Ocean City Today

Airbnb tax payments still ongoing debate

State, hotel industry seeks transparency for platform’s rentals through legislation
By Greg Ellison | Aug 25, 2016
Thomas Maloney, Marriott International’s senior director of government affairs, and Amy Rohrer, president and CEO of the Maryland Hotel & Lodging Association, co-chaired a discussion about online hosting platforms, like Airbnb, last Friday at the Maryland Association of Counties Summer Conference at the Roland E. Powell Convention Center on 40th Street.

(Aug. 26, 2016) Internet-based short-term rental companies are doing more than competing with the traditional lodging industry, they also are cutting into the revenue that county and local governments receive from hotels, motels and brick-and-mortar rental firms.

That was the message last Friday from Marriott International’s senior director of government affairs, Thomas Maloney, and Amy Rohrer, president and CEO of the Maryland Hotel & Lodging Association, at a discussion of online rental companies at the Maryland Association of Counties conference at the convention center.

Marriott sponsored the afternoon session titled “Protecting people and communities amidst changes in the lodging industry.”

“When we talk about the sharing economy and short-term rentals, I think a lot of folks think it’s an immediate oppositional position that we have,” Maloney said. “We’re here and we just want to have a conversation. The goal today is planting some seeds when you’re having these conversations back in your respective counties,” he said.

The issue, he and Rohrer agreed, isn’t just so much the rapidly emerging competition, but that Airbnb and similar services are flourishing partly because they don’t have to shoulder the same regulatory and financial burden as traditional members of the lodging industry.

“When we talk about short-term rentals, we are referring to online hosting platforms that enable homes, or even a room in a home, to be rented out just like hotels,” Rohrer said. “Airbnb is the biggest player in this market by far, but they are not the only one.”

Other competitors Rohrer mentioned included OneFineStay, VRBO, HomeAway and FlipKey.

Quoting an Airbnb company blog post that says its intent is to create “an open world where everyone’s at home and can belong anywhere,” Maloney admitted it “sounded lovely.”

“The rub is they truly are everywhere these days,” he said. “They’re in 191 countries around the world and tens of thousands of cities.”

By comparison Marriott, a Fortune 250 company with lodging operations in 87 countries, took 60 years to establish its current market share, Maloney said, while Airbnb has entered the playing filed in essentially the blink of an eye.

“The Airbnb model is really well suited to rapid growth,” he said. “They’ve got over 2 million listings around the word and contrast that with our (Marriott’s) 750,000 rooms.”

With its bookings growing exponentially, Maloney said Airbnb has transformed into a larger animal.

“For some time, when folks thought of Airbnb, there was a sense that it was just college kids sharing couches and it was kind of a small time thing,” he said. “Airbnb today is larger than any of the largest hotel companies in the world.”

While Airbnb hit $4 billion in bookings in 2014, Rohrer said that figure, which jumped to $7.2 billion last year, is projected at $12.3 billion for 2016. Quoting from a study released by the American Hotel & Lodging Association, which examined Airbnb home listings in the 12 largest U.S. markets from October 2014 until 2015, Rohrer said a small segment of users are driving the record growth.

“Some of the data that has come out of that shows some trends that are quite disturbing for our industry,” she said.

The study, which was conducted by researchers at Penn State University’s School of Hospitality Management, found nearly 30 percent of Airbnb operators in the targeted cities were in business full-time, with listings available more than 360 days a year. Further, landlords with two or more units generated nearly 40 percent of the revenue in those cities.

“These are commercial operators that, in many cases, are operating illegal hotels,” she said. “They are competing with bed and breakfasts as well as hotels.”

Locally, Rohrer said she found that 77 percent of listings in the Ocean City area are available for four or more months.”

In total, the search found 150 hosts with 398 active rentals in Ocean City, Rohrer said, with 25 having multiple listings. Statewide, the site reports during 2015 Maryland had approximately 2,400 Airbnb hosts with roughly 75,000 guests.

Although vacation rentals are nothing new to big hotel chains, Maloney said, the advent of hosting platforms like Airbnb has had unforeseen impacts on the housing market.

“You’ve got folks on the local news at night saying, ‘I used to live in this building until last week and now my apartments on Airbnb,’ because landlords can make a lot of money doing that,” he said. “When you’ve got multiple unit listings from one landlord, and or the unit is online full-time, that implies that is a commercial use.”

Another area lacking clarity relates to insurance, Maloney said.

“A lot of residential homeowner policies may not cover this commercial activity,” he said. “Are people properly covered?”

In some instances, the lack of regulation for Airbnb proprietors has affected individual civil rights.

“Marriott can’t decline someone at the front desk based on race, gender, ethnicity, or sexual orientation in the state of Maryland,” Maloney said. “Airbnb has been struggling to get its head around that at that moment. They’ve got individual hosts that have declined business from folks for impermissible reasons.”

While noting that Airbnb has expressed a desire to remit all applicable taxes, Maloney said the terms are typically set to avoid transparency.

“What they like to do is sign a tax agreement where they’re writing a check for all of the properties listed on their site and they can send a lump sum at whatever interval the jurisdiction asks for…they don’t turn over the addresses or names of the hosts so the tax data doesn’t give any line of sight on where the rental activity is happening,” he said. “That’s a strategic decision on their part.”

Maryland tried to draft legislation to address Airbnb’s tax issue last year but it failed to make it out of Annapolis.

“What we saw as problems with the bill, the comptroller saw as problems with the bill,” he said. “Data anonymity and the lack of transparency on where rentals were happening made it impossible to audit or verify what they were paying in taxes is actually accurate.”

Based on last year’s legislative experience, Rohrer said it’s vital for the hotel lodging industry to have a seat at the table next year to assure no questions are left unanswered by Airbnb.

“They pick and choose when they are going to be helpful with this,” she said. “That’s why it’s important to get the legislation right from the start.”

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