10 ms·

Up to a third of Airbnb's price gap with hotels is due to tax treatment

68 points by szx 10y ago

ceejayoz 10y ago
This is a bit of a deceptive headline. The immediate sub-headline is "Up to third of price gap with hotels is due to tax treatment, FT finds", which is a pretty massive difference. (Side note: Usual "Google the headline" trick works on FT.com's paywall)
- jessriedel 10y ago
  Also, the much higher VAT rate paid by most hotels in the UK compared to most AirBnBs (17% vs 0.6%) is not because AirBnBs are illegally avoiding the tax, but simply because most hotels, but few AirBnBs, cross the business-size threshold where the higher VAT kicks in.
  - justincormack 10y ago
    its not a "higher VAT" threshold, you do not have to register for or charge VAT at all if your business earns less than £85,000 (you might want to if you pay out a lot of VAT though). This is unusual in the EU, most countries do not have this exemption I don't think.
    - nathanvanfleet 10y ago
      Canada has the same thing. You have to collect more than 30,000$ in income before you need to collect taxes for it.
    - jessriedel 10y ago
      Thanks. Yes, those percentages must be averages, with most Airbnb's paying zero.
- sctb 10y ago
  Thank you, we've updated the title.
- szx 10y ago
  FYI, HN's handy little "web" link, below the title, does exactly that (i.e. Google the headline)
darpa_escapee 10y ago
It's almost as if AirBnB, Uber et al get by on skirting the law other people have to follow.
- wyager 10y ago
  "Skirting the law" is loaded language that makes it sound as though they are doing something illegal. They are not. It's true, though; the reason companies like AirBnB and Uber are so vastly superior to the entrenched competition is that they don't have to deal with all the ridiculous and pointless red tape that makes taxis so horrendous and American hotels so insanely expensive. I'm not sure how anyone can recognize that overregulation makes taxis, hotels, etc. so truly awful and then turn around and suggest that the solution is to also overregulate everyone else who managed to escape from that utility-sucking tarpit of bureaucracy and waste.
  - tyingq 10y ago
    I think you may have swung a bit too far to the other side. There are certainly credible entities that did believe Uber and AirBnB was/is doing something illegal. They've certainly both been cited for violations, taken to court, etc...successfully. As usual, the truth is somewhere in the middle.
  - stephengillie 10y ago
    "Loaded language" makes it sound like these are fully legitimate businesses on the receiving end of undue criticism. But then you point out how these businesses are operating in the same market, but avoiding the market regulation, almost as though they are operating in a quasi-illegal state. Why do you believe the regulation of these markets is particularly onerous? Can you provide some specific examples?
    - wyager 10y ago
      > Why do you believe the regulation of these markets is particularly onerous? Can you provide some specific examples? Have you ever stayed in a hotel, and have you ever stayed in an AirBnB? For me, in both cases, the answer is "many times", and the overwhelmingly clear conclusion is that AirBnB offers a vastly superior experience to staying in a hotel for a vastly lower cost. If you look at regional hotel regs; it's clear where the difference is going. Resort taxes, occupancy taxes, inspection and certification fees, etc. For all their costs and alleged benefits, they don't actually manage to make the hotel experience any better or safer than staying in an AirBnB.
jlg23 10y ago
"around a third of the $100 saving you make over the price of an average hotel room" Up to 30USD of the 100USD I save compared to a regular hotel? PER NIGHT? In that price range, $30 are a mere tip.
- steveklabnik 10y ago
  Yes, in a London hotel in 2015: > On average, guests paid $220 a night for a hotel room in 2015 before VAT, while Airbnb hosts received $142, according to the Hotelschool report, which was calculated in dollars. After taking account of hotel room VAT and Airbnb fees (assuming a 10 per cent guest fee and a 3 per cent host fee, plus VAT) the prices were $264 for the hotel room and $164 for Airbnb.
jdavis703 10y ago
Hotels are heavily taxed because tourists and business travellers can't vote. In many cases cities like London and NYC are non-fungible goods, so if you want to go there you just have to pay the taxes. If they ever get high enough that hotels can't book rooms, the businesses should lobby the government to lower them.
- logicallee 10y ago
  could you add in your analysis of airbnb or how it relates to what you've written - you've left it entirely out of your paragraph and I can't draw an immediate conclusion. (Though maybe you were adding information about hotel taxation without any thoughts about airbnb or how it relates.)
  - stale2002 10y ago
    It is related to AirBnB because there is an argument that the tax is unfair to consumers to begin with. It is designed to screw over foreigners.
    - AJ007 10y ago
      Tourists use a cities resources that the residents(former, current, and future) paid for. Would it be better they paid an income tax and received voting rights?
    - rayiner 10y ago
      Visitors use a ton of resources--they should pay for them. E.g. think about all the money that goes into security for Times Square.
      - jeffdavis 10y ago
        Most cities seem to love tourism, to the point that it's considered an industry and has its own advertising. Tourists pay sales tax and indirectly pay other taxes through businesses that cater to tourists.
stale2002 10y ago
.... So, ONLY a third? That leaves two thirds left, thats not due to that. That is still a big difference.
- nathannecro 10y ago
  Hotels have to comply with other regulatory mandates like health insurance for the workers, worker's comp, pension/retirement plans, in some cities - unions, etc. You may also be forgetting the other amenities that hotels may provide: the additional cost of common area facilities (exercise rooms, breakfast areas, pool, etc) the hotel provides for the guest. Room service, turndown service, and daily cleaning also play a huge role. There's also a huge amount of space that's used for things like lobbies, front desks, back of the house offices for the accounting/managerial/etc staff that keep not only your one room operating, but provides the flexibility to rent 100, 200, 300, 400 rooms. Then of course, you have the construction + regulation that goes into a hotel. Guestroom entry doors must meet a specific fire-rated standard (greater than those normally found in residential homes). In the United States and in Europe, each guestroom is designed to maximize the protection of the occupant from environmental threats. Fire alarms and sprinklers are regularly tested, every entry door has a lock whose key is tightly controlled. HVAC systems are constantly maintained so that dust and mold don't build up inside. And so on, and so forth.
- dazc 10y ago
  There is a hotel chain in the UK that will refund you if you do not have a good night's sleep. They pay out on this promise too, I can assure you. Hotels also have a lot of empty rooms that cost money to maintain whether they are occupied or not. Hotels employ staff, not all of whom are fully productive 100% of the time. Before a hotel takes my money I actually know where it is. The hotel is governed by local legislation so I have redress if something goes wrong. I may have some redress with Airbnb but I wouldn't like to bet on it.
mcguire 10y ago
"Airbnb did not comment directly on the FT’s calculations, saying that tax was proportionate to the level of activity provided, not the platform on which accommodation is listed. It suggested it was misleading to compare someone occasionally sharing a spare room with a 200-room hotel with high occupancy rates." Is AirBnB still pushing the "spare room" thing?
franciscop 10y ago
This is the relevant quote, and not that clickbait title: > The VAT on most Airbnb stays can be as little as 0.6 per cent because the UK only levies the tax when businesses sell more than £83,000 per year — a threshold reached by very few Airbnb hosts. It is otherwise only payable on Airbnb’s booking and service fees. So the problem is that many "small business" pay less taxes than big companies, which seems fair. The main difference is that thanks to Internet, those small business now can be aggregated into a platform while still operating independently, which is basically awesome.
- digitaltrees 10y ago
  Yes, and AirBnB could be charged for the difference in tax. This would preserve the advantage for small business and treat them the same as a large hotel chain.

