Airbnb CEO: NYC hotels will get more expensive after short-term rental crackdown

https://thepointsguy.com/news/airbnb-new-york-city-ban/

by smohnot • 3 years ago

46 107 3 years ago

hypeit6• 3 years ago

I seriously doubt hotels will get more expensive as they still have to compete with each other. I would say Airbnb has never had any influence on hotel pricing in NYC.

That being said, I tried Airbnb in NY a few times and it was absolutely disgusting. In most places Airbnbs will be a bit dirtier than a hotel but in NY it wasn't even close. Rats, cockroaches, showers that don't drain, grime everywhere... After a few experiences like that I was out. Hotels in NY offer a much better experience.

mikepurvis• 3 years ago

Can confirm— stayed in a flat in Brooklyn and it was gross. Bathroom worked but the kitchen was full of roaches. Anything not sealed had to go straight in the fridge.

gotaran• 3 years ago

I rented a unit in a prewar in Hell’s Kitchen. The basement and trash chutes were roach infested. I had to go through absurd lengths to not get a roach infestation in my apartment. Taking out trash every night (into a roach infested chute), never keeping any cardboard lying around, caulking all gaps around (a surprising number of) pipes, plugging drains at night, applying bait and IGR every once in a while, having monthly exterminator visits (if the guy ever showed up), and then spraying a special insecticide I got every other week.

Even then, I used to occasionally see roaches in my unit. I can’t imagine what it’s like when you have an AirBnb with some very transient tenants and no pest control.

atleastoptimal2• 3 years ago

Supply and demand. Fewer AirBnB's mean more will use hotels who will otherwise use AirBnB, leading to hotels increasing their prices, even though they compete with each other.

RC_ITR5• 3 years ago

And the supply of apartments for living in will go up by exactly the same amount.

Supply and demand works in both directions.

hypeit6• 3 years ago

There's no shortage of hotel inventory in NY. The supply is there. Hotel pricing didn't change at all in NY pre/during/post-Airbnb.

blockwriter• 3 years ago

I have the same negative perception of AirBnBs in New York. I think the city also encourages hustler types, or people that are plugged in with local polls, who get away with everything they can.

p_j_w2• 3 years ago

You don't need to be a hustler or plugged in with local polls to get away with running a shoddy AirBnB, the site will happily let you do it and the space is completely unregulated.

rrauenza• 3 years ago

What does the expression 'plugged in with local polls' mean? Is that a New Yorkism?

nolok• 3 years ago

Agreed, as someone who needs to travel a lot worlwide, in cities where the hotel business is very active airbnb is systematically terrible. It might be cheaper, but you will wish you spent the extra bucks.

hospitalJail3• 3 years ago

Its been a long time since I used AirBnB, but when I started, basically everyone lived at the home we were going to. You went into someone's actual home, actually decorated, with recommendations from people who actually live there.

Now, you didn't have 100% privacy, but back then, I just wanted a cheap place to stay.

Since then, AirBnB are just commercial properties.

KenArrari• 3 years ago

This has already happened.

The supply is lower now. The demand is the same. The prices must go up from the people competing for the smaller number of rooms. This is also why it caused rents to rise.

hypeit6• 3 years ago

This has already happened.

Except it hasn't. Hotel prices are the same today in NY as they were when Airbnb was going full blast. Again, NYC has always had excess hotel inventory. There is no shortage that would effect pricing. You can check right now on Expedia and see that prices are roughly the same as last year and the year before that.

fasthands93• 3 years ago

I'm seeing stats that say hotel occupancy in NYC averaged 87% percent last year.

I'm also seeing there are 123,000 hotel rooms and there were 40,000 airbnb listing in NYC.

This seems to suggest that supply of airbnb will materially change total hotel listings.

cypress66• 3 years ago

123,000 hotel rooms

That sounds kinda low for NYC.

ttymck• 3 years ago

What was Airbnb occupancy?

l72• 3 years ago

I find AirBnBs only make sense in two scenarios:

- You need a "long term" stay, like 3-6 weeks. When I travel over seas, I usually stay in a single city for at least 3 weeks. Having an AirBnB makes sense. I don't need daily cleaning and having a kitchen is great! - You need a full house for a family gathering.

