Airbnb and Entrepeneurship

Recently Ed posed the question: Should Airbnb be illegal? This question resounded with me, not because I have any great interest in Airbnb. Heck, I haven’t even stayed at an Airbnb. But, rather, the question resounded with me, because Airbnb facilitates entrepreneurship.


While most discussions about Airbnb focus on the sharing economy–the idea that if you’re not using something, share it, and you can make some money, and others with a need get a discount–Ed’s particular post talks about the business side. You see, New York legislators are attempting to fine folks who advertise short term rentals. Airbnb makes the argument that this is in support of the hotel industry and will lead to people losing their homes. Ed appropriately notes that both positions are stark.

Airbnb and Entrepeneurship

The thing that strikes me more about Airbnb is the opportunity for using ones own assets for entrepreneurship with little barrier to entry. It’s a lot like reselling on Amazon. Which, while more refined, is still an area with a lot of gray area. For example, in Ed’s post, he talks about collecting and remitting hotel taxes. The same could be said about sales taxes in reselling.

Like Ed, I don’t want to see over-regulation. That requires entrepreneurs to be responsible and report their income. I would argue that there should also be a “start up period,” with respect to hotel taxes for Airbnb, and sales tax for resellers, such that folks have a year or two to become fully compliant. The idea is that it takes a year or two for folks to establish a side business. To expect them to meet all regulatory requirements of a big business, like a hotel, or a multi-million dollar reseller, right out of the gates, puts up a rather large barrier to entry. Such barriers help only those entrenched, whereas we’ve seen time and time again, that they hurt market disruptors like the sharing economy.

Bottom Line

The sharing economy, like other niches, represent great opportunity for those with the entrepreneurial spirit. The challenge comes with attempting to have all parties play on an equal playing field. That said, one of the great things about the US is the fact that entrepreneurship is valued. As such, should be accounted for in various legal and tax calculations. Companies like Airbnb should be positioned to collect the necessary taxes, to facilitate compliance. Just the same, there should be some limited time grace period for small businesses to ramp up to a point where they can meet regulatory requirements. I think this is the same concept as in reselling, with things like sales tax. Finally, I think there needs to be personal responsibility, meaning if you generate a profit, you pay your fair share.

What do you think? How should side gigs and sharing economy businesses be treated?


7 thoughts on “Airbnb and Entrepeneurship

  1. That’s a great idea that I’ve never heard before, to have a ramping up period. It makes a lot of sense. Perhaps there could be a combined time and revenue threshold, i.e. either 2 years or $100K in revenue (or whatever $ amount is reasonable).
    The question that is unique to AirBNB, I think, is zoning. If we have residential and commercial zones, and that there are particular places we have hotels and we don’t have hotels. If there is an rationale for that idea at all, then how do we decide if it’s OK for a home to be a short term rental. I don’t like laws that say a certain percentage of units can be short term rentals. That seems unfair to the other units. i.e. if there is a large number of units in my building that are rented out exclusively as short term rentals, that could use up all of the slots and exclude me from being able to rent out my home while I’m on holiday.
    Services like airbnb are such a great use of resources, and a great opportunity for people who are inclined to dip their toe into the entrepreneurial waters to be able to do so without having to put a huge amount of money on the line to get started. This is a great discussion to have!

  2. If anything, AirBnB is underregulated. I’ve read too many horror stories about having reservations cancelled abruptly, because the owner had a better offer (a longer term rental, VS one or two nights, for example), prices going up with previously undisclosed “fees”, rentals described as use of an entire home that turns out to have the owner staying there, too, and price gouging, in general.

    In popular destinations, owners charge not only a nightly rate, but a cleaning fee, which frequently raises the cost by up to 25%. While a hold of even a couple hundred dollars on a CC seems reasonable to me, because there are people who treat other people’s property like their own personal dumps, it seems that charging a cleaning fee for an AirBnB is akin to a hotel charging extra for maid service.

    I don’t know THE answer, and I can’t say that I don’t have a vested interest in this issue, either. We would like to own a couple of condos downtown, and use AirBnB to rent them out. But the bad reputation that AirBnB is generating for itself is a deterrent.

