Earlier this week, a New York City judge likened an apartment rented out through the online service to an “illegal hotel” and fined the offender, Nigel Warren, $2,400. But what about everyone else? Do New Yorkers who planned to make a few bucks this coming holiday weekend risk getting into trouble also?

A New York state law does indeed forbid rentals for less than 29 days unless the tenant is living there at the same time. But rather than acknowledging this very real challenge to its business model, Airbnb continues to operate in denial. Even more dangerously, it’s asking that of customers. Consider this email the company sent users yesterday:

…this points out with absolute clarity that the laws in New York need to be changed so this can never happen again. While there is universal acknowledgement that hosts like Nigel were not the intended target of the law, that provides little comfort to the few who find themselves subject to these fines.

The bottom line of yesterday’s news is that the judge’s decision simply creates even more confusion around an already confusing New York law. As always, we urge our hosts to learn about and obey all of the local laws in their cities. But it is often hard to predict how individual city administrators will interpret laws like this, and that needs to change.

Translation: Figure out the local law in your city. If that city is New York, the law is unclear. Well, it’s kind of clear but we don’t like it.

Airbnb has no shortage of supporters who say regulators will have to come around and embrace the so-called sharing economy. Wired wrote yesterday: “…even the most stubborn pencil pushers won’t be able to resist change for long. After all, even bureaucrats have extra bedrooms.”

But Airbnb has bigger problems than a chilly reception from city governments around the world. Instead of targeting the arcane short-term hotel law, it might want to look at the more widespread rule being flouted around the world. Check out this standard lease agreement from Michigan:

Subleasing, Sharing, Assignment and Guest at Premises: No subleasing, sharing of Premises, or assignment of agreement is permitted…

Here’s another from Ontario:

The Tenant shall not assign or sublet the premises without the prior written consent of the Landlord.

If not expressly prohibited by the landlord, the tenant may sublet or assign the premises with the landlord’s prior written consent…

A letter from your landlord saying it’s okay to make a few bucks for the weekend off a total stranger? Good luck.

But Airbnb functions under the premise that those inhabiting an apartment have the right to let it out. As the leases above show, the reality is that most people do not. Hosts on Airbnb know this. Airbnb knows this. (That’s why it dodges the frequently asked question on on its website: “Do I need to be there with my guests? It’s up to you! Airbnb does not require you to be present while guests are staying in your space.” Then the perfunctory: “rules and regulations differ from place to place…”)

Ignorance, real or feigned, has been critical to Airbnb’s success.

But the timing couldn’t be worse for Airbnb, whose looming IPO is one of the most anticipated of the year. It’s been an investors’ darling with valuations touching the $2.5 billion range and some fervent believers predicting annual revenues could top $1 billion.

In an interview with Skift earlier this year, Airbnb’s public policy head David Hantman actually said, “We can’t possibly keep up with the law in all the cities. … What we’d like to do is figure out a way to make New York the model city.”

The real estate sector, in which Airbnb operates, is infamously corrupt—everyone looks the other way to get around the rules. I’ve done it, too. Years ago, when I got a new job hundreds of miles away from my apartment, I slipped the superintendent $200 and told him to tell anyone who asked that I lived there on weekends so I’d be in compliance with our building rules.

Airbnb is doing the same—on a massive scale. I asked the company to comment and it referred me to this blog post by Hantman, referring to the New York ruling and Nigel Warren’s case:

We believed, and still believe, that as long as a host is present during a stay, the stay is legal. That is why we intervened in this case.

As expected, the company is being called on its duplicity. A commenter named Alex wrote:

Also… if you seriously believe “so long as the host is present during the stay, the stay is legal”… Then why is there an option to select “Entire home/apartment” when searching for a place to stay in NY? … I don’t think you’re going to be able to BS your way out of this.

No time like pre-IPO to keep up with the law—and cut the BS.

This story originally appeared on Quartz, a Skift content partner.

Additional links from Quartz:

• The UK’s fastest growing tourist group endures the slowest visa process
• Something is wrong when a country says it’s 40 million rolls short on toilet paper
• Tesla’s next model: a $450 million convertible (debt) offering

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Based on nearly 6,000 hotels reporting income and expense statements to STR, U.S. hotel-industry profit came in just under the peak level recorded in 2007. Total industry revenue levels topped an estimated US$162 billion, with house profit reaching US$58 billion and net operating income just under US$40 billion.

“No matter how you revenue-manage your hotel, it’s ultimately about profit,” said Carter Wilson, director of STR Analytics, which oversees the HOST Almanac. “While it’s encouraging that the gross numbers for 2012 is near record highs, many properties are still not back to peak profit. Luxury and Upper Upscale properties are leading the charge back to profitability, but there are still a lot of struggles in the middle and lower Chain Scale segments.”

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Undated handout photo of paramilitary policemen, equipped with fire extinguishers, patrol on a street of Lhasa. Handout / Reuters

Tibetan campaign groups are launching a boycott of the InterContinental Hotels Group – the owner of Holiday Inn, Crowne Plaza and others – because of plans to open a vast 2000-room resort in Lhasa.

The campaign, led by Free Tibet and backed by Students for a Free Tibet, wants IHG to withdraw from the project in the Tibetan capital, arguing the hotel is a “PR coup for the Chinese government” given concerns about human rights in the region and will exacerbate Tibetans’ marginalisation.

Opposition to the InterContinental Resort Lhasa Paradise – which is due to open in 2014 and is currently under construction – comes amid growing concern about the impact of rapid development in the Tibetan Autonomous Region.

Officials believe tourism is essential to Tibet’s future and have set a target of 15 million visitors a year by 2015. China’s state news agency Xinhua reported that the number of tourists increased by more than 20% to 10.6 million in 2012, compared with the previous year, while revenue rose by 30% to 12.65bn yuan (£1.4bn).