Neither of these compete with hotels.

Granted, there were options for these types of stays before AirBnB (VRBO and private listings), but AirBnB elevated these.

shawabawa3• 3 years ago

Airbnbs also make sense in this scenario:

- you get more space, a nicer room, for cheaper than an equivalent hotel

Which I'm not sure about NYC specifically, but has generally been true everywhere in the world I've gone

zactato• 3 years ago

Most cities have Hotels in very specifically zoned neighborhoods. Sometimes these are in neighborhoods you actually want to be in sometimes not.

AirBnBs allows you to stay in neighborhoods where people actually live. This is a huge difference for a lot of folks.

JamesBarney4• 3 years ago

Hotels will get more expensive, competition does not limit the effects of supply and demand. But rents will become less expensive.

AnthonyMouse• 3 years ago

These effects are not required to occur in equal amounts, however. 40,000 units is a much larger proportion of the short-term rental stock than of the total NYC area housing stock.

mastercheif• 3 years ago

The problem is that it’s essentially illegal to build new hotels in NYC.

This is because NYC’s hotel labor unions successfully lobbied to enact a law requiring city council approval to build new hotels in the city. Effectively damning any new developments to endless hand wringing and grandstanding from NIMBYs and other interests.

Many new hotels in recent years were staffed with non-union labor, this was their way to secure leverage in perpetuity.

I’m sympathetic to the union’s position, but this law is going to damage the city’s economy and make NYC unaffordable for many wishing to visit.

https://therealdeal.com/new-york/2022/12/09/how-special-are-...

https://www.nytimes.com/2021/04/27/nyregion/hotels-tourism-n...

JumpinJack_Cash• 3 years ago

> The problem is that it’s essentially illegal to build new hotels in NYC.

Let's build a cruise ship in China or the Netherlands and then use it as a floating hotel in NYC

hypeit6• 3 years ago

The problem is that it’s essentially illegal to build new hotels in NYC.

I really wouldn't classify this as a problem. It's completely possible today to book a hotel room in NY at all manner of price points. The prices are not noticeably different than anytime in the past few years.

There is a ton of hotel inventory in NYC. If I was a resident, I wouldn't even want more hotels built because the city is already full to the brim with tourists and lacking space for affordable residential property.

bobthepanda6• 3 years ago

The city is already the sixth largest tourist destination in the world.

If you actually ask the average resident they would probably shrug or have a negative opinion of lowering the barrier to tourism. This also isn’t uncommon, major destinations like Barcelona and Venice are trying to limit arrivals outright.

toomuchtodo2• 3 years ago

If you damage the city's economy, would that not lead to a reduction in housing costs eventually? If you can't build your way out, destroy demand.

WinstonSmith84• 3 years ago

You don't need to doubt, simply check booking.com: hotels are already more expensive. It's practically impossible to find anything half decent on Manhattan below 350USD/night. Before, AirBnbs (and hotels), there were many sort of half decent options around ~250.

Meanwhile, office rental space are in trouble, such an irony.

Also, while this may not apply to NYC, I will never ever book hotels on a long term basis but apartments because I just don't want to eat out but instead feel at home with kitchen etc. Airbnb or booking.com flats are my go to option wherever I go. Again, not particularly relevant for NYC simply because it was already too expensive to stay there for an extended amount of time.

hellomyguys• 3 years ago

A quick search show plenty of solid hotel choices under $350 during the week, in fact plenty of good choices around the $250 mark you mentioned.

PumpkinSpice• 3 years ago

They weren't more expensive before Airbnb. If they do get more expensive now, that'd be Airbnb's doing, in the sense that they might have forced hotels to reduce capacity to offset the traffic diverted to Airbnb.

But honestly, I'm skeptical. You have something like 60+ million people visiting NYC every year. Airbnb's inventory was tiny in comparison to that. Also, tourism absolutely cratered during COVID and hasn't fully rebound yet, so there's likely plenty of spare capacity.

wnc3141• 3 years ago

I would imagine theres a body of research on this. But I would be surprised if Air BNB didn't put downward pressure on hotel prices - as more supply creates greater competition. I'm thinking of the "southwest effect" where entry of a low cost airline to a market leads to overall lower ticket prices across airlines serving that market. (even though incumbent airlines were already competing).

