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By Sam Schechner in Paris and Greg Bensinger in San Francisco 

Airbnb Inc. is showing a willingness to place curbs on its home-sharing business, a nod to regulators globally who have besieged one of the world's most valuable startups with potentially crippling restrictions ahead of an inevitable initial public offering.

The company on Thursday agreed for the first time to limit the number of nights a year a host can rent out a home in two of its biggest European markets, London and Amsterdam. The concessions could provide a template for how Airbnb operates in nearly 200 countries around the globe, including major cities such as New York and its hometown of San Francisco where it faces bitter fights over some of the toughest rental laws in the world.

Airbnb's ability to seize a noticeable share of the hospitality industry after eight years has convinced backers like Alphabet Inc.'s investment arm CapitalG and mutual funds such as Fidelity Investments to value the company this year at $30 billion, as richly as hotel company Marriott International Inc.

But much like its crosstown cousin Uber Technologies Inc., the car-hailing service valued at $68 billion, Airbnb has drawn the ire of legislators and an entrenched industry which view its as a threat to the old way of doing business. City officials in tourist capitals from New York to Berlin argue that Airbnb's short-term rentals can squeeze out locals by making it more lucrative for owners to cater to tourists than lease their homes to long-term residents.

Under pressure by investors to eventually pursue lucrative IPOs, Airbnb and Uber have bulked up lobbying efforts and begun offering additional services that could help buffer any impacts to their so-called sharing-economy businesses. Between them, the two companies have raised more than $16 billion in venture capital.

In its biggest effort to quell regulatory concerns, Airbnb said Thursday it would block hosts in London and Amsterdam starting in January from renting out entire homes for more than those cities' legal yearly limits on rentals, unless the host has a license to do so.

"This is a way of saying, you can trust people to paint within the lines, because we're going to help with that," said Patrick Robinson, Airbnb's head of public policy in Europe, the Middle East and Africa.

Airbnb sent a message to hosts in London on Thursday saying it would start to apply the city's 90-day-a-year limit on rentals beginning Jan. 1. In Amsterdam, it will apply the city's 60-day-per-year limit at the start of the year, too.

A new law in New York City goes further, effectively banning most short-term rentals of an entire home in a multiunit building by penalizing hosts with fines of up $7,500 on listings for fewer than 30 days. The company has said it is working with legislators on a compromise.

The company is also facing restrictions at home where San Francisco Mayor Ed Lee is reviewing a bill that would prevent hosts from renting out dwellings for more than a collective 60 days each year.

Airbnb has also sued San Francisco in federal court over an ordinance that would apply fines of as much as $1,000 a day for each listing from hosts not registered with the city. It contends the restriction would be onerous to enforce and a violation of its free speech right to allow users to post what they wish on its website.

In an interview earlier last month, Airbnb Chief Executive Brian Chesky said he was hopeful he could reach compromises with New York and San Francisco. Airbnb says that sharply restricting short-term rentals would hurt the ability of regular citizens to earn additional income while eliminating a check on escalating hotel room prices.

One study this year found that Airbnb's average room rate was $81.80 cheaper per night in New York than the average hotel, $108.29 less in London and about the same in San Francisco. In some cities, like Barcelona and Austin, the average Airbnb rate was more than $100 higher than hotels, according to the study by travel website Busbud.

Elsewhere, Airbnb is facing pushback from regulators in Canada, Japan and other nations. The company also has struggled to make headway in China, like other U.S. internet companies, and is closing in on a deal to acquire locally based rival Xiaozhu.com, according to a person familiar with the matter. Uber earlier this year yielded the China market to Didi Chuxing Technology Co., selling its operations to the local rival after investing hundreds of millions of dollars there.

For Airbnb and Uber, resolving regulatory battles without hurting their businesses is an important test ahead of any eventual IPO. Uber has tussled for years with legislators and taxi commissions who claim its ride-hailing business skirts local laws and threatens rider safety. Neither company has discussed IPO plans.

Airbnb declined to comment on the revenue hit it could take from Thursday's announcement. Airbnb says 35,000 hosts received 1.5 million guests in London in the year ended Sept. 16 and a "typical" host had Airbnb guests for 50 nights in 2015. In Amsterdam, the company had 14,200 hosts with 575,000 guests in 2015, and a typical host had guests for 28 nights of the year.

London is one of the company's top three revenue generators, along with New York and Paris, and Amsterdam is in the top six in Europe, according to Airbnb's Mr. Robinson. New York hosts were generating about $1 billion a year in sales, from which Airbnb takes up to 15% in commissions.

To help move beyond its core home-rental business, Airbnb in November introduced a new service that connects travelers with local experts for curated experiences, like brewery tours, sumo lessons, yoga retreats and kayak outings. The service, available in 12 global cities, is Airbnb's first stab at creating a new significant revenue stream.

Write to Sam Schechner at sam.schechner@wsj.com and Greg Bensinger at greg.bensinger@wsj.com

(END) Dow Jones Newswires

December 02, 2016 02:47 ET (07:47 GMT)

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