But campaigners say the rapid growth is eroding the region’s heritage and culture and has benefited Han Chinese more than Tibetans.

In July, the authorities announced plans to build a £3bn theme park in Lhasa, saying it would reduce pressure on heritage sites.

More recently, a tourist posted photos apparently showing the construction of a shopping mall complete with underground carpark on the Barkhor, the route pilgrims take around the Jokhang temple, in the heart of the old city. In December the government of Lhasa said it was embarking on a 1.2bn yuan upgrade of the Barkhor area’s infrastructure that would help to preserve the city’s ancient heritage.

Eleanor Byrne-Rosengren, Free Tibet’s director, said: “The presence of an upscale multinational brand such as InterContinental gifts priceless PR to the Chinese regime responsible for gross human rights abuses throughout Tibet.

“InterContinental’s marketing portrays Lhasa as a paradise and trades on images of an ancient Tibetan culture which in reality is being systematically destroyed by China.

“IHG and China will take the profit: Tibetans will wash the dishes. InterContinental Hotels are parasites in their so-called paradise.”

IHG held a meeting with Tibetan support groups after the plans were first announced in 2010. Free Tibet declined an offer of a second meeting, saying it did not believe it would be productive unless IHG answered a detailed list of questions – such as how the economic benefits to Tibetans would be maximised.

An IHG spokesperson said: “We take our commitments to human rights and creating local economic opportunity very seriously. All IHG employees have signed on to our code of ethics and business conduct and our human rights policy.

“As a managed hotel, the InterContinental Lhasa will be held to our high operational standards and policies, which include recruiting, training and developing hotel staff. IHG’s hotels create jobs and drive tourism income in the communities where they operate, thereby helping to increase living standards in Lhasa and wider Tibet.”

There is already a 250-room St Regis resort in the Tibetan capital, but the new project is on a far larger scale.

Beijing says that criticisms of its human rights record in the region are “groundless” and that it has invested heavily to raise incomes and living standards. The average urban household income in the region rose from just under 12,000 yuan in 2007 to just over 18,000 in 2011, while the rural income rose from almost 2,800 yuan to around 4,900 yuan. Xinhua reported last month that the Tibetan economy grew 12.2% year-on-year in the first quarter.

The Tibet government office said it was not responsible for handling queries on the region’s tourism strategy. The Lhasa government office could not be reached and the Lhasa tourism office referred calls to the marketing department, where no one answered.

The new resort is being opened in partnership with the Chengdu Exhibition and Travel Group. A press spokesperson there, Wu Zhiming, said the resort was still under construction.

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Room 77 employees take a break from "turning hotel search inside out" or whatever else they do at company headquarters. New CEO Drew Patterson (center, on the couch) thinks these are very early days for hotel metasearch. / Room 77

Drew Patterson, who recently became Room 77′s first CEO, does a perceptible double take at the seeming absurdity of the question.

“How is Room 77 going to meet the challenge of being relatively late to the party?” he’s asked.

After all, the first crop of travel metasearch sites, including FareChase, SideStep and Qixo, are now distant memories of a bygone Travel 1.0 era, and notable players such as Skyscanner and Kayak have each been refining their products and building traffic for about a decade already.

How, then, are travel startups such as Room 77, which only debuted its hotel-metasearch business about a year ago, and Hipmunk, founded in 2010, going to compete against the bigger and and more-established players?

It may be late, but it’s still early

Patterson believes it’s actually early rather than late.

“It’s the very early innings of the shift to mobile,” Patterson says, noting that a massive shift in consumer behavior is under way as travelers reach for their smartphones and tablets, often even when the desktop is within easy reach.

“Mobile is the catalyst,” Patterson adds.

Patterson argues that travel search is a great fit for mobile as travelers won’t need a plethora of apps, they may be on-the-go searching for a hotel, and can benefit from streamlined side-by-side comparisons “when there’s no keyboard and screen real estate” is scant.

In some ways, as relatively new and funded travel startups, Room 77 ($43.8 million) and Hipmunk ($20.2 million) find themselves in similar situations. How are they going to break out of the pack in the battle for global traction, and site and mobile visitors?

“It all starts with the right product,” Patterson says.

Is Room 77 different enough?

In that regard, one can make an argument that Room 77 currently has a more differentiated product than Hipmunk’s.

Sure, Hipmunk has its much-touted and attractive user interface and Agony index, and can adeptly enable users to search for hotels based on the location of their business meetings, too.

But, consider some of Room 77′s differentiators:

• Room 77 offers simulated room views for around 1 million rooms at hotels that are three stars and above, and also features insider tips for choosing specific rooms, hotel floors, or vantages (pick a room facing E. 33rd Street) at around 16,000 hotels.

• You can book about 200,000 hotels on Room 77 without having to navigate to another hotel or online travel agency website, and many of these properties enable guests to delay payment until hotel checkout, a spokesperson says. Customers can also book hotel stays from the Expedia Affiliate Network and Getaroom.com without leaving Room 77.

• In addition to displaying rates from various online travel agency and hotel websites, Room 77 also shows AAA, senior, government and military rates.

• At four- and five-star hotels booked on Room 77, you can indicate your room preferences and Room 77′s Room Concierge service will attempt to get you a specific room type or location to match your likes and dislikes. During the booking process, guests can also give hotels special requests such as putting flowers in the room for an anniversary etc.

The tortoise and the cheetah?

Patterson argues that Room 77′s site speed is a differentiator, too. Around the Skift office, we informally gauged the pace of Room 77′s loading of hotel search results against those of Hipmunk and Kayak. Room 77 may have been a tad quicker, although this was far from a scientific study, and the contest was close.

However, the speed of TripAdvisor’s hotel metasearch results seemed like a tortoise compared to Room 77′s cheetah.

Breaking into seeming talking points mode, Patterson says Room 77′s “speed, intelligence and relevance is second to none.”