If your'e curious: https://en.wikipedia.org/wiki/Effect_of_low-cost_airlines_on...

JumpCrisscross5• 3 years ago

doubt hotels will get more expensive as they still have to compete with each other

They already have, by double-digit figures [1]. Both in terms of rates and average revenue per room.

There are a lot of hotels in New York. But within each lodging category, in each neighbourhood, it’s more limited. During marquee events (UN, fashion week, et cetera) or the holidays, a given set of hotels have a virtual oligopoly, as the alternative is hoofing it from New Jersey.

[1] https://www.pwc.com/us/en/industries/consumer-markets/hospit...

lawlessone2• 3 years ago

oh no ;_;

I'll be thinking of the hotel customers when i'm paying my rent.

tptacek• 3 years ago

I read the story, and there's nothing in here that's surprising; per the headline, the laws of supply and demand still hold. The new regulations in NYC were about reducing the price of long-term housing, not short-term stays.

pseg134• 3 years ago

Well I’ll be sure to think about that as I am having the first full night of sleep that isn’t interrupted by French tourists buzzing every door in the building at 3AM every night.

plagiarist• 3 years ago

OTOH fewer people will show up to listings for non-existent locations or locations that aren't owned by the fraud who listed it.

RC_ITR5• 3 years ago

Yeah and on the flipside the price of rent will go down.

A weird quirk of America is that we are so obsessed with tourism that we are willing to sacrifice quality of life for people who live in one place, for the benefit of a bunch of people who visit for 3-4 days.

This is the peak of that thinking.

jddj• 3 years ago

You'll be pleased to know that isn't an exclusively or even particularly American trait

lawlessone2• 3 years ago

We have the same issue's in cities across Europe. And then some dim people blame refugees when they would rather be living in apartment or house.. but can't because those are on AirBNB.

Hotels aren't blameless either. in my city they cancelled a ton of reservations and blamed a technical fault.. when really they wanted to charge more after a concert was announced.

https://www.irishmirror.ie/news/irish-news/taylor-swift-book...

JamesBarney4• 3 years ago

Regions do not support tourism for the sake of the tourist. They support tourism, because tourists spend lots of money which flows into the pockets of the people that work there. Tourists spend around 48 billion on the NYC economy.

RC_ITR5• 3 years ago

This is always such a weird argument to me, because you know who else adds to an economy? People who live and work there.

Forcing people to commute in from Jersey City is a huge net drain on NYC's economy.

tayo42• 3 years ago

price of rent will go down.

airbnb has been banned and regulated heavily in a lot of places already. has this happened anywhere? all i see is rents keep going up

renewiltord2• 3 years ago

Yeah and on the flipside the price of rent will go down.

Would you like to set up a bet on this? We can use the average 1 br rent in NYC as the target. To protect against seasonal effects we'll take the min and max over a 1 y period before this occurs and after this occurs. You win if both are lower over 1 y than they are now. I win if both are higher over 1 y. If there's a mix, we call it a tie.

https://www.zillow.com/rental-manager/market-trends/new-york... can be our source

RC_ITR5• 3 years ago

It's so weird to me that people can claim to fully understand the concept of inflation and still expect prices to go down rather than the rate of growth to decrease.

Rents will go down vs. where it would be otherwise. Almost nothing deflates in nominal dollars ever.

chollida12• 3 years ago

Well AirBnb banning in New York is alot different than in other cities just by virtue of the type of accommodations that are available in New York.

If you ask most people why they airbnb over hotels they say its because I can take my family or group of friends to an airbnb, where as in a hotel we'd need to get 4-5 rooms.

In most other cities you can trivially find 5 bedroom places that fit that bill. In New York I'm not sure you can find alot of 5 or 6 bedroom places, especially in Manhattan.

So airbnb's main draw for most people just isn't available in New York in a way that it would be in most other large cities.

Which means you'd expect alot less people to use airbnb over a hotel in New York.

hn_throwaway_994• 3 years ago

Which means you'd expect alot less people to use airbnb over a hotel in New York.

