New York invests $10M in illegal hotels hunt

In September, New York detailed the results of a year and a half of illegal hotel inspections, with the city issuing 566 citations after following up on 2,684 reports during that period. These citations are a drop in the bucket for a city with roughly 15,000 active whole-unit Airbnb rentals, but New York is preparing to renew its efforts.

NBC New York reported that the city is planning to spend $10 million over the next three years on locating and shutting down illegal hotels. The funding will be given to the Mayor's Office of Special Enforcement. City administration said action is being taken because illegal hotels are putting a drain on New York's housing market, which is already suffering from scarcity.

The money will be used to hire five new staff members, track data to find illegal operators and generate a public-awareness campaign to inform residents what their rights are under New York's increasingly strict occupancy law. According to the New York Daily News, this recently strengthened law forbids many residents from renting out their apartments for less than 30 days, though exceptions can be made for people who own one- and two-family homes.

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Now, the mayor's office will be tracking down illegal home-sharing operators in advance of complaints, which was the only thing that triggered  investigations prior to the new plan. Some 1,616 short-term rental complaints were filed during the past 18 months in New York City.

Hoteliers may breathe a sigh of relief when looking at New York's renewed investment in shutting down illegal home sharing, but a new report from Morgan Stanley shows that the main companies suffering from Airbnb's market disruption are online travel agencies, not hotels. According to Bloomberg, Airbnb's leisure bent puts it more at odds with OTAs than hotels, which are still deriving a significant chunk of their bookings from business travel. The report found 42 percent of Airbnb users are swearing off hotels completely, and the majority of Airbnb guests are staying three to five nights.

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