Founded in 2009 by Brad Gerstner, a former co-CEO of National Leisure Group and avid travel industry angel investor, who serves as Room 77 chairman, the company first focused on its room view technology after having acquired OpTrip and TripKick for their tech and talent.

Changing views about the business direction

Room 77′s room views, created by plotting a room’s latitude, longitude and altitude, and then marrying them with Google Earth, are still part of the site, but they are relegated to the lower portions of the page. Many hotels weren’t exactly enamored with the idea of giving consumers the option to book a specific room, which was Room 77′s ultimate intent, although there is indeed some of that going on in the hotel industry today.

At the time, Room 77 enlisted hotel guests with its iPhone app and spent a lot of energy in the early days collecting hotel floor plans to build the world’s largest database of hotel rooms.

That process may be ongoing, but Room 77 pivoted toward hotel metasearch and got into it in a meaningful way about a year ago.

Independence, with a few dependencies

With 38 employees, Mountain View, California-based Room 77 has implemented a different funding strategy than its Hipmunk competitor and neighbor in nearby San Francisco.

In January 2013, Expedia, Concur, Sutter Hill Ventures, General Catalyst Partners, Felicis Ventures, and a bunch of angels, including Rich Barton, Erik Blachford, and Spencer Rascoff, participated in a $30.3 million Series C round, bringing Room 77′s total funding to $43.8 million.

With its $20.2 million in funding from the likes of Institutional Venture Partners and Ignition Partners, not to mention Ashton Kutcher, Hipmunk doesn’t have Expedia- and Concur-like strategic investors, and Hipmunk CEO Adam Goldstein argues this gives Hipmunk a competitive advantage with potential partners because it is “independent.”

Investments from Expedia and Concur send a signal about Room 77′s direction and strategy, Goldstein argues.

In fact, Goldstein says: Hipmunk is “one of the last independent metasearch companies in the U.S.,” and “one of the fastest growing.”

Patterson of Room 77 isn’t buying Goldstein’s analysis, saying: “I’m not sure they [Hipmunk] could make up more asterisks on what they are number one in.”

Patterson says Expedia and Concur are “passive investors” in Room 77, and they don’t have seats on Room 77′s board.

Still, Patterson says, “we are in active discussions with those guys.”

Expedia, Trivago and Room 77?

It may not be too far-fetched to speculate that one day Expedia, which recently poured $632 million in cash and stock into German hotel metasearch site Trivago, taking a majority stake, could one day consider acquiring Room 77 outright. If it paired Trivago in Europe with a growing Room 77 in the U.S., then Expedia could build a base to begin to challenge Priceline-Kayak in the global online travel battle.

Patterson doesn’t touch that speculation, but says Room 77 is “well-capitalized,” which gives the company “enormous flexibility.”

Room 77 is experimenting with online marketing through different channels, although the key would be to find the right ways to engage consumers, and not just buy traffic, Patterson says.

“Having that kind of dry powder,” Patterson says, referring to Room 77′s funding, “creates flexibility. Do we want to go offline [with advertising]? We have the capital to do that.”

Hotel metasearch is a crowded field with intense competition. Search engine marketing is very expensive, and titans of metasearch, such as Kayak, undoubtedly command better unit economics than startups like Room 77 and Hipmunk because of their much smaller footprints.

And, let’s not overlook TripAdvisor, which will undoubtedly play a huge role in shaping the market.

However, even with those disadvantages, amply funded travel startups such as Room 77 and Hipmunk are currently focusing mostly inward on their products, and aren’t in a huge hurry to play the big, paid-marketing game.

After all, if you believe Room 77′s Patterson, these are the early days.

“The smartest investors in this category see huge growth to come in search,” Patterson says. “We are playing with where the business can be five or six years from now, and not the next quarter.”

This is the second of a four-part series on funded travel startups, looking at where they started and their strategies for breaking out of the pack.

Part 1: The real-world challenge for travel startups, as mirrored in Hipmunk’s story 

The post Will Room 77′s deep pockets and strong hotel product get it a seat at the table? appeared first on Skift.

Sen. Krueger re-iterated her stance that the law as written was indeed directed towards the type of rental activity that takes place on sharing and vacation rental sites. Airbnb has stated that 87% of its hosts are renting the units they live in, but the senator argues that a much larger portion of the activity on these sites is carried out by unscrupulous agencies and landlords than the sites would have users believe.

A portion of her statement follows:

The real problem here is the devil-may-care attitude companies like Airbnb have taken toward the legal consequences for their users. Whether it’s laws like New York’s, or it’s the basic terms of use of a potential user’s apartment, companies like Airbnb or Flipkey are recruiting private citizens into their business model without sufficiently warning them that it may not be legal and could even lose them their homes. That’s pathologically irresponsible.

New York’s law deals with a serious problem — our city’s chronic residential housing shortage has reached a crisis level. The bulk of listings on Airbnb and similar services in New York City are not individuals or small entrepreneurs renting out one or two rooms from time to time to supplement their income — they are large, ongoing illegal business enterprises taking residential apartments entirely out of the market and using them as unsafe, illegal hotel rooms. This is bad for visitors, who don’t get proper services, safety, or security in these illegal accommodations, and bad for New Yorkers, who are suffering under a housing shortage and can’t afford to have residential apartments illegally taken out of the market.

I am open to discussing good-faith efforts to improve our law, but the only proposals that have been put forward so far would gut the law, making it practically unenforceable and leaving New Yorkers without any recourse against illegal hotel operations compromising the safety and security of their homes.

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This April 29, 2013, photo made with a fisheye lens shows the Music City Center in Nashville, Tenn. Mark Humphrey / Associated Press

After nine years of discussion, controversy, planning and construction, Nashville’s mammoth, gleaming new $585 million convention center opened with two days of public events and concerts Sunday and Monday.