This analysis doesn't make any sense given that New York was a huge part of AirBnB's overall inventory, being their biggest market worldwide for a long time.

chollida12• 3 years ago

This analysis doesn't make any sense given that New York was a huge part of AirBnB's overall inventory, being their biggest market worldwide for a long time.

Was NYC their biggest market?

Where can i find the data you're using?

Jenk2• 3 years ago

I used to work for a similar company - a competitor - and the marketing analysis would consistently and very strongly return the same result everytime:

Customers think they are getting more for their money via a short-term rental platform like AirBnB.

The perception is that Hotels have all kinds of additional services (staff, etc) to pay that (somehow) AirBnB hosts don't. The glossy adverts show you a loving, warm, full-of-character home to visit, whilst most hotels have an almost cold, faceless image of nothing but dimly-lit corridor after corridor of numbered rooms.

Reality is most of the properties are owned or managed by rental megacorps, are priced very highly to hide all the commission and fees, they sit empty for long periods of time between rentals, and they get cleaned and maintained _far_ less frequently than hotel rooms do.

shortcake273• 3 years ago

For me it’s the price of single occupancy.

I’ve spent a lot of time nomadic freelancing in the past 10 years. In most cities around the world, a room on Airbnb is about the same price as a bed in a hostel. And a hotel is usually double the price.

My needs as a traveller are certainly less important than those of the residents in the cities I visit. Nonetheless, I still lament, as the ever-growing ban on Airbnbs effectively kills the nomadic lifestyle.

objektif• 3 years ago

Tech CEO: Please do not stop us from making money.

toomuchtodo2• 3 years ago

It is in vogue to call AirBnB a tech company, but they are no different than any other internet booking engine (Booking.com, Expedia, etc). The only difference is they manage the inventory database themselves vs plugging into other lodging inventory systems.

gkoberger• 3 years ago

Rent goes down, though, which seems good in general.

hamandcheese• 3 years ago

There is no mention of the long term rental market and how this may affect it, which feels like a glaring omission.

p_j_w2• 3 years ago

It's an intentional omission, the AirBnB CEO is trying to take everyone's eyes off the ball. He's trying to redirect your attention like a cheap magician.

orange-mentor• 3 years ago

I kind of wish capitalists would just be honest for once. This is bad for their specific business. Just come out and say that instead of making stuff up.

etchalon2• 3 years ago

I'm shocked that the CEO of Airbnb would go out and try to get consumers angry about a policy which negatively impacts his business.

bobthepanda6• 3 years ago

People who are not residents of New York (the customer base) have pretty much no leverage over a government entirely elected by the residents.

Of the residents, there are a lot more pissed off renters and neighbors than there are AirBNB hosts.

etchalon2• 3 years ago

Yep. It's not a ploy that will do much.

rdtsc• 3 years ago

The stories I have read over the years had kept me from trying Airbnb. Maybe I am too risk averse, but if I spend money and time on vacation, leaving all that up to some unknown shady host to mess up and then having to fight with Airbnb support sounds not enjoyable at all. I'd rather be surprised by fun and enjoyable things.

Hyatt announced a new vacation rental platform, Homes & Hideaways by World of Hyatt, the same day Chesky was speaking.

That's one good thing is that it keeps hotels on their toes and forced them to play in that market as well.

Further, IHG is even offering 10,000 IHG One Rewards points to travelers who can prove their New York City Airbnb reservation was canceled in light of the new city policy.

That sounds like an interesting approach. Just the ad itself is enough to turn heads. 10k points is not a huge amount but might still get a number of customers. When a competitor mistreats a customer, and you're the one helping them solve their issue, they'll remember that forever.

yieldcrv2• 3 years ago

thats… yes, too risk averse

people have overwhelmingly positive experiences with airbnb and a few outliers, or people make fun of the pricing of the fees

but the actual experience is pretty benign

welldoneator2• 3 years ago

...until something goes wrong and you're dealing with a situation at best more annoying and worst downright hostile (ask me how I know). Your only recourse if something goes wrong is a random host whose income is directly tied to not helping you. If you're dealing with an issue at a hotel, there's strict policies in place and at the very least the person on the other end gets paid regardless of whether or not you're refunded, so you're more likely to actually be refunded via policy rather than the whims of a fraudster.

hospitalJail3• 3 years ago

I've both used and hosted AirBnB. I probably have ~50 experiences of various transactions.

