Skift Take

The regulatory environment for Airbnb is becoming increasingly more restrictive, but completely wiping out Airbnb as an alternative for travel accommodations via regulation won't necessarily be beneficial from an economic standpoint.

The impact of regulation on Airbnb’s growth has been a key area of concern for critics, and not without reason. In New York, for instance, rentals for fewer than 30 days are illegal unless a resident is present for a certain type of apartment building with three or more units. Airbnb is also in a legal battle against the city over a law forcing the company to share host information. Issues like these, which can cause listings to decline significantly in the market, demonstrate the power that regulations can have over the company’s growth.

In our latest Skift Research report, A Deep Dive Into Airbnb 2018: Tackling Roadblocks on the Runway, we assess a few key areas of focus and controversy for the company, one of which relates to the impact increasing regulation is having on Airbnb.

While Airbnb is diversifying its product lines (experiences, restaurants, hotels, etc.), the company is also diligently working with regulators to try to set up and implement the best policies on a city-by-city basis.

Our research suggests Airbnb has a lot of work to do, but completely wiping out Airbnb as an alternative for travel accommodation via regulation is not necessarily beneficial from an economic standpoint.

Last week we launched the latest report in our Skift Research service, A Deep Dive Into Airbnb 2018: Tackling Roadblocks on the Runway.

Below is an excerpt from our Skift Research Report. Get the full report here to stay ahead of the trends.

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We analyzed the current regulatory status for the largest 10 international cities by number of Airbnb listings (according to AirDNA data) in order to assess if regulatory changes have any impact on Airbnb listings. If recently implemented regulations were stricter and the number of Airbnb listings declined, this is a negative reflection of the company. If the opposite, it’s positive. If regulations implemented were more restrictive, but the number of Airbnb listings remained the same, we considered this neutral for the company, as it would suggest either the policy won’t be enforced or the demand far outweighs the cost of legal implications and a loosening of restrictions is likely.

Out of the 10 cities we analyzed, six have issued more restrictive homesharing policies, while four have been more open. And out of the six cities with stricter policies, four have seen significant declines in listing growth or even negative growth. This research confirms what many industry stakeholders have argued — Airbnb’s growth is being impacted by regulation, and one of the biggest hindrances to the success and development of Airbnb hinges on its ability to successfully work with governments and regulatory authorities to set appropriate regulations that allow for the sector to grow, without punishing or negatively impacting other aspects of cities (housing prices, wear and tear of cities, taxation of hotel-like buildings, etc.).

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For all the regulatory troubles Airbnb is facing, the company has contributed significantly to the world economy. We assessed Airbnb’s total economic impact, including host income and guest spending, as well as typical host annual earnings, according to numerous Airbnb press releases and websites, for 10 of Airbnb’s largest cities as measured by number of listings (for those cities where data was available from Airbnb).

Our analysis concludes that, for 10 of Airbnb’s largest cities, Airbnb had a total economic impact of approximately $12.3 billion. Typical hosts made approximately $3,900 per year (median number), which is not an insignificant amount for a host looking to offset mortgage payments or generate some supplemental income. On an assumed annual income of $60,000, $3,900 represents 6.5 percent more income.

“Every day, we hear from our host community about the ways home sharing is helping them earn important supplemental income at a time when wages are stagnating and the cost of living is on the rise” Nick Papas, global press secretary of Airbnb, noted. “Airbnb helps hundreds of thousands of people pay the bills and serves as an important economic tool to help many afford living in increasingly expensive communities … We believe that home sharing can be a force for good in neighborhoods by creating economic opportunity for everyone.”

We expect Airbnb will continue to work with policy makers and governmental organizations around the world to ensure safe, law-abiding business practices, as well as further implement initiatives that help contribute to developing economies around the world. Papas indicated, “we have found that the most effective regulations we’ve seen globally are those that regulate the entire short-term rental industry, not just one company or platform, and provide cities the tools they need to enforce the rules.”

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Tags: airbnb, homesharing, hotels, housing, regulations, skift research, vacation rentals

Photo credit: The regulatory environment is becoming increasingly more restrictive for Airbnb. Airbnb

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