The new Music City Center is three times bigger than the city’s existing convention center, which opened in 1987, and nearly 3 1/2 times bigger than the Memphis Cook Convention Center that opened in 1974. An 800-room Omni Nashville Hotel under construction next door will open this fall and has already booked 250,000 room nights through conventions and meetings in the years ahead.

Those facts have Memphis convention planners concerned, even as they applaud Nashville’s chutzpah in building the 1.2 million-square-foot, architecturally unique MCC.

“I think it’s bold news on the part of Nashville, a smart move on the part of their community,” said Kevin Kane, president and CEO of the Memphis Convention & Visitors Bureau. “It’s clearly going to pay huge dividends for Nashville tourism for years to come. And it’s clearly going to have an impact on Memphis because of the size and scope of the facility.

“We’re very concerned about what the long-term impact will be on Memphis. Nashville is a strong convention and meetings destination to begin with. They got stronger with this move. Will it put us out of business? Of course not. Will it make our job a little more difficult? You better believe it will.”

Music City Center occupies what had been six square blocks of parking lots, one-story office buildings, service and repair shops, a strip joint, a Greyhound bus station and an electrical substation — all demolished or moved when construction began in March 2010.

The center is the latest project in a massive transformation of the “SoBro” area, south of Broadway’s famed honky-tonks, that includes 20,000-seat Bridgestone Arena, a Hilton Hotel, Schermerhorn Symphony Center, 29-story Pinnacle office tower and a 21-story luxury condominium tower.

The $250 million Omni shares the block east of the center with the Country Music Hall of Fame and Museum, which is being expanded and integrated with the hotel as part of a separate $34 million city-funded project.

The project dwarfs Memphis’ modest renovations to the Cook over the years, including the 2003 expansion that added the city’s high-end performance center, the Cannon Center.

The convention center’s most striking feature is its wavy, flowing and open architecture, which combines artistic themes evoking guitars, sound waves and rolling hills. Four acres of the roof is an undulating space covered with live vegetation; the rest of the roof is a giant outline of guitar hiding a 200-kilowatt solar panel grid. Rainwater from the roof is stored and used for restrooms.

Seven outdoor balconies of varying sizes jut out of the building on three sides, encouraging visitors to walk outside, and much of the building’s exterior walls is glass. Even the main 350,000-square-foot exhibition hall is glass-walled on one side.

“Unlike a lot of convention centers, this building is filled with windows. Visitors are going to have natural light and are going to be able to orient themselves with our city,” Mayor Karl Dean said during a preview tour last week. The center has 60 meeting rooms totaling 90,000 square feet.

Dean spearheaded the project after his first election in 2007, following three years of indecision by city leaders and opposition by former mayor Bill Purcell, who focused his efforts on the city’s neighborhoods after years of big civic projects by his predecessor, Phil Bredesen. Dean persuaded the Metro Council to approve the project in January 2010.

The city sold $623 million worth of bonds to finance the center, to be repaid with revenue primarily generated through visitors: half of the 6 percent hotel-motel tax, an additional $2 per-room per-night room tax, a 1 percent surcharge on rental cars and a $2 “airport ground transportation departure” fee every time a taxi, shuttle, bus or other commercial vehicle exits the airport. Also earmarked for paying the debt are all future increases in sales tax revenue collected from a downtown tourism development zone and all sales tax collected at the center and the hotel.

After the open house, tours and free concerts, the first paid event is a sports festival this weekend. The Country Music Association’s annual Music Fest is scheduled. The 2014 NCAA women’s basketball Final Four is set across the street at the arena, but it wouldn’t have come without the new convention center. The National Rifle Association’s huge national convention is booked for 2015.

The center enables the city to go after 75 percent of the nation’s conventions and exhibitions, said Charles Starks, MCC’s president and CEO. “The average size of the group that’s booking with us now is about 6,500 attendees. The old center is about 1,500 attendees. So the sheer size of the groups coming is dramatically increasing.”

In Memphis, studies commissioned by Mayors Willie Herenton and then A C Wharton have recommended new facilities, and Wharton said in January he’d take up the task again with a new committee that would explore the city’s overall convention business and operations.

Dean, 57, a Massachusetts native and Vanderbilt University Law School graduate, is the county’s former elected public defender. Dean won re-election in 2011 with 79 percent of the vote, and clearly feels vindicated by the project, which was loudly opposed by some council members and others. ___

The post Nashville’s new convention center sets up big challenge for Memphis appeared first on Skift.

Tablet Hotels CEO and co-founder Laurent Vernhes. / Tablet Hotels

The online hotel booking market is relatively packed, and standing out from the pack is difficult for any brand. The leadership at thirteen-year old Tablet Hotels, takes the position that each new entrant that may promise something new or unique is actually either a validation of its model or an opportunity to further evolve.

Tablet Hotels features a limited number of hotels in nearly 900 destinations around the world. In a market like London, for instance, you’ll find fewer than 60 properties, as opposed to over a thousand on Booking.com. The promise of Tablet is a specialty property at the lowest possible cost, and it has a history of delivering.

In addition to the listings, Tablet’s site also offers a magazine and a series of travel guides that offer a mix of inspiration and information that it hopes will help guests make smarter decisions before and after booking.

Skift sat down earlier this month with Tablet Hotels CEO and co-founder Laurent Vernhes in the company’s New York office.

Skift: Can you talk a bit about the origins of Tablet Hotels?

Laurent Vernhes: I got the idea to create Tablet out of need. I spent about ten years working as an expat in various parts of the world, but mostly Asia.

I was traveling every week to a new location. Some consultants in the U.S. will go to Cincinnati for three months, and then to Cleveland, and then to Kansas City, or something.