0 problems.

I hate that the fees are hidden until you are about to pay, but the actual service is like renting out a furnished apartment/house. Way back when, people were renting out rooms in their home, so you actually got to talk to a host to get advice about the area, and the home was decent.

Today its basically a bunch of landlords who have some property manager and cleaning service taking care of a furnished apartment/house.

But its just another hotel-style company. I imagine you havent tried chatgpt either.

itsoktocry• 3 years ago

Yes, cracking down on the unlicensed, uninsured black market in hotel rooms will raise the price of an average stay. But there are obvious benefits that the Airbnb CEO isn't considering.

I feel hypocritical, because with a young child Airbnb is awesome for trips. We get space and separate rooms. But I understand the strain it's putting on our system (I'm Canadian).

Salgat2• 3 years ago

Sounds like this will promote growth of new hotel construction/expansion. Great!

jdminhbg• 3 years ago

Ideally it would; in practice, zoning and planning prevent supply from keeping up.

genericname• 3 years ago

NYC recently passed a zoning amendment which requires special permits and additional construction rules for new hotels https://www.hvs.com/article/9578-new-york-citys-2018-2021-ho...

Unfortunately, I do believe the extra burden will lead to less construction and I worry that short-term stays will indeed become more expensive because of the lower supply of rooms.

Salgat2• 3 years ago

In many parts of the city hotels have already outpaced other non-residential development. These regulations, on top of supporting union workers, just ensure that hotels don't take over too much of certain parts of the city. The biggest issue with AirBNB is that you have unregulated conversion of residential property into short term hotels, which impacts long term residents living in the city. A hotel shortage mostly impacts tourism, which is already booming in the city and is a less critical issue for NYC residents.

gumby2• 3 years ago

He’s whistling past the graveyard, as I suppose he should be. As others have commented, Airbnb was never enough to move the needle on hotel prices in NY anyway.

But they did move the needle on quality of life for people who live there, which is whom the government represents. Historically it’s the visitors who get soaked everywhere (car rental fees at airport, hotel visitor taxes and of course Cheesecake Factory in Times Square). The sheer mass of these charges in NY are another reason why Airbnb had no impact on costs.

Simulacra• 3 years ago

If not then why is the city and hotel industry fighting so hard to shut them down? Airbnb was competition.

gumby2• 3 years ago

I believe the real pressure is coming from city residents who don't like having an ABNB nearby or object to the reduction of rentable apartments, while the hotels are just piling in on the scrum.

floatrock• 3 years ago

Cool, now do housing costs for the people living there (and, theoretically, the ones deciding how their own city should be regulated).

Backlash was never about hotel prices, it was always about the externalities like rampant real estate speculation driving up housing costs and hollowing out neighborhoods for a quick buck. The corporate economic pollution.

Turns out there's a certain point where people want their quality of life. Ignoring this angle is completely disingenuous and tone deaf, but hey, if your argument can't stand on the merits, throw in a fear-mongering distraction. CEO-speak 101.

locallost• 3 years ago

By the same logic rents will go down, so thanks for the crackdown.

Ajay-p• 3 years ago

The hotels have always been overpriced, especially in New York City with all of the fees and extra taxes. New York City has nearly destroyed Uber and other ride sharing services in favor of taxis, and they will do the same to Airbnb to satisfy the hotels. Protectionism by another name.

yardie• 3 years ago

It's funny Brian compares NYC to Paris. If there is one thing the French love is to create rules and regulations. I think the team in Paris realized, probably early on, they could work with the marie or against the marie. And work with some well-meaning regulations. Parisians were concerned about affordability and flat supply early on with Airbnb, VRBO, and PaP. NYC city hall was not and figured the market would sort itself out. Year after year the calls were growing louder about landlords evicting tenants for short term tenants, and the council continued to ignore it. People are angry, they vote, and if you piss them off long enough they can do leverage it in unexpected ways.

I was an early proponent of Airbnb, when it was just geeks renting their flats out for the weekend. But growth meant it had to take over more housing. Taking it away from residents and turning it over to tourists. I wanted it to "Live like a local" but when you have entire buildings dedicated to short term rentals none of the locals are around.

