Airbnb's New York bookings risk getting slashed by half

San Francisco

AIRBNB was dealt one of its biggest blows in the company's 10-year history last week when New York City council members voted to require the home-rental company to hand over the names and addresses of its hosts in the city.

The officials have said they need the information to police Airbnb hosts that operate illegally and drive up neighborhood rents. Airbnb has said the Bill represents an unreasonable violation of users' privacy.

The new legislation would dramatically cut Airbnb's New York City bookings, as the city promises to use the data to lead a sweeping crackdown on short-term home rentals.

Airbnb takes about 15 per cent of the revenue from bookings, or what users pay to rent homes and apartments on the platform.

Airbnb and its hosts are on track to generate about US$140 million in gross bookings in New York City this year, said people familiar with the matter. That number is expected to drop by at least half when the new legislation goes into effect in January.

That loss would be tiny compared to Airbnb's revenue from bookings globally, but the proposed legislation raises questions about Airbnb's growth prospects as more cities take a harder line on home-rentals.

The Silicon Valley hospitality giant is on track to generate about US$3.6 Billion in bookings around the world this year, said the people. The company was last valued by investors at US$31 Billion.

If the New York Bill becomes law, it could give Airbnb-sceptical regulators around the world a straightforward playbook to copy as they seek to limit the company's influence, said Scott Shatford, CEO of hospitality analytics company AirDNA.

"Other cities will now see that data is the key to enforcement," he said. "It's just a domino effect from here."

Airbnb disagrees with Mr Shatford's prediction that the new law would inspire other cities to take a more aggressive stance toward regulation.

"New York City is an outlier because the New York City Council is a wholly-owned subsidiary of the hotel industry, and they aren't interested in working together," said Chris Lehane, Airbnb's head of global policy.

A report by Airbnb said that 15 of the city's 51 council members had received donations from the hotel industry and related associations.

Airbnb is facing resistance from regulators in Amsterdam, Santa Monica (California) and Reykjavik (Iceland), among other popular tourist destinations.

But not all cities are opposed to the recent rise of short-term online renting. Airbnb said cities in China, India, Australia and Cuba are actively supporting use of the platform because it can ease the way for tourists.

Mr Shatford believes that what Airbnb stands to lose in New York City could be quickly made up for in China, one of Airbnb's fastest-growing markets.

In 2016, the company sued its hometown of San Francisco in federal court after regulators there required hosts to register their rental properties with the city. Airbnb and San Francisco ultimately settled and agreed to remove listings that did not comply with the city's home-sharing laws.

So far, Airbnb has agreed to share some user data with regulators in Chicago and San Francisco as part of a plan to legalise, tax and regulate home-rentals. In San Fransciso, Airbnb's conciliatory move cost it almost half of its listings in the city. In January of this year, Airbnb scrubbed nearly 5,000 San Francisco rentals from its website.

An Airbnb spokesman said that roughly 70 per cent of those listings had not been booked within six months of the law taking effect.

A person familiar with the fallout said the purge will cost Airbnb and its hosts about US$35 million in revenue this year in San Francisco, representing a 60 per cent drop from gross revenue from rentals in the city in 2017.

Ron Conway, one of Airbnb's earliest backers, said he's not concerned. "It's important to understand that Airbnb is a large global company now, so it's not dependent on any one particular market."

He added that he speaks for most Airbnb investors. But some investors expressed concern that the regulation could be a bellwether that puts a damper on the company's eventual public market value.

Brian Chesky, Airbnb's chief executive officer, told employees last month that the company plans to pursue an initial public offering before the end of 2020.

The investors said it's important that Airbnb continue to find alternative business models to offset cuts caused by increased regulation.

In 2016, Airbnb began selling unique tourist experiences, such as hat-making classes and paddle-boarding excursions, provided by users. In February this year, it launched a marketing push for boutique hotels on its website. BLOOMBERG