In my case, it was Bangkok, then Kuala Lumpur, Bombay, Jakarta. I was living in hotels, literally. When I decided to have that kind of career, my fantasy was to have a life like James Bond. I would have women all over in all of the cities

Very quickly, I realized it was not going to be like that.

Traveling for business is not that exciting. You have to work very hard to make it exciting. It’s hard work. I didn’t give up. I tried very hard to make traveling for business as a life exciting.

I realized that part of that was picking your hotels carefully because the of region. Basically, there are two types of hotels. There are hotels that are commodity products; it’s all about amenities, price, location. Then there are hotels that have soul, some personality, something, whether it’s design, or it’s with service.

If travel is your way of life, it’s important to find a hotel that has soul. It can be a big hotel, a small hotel. It’s not the matter of size. It’s not a matter if it’s part of a chain or not part of chain. You just need to find a hotel.

I was doing a lot of acquisitions of small companies on behalf of a very big company when I realized that I wanted to be like the guys whose companies I was buying. I wanted to be one of those people rather than CEO of a large division or large entity within the multinational thing. There was no dream there for me.

The dream was to be one of these people that had that freedom of thinking for yourself and doing something about it. I wanted to be like them. I’d say that I wanted to be an entrepreneur. The most interesting thing for me was to create the product I needed. That product was, basically, the ultimate hotel guide, which would restrict your selection to hotels that have a soul of some kind and eliminate all the commodity versions of hotels.

Skift: When you stepped in a little over ten years ago, it was pre-flash sale, pre-Jetsetter type of thing. You had legacy, stuff like Conde Nast Johansens and Small Luxury Hotels and things like that.

Laurent Vernhes: Marketing companies.

Skift: There was probably some overlap in some of the properties. But, how did you step into it and say, “I don’t want to do that marketing thing?”

Laurent Vernhes: I knew these marketing companies. There is nothing wrong with them. But I knew why I couldn’t rely on them. I couldn’t rely on them because they were charging hotels to represent them. They were marketing companies. They were also not comprehensive in terms of their selection.

There are a lot of great hotels that wouldn’t be in these books because they just didn’t want to pay these companies to be in the books. They were not entirely reliable either because their business model was built up on having as many hotels in the book as possible. So they were trying to find this balance.

As a traveler, that was not getting me the answer I was looking for. In fact, their business model was not marketing to travelers but marketing to travel agents. That’s what they do. They go to travel agents and say, “We have this collection of hotels why don’t you…we have this seal of approval.” That’s what they do. They were not meant to be catering to travelers directly.

As a traveler, I wanted a guide that had total integrity in terms of the selection. Therefore, it couldn’t charge hotels for being in the guide. Otherwise, you defeat the whole idea. It couldn’t be funded by advertising because who is going to advertise on your site? It’s going to be the hotels. If you do that, then it’s the biggest possible conflict with your editorial mission.

That’s why we became quite innovative actually at the time. Since then we have a couple innovations. The innovation was to merge editorial and commerce. In our case, we are a hotel guide merged with an online travel agency, and that was really new. Only the Internet could allow that, and there is no conflict. You sell what you recommend.

In our case, if our users tell us, “This thing is going down. You should remove it,” we’ll remove it. The hotel didn’t pay us to be on the site, so we’re completely free to do that. We just sell what we think is great, and our users confirm our work, members or travelers confirm it’s great.

Skift: How do you keep that pure because that’s the challenge, right? You guys have a financial incentive to include as many things as possible, so how do you always come down on the side of the consumer?

Laurent Vernhes: No, but it’s not. The financial incentive is not to add as many hotels as possible. The financial incentive is to take as many bookings in these hotels as possible. It’s a big difference.

Skift: You talk about removing something. How often do you need to remove something?

Laurent Vernhes: On a regular basis. Currently, it’s around 1,800 hotels on the site. Over the past 10 years, we’ve probably removed over 300 hotels. Hotels go through — just like anything else in life — they go through changes.

Skift: You’ve been around for ten years. What’s been the key to your survival during that period? This industry has changed dramatically since when you started. Other people have come around and gone away.

Laurent Vernhes: The key to survival has been that integrity I was talking to you about. The soul of the curation was that we wanted to be the best hotel guide we could be.

Now the word “curation” is a big buzzword — curation, curation. We’ve been doing curation from the beginning. That’s what it was all about. I used to call it “editing,” being an editor, editing a guide. Now Jetsetter, in particular, uses that buzzword of “curation.” What’s new about that? Nothing is new, except they are pushing it because they are not doing it.

If you look at the hotels there, half of them are great, the other half…

Skift: Need to fill the rooms?

Laurent Vernhes: …are hotels that agreed to do these crazy private sale things. Because they are cold calling hotels, “Do you want to do this?” “Do you want to do this?” In that case, they need to supply a never-ending stream of private sales.

In a way, that’s the difference between copycats and the company that they are imitating. Often the company they are imitating has the soul, and the copycats don’t. It’s just opportunity. Often companies that are the true pioneers disappear because they don’t manage to turn that soul into a sustainable business at the other end.

That soul kept us going and kept us relevant to people. Then the question is how do we maintain our competitiveness as a business? Are we going to increase our competitiveness?

A couple of things. One is, in terms of features, people like private sales, so let’s give them private sales. Except we give them private sales just in the hotels we cover. We’re not going to go desperately looking for private sales from any hotel that will do it because that’s not our main business model.

We follow the trends. Now HotelTonight, I think, is very interesting, and we’re hoping to launch Tablet Tonight in the next couple of months — Tablet Tonight, Tablet Tomorrow, why not? We can. Now we have. The reason why we can do this is because, in the process of all these 10 years, what we’ve developed is something that’s not visible but critical, is the technology.

We have so much technology. It takes a lot of technology to make technology disappear. In other words, to make your user interface ever more easy to use, you need to build a lot of technology. A lot of this technology is creating ever more efficient ways to have access to the best availability and the best rates in the hotels we want. That’s the role of technology, to make that seamless, to make that easy for the hotels, to make the data easy to use from a user interface for travelers. It takes a lot of technology.