JumpCrisscross5• 3 years ago

It is an interesting example of a company failing to self regulate. I’m genuinely fine with my neighbours renting out the apartment they live in while they’re there or out of town. But it wasn’t okay to be woken up at 4AM to the button-mashing buzzer fiend of the week.

hospitalJail3• 3 years ago

I think the team in Paris realized, probably early on, they could work with the marie or against the marie. And work with some well-meaning regulations.

That sounds all great, but you also wonder if these well-meaning regulations are the reason why Europe is so far on the decline.

I'm not convinced NYC did the right thing here. You are destroying a large part of the tourism industry in favor of a mere ~10k new listings, still controlled by landlords. You wonder how much this is going to hurt the government's bottom line.

stephanerangaya• 3 years ago

"The measure is believed to have eliminated as many as 15,000 — or about 70% — of Airbnb's listings in New York City, Wired reported using data from housing advocacy group Inside Airbnb."

I hope this means lower rent for New Yorkers, 15,000 apartments possibly going back to the rental market seems like something positive.

kypro• 3 years ago

New York is never going to be affordable though. The whole concept of "low rent" in New York is an inherently stupid goal.

The reason rents are high in New York is primarily because it's tourist hotspot, but because people are serving a market. If you want rents to be cheaper in NYC then the fix here is really to make the city less desirable to tourists so people don't want to stay for the week. But then is it even New York?

In an ideal world New York could have low rents, be a tourist hot spot and be a place people can live and raise kids. In reality that's never going to happen, and politicians trying to "fix" the problems with New York is just a waste of resources and is going to come at the cost of people who invested in property in NYC to serve the actual demands of the city (yeah, I know f** landlords, etc).

The solution here, if anything, is transportation and remote working. Ideally people should be able to easily and affordably commute into cities like New York when needed, but they shouldn't feel they have to live there. But even this is probably too utopian. Not everyone is a software engineer with the luxury of remote working after all.

hn_throwaway_994• 3 years ago

Wow, some of the armchair analyses here are just so lacking in understanding beyond people's own individual experiences ("My AirBnB was dirty!"):

1. Of course hotels will get more expensive. This is basic supply and demand at work. As another poster commented, the total amount of AirBnB inventory in NYC was material. Saying "hotels still have to compete with each other" is just missing the absolute basics of Micro-econ 101.

2. Of course, as others have posted, the whole point of these AirBnB crackdowns is to make more long term rentals affordable. It's really just about shifting supply from STR to LTR, so you'd expect prices to go up in one market and down in the other.

3. Regarding AirBnB, "It might be cheaper, but you will wish you spent the extra bucks" has to be the most eye-rolling comment I saw. Many people simply don't have "extra bucks" lying around. I certainly remember when I was younger thinking there were many trips I just wouldn't have gone on without AirBnB. It's the same reason budget airlines are so popular - people know they suck, but especially in a city like NYC the expectation is you are hardly spending any time in your room besides sleeping in the first place, so people are willing to accept the tradeoff. Plus, access to a kitchen can by huge in terms of cost savings while in NYC.

stvltvs• 3 years ago

1. Of course hotels will get more expensive. This is basic supply and demand at work.

Not if the hotels are sitting on off-market inventory. I'm not a hotel general manager, so I assume whatever analysis I would do would be overly simplistic. I just know that hotel rooms often go empty, so AirBnB rooms leaving the market might not affect supply and demand in simple ways.

shashasha• 3 years ago

“in cities where the hotel business is very active” I really agree with my understanding of the comment referenced in #3. I understood it as whole apartment rental vs hotel. Not room in apartment vs hotel. I would assume seriously cash constrained people would simply opt for room in apartment, which could be a nice deal. but for those who actually need a whole private apartment for some reason, the difference between that price and a nice hotel just isn’t enough to offset the roll of the dice aspect of Airbnb. City specific and imho, but I’d agree it’s accurate for nyc pretty generally.

nine_zeros• 3 years ago

In other words, all these airbnb units will become long term rentals. Thus, residents of the city will now be able to afford to live there.

Airbnb CEO: NYC hotels will get more expensive after short-term rental crackdown

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