and Franki Cookney
The room-rental website, now worth $30bn, faces a critical year as city authorities clamp down
In the back room of a pub in Kentish Town, a group of middle-class Londoners are perched on velvet-covered stools, eating hummus and talking about property. On the wall, above a pile of empty beer kegs, a slide presentation is in progress. A video of Airbnb’s recent advert shows smiling hosts opening their front doors and declaring their support for Sadiq Khan’s post-Brexit “London is open” campaign.
The audience of Airbnb hosts are there after receiving individual invitations from the company to a “home sharers” meet-up – a concept largely unfamiliar to the slightly bemused crowd. Jonathan, an enthusiastic Californian Airbnb employee, who was recently seconded to London to set up the clubs, is happy to explain: “Homesharing clubs are simply a way of organising this into something … that has a unified voice … then actually takes actions as a collective,” he says, in a less than clear answer.
More simply, homesharing clubs are advocacy groups made up of Airbnb hosts – loose, informal lobbying groups that push the company’s agenda to politicians. The clubs are part of a what is fast becoming a concerted fightback by Airbnb, the website founded in 2008 when three college friends rented out air mattresses in their San Francisco flat as a way of making money, to become one of the biggest online travel brands in the world.
But its phenomenal growth is proving to be its greatest liability. Authorities in cities around the world fear the impact it is having on their communities and are now seeking to arrest Airbnb’s near unfettered expansion.
The latest in a series of attempts around the world to curb its growth came earlier this month when New York governor Andrew Cuomo signed a bill that will fine tenants or landlords who let out unoccupied flatsfor less than 30 days.
Meanwhile, in Dublin, the owners of one flat have recently been prohibited from using it as an Airbnb let without planning permission, raising the prospect of copycat actions elsewhere.
In Berlin, people who let more than half of their flat short-term without obtaining permission from the city council now risk a fine of €100,000. And in London, a 90-day rule was introduced last year under which no property can be rented out on Airbnb, or any similar service, for more than three months a year without planning permission.
So how is Airbnb responding? In New York the company has filed a lawsuit in the US federal court. But at a wider level the company is now supporting efforts to prevent these types of actions from taking place in the first place. And the best way to do this, Airbnb thinks, is to get its millions of hosts to rise up on its behalf.
Last year the company announced plans for 2016 to create homesharing clubs in 100 cities around the world. The aim, it said, was to form “a powerful people-to-people based political advocacy bloc”.
The bulk of the clubs are in North America, with a couple in Australia, South America and Asia, and an increasing number in Europe. In Britain, however, the number of clubs is negligible, even though there are more than 40,000 listings on Airbnb. The company is concentrating its efforts on building this UK base. Meetings, such as the one at the Abbey Tavern in Kentish Town, have been happening all over London as Airbnb seeks to build a grassroots campaign to fight the threat of greater regulation and more restrictive policies.
The hosts at the Kentish Town meeting are told that, earlier this year in Berlin, Airbnb “dropped the ball” after the city’s ruling on short-term lets – the suggestion being that it did not want this to happen again elsewhere. As a result of that ruling, the Berlin Home Sharers Club was created and started lobbying to try to change what it saw to be an unfair policy. In London, the 90-day rule may itself not be onerous compared to other cities, but there are growing calls for further regulations .
Airbnb’s Jonathan steers clear of telling the group that they should lobby for change. “On the one hand, would Airbnb like to see homesharing groups set up all over Europe? Absolutely,” he says. “Would it share in their interests? Absolutely. But whether those sharing clubs decide that their only interest is to share electricians and plumbers or to take political action is completely up to them,” he says.
The next slide focuses on Barcelona, a city where, in 2014, Airbnb was fined €30,000 for breaching tourism laws. Later, another slide listing “write to your MP” as a suggested activity is shown. “Writing letters to local newspapers and selected officials is obviously something that we would want to see concerned hosts do, but only if it applies to them and if they’re motivated to do so,” Jonathan says.
Chris Lehane, Airbnb’s head of global policy and communications, said the clubs act as “a voice against the powerful”.
“These folks absolutely should have the capacity to go out there and represent themselves, and we’ve been clear that we want to provide that support and provide some of the infrastructure,” he said. “This can be an incredibly effective advocacy tool. I think we’ve been pretty transparent and open about that.”