If you are creating “Tablet” now, we wouldn’t be able to…we would have to invest a very large amount of money in technology to just match the user experience. That’s something we didn’t have in the beginning. Now we connect the extranet, direct connects with all kinds of sources of inventory, they push inventory to us, all this stuff. If we hadn’t built that, we would be dead by now.

Skift: Have you guys built your own inventory system that the hotels tie into?

Laurent Vernhes: That’s what’s enabling us. Now, like this Hotel Tonight thing is really interesting. It’s giving a way for hotels to get rid of inventory. It’s great. Everybody loves it. Can we do it? Yes.

Skift: Are you taking the same approach that you took with flash sales where it’s: We see a trend, people like these deals, but we’re going to continue working with our core of recommended hotels? It’s the same thing where it’s like, people want to do it now, we’ve got the hotels and the relationships, just add the element of time…

Laurent Vernhes: We are doing it in the hotels we are selecting. It’s still within our universe of being a hotel guide, and we only features hotels we believe in because they are our hotels. They are unique and they have a soul. Within that, we stay within the guide, but we need to add all these features that help people get better prices and get what they want basically.

Skift: Your relationships with hotels, I’ve probably, over the past five years, I’ve probably booked through you guys, or my wife has, at least eight or nine times and whatnot.

Laurent Vernhes: Thank you.

Skift: I would say in almost all the cases, if not all the cases, we received an upgrade. We’re not Tablet Plus members or anything like that. What do you guys do? How are you delivering customers in a way that makes them want to give me an upgrade even though I paid a pretty cheap rate?

Laurent Vernhes: It’s a few layers, actually. We approach these hotels as partners because we are in there for the long-term with them. If you approach hotels as a commodity product, they are interchangeable. If it’s not this one, you say, “OK.” Put yourself in the shoes of Expedia. “OK, Starwood. You don’t want to do a deal with us. It’s OK. We’ll do this other chain. Same thing. What’s the difference? We don’t care.” That’s the way that they negotiate.

We don’t negotiate this way because we like this hotel because it’s so unique. We’re not going to tell them, “Tough luck. Let’s do a deal with the other one. We don’t care.” Because we care. That’s the whole idea.

Skift: There’s only one that you love.

Laurent Vernhes: We love this one, so we’re going to work harder in creating that working relationship. What I’m going to try to squeeze them at every opportunity. We think of it as a partnership. We have a good relationship with hotels, Where Expedia is just completely ruthless about the whole thing.

I think Booking is smarter. They do it in a more sophisticated way, but basically they are completely ruthless.

There’s nothing wrong with being that. But that’s not very consistent with what we are trying to do which is we pick these hotels because they are great. We need to think about it as a partnership not as, “Well, if it’s not this one, it’s the next one.”

Second, we want to be not just the best place to find the best hotels, but the best place to book these hotels. What do we do about the booking portion that means that you’re going to get treated better when you book through us than when you book through the same hotel on Expedia? Obviously some hotels are a mini-travel agent, online travel agents. What can we do to make sure the hotel is going to treat our client better”

The initial premise is that we don’t try to squeeze the hotel, and this goes a long way actually. The second thing is that we increasingly are doing proactive customer service. We are calling these hotels and telling them, “We have this client coming. It would be good if you did this and that.”

Our ambition is to be the best place to book a hotel, even better than booking the hotel directly with the hotel.

Skift: You mentioned Booking.com. How do you guys go about customer acquisition online. Booking.com spends a little bit of money. Priceline spends some money on search engine marketing.

Laurent Vernhes: Not as much as Expedia.

Skift: How do you guys go up against that and get discovered?

Laurent Vernhes: We can’t match their marketing money, unfortunately. We have something that they don’t have which is a high level of loyalty and that goes back to our product and our mission.

It’s fair to say people don’t have a personal relationship with Expedia. They feel more often like they have a personal relationship with Tablet.

We’re not a commodity site. We don’t write marketing copy about the hotel. When we write the descriptions, it’s not the typical description you would read on an online travel agency site.

There is one hotel that we put on the site, if they disagree with the description and we tell them if there is anything factually wrong about the description, let us know, we’ll correct it.

There is this hotel and they were unhappy with the way we were talking about their hotel. There was nothing factual about it. They just didn’t like the tone. This is our site. If you don’t like it, then we won’t talk about you. If you disagree then we shouldn’t display your hotel because clearly there is a disconnect here. So we removed the hotel from the site. That kind of integrity is what’s creating the loyalty. It’s helped us a lot and people see that in us.

Skift: What have you learned especially in the last year with last-minute bookings that has caused you guys to say, “OK, we need to do Tablet Today?”

Laurent Vernhes: We used to have a last minute section of the site. We dropped that. We dropped it for reasons of pure programming because that portion of the site was killing the site itself because the programming was so bad. It was doing well. So we had to remove it because it was diminishing our ability to scale the site. Now we’re coming back to it. For sure, last-minute bookings are a very significant portion of bookings. It’s a key battlefield in terms of prices and availability. We need to offer hotels, tourists, to give us the best availability and the best rates for last minute bookings.

In fact, if you think of bookings for today and tomorrow, already it’s about 12 percent of all of our bookings are tonight and tomorrow already. The behavior of travelers is strongly biased towards last-minute bookings already. It’s something that we haven’t done enough in terms of getting hotels to give us even better rates for that portion of the supply.

That’s what we’re building now.

Hotel Tonight has done that very effectively and very well. We need to match that or exceed that. In fact, so we’re going to do it for tonight, for tomorrow, and for the next 14 days.

Skift: What’s the launch on that?

Laurent Vernhes: I hope June. We launch about June-ish.

