San Francisco is at the forefront of showing how tourism bureaus, which rely on hotel bed taxes for funding, can collaborate with room-sharing companies that are in direct competition with hotels.
For Super Bowl 50 in San Francisco last weekend, an estimated 15,000 visitors stayed with over 5,000 Airbnb hosts located in over 40 area municipalities.
That represents a 400% increase over the total volume of Airbnb bookings during Super Bowl weekend last year in Phoenix. The data also suggests that the room-sharing company helped drive visitation to areas outside the heavily trafficked hotel zone in and around San Francisco’s financial district.
Despite the numbers provided by Airbnb, price-gouging more commonly associated with hotels during big events took place too. Or at least tried to.
Spreading tourism dollars in wider circles throughout a destination is one of the primary functions of tourism bureaus such as San Francisco Travel. In July 2015, the bureau was the first ever to announce a formal partnership with Airbnb, based on the fact that Airbnb charges additional fees to contribute to the city’s transient occupancy fund (bed tax), albeit on a self-reported basis that the city cannot independently verify.
That is fundamental for destination marketing organizations like San Francisco Travel — which are generally funded in large majority by hotel taxes — to align themselves with Airbnb. Here is a list of all of the cities where Airbnb collects transient occupancy fees through its website.
The partnership between San Francisco Travel and Airbnb provides neighborhood tourism materials for local businesses to help attract Airbnb guests, and exclusive content provided by Airbnb highlighting local neighborhoods, businesses, and experiences in the area.
“The growth of the sharing economy has generated new visitor demands for creative lodging and transportation options around the world,” said Joe D’Alessandro, president and CEO of San Francisco Travel, when the partnership was announced. “San Francisco is excited to be the first destination to formalize a relationship in this exciting new space.”
We spoke with D’Alessandro before the Super Bowl to dig a little deeper into the collaboration and understand the motivation behind the bureau’s strategy.
Skift: How involved was San Francisco Travel in advocating for Airbnb to pay occupancy taxes to help support the city’s destination marketing efforts?
Joe D’Alessandro: We were very involved in the planning with the city of San Francisco to make sure that Airbnb collected room tax, and that it also had insurance and provided guarantees for businesses like hotels try to do. Once Airbnb did that, which has been over a year now when they first agreed to do so, we said they’re a legitimate organization. They’re a legitimate business operating in San Francisco that’s providing a service that visitors want. So let’s bring them into the partnership and make sure that we’re holistic in our efforts, and that any type of experience that people are looking for in San Francisco, we can help people find.
Skift: So, for other bureaus reading this, you feel your advocacy to communicate the value or need for Airbnb to collect occupancy tax was effective?
D’Alessandro: Yes. Our public policy area was very involved with the discussions with the city and counties with Airbnb. It’s all about leveling the playing field. It would not have been fair for Airbnb to operate and not collect the hotel tax and not play by the same rules that hotels do.
We worked together with all the entities, and I’ve got to say, it wasn’t about us applying any kind of pressure on Airbnb, going back to the very first discussions. They were always willing to collect the hotel tax. They never said that they did not want to do it, but at the time there was just no mechanism in place to do that. They were willing to do this, and we made sure, with all of the partners together, that they were able to make it happen.
Skift: How did the hotels feel about that in general?
D’Alessandro: You know, I think the hotels are very happy that Airbnb started collecting taxes and having insurance, and all of those activities to make it a more level playing field. Of course, it’s new competition. Any time that there’s new competition, people have to adjust to it. They have to be concerned about how they are going to adapt their business plans to compete with the new competition. I think we’ll find a way to make it happen. San Francisco was the first city to develop this program with Airbnb so we’re establishing new ground here.
San Francisco International Airport was the first airport in the country to work with ride-sharing companies, so they did the same thing. They played by the same rules. They were made to conform to the airport regulations, unlike a lot of places in the country where you can’t get a shared ride at the airport. These sharing companies were born here so they’re not so foreign to our culture. We just have to figure out how we can make it work for everybody.
Skift: So, just to confirm, if it wasn’t for Airbnb paying occupancy fees, then politically-speaking that makes it almost impossible for a tourism bureau like yours to support them. Is that correct?
D’Alessandro: That is correct. I think that, again, they have to, any of these companies, not just Airbnb, but any of these companies have to play by the same rules. I think that that’s really important. They have to make sure that they’re operating legally in the locality where they operate. When the ordinance passed with the board of supervisors of San Francisco, it made Airbnb legally operating in the city like any other entity. They’re providing a service and providing a product that our customers are looking for.
Skift: Are you developing any marketing partnerships with Airbnb?
D’Alessandro: Yes, we are. That’s the majority of what our relationship is about. Our broad main focus with Airbnb is marketing partnerships. Our hotel block, the major grouping of our hotels are located in a couple of neighborhoods in San Francisco, such as Union Square. Probably 90% of all of our hotels are in close proximity in that area. Very few Airbnb locations are in that same area. Most of those are further out into the neighborhoods.
Part of our goal here in San Francisco is to get people to explore the neighborhoods. To explore the businesses in those neighborhoods, whether they’re in the Mission District or North Beach. Those are the type of areas where the majority of Airbnb locations are. They really complement each other. I was just talking to some people that came here for a convention, and they stayed in a hotel at Union Square for the convention. They wanted to extend their stay, so they moved to an Airbnb in the Mission because they wanted to have a fuller experience of the diversity of San Francisco.
Our partnership with Airbnb is really focusing on the neighborhoods and what people can do. That includes recommendations of sites that each one of these neighborhoods offer, such as unusual retail and cool restaurants — stuff to really get the full experience of San Francisco. Hopefully, it might make people extend their stay in San Francisco, and also provide more unique experiences that they typically may not find in another city. That’s really where the focus of Airbnb is, getting people out in the neighborhoods, and really helping support the businesses in those neighborhoods.
Skift: What do those recommendations look like?
D’Alessandro: We’re developing web-based campaigns and printed neighborhood maps that will be given to Airbnb hosts so they can be made available for visitors. We’re also hosting events, including some at Airbnb headquarters, where members of the hospitality community, whether they’re hoteliers or attractions, can get to know Airbnb so there’s more collaboration and cooperation working together going forth.
Skift: How did those go over?
D’Alessandro: They were basically receptions where Airbnb talked about what they’re doing. People got to know each other. Anything new can be threatening to other people, but when you get to know them and get to know the people behind it, and get to know how that works and what their goals are, you can get through a lot of that. You can find a lot of ways that you can cooperate.
Skift: Do you anticipate that all tourism bureaus will eventually be collaborating with Airbnb and similar companies, as long as they’re paying occupancy tax in the destination?
D’Alessandro: I do. I believe over time that’s going to be the case. I think that a great example of that is that there was once a moderate resistance from the hospitality community going back over a decade ago with Expedia. Online booking was disrupting their whole business model. It was disruptive of the way that business was done.
But now, 10 or 15 years later, they’re part of the mainstream hospitality industry, and they’re on our boards. They’re very involved in promoting destinations. I see the same thing with these new accommodation models. Once you figure out how to make it work, once you figure out how to benefit all of the people involved, more businesses are going to be partners with them.
It’s an evolution. It’s the way the nature of the business changes and develops over time. Some of big digital tech companies like Airbnb are here, they’re based here, so we know them a little bit better. It only makes sense that we started developing these partnerships in San Francisco. I think that as these companies continue to play by the rules around the country and around the world, you’re going to see more cooperation.
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Photo credit: An Airbnb listing in San Francisco's Mission District. Airbnb