislative session, Airbnb is moving forward, with an updated agenda of trying to attract business travelers. “Earlier on, the business travelers would stay in a hotel,” Del Signore said, “since their company would pay for it, and they may need to be in a certain spot.”
She is optimistic that this issue will be resolved and that it will lead to a stronger tourism industry. “I think our industry is very quick to adapt,” she said, “and I think hotels are thinking [that this issue will result in their] building a better mousetrap.”
After all, anyone who’s been around Annapolis for very long knows that during Commissioning Week — when “locals were renting their homes for $1,000–$5,000 a week,” Del Signore said — or in New Orleans during Mardi Gras, or more recently in Cleveland or Philadelphia during this summer’s political conventions, renting out one’s home during a major hometown event is not a new idea.
“We have 11,000 rooms in the county, which is more than Baltimore City, with two more hotels, including one at Maryland Live! Casino, in the pipeline,” she said, adding, “This is not a problem; it’s normal growth.
“We’re really in a very sweet spot, and we want to maintain that position,” Del Signore said, “so leveling the playing field is very important.”