In San Francisco and Portland, Airbnb renters to pay taxes By Danny King Home- and room-listing service Airbnb plans to start charging guests occupancy taxes for accommodations in San Francisco and Portland, Ore., in what could be a conciliatory gesture to municipalities that have said they’re not getting their fair share of revenue from overnight visitors. The privately held company, which specializes in enabling homeowners to list their houses or rooms in return for a transaction fee, late last month debuted what it called its “Shared City” initiative for Portland. “We’re offering to cut red tape and to collect and remit taxes to the city of Portland on behalf of our hosts,” Airbnb CEO Brian Chesky wrote in a post on the non-profit blog Medium late last month. “This is new for us, and if it works well for our community and cities, we may replicate this project in other U.S. cities.” The company followed up by announcing that it would do the same in its home city, San Francisco, starting this summer. The move likely reflects a strategy by the rapidly growing 6-year-old company to help defuse what’s been the contentious issue of occupancy-tax collection, of which many municipalities allege that third-party accommodations distributors like online travel agencies (OTAs) and home-based listing services aren’t paying their fair share. More than two dozen municipalities, including Chicago, San Diego, Philadelphia and Washington, have taken on the OTAs in court since 2006 because of disputes over who pays occupancy taxes on the amount an OTA marks up its room prices relative to their wholesale costs. “The Shared City strategy was designed to be a pre-emptive strike against cities first, a marketing effort second,” said Henry Harteveldt, travel industry analyst at San Francisco-based Atmosphere Research Group. “Airbnb wants to take every possible step to avoid the distraction and legal expense they saw OTAs forced to engage in regarding taxation with municipalities.” Airbnb has garnered further controversy after hosts came under attack in New York and Los Angeles for what city officials and some neighborhood activists said was the illegal short-term rentals of their rooms, apartments and homes. Airbnb, whose officials declined to comment on if or when New York would be included in the Shared City initiative, responded last year by releasing a report claiming that its members’ rentals generated $632 million worth of economic activity in New York for the year ended July 2013. Still, unlike HomeAway, in which hosts collect booking revenue themselves and pay the company a fee for the listing, Airbnb collects booking revenue up front, takes a percentage, then pays the rest to its hosts. That means Airbnb can collect occupancy taxes up front, then remit them directly to the cities. Portland has an 11.5% occupancy tax (including those assessed by Multnomah County) while San Francisco’s is 14%. “As sharing economy services such as Airbnb [and ride-sharing companies] Uber and Lyft rise in popularity, the potential clash with local players and authorities would be inevitable, especially where there is a uneven playing field,” said PhoCusWright senior analyst Douglas Quinby, who called the Shared City initiative “an inspired move.” The initiative also reflects a company eager to protect its growing presence both in the travel sector and in financial circles. Airbnb, which has listings in more than 34,000 cities across 192 countries, generated a funding round in 2011 worth $117 million, and last fall it named Joie de Vivre Hospitality founder Chip Conley to the newly created position of head of global hospitality. Conley, who opened or managed more than 50 hotels, is charged with implementing operations standards such as cleaning, listings and host-response times. Last month, the Wall Street Journal reported that private-equity firm TPG was leading a group that was preparing to invest as much as $500 million in the company in a stake that would value Airbnb at about $10 billion. That is more than Hyatt Hotels’ market capitalization and is on par Expedia. The company declined to comment on the report. “Our hosts are not hotels, and most of these tax laws were not designed for them,” Airbnb head of global policy David Hantman wrote in a March 31 blog post. “But whether or not we agree with the tax laws, we want to help our hosts follow the rules.” ___ Follow Danny King on Twitter @dktravelweekly.
Posted on: Wed, 09 Apr 2014 13:04:30 +0000
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