    To that end, greater regulation within AirBnB’s own structure would certainly make it easier for both governments and neighbors to be more calm about having a short term rental unit in residential buildings.

    And that’s the issue, really. One of the reasons why heavy handed regulations get passed, of course, is the unwillingness of corporations to regulate themselves. Both Uber and Lyft, as corporations, are better off with the rules that they’ve become subject to, and AirBnB will, as well.

    The same rules should apply to short term rentals in all parts of the economy. If *I* am competing with hotels, then I should be collecting taxes, too, as well as demonstrating consistency in how I screen my customers, etc.

  3. To mickisue:

    As an Airbnb host myself, you cannot just cancel whenever you want to get a higher rent. The first time, you pay a $50 penalty, the second time you pay $100 penalty. And you lose the opportunity to be superhost AND you get an automatic review on your profile that says you cancelled within so many days of xxx reservation. So that is not a rampant thing hosts are doing, sure it happens, but not any kind of serious Airbnb host. (I would never in a million years do this, my reviews are important to my business)!

    For what it is worth, I find cleaning fees and security deposits annoying and I adveraise I charge none of them, and no extra person fees, either, though I just make up for that in my going rate. As a frequent flyer I know I despise extra fees.

    A little story. My city just sent out cease and desist orders to 50 Airbnb hosts myself included. I was horrified. I have made this my primary income and I love what I do. But something that is not often brought up in the zoning discussion : “bed and breakfasts”- you can be zoned as a residential area, but if you live at the property- likely you can get by as a legal bed and breakfast (this means you live at the property also, I own a duplex, live in half rent out the other 3 bedroom apt)- I was pretty happy when I found this out.

    I’m 26 and this is my first business, which is actually pretty successful, with 104 guests visiting this month alone. I’m already considering purchasing my next property, so I definitely agree with the idea that Airbnb fosters entrepreneurship!

    • @Sean: That’s wonderful. And I’m glad that you DON’T do those things.

      But the ones who do are the ones who, of course, get the press. If AirBnB shut people down the first time they did it, and made it clear that they do, it would help. As would it help for AirBnB to, themselves, refund the money for severe violations, rather than waiting for the owners to do so.

      The problem, just like with any organization that fosters entrepreneurship, is that a handful of asshats can pollute the waters for all, when they jump in.

  4. I live next to an Airbnb, a RENTER actually is Airbnbing the house he is renting. It’s okay by the owner because he is making the rent. The crap part about living next to an Airbnb is that there are always a whole bunch of tourists that throw their trash where ever and create a lot more traffic on a quiet street where kids play outside. These tourists don’t understand the area and drive like total assholes. It has ruined the neighborhood vibe. And yes, this guy is violating zoning laws and knows it. He changed his ad so that one hones in on the location to find the property. It is a little more obscure. The city is too busy to keep up and shut these guys down. It takes all my will not to throw eggs at the rental cars and the house and call the police as I know there are bigger crimes that need to be dealt with. If you are thinking about doing a transient accommodation, think of the neighbors. Think about the fact that they are dealing with tourists and most tourists are assholes with no accountability to the people around them. You may be on property but you can’t control the way they drive, where they park, and that they are taking up legitimate space from folks who really may need to rent long term. These types of businesses drive up long term rental costs by squeezing out the market. So yah, if you are zoned in a resort/business area, this is the norm and totally okay but if you are zoned as residential, then NO, it’s not okay and the neighbors actually hate you.

    • MickiSue:

      Just one quick clarification(I think this is what you were referring to?), in the event a host cancels, the refund is immediately processed back to the guest. Rent is always charged at the time of booking but Airbnb holds it in a type of escrow until 24 hours after guest check in, and then it is released to the host. This definitely protects guests in the event of a shady host.

      • No. The cancellations because a better offer comes along is a separate issue.

        Refunds for rentals that are not as they appear–the whole house is not the whole house d/t the owner being there, the place is filthy, etc, are extremely difficult to obtain, if the owner already has the money.

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