Editorial: Click on competition in travel market

The Detroit News

As the sharing economy grows, no sector within it is safe from the heavy hand of government regulations. Popular app-based ride sharing companies Uber and Lyft have faced these intrusions and now home rental services are feeling the heat.

Short-term rental companies like Airbnb and HomeAway, which help individuals rent out their properties much like hotels, have become targets for special interest groups and local governments throughout the country that want to see more onerous regulations put on the innovative services.

Some additional rules might make sense, depending on the locality, to ensure travelers’ safety. But local governments shouldn’t regulate for the sake of it, or to try to level the playing field with hotels and other traditional travel accommodations via new taxes or licensing requirements.

These rental services have become wildly popular over the past several years. With a new valuation of $25.5 billion, Airbnb is now the third-largest privately held company in the world after Uber and Chinese electronics maker Xiamoi.

The company and other short-term rental services offer travelers accommodations often more affordable than hotels, for varying periods of time, and provide competition in an industry that has operated largely as a monopoly for decades.

Recent studies from Credit Suisse and Boston University both found that short-term rentals contributed pressure pricing on hotel options, as well as lower costs and more options for visitors.

They’ve also enabled people to make extra income off their properties, and created an entire economy that meets a need.

And the system has worked just fine, without government interference.

Hotel chains are concerned these rentals are cutting into their slice of the market. But that’s not the case.

The American Hotel and Lodging Association reported that revenue grew from $163 billion in 2014 to $176 billion in 2015. A Morgan Stanley equity analyst report projected increases in hotel-occupancy rates from 65 percent in 2014 to more than 69 percent in 2017, according to data compiled in an R Street Institute report on the sharing economy from earlier this year.

This also seems to be the situation in Detroit, where both short-term rentals and hotel occupancy are rising. According to STR, a global benchmarking and information service for the hotel industry, Detroit experienced an 11 percent increase in occupancy — up to 79 percent — over the past year.

Airbnb says Detroit’s inbound guest growth on its service increased 127 percent over roughly the same time period, and the city now hosts 20,000 guests annually using the service.

Detroit politicians haven’t yet interfered with Airbnb, and that’s to their credit.

But cities such as Austin, San Francisco, Seattle, Chicago and New York have been considering or have passed legislation to make it difficult or outright illegal for individuals to offer short-term rentals. That amounts to a violation of property rights.

Local governments’ heavy hand in the affairs of short-term rental companies has forced more aggressive lobbying on the part of companies like Airbnb, which has enlisted the help of several past mayors to lobby various city councils, and will surely have to spend more money corralling politicians as the debate continues.

The goal should be empowering businesses — even individual renters — to stimulate the economy with as little government intervention as possible.