3 ms·

I've always thought AirBnB has as big a deck stacked against it (or bigger). There are a lot of cities whose main industry is tourism and collect 10%+ bed taxes

I've always thought AirBnB has as big a deck stacked against it (or bigger). There are a lot of cities whose main industry is tourism and collect 10%+ bed taxes. I can't imagine they'll give those up easily.

yardie 14y ago
I don't think so. The VRBO market has existed for years (decades even) AirBnB just made it marketable and easy to enter. The controversy with them is some of the property owners are really taking the piss and treating their residential property as hotels and not paying the hotel taxes (BTW, Florida is 20%). All the reports I've read have been spot on (though the AirBnB founders disagree). The hotels are paying this tax. Some of your members properties look awfully like a hotel. You collect the money, you collect the tax. Unlike the taxi companies who actually have a monopoly, the hoteliers just want the same deal to apply to everyone.
- Zak 14y ago
  It might be reasonable in this case to ask why the hotels have to pay a special tax. Why shouldn't they just collect sales tax like every other business?
  - rprasad 14y ago
    Because renting out a hotel room is not a sale. Ergo, a sales tax does not apply. An occupancy tax is the tax levied on short-term leases (i.e.,, hotels).
    - ajays 14y ago
      It's mainly because (a) sales taxes are much less than these occupancy taxes, and (b) socking it to the visitor has no political repercussions; they're not going to vote in the elections anyways.
    - Zak 14y ago
      There's sales tax on renting a car most places - why not a room? Why should there be a different tax at a different rate for renting a room?
  - yardie 14y ago
    Because visitors don't pay taxes or elect politicians. So when the cities need to balance their budget and vote on a new revenue stream guess where it's coming from? Property and sales tax increases are widely unpopular so politicians look for revenue that won't impact their career: cigarettes, liquor, gambling, and hotels.
jeandenis 14y ago
Couldn't those cities move to tax the vacation rental industry, though? In developed markets like Paris, a majority vacation rentals are done through agencies (who manage cleanings, checkins checkouts, quality control, etc.). It would be fairly straightforward for the cities to pass laws to force agencies to get licenses and pay a tourism tax, much like hotels do. Most vacation rental agencies I've dealt with wish they were taxed as opposed to being de jure illegal but de facto tolerated. That uncertainty has made acquiring new properties and investing capital in the business quite risky. That's not to say that the deck isn't somewhat stacked against vacation rentals. There is a hotel lobbie that's dead-set to kill the industry. Unlike the agencies, the hotel people are quite organized (although that's changing in my experience). And there's an even greater threat from the fact that most vacation-rental properties are owned by foreigners who are seen as driving the price up of longer-term rentals because of the new emphasis on the short-term market. I do think that rising rental prices in many urban centers is the biggest short-term danger -- PR and real. At the same time, vacation rentals are becoming more and more necessary to tourism in big cities. E.g., Paris has more than 75+k apartments rented by the week, with occupation rates above 50%. If you made it illegal, there wouldn't be nearly enough hotels to cover those millions of travelers. And enforcing a ban on a per-property basis would be extremely expensive in terms of man-power. My prognosis is that the market matures, the cities find a way to benefit through taxation, vacation rentals become a bit less price-competitive versus hotels because of that taxation, and it grows from an $80b a year market to a $200b a year market [see http://software.homeaway.com/Media/Files/pdf/RezFest2012-BrentBellm.pdf http://software.homeaway.com/Media/Files/pdf/RezFest2012-Bre...]. I know next to nothing about Uber and that business, and I am sure the taxi lobby will do its best to kill it, but in the end one should never underestimate gov't ability to be clever when it comes to finding new revenue through taxation, especially during these times. [I have invested in a couple of companies in Europe in the vacation rental market]

yardie 14y ago

I don't think so. The VRBO market has existed for years (decades even) AirBnB just made it marketable and easy to enter. The controversy with them is some of the property owners are really taking the piss and treating their residential property as hotels and not paying the hotel taxes (BTW, Florida is 20%). All the reports I've read have been spot on (though the AirBnB founders disagree). The hotels are paying this tax. Some of your members properties look awfully like a hotel. You collect the money, you collect the tax. Unlike the taxi companies who actually have a monopoly, the hoteliers just want the same deal to apply to everyone.

Zak 14y ago
It might be reasonable in this case to ask why the hotels have to pay a special tax. Why shouldn't they just collect sales tax like every other business?
- rprasad 14y ago
  Because renting out a hotel room is not a sale. Ergo, a sales tax does not apply. An occupancy tax is the tax levied on short-term leases (i.e.,, hotels).
  - ajays 14y ago
    It's mainly because (a) sales taxes are much less than these occupancy taxes, and (b) socking it to the visitor has no political repercussions; they're not going to vote in the elections anyways.
  - Zak 14y ago
    There's sales tax on renting a car most places - why not a room? Why should there be a different tax at a different rate for renting a room?
- yardie 14y ago
  Because visitors don't pay taxes or elect politicians. So when the cities need to balance their budget and vote on a new revenue stream guess where it's coming from? Property and sales tax increases are widely unpopular so politicians look for revenue that won't impact their career: cigarettes, liquor, gambling, and hotels.

jeandenis 14y ago

Couldn't those cities move to tax the vacation rental industry, though? In developed markets like Paris, a majority vacation rentals are done through agencies (who manage cleanings, checkins checkouts, quality control, etc.). It would be fairly straightforward for the cities to pass laws to force agencies to get licenses and pay a tourism tax, much like hotels do. Most vacation rental agencies I've dealt with wish they were taxed as opposed to being de jure illegal but de facto tolerated. That uncertainty has made acquiring new properties and investing capital in the business quite risky. That's not to say that the deck isn't somewhat stacked against vacation rentals. There is a hotel lobbie that's dead-set to kill the industry. Unlike the agencies, the hotel people are quite organized (although that's changing in my experience). And there's an even greater threat from the fact that most vacation-rental properties are owned by foreigners who are seen as driving the price up of longer-term rentals because of the new emphasis on the short-term market. I do think that rising rental prices in many urban centers is the biggest short-term danger -- PR and real. At the same time, vacation rentals are becoming more and more necessary to tourism in big cities. E.g., Paris has more than 75+k apartments rented by the week, with occupation rates above 50%. If you made it illegal, there wouldn't be nearly enough hotels to cover those millions of travelers. And enforcing a ban on a per-property basis would be extremely expensive in terms of man-power. My prognosis is that the market matures, the cities find a way to benefit through taxation, vacation rentals become a bit less price-competitive versus hotels because of that taxation, and it grows from an $80b a year market to a $200b a year market [see http://software.homeaway.com/Media/Files/pdf/RezFest2012-BrentBellm.pdf http://software.homeaway.com/Media/Files/pdf/RezFest2012-Bre...]. I know next to nothing about Uber and that business, and I am sure the taxi lobby will do its best to kill it, but in the end one should never underestimate gov't ability to be clever when it comes to finding new revenue through taxation, especially during these times. [I have invested in a couple of companies in Europe in the vacation rental market]