68 points by szx 10y ago

This is a bit of a deceptive headline. The immediate sub-headline is "Up to third of price gap with hotels is due to tax treatment, FT finds", which is a pretty massive difference. (Side note: Usual "Google the headline" trick works on FT.com's paywall)

jessriedel 10y ago
Also, the much higher VAT rate paid by most hotels in the UK compared to most AirBnBs (17% vs 0.6%) is not because AirBnBs are illegally avoiding the tax, but simply because most hotels, but few AirBnBs, cross the business-size threshold where the higher VAT kicks in.
- justincormack 10y ago
  its not a "higher VAT" threshold, you do not have to register for or charge VAT at all if your business earns less than £85,000 (you might want to if you pay out a lot of VAT though). This is unusual in the EU, most countries do not have this exemption I don't think.
  - nathanvanfleet 10y ago
    Canada has the same thing. You have to collect more than 30,000$ in income before you need to collect taxes for it.
  - jessriedel 10y ago
    Thanks. Yes, those percentages must be averages, with most Airbnb's paying zero.
sctb 10y ago
Thank you, we've updated the title.
szx 10y ago
FYI, HN's handy little "web" link, below the title, does exactly that (i.e. Google the headline)

darpa_escapee 10y ago

It's almost as if AirBnB, Uber et al get by on skirting the law other people have to follow.

wyager 10y ago
"Skirting the law" is loaded language that makes it sound as though they are doing something illegal. They are not. It's true, though; the reason companies like AirBnB and Uber are so vastly superior to the entrenched competition is that they don't have to deal with all the ridiculous and pointless red tape that makes taxis so horrendous and American hotels so insanely expensive. I'm not sure how anyone can recognize that overregulation makes taxis, hotels, etc. so truly awful and then turn around and suggest that the solution is to also overregulate everyone else who managed to escape from that utility-sucking tarpit of bureaucracy and waste.
- tyingq 10y ago
  I think you may have swung a bit too far to the other side. There are certainly credible entities that did believe Uber and AirBnB was/is doing something illegal. They've certainly both been cited for violations, taken to court, etc...successfully. As usual, the truth is somewhere in the middle.
- stephengillie 10y ago
  "Loaded language" makes it sound like these are fully legitimate businesses on the receiving end of undue criticism. But then you point out how these businesses are operating in the same market, but avoiding the market regulation, almost as though they are operating in a quasi-illegal state. Why do you believe the regulation of these markets is particularly onerous? Can you provide some specific examples?
  - wyager 10y ago
    > Why do you believe the regulation of these markets is particularly onerous? Can you provide some specific examples? Have you ever stayed in a hotel, and have you ever stayed in an AirBnB? For me, in both cases, the answer is "many times", and the overwhelmingly clear conclusion is that AirBnB offers a vastly superior experience to staying in a hotel for a vastly lower cost. If you look at regional hotel regs; it's clear where the difference is going. Resort taxes, occupancy taxes, inspection and certification fees, etc. For all their costs and alleged benefits, they don't actually manage to make the hotel experience any better or safer than staying in an AirBnB.

