Might there be some good news on the horizon for hoteliers bumping up against the ever-growing presence of Airbnb? For hotel and resort operators in Los Angeles, it is quite possible.
The Los Angeles City Council is currently considering a proposed ordinance amending sections of the Los Angeles Municipal Code, which–if passed–will impose strict regulations on alternative accommodations, such as Airbnb. No doubt, the ordinance, which is expected to become law in L.A. in the coming months, would have a dramatic and very positive impact on the hotel industry.
Presently, the short-term rental industry is largely unregulated in L.A. As a consequence, some hotels in the city have seen profits fall by virtue of Airbnb’s footprint there. According to an analysis of Airbnb in the U.S., released in January by STR, parent company of Hotel News Now, the company earns more revenue in L.A. than in any other market. No doubt then, L.A.’s traditional hospitality players would more than welcome the passage of the ordinance.
The details
First, the ordinance would dramatically decrease the number of Airbnb listings in L.A., in part because it would require every host to endure a comprehensive application process with the department of city planning.
By way of the application, any would-be host would need to certify that he or she is the primary resident of a property to be listed. And to be considered the primary resident, the host would have to attest to living at his or her property for more than six months a year.
The net effect: If the ordinance passes, L.A-area homes owned for rental purposes only (those in which hosts do not live for at least half the year) would no longer be able to be listed on Airbnb. As a result, the common practice of an individual Airbnb host renting out several residences at a time would not be feasible, thus drastically reducing the inventory of properties available for short-term rental.
But, it doesn’t stop there. The ordinance would expressly prohibit any person from operating a short-term rental property for more than 180 days each calendar year.
The penalty box
Hefty penalties would be in effect in the event of violations of the ordinance. Airbnb could face daily fines of up to $500 for each illegal listing advertised; $1,000 for refusing to provide addresses of unregistered short-term rentals to the city of L.A.; and $1,000 for the refusal to submit documentation to the city verifying transient occupancy tax payments.
Property owners could confront financial risks of their own for violation of the ordinance. Hosts would be subject to a fine equal to twice their nightly rental fee (or a minimum $200) if not in compliance with the law, and owners would be fined $2,000 for each day they rent their properties beyond the 180 days allowed per year. These penalties would have a chilling effect on the short-term rental market to be sure.
Who wins?
The obvious beneficiaries of the ordinance would be hoteliers in L.A. That being said, the hospitality industry at large has much to gain to the extent that the proposed law becomes a trend. Indeed, ordinances like the one being debated in L.A. have passed in other major U.S. cities, such as New York, San Francisco, Sacramento and Portland, among others.
The reigns seems to be tightening on Airbnb in the wake of increased regulation. The takeaway for hotel and resort operators in L.A. and beyond: Prepare to absorb the resulting influx of business should L.A.’s ordinance, and similar ones nationwide, become law.
Kyle Klein is an associate at M&R, where he focuses his practice on the hospitality industry as well as counseling and litigating on behalf of employers in matters relating to discrimination, harassment, wrongful termination, reduction in workforce, hiring, wage and hour issues, misclassification, overtime and meal/rest breaks. Mr. Klein can be contacted at 310-564-2670 or kklein@mrllp.com.
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