Airbnb and the Short-Term Stay Industry vs Hotels

Katy Pilling

Aug 12, 2020


Competition History

The hotel industry was struggling to compete with Airbnb and other short-term stay competitors long before the pandemic hit the United States in the early months of 2020. Airbnb, and similar home-share companies, put pressure on the hotel market, and there have been struggles between them ever since. From disruption in apartment buildings and other areas and property vandalism to the short-term stay competition damaging the hotel industry, many cities have tried to eradicate Airbnb from their city limits.

Airbnb, which started in August of 2008, hit multiple snags before it became the $31 billion company that it is today. Even in June of 2020, a long legal battle was finally settled between Airbnb and New York City, where there is already an oversupply of hotels vying for customers from the city’s tourism industry.

To comply with the many issues raised about the company’s practices, Airbnb started to collect hotel taxes and remit them to certain cities. On its website, Airbnb outlines how many of these taxes and other rules work for hosts. As Airbnb and similar companies become more popular with customers who are looking for other hospitality industry options, cities have enforced rules and regulations before hosting is permitted. Now, there are a variety of regulations and additional taxes for running an Airbnb in order to adhere to city demands. Here is some additional information on how it works in certain cities:

Chicago

  • Bed and Breakfast Licensing: To register an Airbnb, the host must also have a license for a “bed and breakfast,” according to Section 4-6-290 of the Municipal Code. For further information, visit the City of Chicago Small Business Center page and Business Licensing page.
  • Additional Taxes: The City of Chicago imposes a 4.5% “Hotel Accommodations Tax” for the listing price (including cleaning fees) paid for vacation rentals, bed and breakfasts and other hotel accommodations, as well as a 4% “Shared Housing Surcharge.” Cook County also has a 1% tax that applies to certain properties, and the state of Illinois also has homestay-specific taxes. All taxes are collected by Airbnb and remitted to the proper office.
  • In addition to these regulations, visit either the Airbnb Chicago-specific page for general information, or the City of Chicago website.

Austin

  • Short Term Rental Licensing: any owners of Short-Term Rentals (STRs) in Austin, Texas are required to obtain an operating license for hosting. The City of Austin defines an STR as the rental of a residential unit or accessory building for less than 30 consecutive days.
  • Additional Taxes: In Austin, the licensing process requires hosts to pay a 11% “Hotel Occupancy” tax where applicable. Additional information about state hotel taxes is available here. In addition to these regulations, visit either the Airbnb Austin-specific page for general information, or the City of Austin website.

Nashville

  • Short-Term Rental Property Ordinance: The City of Nashville has a special ordinance for people looking to host their property as short-term rental properties. It is important to read and comply with the rules and regulations outlined in Ordinance 2014-951.
  • Additional Taxes: Metro Nashville and the State of Tennessee requires property owners to obtain a business license and to collect other state and local taxes. The City of Nashville also imposes a “Hotel/Motel Tax” which must be collected under the terms of the Short-Term Rental Properties Ordinance.
  • In addition to these regulations, visit either the Airbnb Nashville-specific page for general information, or the City of Nashville website.

Other Important Information to Remember

When thinking of renting your apartment or condo out as an Airbnb or other home-stay, it is necessary to review the terms of rental leases and other binding contracts. Failure to do so when applicable could result in fees and other legal actions by tenant organizations or landlords.

Final Thoughts

The hospitality industry is shifting dramatically, and will probably continue to do so in the post-pandemic world. Whether that means hotels re-emerge as the favorite of the competition due to their ability to maintain clean facilities, or they are overpowered by the at-home feeling of the Airbnb and other home-stay options, there is uncertainty in the industry.

Additional resources

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