Airbnb Just Lost a Limb in its Fourth Biggest Market

Amid a blossoming backlash against mass tourism.

By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.

Spain’s eighth largest city by population, Palma, made history this week by becoming the first Spanish city to impose a blanket ban on all tourist apartments. Starting in July homeowners in the capital of the popular island destination, Mallorca, will not be able to rent out their apartments to tourists. Only owners of detached, single-family homes, which represent just 12% of the city’s housing stock, will be left untouched by the ban.

The ban is intended to put an end to surging rental prices in the city. While vacation rentals are not the sole cause of the 40% rise in average rental prices since 2013, they are certainly a big factor. According to one study, the number of non-licensed apartments on offer to tourists increased by 50% between 2015 and 2017 alone.

In 2017 the regional government introduced a raft of measures that allowed authorities to issue apartment owners on the islands of Majorca, Ibiza, Menorca and Fomentera with fines of up to €40,000 if they were caught renting unlicensed properties to tourists. Travel agents or websites caught advertising unlisted flats to rent on the islands, such as Airbnb and HomeAway, face fines of up to €400,000.

On Monday Palma’s city council escalated the regulatory assault by banning tourist apartments altogether. For Airbnb, the ultimate disruptor of global tourism, this trend is most certainly not its friend.

Spain is the firm’s fourth biggest market in terms of listings, after the U.S., France and Italy. But the company is losing the battle for hearts and minds. Many local residents of tourist-saturated towns and cities no longer feel the benefits provided by unfettered tourism — namely money and jobs — are sufficient compensation for the toxic mix of externalities it leaves in its wake, including sky-high prices and rents, overcrowding, noise, overstretched public services and infrastructure, and the erosion of the town or city’s distinctive character.

In Barcelona, Airbnb’s sixth biggest global destination, the situation has got so bad that in 2017 local residents identified tourism, which provides €12 billion of funds annually, as the biggest problem the city faces — worse than poverty, crime, terrorism and unemployment.

To make matters worse, many, if not most, of the landlords who have been profiting from the unprecedented tourist influx do not pay local taxes. According to El País, only 645 of 11,000 holiday rentals being offered to tourists in Palma have the licence required to do so.

This is also a common complaint in Barcelona, where the City Council has been locked in a bitter battle with Airbnb over unlicensed accommodation. At one point the Council sent out a blanket letter to local residents warning them that owners of unregistered apartments could face fines of up to €30,000. The letter also urged residents to snitch on any neighbors who they believe are running illegal tourist accommodation operations in their buildings. Given the volume of noise and scale of disruption tourist apartments tend to produce, many locals were more than happy to oblige.

Airbnb responded by offering to limit the number of rentals available via non-professional landlords in Barcelona’s central Ciutat Vella district. The proposal fell short of appeasing the local government which continues to insist that Airbnb take concrete steps to ensure that all of its affiliated apartments have tourist accommodation licenses.

The problem is not just the legal status of the apartments being rented; it’s also the type of landlord doing the renting. Given the huge profits that can be earned, more and more private investors are snapping up apartments in popular tourist destinations. In Barcelona it’s not just professional investors moving in on the market; so, too, are organised criminal gangs, who are taking advantage of the irresistible money-making machine without even having to actually buy the property.

Earlier this month the backlash against tourist rentals moved to Paris, Airbnb’s second largest global destination with 65,000 homes listed, where authorities filed a lawsuit against the company and two other firms for failing to respect local laws regulating holiday rental properties. Airbnb’s response was to bemoan Paris’ “complex, confusing” regulations while urging it to “follow the path… of other cities with whom we have worked efficiently on common-sense measures to promote responsible furnished tourist rentals,” such as London, Berlin and… Barcelona. No, seriously.

Airbnb hopes it has finally made authorities in Barcelona an offer it won’t be able to refuse: to ensure all Airbnb visitors to the city pay a tourist tax, a similar offer to one it has made to local authorities in France. Meanwhile, Spain’s cash-hungry government has begun to show an interest in the fiscal footprint of tourist rental platforms like Airbnb and their hosts. The government plans to launch a new law in July requiring platforms to provide a kaleidoscope of information on all their hosts, including the identity of the home owner, the assessed value of the property, how many days it was rented for and for how much.

At first, representatives of Airbnb reportedly agreed to cooperate with the government’s request. That was on Tuesday. On Wednesday Airbnb deniedsaying any such thing. The proposed new law is both “confusing and impracticable,” the company complained. A lot of the data requested “has no relation to taxes” and providing such information would contravene EU rules on data-protection.

While the company may have a point, especially when it comes to data protection, Spain’s government, faced with one of the worst pension crises in Europe (largely of its own making), needs money fast. And it will do just about anything to get hold of it, including trying to shake down the world’s biggest home rental service.

For Airbnb, it’s just another headache in its fourth biggest market. Where management’s real concern must lie is in the blossoming public backlash against mass tourism in places like Barcelona and Palma de Mallorca, because trying to stop that trend while also trying to increase the size of its market in those same places is more or less impossible, even for a firm backed up by a global army of corporate lawyers and lobbyists. By Don Quijones.

“This plan, far from solving or alleviating the problem, is likely to make it a whole lot worse.” Read…  Banks & Builders Want New Property Bubble In Spain, Government Obliges

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