Airbnb does furnished apartments, Uber does taxis

 

The new sharing economy giants

 

While listening to a radio show discussing the movement by the taxi industry to counter, via legislation, the UBER push in many cities where it is operating, I began reflecting on how AirBnb has changed the furnished apartment business. Personally, I feel more competition and change can be embraced as long as we all play by the same rules. The disruption caused by Uber in the taxi industry and AirBnb in the furnished short-term apartment business has been tremendous.

If you had a problem with a cab driver who never picked you up for your airport ride, who could you complain to? If a cab was dirty, who did you complain to? Uber allows star ratings of both driver and customer: an enormous improvement. AirBnb allows the same. So, now a bad landlord or problem tenant guest can be kept out  or become the star of the system for the benefit of all. You can also write to the management about issues and in the case of UBER, you will get a 100% refund of your ride, boom, just like that! Wonderful.

Taxi drivers and owners of medallions are up in arms! All of a sudden they are accountable! What a concept! I welcome this change. What about the furnished apartment business? As you can see from this article “Raleigh orders halt to homeowner using online rental AirBnb” the push back is coming for AirBnb also. Neighbors of people like the homeowner in this article do not like the constant flow of strangers in and out of their community. There are also some legal nightmares already happening all over the country. As a result of the new unregulated market, complex legal cases are rising in the courts because of tenants illegally subletting their apartments on AirBnb. Under existing tenant – landlord laws in Massachusetts, it is illegal to sublet for profit to a third party not approved by the landlord. Some guests will lose their money and a place to stay if the Landlord challenges the sublet. Zoning laws outline where and how hotels and furnished apartments can operate. Tenant laws regulate what a tenant on a lease can and cannot do and prohibit subletting.

I used to have little competition in the small owner short-term rental business. Now everyone who owns a condominium or rents an apartment is a potential competitor. My business has evolved and changed in the recent years.

I understand how the taxi people feel squeezed, a taxi medallion in the city of Boston costs hundreds of thousands of dollars. The license was a kind of protection from competition and restricted the driving of a taxi to approximately 1,300 cabs in the city. This allowed the cab owners to extract every penny out of drivers and charge some of the highest rates in the country per mile driven. Cabs were dirty and dispatchers were unresponsive to the customers’ request for timely pickups. We lived in a semi-monopoly regulated by the city of Boston who dispensed some of the medallions to a select few multimillion dollar cab owners, who then milked immigrant drivers and consumers like you and me.

In the furnished apartment business, we have some similar and completely different challenges posed by AirBnb’s entry a few years’ back, the difference is there is no exclusive medallion the city dispenses for us. But similarly furnished apartments are issued yearly licenses each year that hold landlords accountable via inspectors and police who enforce rules and laws. Not only do we have to compete in price and amenities with AirBnb hosts so we can get good rating and business, we also have to keep an eye on laws and comply with them to keep our licenses in compliance.

Each year we spend thousands of dollars to make sure we comply with our license requirements we also pay a small staff for emergencies. This overhead is included in the rate of our apartments which in turn has to be in line with AirBnb going rates for us to remain competitive. Our competition of mostly single condominium owners or renters, do not have to comply with same laws under present unregulated system.

In essence there now is an unregulated Far West on one side represented by the new AirBnb hosts and us, the old guard providers who must comply with fire codes and egress and sanitary inspections. We are at a competitive disadvantage because we are being held to higher standard by regulations and because we have a recognizable corporate entity which can easily be soiled or removed from us if we don’t take care of problems immediately be it 11 pm or 2am.

We also pay to have service people on our staff at the ready. The apartment owner or renter vacationing in Mexico  or Italy will not get to a flooding apartment as fast and as efficiently as we can with a continuous presence.

All in all the short term furnished rental model introduced by AirBnb brings some welcome challenges to our industry. As a result of AirBnb making it easier for owners of apartments to monetize his/her apartment we all have more options as guest and host, the rating system for guest and host is awesome news, but this should not happen in a legal vacuum. The absence of specific short term stay regulation does not protect the guest who stays in AirBnb apartments, and creates unfair competitive advantages, for this reason, I favor the introduction of city ordinances and rules which AirBnb hosts must comply with, the same fire and egress and noise and sanitary laws that we — the professionals of the furnished apartment business — have always been held to.