Skift: What percentage of your users are Tablet Plus members?

Laurent Vernhes: The percentage that’s interesting is what is the percentage of bookings made by Tablet Plus members, and it’s over 20 percent. That’s significant.

Skift: What’s your rate of keeping Tablet Plus members?

Laurent Vernhes: It’s over 80 percent. We’ve made great progress on that. Tablet Plus is where we experimented with a lot of proactive customer service. We email people before their stay. It’s unprompted. It’s gone a long way.

Skift: You guys survived the flash sale onslaught.

Laurent Vernhes: We did, and the flash sale flameout.

Skift: Was there a period during that when you guys were panicking or like, “How are we going to do this”? People weren’t talking about you as much as they were talking about everybody else.

Laurent Vernhes: We launched our flash sale too, so we got a bit of traction from having that too. We were not panicking because we were growing. I always thought private flash sales were a great marketing tool, more of a marketing tool than a production tool. As a marketing tool, it served us too.

But I was looking at these companies doing just that, and to me, the only way they were going to survive was if they ended up copying us or trying to. What I mean by that is, have something for everyday, not just be flash sale, but be a good online travel agency.

You’ve got to be able to turn that marketing gimmick into becoming a true online travel agency, a good one. It looks like they were not successful at making that transition because it’s actually more difficult to be a good online travel agency than to run a flash sale operation. It’s a lot more difficult.

Jetsetter, they had a ton of money, and they burned and burned and burned. I could see they were trying to switch to basically full-on copying us, but for some reason, they underestimated what it takes.

I had to calm down some of my colleagues because they were looking at this and thinking, “Oh my God. They are going to take over this whole thing.” I had to tell them, “Look, it will only survive if it’s a real business. Right now, all we know is that they are really good at spending a ton of money. The jury’s still out on whether or not they can build a sustainable business.” Frankly, when I was looking, I didn’t think they were.

If you’re patient enough, it’s a matter of survival. The question was how much more money they had to spend to make it to a level of sustainability. The problem with VCs is that the more money you spend, the less patient you are, the more you want your site to be dramatic.

Even if you get to some level of where it actually makes sense, but if it’s not comparable to the vast amount of money you spent, you let it go. I’m very familiar with these dynamics. I’ve done Tablet the hard way. No VCs, completely independent.

We never had that money to spend before. Now we have more money because we are a bigger business. Obviously, as you grow, you get the means to do things on a bigger scale, but we never had that “Oh, we have five million to spend on getting the word out,” ten million or whatever it was. They’ve gone through a lot more than that, but I don’t know how much was for marketing. Who cares? [laughs]

I know because I used to buy companies. I know about building a business, a real business. I know it’s not easy. You don’t do it just like that. It’s not as easy as just throwing money out there to get the word out.

Skift: You’re self-funded, no VC money. What’s your endgame? Do you want to retire and pass Tablet down to your children or is it something where you want to sell?

Laurent Vernhes: No. It’s a good question. Somehow, I bumped into creating a family business. That was not the objective. I mean family as in the family of people who started this business. I don’t mean the family with children.

Since we don’t have a large outside investor, it’s become a traditional family business, so the option is there to actually keep it that way. I don’t want to load my kids future with that future. “This is the future. Good luck with it.” No, I think they have to create their own future.

The post Skift Q&A: Can an independent hotel booking site survive and thrive? appeared first on Skift.

If this apartment is rented for less than 30 days it is illegal. / Airbnb

Yesterday a New York City judge ruled that Nigel Warren, a tenant in who rented his apartment to a user on Airbnb would have to pay a $2,400 fine for breaking a New York State law that prohibits almost all rentals of apartments for less than 30 days in the city. The New York Times‘ Ron Lieber began covering Warren’s case in November, and he was seen as something of a canary in the coal mine in the industry; so much so that Airbnb sent legal representation to advise Warren.

Still, he lost, and he’ll have to cover the fine.

Airbnb responded to the ruling by issuing a statement which read, in part, “This decision runs contrary to the stated intention and the plain text of New York law, so obviously we are disappointed.”

The problem is, the decision was exactly in line with the plain text of New York law (you can read the full senate bill here). The law was written to deal with the growing number of apartments in New York City that were being used to house by-the-night transient visitors. Although Airbnb has consistently argued that this was a movement by the threatened hotel industry to ban short-term rentals, it was actually a years-long movement by tenants and community groups to prevent the wholesale takeover of buildings zoned for residential use by landlords eager for the higher incomes short-term rentals could bring. In fact, some of the more brazen landlords had legitimate hotel brands as their illegal operations, such as a Marriott ExcuStay in Chelsea.

It’s important to note that while Airbnb has become the poster child for the fight in New York, it’s about any short-term rentals that don’t abide by the city’s laws. Earlier this month, the city’s largest housing development had to remind its tenants that they would be evicted if they took FlipKey up on its open solicitation to use their units for short-term rentals.

We covered the issues specific to New York City earlier this year in the story ”Airbnb’s growing pains mirrored in New York City, where half its listings are illegal rentals.”

In the interest of making things clear, here’s the official Skift cheat sheet to Airbnb rentals in New York City:

How do I know if a rental is illegal in New York City?

If the rental period is for less than 30 days and the person renting you the unit will not be present, the rental is illegal. There are a few tiny exceptions (such as when it’s for an entire house that meets a relatively rare residential classification), but not in the neighborhoods that visitors actually want to stay in.

Really?

Yes.

What if the landlord is the one doing the rental?

Then he or she could real be in for trouble, if the city decides to crack down.