The networks of host groups, which in effect lobby on behalf of the company, are an illustration of how far Airbnb has grown since its inception in 2007. Back then, founders Brian Chesky and Joe Gebbia could not afford the rent on their San Francisco flat and so put three airbeds on the floor and charged $80 a piece for their first guests.
Even by the rapid standards of growth in the tech industry, the company has expanded very quickly. It is now valued at $30bn, and claims two million property listings in 191 countries. That valuation puts the worth of the Californian firm at more than Hilton Hotels.
Wouter Geerts, an analyst for Euromonitor International, says this rapid growth has led to the “corporatisation” of Airbnb, with more listings from other hospitality companies and people with multiple properties. “That might be hotels or estate agents, serviced apartment providers. They all look at Airbnb and think ‘actually what is stopping us putting these properties on Airbnb as well and making extra money?’. And of course there are more and more stories about landlords that push out long-term tenants because they can make more money through Airbnb,” he said.
One of the most frequent criticisms of Airbnb has come from the hospitality industry, which has complained of the differences in regulation that hoteliers have to operate under, compared to Airbnb. But the organisation that acts as the voice of this industry in the UK says it is not just about them. “Many councils in London have expressed their concerns recently,” says Ufi Ibrahim, chief executive of the British Hospitality Association. “Much of that is because the sharing economy – and in particular we are talking about the unlawful professional landlords, the pseudo-landlords operating illegally – has put a huge strain on rental prices.”
Increasing levels of hostility to Airbnb have also started to come from the neighbours of those who let their homes through the website. Last month a property court in London ruled that homeowners whose leases say that their homes can be used only as a private residence cannot rent out their properties as short-term lets. The case came after the neighbours of Slovakian interior designer Iveta Nemcova informed the freeholder of the building that she was listing her flat in north London on Airbnb. As a result, Airbnb hosts have been warned that they could be in breach of the terms of their mortgages and building insurance policies.
One homeowner who spoke to the Observer said that the ground-floor flat in her building had been rented out on Airbnb by a tenant without the knowledge of the owner. As a result, the house insurance of the whole building was potentially invalidated.
In London, Westminster City Council is investigating 1,200 properties alleged to be let in excess of the 90-night limit. Enforcement notices have so far only been issued against two. “In practical terms it is a real challenge for us to gather evidence to prove that individuals are letting properties for over 90 nights,” a council spokesman said.
The scrutiny that Airbnb faces from both users and policymakers around the world comes after the site’s runaway growth. John O’Neill, director of the Centre for Hospitality Real Estate Strategy at Pennsylvania State University, estimates that the number of hosts has doubled in the last year with revenue up 60%. With that growth has come an ecosystem of support companies, typically property management firms that submit the advert for the property onto the website and then may manage guests arriving and leaving, dropping off and collecting keys, for example.
The exact effects of this growth on the hotel industry are unclear. The British Hospitality Association said it would be “unfair” to say there had been an impact on the demand for its members’ services as a result of Airbnb – and instead the association focuses its criticism on the effect on housing. Airbnb says that its growth has been a reflection of how people live, and describes the attacks from the hotel industry as “disappointing but not surprising”, rejecting claims that it has a negative effect on the housing market.
“Homesharing puts money into the pockets of regular people and spreads guests and benefits to more communities and businesses,” the company said in a statement. “Countless cities around the world have introduced clear home-sharing rules, and we will continue to be good partners to policymakers and work together on progressive measures to promote responsible homesharing.” The vast majority of hosts follow the rules, it said.
Where the Airbnb debate goes next, after such a period of rapid growth, is unclear. Some hotel companies, instead of continuing to fight Airbnb, have chosen to join it. “The larger hotel chains are moving away from trying to combat Airbnb. Initially there were some kneejerk reactions of ‘we have to lobby against this, we don’t exactly know what’s happening, they are not regulated well’. Most of the companies have moved on from that now and they have started to realise certain potentials that it brings,” said Geerts. “There is this movement of looking at short-term rentals not as a negative, but more as a positive, and seeing the changing demands of consumers.”
This was illustrated in April when French hotels group Accor, said to be Europe’s largest hotelier by room numbers, paid £118m to acquire Onefinestay, which offers short-term lets on expensive homes.
