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New Data on Airbnb in Phoenix Takes Aim at Arizona’s Pro-Sharing Economy Stance

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Skift Take

While it’s pretty clear that the hotel industry and Airbnb are at odds with one another, it’s still obvious that more transparent data is sorely needed to understand the true impact of Airbnb and other home sharing platforms on cities and communities.

— Deanna Ting

Most of the Airbnb hosts in Phoenix, Arizona — about 85 percent — could be operating illegal hotels, and generating nearly 98 percent, or $41.25 million, of Airbnb’s $42.21 million in total revenue for the region, according to new data released by Penn State University’s School of Hospitality Management.

The data comes from a study originally commissioned by the American Hotel & Lodging Association (AH&LA), one the largest organizations in the U.S. representing hotels, management companies, and other parts of the hospitality industry. With this in mind, it’s worth noting that AH&LA isn’t the most impartial of organizations in the fight against home sharing platforms such as Airbnb. For this study, Penn State examined numbers from Airdna and its research partner, Kalibri Labs, which looked at Airbnb operators, revenues, and listings from October 2014 to September 2015.

Earlier this year, AH&LA and Penn State released Phase I of the report, which noted that nearly 30 percent of Airbnb’s revenue ($378 million) in 12 of its largest U.S. markets came from Airbnb hosts who list their properties for rent full time, or essentially 360 days or more in a year. The January 2016 report also found that nearly 40 percent of Airbnb’s revenue — some $500 million — in those 12 cities comes from “multi-unit operators,” hosts renting out two or more units.

“One thing what was striking about the Phoenix data, like all the cities we analyzed, was that there was huge growth in terms of what I would refer to as ‘professional operators,'” John O’Neill, professor and director of the Center for Hospitality Real Estate Strategy at Pennsylvania State University, who directed the research, told Skift. “On a national basis, about 17 percent of hosts are multi-unit operators and they generate about 39 percent of Airbnb’s revenue. In Phoenix, it’s even more extreme; only 14 percent are multi-unit operators, but they generated more than 40 percent, or $17 million, of Airbnb’s revenue from Phoenix from September 2014 to September 2015.”

The release of the data regarding Phoenix is especially timely. On March 8, the Arizona Senate gave preliminary approval to a bill, Senate Bill 1350, that prevents local governments from banning short-term rentals on vacation and lodging websites such as Airbnb and HomeAway. It also addresses tax collection from home-sharing companies, allowing the state to collect some sales taxes via voluntary agreements. The bill passed with a 27-1 vote and awaits ratification.

Senate Bill 1350 also aligns with the agenda set forth by state governor Doug Ducey, who said, “Arizona should be to the Sharing Economy, what Texas is to Oil and what Silicon Valley used to be to the tech industry,” in his State of the State address on Jan. 12.

Phoenix was also noted as one of the top 10 U.S. markets for unit growth in a CBRE report on Airbnb released in February, which compared Airbnb data with that of hotels in key markets throughout the United States. According to the CBRE research, Phoenix saw year-over-year growth of about 175 percent in its number of Airbnb units in the third quarter of 2015.

Vanessa Sinders, head of government affairs for AH&LA, says the purpose of the report is to target commercial operators who are using Airbnb, and to inform policymakers about the rise in professional Airbnb hosts that use the platform on a full-time basis, or have multiple units listed on it. She hopes lawmakers in Arizona take a good look at the data before ratifying bills like SB 1350.

“From AH&LA’s perspective, this is not about the occasional room share or home share that’s been going on for decades,” Sinders told Skift. “We support the right of property owners to do that. We are an industry of competition, and we welcome it, but there should be a level and legal playing field, especially when it comes to these commercial operators who are operating rogue or illegal hotels in these cities. The data shows and tells these stories.”

Here are more data highlights from the Phoenix Region report:

  • 14 percent of operators who list their properties for rent more than 180 days per year generate $9 million, or more than 21 percent of Airbnb’s revenue in Phoenix
  • The Phoenix neighborhood with the most Airbnb listings is Scottsdale, Las Vivendas, Desert Cove, Waterfront (zip code 85251) with 191 hosts, 235 properties, and $3.1 million in revenue
  • The top five zip codes with the most Airbnb listings generated 19 percent, or $7.89 million, of Airbnb’s Phoenix revenue
  • If Phoenix-based Airbnb hosts had to pay the same exact taxes as other local lodging businesses in the City of Phoenix from October 2014 to September 2015, they would have owed more than $5 million in local taxes

Not surprisingly, this data conflicts with information released by Airbnb in January 2016. Airbnb’s data looked at the period from January 1, 2015 to January 1, 2016 for the entire state, and found that two-thirds of listings in Arizona were rented fewer than 60 days per year, and that only half of its listings in the state are booked more than 30 days. It also found that only 6 percent of listings are booked more than 180 days per year.

A spokesperson for Airbnb gave Skift the following response to the AH&LA report: “This study shows that the hotel industry gets what it pays for, which in this case is a specious study intended to mislead and manipulate. Airbnb is succeeding for the very simple reason that our hosts — the vast majority of whom are middle-class people sharing their homes in order to create supplemental income — provide guests authentic, transformative experiences.”

Airbnb has been collecting and remitting hotel taxes on behalf of its hosts in the City of Phoenix since July 2015. That means a 3 percent hotel/motel tax for reservations of 29 nights or shorter, and a 2.3 percent sales tax on all reservations. Both taxes are based on the listing price, including any cleaning fee. Owners and operators of hotels and certain types of lodging are also required to register with the city and obtain a license.

The 5.3 percent tax, however, doesn’t include the 7.27 percent in state and county taxes that traditional hotel and motel operators have to pay. Airbnb says it is supporting SB 1350, which would allow it to voluntarily collect and remit state taxes in addition to city taxes. As the law stands now, guest stays of 30 days or more are exempt from the transient lodging tax at the city, county, and state levels.

Airbnb also doesn’t have the cleanest track record in terms of the information it chooses to release. In February, Airbnb confirmed findings from Inside Airbnb, which showed the company removed some 1,500 New York City listings from commercial operators right before it released data about its operations in the city. Because of the listings purge, what was presented as a snapshot of Airbnb’s business activity on Nov. 17 in New York was clearly skewed, downplaying the number of Airbnb hosts with multiple listings.

O’Neill pointed out that the data reviewed by Penn State for this study looked at data before the purported October/November 2015 listings purge by Airbnb. “Some of the other studies use different time periods that were based on purged data,” he explained. “A lot of that purged data happened after Sept. 2015.” He says the study also excluded shared room or shared apartment listings. “We focused on what’s more comparable to a hotel or bed and breakfast.”

The rules and regulations governing the legality of Airbnb usage in Phoenix aren’t necessarily clear-cut, as is the data being being generated about Airbnb’s operations in cities like Phoenix. However, this latest report does show that the Airbnb hosts using the platform all year-long, or using it to list multiple properties, are having an impact on Airbnb’s revenues, and the city of Phoenix overall, and its gives policymakers some information to mull over as they consider opening the state up to the sharing economy.

AH&LA will release more reports similar to the Phoenix one that will look at Airbnb’s operations in cities that include Los Angeles, New York, San Francisco, Chicago, and Washington, D.C. over the next few weeks.

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