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Airbnb set to lose millions in revenue after cities crack down on rentals

Airbnb set to lose millions in revenue after cities crackdown on rentals

As cities around the world clamp down on Airbnb rentals, the new regulations will hit not only those offering up their homes, but the San Francisco startup as well, as new figures released this week suggest reservations in London alone in 2017 could be over $400 million less than expected.

As the company begins to comply with a new U.K. law which limits rentals to 90 days a year, data gathered by accommodation search engine AllTheRooms, and analyzed by the Financial Times, suggests that this move will cost Airbnb $100 million in lost fees.

The data suggests that while some of those looking to book on Airbnb will choose another room on the platform, many may now look elsewhere. This has led AllTheRooms to revise downwards its prediction of revenue from Airbnb bookings in London this year from $1.24 billion to $812 million.

With Airbnb taking a cut of up to 15 percent of each booking, that is a significant amount of revenue to lose in a single city. London is among Airbnb’s three most lucrative markets, along with New York and Paris.

Critics of the service say Airbnb hosts are able to avoid paying the higher taxes imposed on hotels, such as expensive property taxes and value added tax (VAT). Those using the service can also take advantage of tax free allowances offered by some cities.

The result is that Airbnb rooms are often much cheaper. A study last year showed that in 20 of its biggest U.S. markets, renting an entire house for a night was cheaper than renting a hotel room.

But that could all change with Airbnb agreeing to impose these regulations on its London hosts. Previously the company had argued that it was up to the property owner to enforce the law.

London isn’t the only city seeking to clamp down on what many see as unfair practices being exploited by Airbnb and its customers:

  • Berlin: In June the courts upheld a ban which prevents Airbnb hosts letting out their properties for more than 50 percent of the year — or risk facing a €100,000 fine ($104,000).
  • Amsterdam: Just as in London, Airbnb has agreed to impose a limit to the number of nights a property can be rented out. In the Dutch capital, the limit is now just 60 nights a year.
  • Paris: In the French capital (along with 17 other cities in the country), Airbnb has agreed to collect local tourist taxes. In Paris, hosts must now register with their local authorities, a move designed to make it harder for residents to surpass the 120 day limit.
  • Dublin: Last year Airbnb opened a new 40,000-square-foot international headquarters in the Irish capital. But the government has indicated that it is ready to introduce new legislation to curb its growth in the country, after one flat in Dublin was put up for sale and boasted that it generated €80,000 annually from Airbnb rentals.
  • New York: In Airbnb’s biggest market, lawmakers last year said they would impose steep fines for advertising home rentals that violate New York City’s short-term rental rules. Airbnb initially challenged the new rules, but last month withdrew its lawsuit.
  • San Francisco: As in New York, Airbnb has withdrawn its legal challenge to strict new regulations brought in by its hometown and says it is willing to work with lawmakers to curb illegal short-term rentals in the city. Mayor Ed Lee is reviewing a bill that would prevent hosts from renting out dwellings for more than 60 days each year.

Cover: ASSOCIATED PRESS

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