Airbnb: Will it really 'take care of itself?'

(airbnb illegal hotels)

So how much of a disruptor is Airbnb (which just named former Coca-Cola exec Jonathan Mildenhall as CMO yesterday), and is it more on the tax side or the market share side of the hospitality industry? 

A new report from Horwath Hotel, Tourism and Leisure examines the potential lasting impact the homestay site Airbnb will have on the traditional hotel model. Calling it "a feel-good Silicon Valley startup story being perpetuated by Wall Street analysts and tech writers because it is dramatic," report author Richard Mandigo, of TR Mandigo & Co., writes that the big issue with Airbnb is taxation. 

For more than a year cities and municipalities like New York City and Quebec have been cracking down on Airbnb rentals, claiming the cash-for-couchsurfing model violates building and zoning codes, as well as local regulations outlining the allowable length of apartment rentals. 

The latest city joining the regulation bandwagon is San Francisco, Airbnb's own hometown. City officials are supporting a ballot initiative to limit the company's operations in a way that goes beyond simply collecting taxes. 

San Francisco Chronicle reporter Carolyn Said told The California Report yesterday the city's proposed ballot measure "has a reward for Airbnb bounty hunters--people who turn their neighbors in for using Airbnb would get 30 percent of any fines or back taxes," she said. Whether this measure will even make it to ballot is still unclear, she said, but the move would "effectively ban Airbnb throughout the city." 

Meanwhile, a New York advocacy group, The Real Rent Reform Coalition, is fighting state legislation there that would relax restrictions on "good actor" New Yorkers who rent their space on the site, according to the New York Daily News. 

Airbnb has expanded its own resources for renters to explain local tax and business license requirements for a handful of major cities. Still, the battle over taxation is likely to play out locally, Said told The California Report. "They're going by the Silicon Valley playbook, which is 'innovate first, regulate later.'"

It's a sentiment echoed in the Horwath report as well. "There is a market for Airbnb, but it is not a model for infinite growth, and it is not one that is going to change the face of the industry," Mandigo writes in the report. "We expect that like the OTAs, the cities will ultimately have the last word on how [Airbnb is] allowed to operate."