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Airbnb’s Bummer

Brian Chesky says occupancy tax laws need to catch up with the "sharing economy," reports Andy Kessler in The Wall Street Journal (1/18/14). "There were laws created for businesses, and there were laws for people," Brian says. "What the sharing economy did was create a third category: people as businesses." This matters to Brian, the co-founder of Airbnb, "a web service that lets travelers book couches, beds, rooms, houses, boats and even castles on a nightly basis." Its business model is based on the idea that anyone can rent their residence.

It matters because, in New York State, the law bars "private citizens from renting an entire apartment for less than 30 days." The law, passed in 2010, was intended "to crack down on slumlords who run illegal hotels in apartments," not necessarily an online venture that "could do to hotels what Amazon has done to bricks-and-mortar bookstores." By year’s end Airbnb says it will have booked more overnight stays than the Hilton and InterContinental hotel chains." Naturally, this has caught the hospitality industry’s attention, along with the scrutiny of New York’s Attorney General.

Brian says this focus on "protecting New York’s 14.75% occupancy and sales tax" has it all wrong, "that rather than taking away income from the city," Airbnb "bring a significant amount of business by encouraging visits by tourists who might not be willing or able to afford the city’s daunting hotel rates." He says the goal is not to avoid the tax: "We want to streamline the process for hosts to pay occupancy taxes … (but) you have to change the laws first, adding: "Don’t kill something wonderful before knowing what it is." Airbnb currently is valued at $2.5 billion, and lists 500,000 properties in "more than 190 countries."