Will Airbnb's Reputation Be Its Downfall?

LOS ANGELES—Airbnb's perception as a "disruptor" could lead to its downfall, according to Paavo Monkkonen, an assistant professor of Urban Planning at the UCLA Lusk Center for Public Affairs and Nathan S. Holmes, a recent graduate of the urban planning program at the school. The two recently published a letter comparing Airbnb's legal disputes to those of Napster, a music downloading platform that was sued for copyright infringement in the early 2000s by several music labels and ordered to pay $26 million in fines. Monkkonen and Holmes argue that Airbnb's reputation in the hotel industry is akin to Napster's conflicts with the music industry, and that, as a result, Airbnb might ultimately suffer the same fate. The letter suggests that Airbnb should aim to shift its reputation by working with local governments to pay hotel taxes and clamping down on users that operate their rentals on a quasi-permanent basis. While there is much debate about the regulations to which Airbnb should adhere, the comparison between Napster and the alternative accommodations site is especially interesting. We sat down with Monkkonen to talk about this parallel and whether Airbnb is disrupting the market of forever changing it.

GlobeSt.com: Is this a fair comparison? The Napster suits were about copyright infringement, so there was a clear victim, or victims, and clearly defined damages. Is there a clear victim in this case?

Paavo Monkkonen: I think the comparison is useful, even though the two companies and industries are very different. Those that want to curtail short-term rental activity argue that the victims are renters that get kicked out when their landlord wants to convert an apartments from 'normal' long-term use to full-time, short-term use. As with sharing music, there are many places where short-term renting can be considered illegal.

GlobeSt.com: Airbnb is part of the sharing economy, like Uber, which has also seen a fair share of legal action. The letter notes that the issue with these types of companies is that they circumvent the existing system rather than work as collaborators. However, this seems to be a new status quo for the millennial generation. Although Napster ultimately failed, Apple's iTunes rose up because it was clear that people wanted a different way to purchase music, and one that the music industry couldn't provide. Even if Airbnb fails, a similar company could rise up in its place. Aren't we really seeing a fundamental shift the hotel industry that will hurt or at least change the way that hotels operate?

Monkkonen: The point of our letter is exactly that, that the service provided by Airbnb is giving consumers something that hotels cannot provide and something that consumers love. It would be hard for hotels to duplicate the Airbnb experience given the diversity of options, locations and amenities individual hosts can provide to guests. Our argument is that Airbnb does face a threat from another company offering a similar platform, but one that is perceived as working with governments and taking steps to minimize any negative impacts on neighborhoods. Airbnb actually does some of these things, but is often not perceived that way.

GlobeSt.com: Should Airbnb be required to pay taxes, or should that be a responsibility that falls on each individual user?

Monkkonen: It is actually the individual hosts that should be paying taxes. However, Airbnb assists local governments in collecting TOT from hosts in some cities. I think that if they offered to collect taxes for local governments everywhere—a complicated endeavor given the fragmented nature of local government in the United States—they would take away one of the main arguments used against them by opponents and effectively get local governments on their side.

GlobeSt.com: While Airbnb doesn't have a positive reputation within the hotel community, it has a tremendously popular public reputation. By comparison, in New York, we saw Mayor de Blasio try to restrict Uber, only to receive a wave of criticism from residents. How does public perception play a role in the Airbnb debate, if at all? Will that help save or protect Airbnb?

Monkkonen: On the one hand, the more people use Airbnb, the more supporters it will have. On the other hand, if they are perceived as a company getting rich by helping people break the law that will not help them.