The Takeoff Episode 03: Why Team and Culture Matter for Travel Startups Sponsored This content is created collaboratively with one of our sponsors.
Airbnb’s current stance would likely be much different if its path to an IPO was uncluttered by web of local and state laws that could trip it up.
This has been a big week for Airbnb in New York, but not the victory lap that many expected after a ruling against one of its hosts was struck down by the New York City Environmental Control Board.
On Friday, CEO Brian Chesky published an open letter to the city suggesting how he’d like to work together. On Monday morning, the Daily News broke the news that New York State Attorney General Eric Schneiderman had subpoenaed user records for its hosts and guests in New York City. Yesterday, Airbnb responded in court by saying the AG’s request was both too broad and the work required to deliver it was too onerous.
While it’s clear now that Chesky’s open letter was written with the knowledge that an action could be forthcoming, what isn’t clear is why Airbnb was the Attorney General’s only target. Airbnb isn’t the only player in New York City’s short-term and vacation rental housing market. In addition to older, local players like New York Habitat, there are competitors like HomeAway, FlipKey, and VRBO, not to mention the knock-off Airbnb clones too numerous to list.
So why is the Attorney General apparently not subpoenaing anybody else?
Yesterday, Crain’s New York Business reported that HomeAway had been in discussions with the AG’s office at the same time as Airbnb, but avoided getting an order to turn over user information. [see Editor’s Note, below]
“We’ve heard from New York City officials and frankly we hear from city officials fairly regularly — several times a year. Usually it’s a request by some official asking to give them a customer list,” Shepherd told Skift.
Shepherd says HomeAway responds to requests for user data by declining to provide the information, but also informing users in that market what the issue is.
Shepherd says, “We believe the cities are simply trying to do what they are supposed to do: Enforce the law.”
At the smaller vacation rental service New York Habitat, which operates in New York, Paris, London, and a handful of other cities, founder Marie-Reine Jezequel hasn’t received any demands from the AG. “We don’t break the law,” she told Skift. “I am a broker and I have to abide by the laws because I have a license. The high-tech companies don’t have that.”
Jezequel said that NY Habitat had to radically change after New York’s short-term rental law went into place in 2011. “When the ban took place I lost a lot,” she says. “It was hard at first. I was enraged.”
She testified against the law when it was proposed in 2010, and has been an advocate for changing it ever since. But NY Habitat has complied with its rules. Staff are required to do due diligence on any listing to confirm that it meets the standards set by the law, and Jezequel has written a 100-page manual to guide them through the process.
“It’s a dilemma when I see the people who fear no consequences. If I do something illegal I won’t sleep at night,” she says.
Airbnb takes a markedly different approach. As it has courted users and raised money, the service has positioned itself as a bit of an outlaw, an industry disruptor challenging not only the entrenched hotel industry but even notions of people’s relation to property and how they live. “Travel is going to go away in the future,” Chesky said at a conference last fall. “People won’t travel, they will be mobile.”
New York officials have complained about how the service deals with them. Officials say conversations with them consist of Airbnb telling them to change the law to make their business model legal. Airbnb has refused to provide hosts with any destination-specific information about local laws or limit how many properties a user can list on the site, or limit what type of unit a user can list.
The ease with which both hosts can list their apartment or house and renters can book and pay for one has allowed Airbnb to grow with a speed that it could not if it researched the laws in the markets where it operates. Jezequel says “It’s seamless, they’ve done such a terrific job at making it easy for the user and I applaud that.”
HomeAway’s Shepherd, who helped guide his company through an IPO says, “What I think we’re witnessing with Airbnb is the result of the hype that’s necessary to drive the company’s valuation so the founders and early investors can keep more ownership of the company as they raise money.”
Top Down Vs. Bottom Up
HomeAway says that the solution to Airbnb and others’ challenges are sensible laws that allow rentals and are easy for hosts to understand and comply with.
“I think it’s naïve to think that you can legislate people out of renting their apartments,” says Shepherd. “You can’t ban them from doing something that’s economically viable for them when the Internet has made it so easy for them to find renters.”
HomeAway approaches the situation by giving local residents information to advocate for rentals. It partnered with Airbnb and FlipKey on the Short Term Rental Advocacy Center, which tells people effective methods for lobbying local and state officials. But it doesn’t believe the lobbying is HomeAway’s responsibility.
“At HomeAway, we believe the people who should be working with City Hall are New Yorkers,” says Shepherd. “It should be locals creating good legislation that supports the city they love. The citizens should come up with the legislation and ordinance that make sense to them.”
Editor’s Note: In an earlier version of this story, we quoted Shepherd as saying that HomeAway had not received a letter from the Attorney General’s office. They did. According to a corrected statement from the company, after receiving the request “We did respond exactly like I said—with a respectful decline and offer to help, just like we do several times per year.” They have not been subpoenaed.