O’Neill estimates that there are 70 lobbyists working for Airbnb in the US, trying to get favourable legislation passed to benefit the company. “Most hoteliers I speak with have accepted Airbnb’s existence and growth. Their concerns have more to do with levelling the playing field between hotels and Airbnb operators, because Airbnb has so many unfair competitive advantages relative to hotels,” he said.
Others have said that regulators need to be fair in how they set out the rules that Airbnb and other similar companies must adhere to. Robert Vaughan, an economist with accountancy firm PwC, said there was a huge variation in those affected – from someone renting out their sofa, to landlords with multiple properties – and there is a difficulty in applying the same rules to all of them.
O’Neill says that while Airbnb may continue to grow, it will not have the free rein it had previously. “I don’t think there will be a free-for-all of unregulated growth as there has been in the past,” he said.
Back at the meeting in Kentish Town, the night ends with a positive response to the homesharing clubs idea. “We need to write a letter,” suggests one host. “We should meet every three months,” suggests another. As the meeting draws to a close, nearly everyone agrees on the need for a club. Jonathan jumps in again: “I do want to stress that there are other sorts of flavours to home-sharing clubs,” he says, launching into a description of a collective bedsheet-washing initiative, but few are listening. As the meeting ends, the group are asked to put their hands up if they want a local club. Nearly every hand goes up.
The Observer reporter who attended the Kentish Town meeting is an Airbnb host
Growing concern around the world
Authorities in the Catalan capital recently stepped up their campaign against homes illegally rented out to tourists using homesharing websites. Hundreds of listings were ordered to be removed, and Airbnb and another online rental firm, Homeaway, faced fines of €60,000 each.
Homeowners who want to rent out properties to tourists must apply for a licence, and a team of 20 inspectors has been set up to find those who do not adhere to the rules. The city’s mayor, Ada Colau, who took office in 2015, stopped the granting of new tourist licences for homes and hotels. She has blamed the rise in Airbnb popularity for growing tensions between residents and rowdy tourists.
The number of people using Airbnb in Barcelona tripled to 900,000 in the three years to 2015.
The 1,600 short-term property lets in Iceland’s capital have to operate under strict rules introduced in June. The legislation allows residents to let their property for 90 days a year before they must pay business tax. The move comes as Iceland’s population of 332,000 is set to welcome 1.6 million visitors this year – a 29% increase on last year – drawn by the glaciers, fjords, lava fields, hot springs, hiking trails and midnight sun.
The move is one of a series aimed at controlling the rapid rise in visitor numbers, including Game of Thrones fans travelling to the filming locations of the television drama. One report estimated there was a 124% increase in Airbnb rentals in one year as residents cashed in on the popularity of the country, with more than 100 flats available on the capital’s main street alone.
Airbnb said last year that the Russian capital was one of its fastest-growing markets, fuelled by high inflation and low incomes. Activity doubled in one year, driven by an increase of single rooms in apartments, which were being listed for short-terms lets in an attempt by many homeowners to make ends meet, given the country’s economic problems.
The growing interest in Moscow on Airbnb brought it into the top 10 most popular cities by bookings on the website at a time when there was no sign of legislative regulation to restrict use of the service. The sharp increase came at the same time as falling wages, which were down 8.8% in the first half of last year. The average price of a private room for a night in the city is £27, and £45 for an entire home, according to the site.
The city has bucked the trend of some of its European neighbours, and instead worked to make it easier for short-term rentals to operate. Hosts are required to register their properties as short-term rentals but there is no limit on the number of nights per year that they can operate.
Mayor Fernando Medina has said people should not be scared of the new tourism dynamic and wants the city to be able to take in more tourists, in turn reducing the number of empty buildings in Lisbon. Tourism is seen as an important part of Portugal’s economic recovery. Airbnb listings in the greater Lisbon area have almost tripled in the past three years.
Although the city is home to Airbnb’s HQ, it also operates strict rules for hosts, who have to register with authorities. If Airbnb advertises an unregistered property it can be fined $1,000 a day for each listing. One action group has posted “wanted” flyers. The crime? “Airbnbing our community” and “destroying affordable housing for immigrant, minority, and low-income families”. Resident groups have campaigned against Airbnb and there have been reports of tenants being evicted so landlords can list on the site. Last year Airbnb successfully campaigned against Proposition F, or the “Airbnb initiative”, planned legislation that would have reduced the number of days owners can rent their properties. Airbnb’s victory was helped by its grassroots homesharing club, which voted in large numbers against the law.