jlg23 10y ago

"around a third of the $100 saving you make over the price of an average hotel room" Up to 30USD of the 100USD I save compared to a regular hotel? PER NIGHT? In that price range, $30 are a mere tip.

steveklabnik 10y ago
Yes, in a London hotel in 2015: > On average, guests paid $220 a night for a hotel room in 2015 before VAT, while Airbnb hosts received $142, according to the Hotelschool report, which was calculated in dollars. After taking account of hotel room VAT and Airbnb fees (assuming a 10 per cent guest fee and a 3 per cent host fee, plus VAT) the prices were $264 for the hotel room and $164 for Airbnb.

jdavis703 10y ago

Hotels are heavily taxed because tourists and business travellers can't vote. In many cases cities like London and NYC are non-fungible goods, so if you want to go there you just have to pay the taxes. If they ever get high enough that hotels can't book rooms, the businesses should lobby the government to lower them.

logicallee 10y ago
could you add in your analysis of airbnb or how it relates to what you've written - you've left it entirely out of your paragraph and I can't draw an immediate conclusion. (Though maybe you were adding information about hotel taxation without any thoughts about airbnb or how it relates.)
- stale2002 10y ago
  It is related to AirBnB because there is an argument that the tax is unfair to consumers to begin with. It is designed to screw over foreigners.
  - AJ007 10y ago
    Tourists use a cities resources that the residents(former, current, and future) paid for. Would it be better they paid an income tax and received voting rights?
  - rayiner 10y ago
    Visitors use a ton of resources--they should pay for them. E.g. think about all the money that goes into security for Times Square.
    - jeffdavis 10y ago
      Most cities seem to love tourism, to the point that it's considered an industry and has its own advertising. Tourists pay sales tax and indirectly pay other taxes through businesses that cater to tourists.

stale2002 10y ago

.... So, ONLY a third? That leaves two thirds left, thats not due to that. That is still a big difference.

nathannecro 10y ago
Hotels have to comply with other regulatory mandates like health insurance for the workers, worker's comp, pension/retirement plans, in some cities - unions, etc. You may also be forgetting the other amenities that hotels may provide: the additional cost of common area facilities (exercise rooms, breakfast areas, pool, etc) the hotel provides for the guest. Room service, turndown service, and daily cleaning also play a huge role. There's also a huge amount of space that's used for things like lobbies, front desks, back of the house offices for the accounting/managerial/etc staff that keep not only your one room operating, but provides the flexibility to rent 100, 200, 300, 400 rooms. Then of course, you have the construction + regulation that goes into a hotel. Guestroom entry doors must meet a specific fire-rated standard (greater than those normally found in residential homes). In the United States and in Europe, each guestroom is designed to maximize the protection of the occupant from environmental threats. Fire alarms and sprinklers are regularly tested, every entry door has a lock whose key is tightly controlled. HVAC systems are constantly maintained so that dust and mold don't build up inside. And so on, and so forth.
dazc 10y ago
There is a hotel chain in the UK that will refund you if you do not have a good night's sleep. They pay out on this promise too, I can assure you. Hotels also have a lot of empty rooms that cost money to maintain whether they are occupied or not. Hotels employ staff, not all of whom are fully productive 100% of the time. Before a hotel takes my money I actually know where it is. The hotel is governed by local legislation so I have redress if something goes wrong. I may have some redress with Airbnb but I wouldn't like to bet on it.

mcguire 10y ago

"Airbnb did not comment directly on the FT’s calculations, saying that tax was proportionate to the level of activity provided, not the platform on which accommodation is listed. It suggested it was misleading to compare someone occasionally sharing a spare room with a 200-room hotel with high occupancy rates." Is AirBnB still pushing the "spare room" thing?

franciscop 10y ago

This is the relevant quote, and not that clickbait title: > The VAT on most Airbnb stays can be as little as 0.6 per cent because the UK only levies the tax when businesses sell more than £83,000 per year — a threshold reached by very few Airbnb hosts. It is otherwise only payable on Airbnb’s booking and service fees. So the problem is that many "small business" pay less taxes than big companies, which seems fair. The main difference is that thanks to Internet, those small business now can be aggregated into a platform while still operating independently, which is basically awesome.

digitaltrees 10y ago
Yes, and AirBnB could be charged for the difference in tax. This would preserve the advantage for small business and treat them the same as a large hotel chain.