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)
Copyright (c) 2016 Dow Jones & Company, Inc.
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