One of the reasons New York State passed the law in July 2010 was to do battle with landlords who were replacing tenants with by-the-night renters, effectively turning apartment buildings into hotels, but without the zoning or safety requirements. Airbnb has always downplayed the number of units that fell into this category, but they were in the thousands before October 2012, when the most notorious operator, Smart Apartments LLC, was sued by the city for over $1 million and shut down for operating hundreds of illegal rentals, often taking over entire buildings in the city’s most desirable residential neighborhoods. Smart Apartments was a marketing agent operating on behalf of landlords, and chose to promote its units on sites across the web, including Airbnb.

This isn’t just a problem for Airbnb: Online travel agencies such as Expedia were booking rooms in illegal hotels throughout the city, too. And it still does. This Central Park Suites hotel listed on Expedia is not a legal hotel.

Shouldn’t an owner or tenant be able to do what he or she wants with an apartment?

There are all sorts of restrictions on owners and tenants. They can’t open a homeless shelter, nightclub, office, manufacturing plant, or youth hostel without the proper zoning. (It’s easy to open up a house of worship, but that’s another matter.) Renting an apartment for a transient guest changes the nature of a property and affects the quality of life of other residents, from security, sanitation, and noise, to the cost of a yearly lease as well as basic maintenance and wear-and-tear issues.

There are bigger issues about how it affects neighborhoods, too, but we’ll leave that to urban planners to explain.

Aren’t hotels scared of the disruptive power of revolutionary services like Airbnb?

“Scared” may be a strong word, but they certainly aren’t happy with the competition. Hotels don’t like the fact that Airbnb and its peers are able to make money off transactions that hotels would face stiff fines for. And they don’t like the fact that the cost of meeting safety and zoning regulations, as well as the high cost of room taxes — which often go to fund infrastructure that makes travel easier — are one reason why hotel rates aren’t competitive with peer-to-peer sites. Like any other industry, they’re going to try to squash the newcomer trying so steal market share.

Can’t we all just get along?

Airbnb’s CEO likes to share loopy ideas about how one day we’ll all give up property and share to our hearts’ content. But really, the sharing economy is about upstarts creating great new products and services that allow them to slice off business from established powers. And they’ve proven to be really good at it.

While some of the revenue for companies like Airbnb has heretofore been unrealized, many of the dollars would have otherwise gone to hotels. There’s no sharing taking place here, just smart business.

What’s next?

In San Francisco, city leaders are trying to figure out how more short-term rental units can be made legal. Nationwide, HomeAway CEO Brian Sharples has taken the role of the adult in the room and has shown that in cities like Austin, Texas, hosts and the city can work together. He’s spearheading a group called the Short Term Rental Advocacy Center that’s teaching hosts how they can begin a dialog with local government to make sure rules are fair on both sides.

Any across-the-board solution, though, will come with more regulations and reporting that we currently see in the market. Hosts will have to start reporting income on tax returns if they don’t already, and they may be required to purchase different insurance policies and meet licensing requirements from local municipalities.

That’s likely to scare off people like Nigel Warren who are just trying to make a few bucks on the weekends they’re out of town. And this uncertainty about fines and penalties for hosts is what really scares short-term rental companies.

The full decision in the Warren case:

Download (PDF, 81KB)

The post Is Airbnb illegal in New York? Definitely not, but many of its hosts break the law appeared first on Skift.

Game on.

Priceline says it paid $522.4 million in cash and issued more than 1.5 million shares of common stock to pay for the right to meld the travel metasearch company into the Priceline fold.

Kayak will operate as an independent company, as do Booking.com, Agoda, and rentalcars.com, within the Priceline Group.

The CEOs of Priceline and Kayak co-founders had something to say today about the whole thing.

“We are delighted to welcome Kayak as the newest member of The Priceline Group,” said Jeffery H. Boyd, CEO of The Priceline Group.  “We look forward to working with the Kayak  team as they build their business and expand the international footprint of their great products.”

“We are excited to join the world’s premier online travel company,” said Steve Hafner, Kayak CEO and co-founder.  “We believe that The Priceline Group’s expertise and worldwide reach will help us expand our business globally.”

Paul English, Kayak CTO and co-founder added, “Our focus will remain creating the best place for travelers to plan and book their travel and providing an effective marketing channel for travel suppliers and online travel agencies.”

Priceline’s acquisition of Kayak kicks off the next stage in competition among global travel companies. It has mostly focused to date on the standalone hotel business, as Expedia and Booking.com duke it out in Europe, Asia and Latin America, but now travel metasearch has been added to the mix.

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Kirk, an Illinois Republican, told the Tribune on Monday that while he had met recently with Pritzker, whose confirmation hearing is Thursday, he had not made up his mind on whether to support her. She’s been making the rounds on Capitol Hill visiting with lawmakers before the hearing.

Kirk spoke briefly to the paper after making remarks to the Illinois Group, a Washington-based group that promotes businesses from the state. He returned to the Senate in January after a major stroke a year earlier and has just begun appearing at events in public. The group’s 25th anniversary was marked with an evening reception in the Dirksen Senate Office Building. Organizers said 200 people turned out to the event.

Speaking clearly but with some hesitancy, Kirk said he wanted to foster a “new optimism for our state” and “rewrite the feelings about our state after the Blagojevich mess.” He referred to the former governor now imprisoned for public corruption, including trying to sell or trade the Senate seat that Kirk won in 2010.

Kirk told the gathering that he was eager to see a new U.S. attorney appointed, wanted to make it a priority to get the Gangster Disciples off the streets and, with Durbin, was seeking federal funding to improve locks and dams on the Mississippi River and make the waterway a “huge, export drag strip for Illinois agriculture.”

Durbin, the Senate’s No. 2 Democrat, is a big booster of Pritzker, a Hyatt Hotels heiress who has helped fund his campaigns. He told the paper as he left the Illinois event that she would make an “outstanding” Cabinet secretary and he would do everything he could to advance her nomination.

When asked if he saw hurdles to her confirmation, he cautioned that Republicans are sometimes determined to filibuster or slow down appointments.

kskiba@tribune.com ___

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