New Business Model Threatens Local Innkeeper

By Wiley Wood

The basic idea of the sharing economy is that if you have an asset that is not being fully used—a car that sits in the driveway, a vacant couch, a pup tent in a closet, fancy camera equipment—you can hook up through the digital world with someone who will pay you to use it.

You don’t have to be a hardware store, say, to rent someone your Sawzall. The website Zilok will put you in touch with someone who wants it for a day and broker the transaction. And you don’t have to run a kennel to board someone’s dog, all you need is space in your house and a registration on DogVacay.

The peer-to-peer economy might seem best suited to urban environments, but at the November meeting of Norfolk’s Planning and Zoning Commission, it came out that the new business model is disrupting markets and bringing cash to this small town too.
Dean Johnson, owner of the Mountain View Inn, drew the P&Z’s attention to four Norfolk property owners who rent out apartments or entire houses—often for stays as short as one or two days—through the online clearinghouse Airbnb.com. Johnson cited them as unfair competitors to his bed-and-breakfast business.

“These people are not vetted,” said Johnson, “they haven’t gone through Planning and Zoning, the fire marshall’s never been to visit.” He pointed out that they are not required to carry commercial liability insurance or to charge a 15 percent Connecticut occupancy tax as he is.

Business at the Mountain View Inn, whose eight carefully decorated rooms rent for $125 to $325 nightly, is based mostly on one- and two-night stays, said Johnson. In many cases his clients come to attend a specific concert at Infinity Hall. He characterized Airbnb as a major threat, drawing thousands of dollars away from his bed-and-breakfast.

“We’re losing money, we’re playing by the rules,” said Johnson. “Our business, every year it’s been climbing, but this year it went down. And I attribute it to this.”

The sentiment of the commissioners toward individuals who rent out properties via the Internet was summed up by Schuyler Thomson: “They’re enjoying all the benefits of being a business without any of the restrictions.” Several also voiced concern about the town’s liability for unregulated activity in the case of an accident: “If the town knows about it and doesn’t do anything about it, the town is at fault as well,” said Thomson. (A video of the full meeting can ve viewed by clicking here.)

Looking at the regulations governing the use of residential property, the commissioners noted that a homeowner is currently allowed to rent out rooms and provide board under certain conditions. Many residents let bedrooms to Yale University during the summer months as lodging for music and art students, an activity that requires no permit.

The commissioners discussed ways of framing the regulations to keep homeowners from competing for short-term guests with established bed-and-breakfasts. They also considered requiring peer-to-peer renters to obtain a special permit. As Vint Lawrence, a commissioner, later summed up the meeting: “The consensus was that if they act like a bed-and-breakfast, then they have to register as a bed-and-breakfast.”

The Norfolk offerings on Airbnb are varied. One is a whole six-bedroom house that accommodates 10 people and rents for a minimum of two nights. The host lives elsewhere and prepares no meals for his guests. The cost for two nights is $850, plus a $500 security deposit. It has been used by work groups for retreats and by large families for gatherings.

Another local Airbnb host lives with her husband in the big house where they raised their children. On the second floor, they built in an apartment with its own small sitting room, kitchenette and private entrance, where they lodge Yale students in the summer. But with property taxes high and the children living elsewhere, the couple considered selling the house. Instead they listed the apartment on Airbnb. “I was looking for a way to make the house work for us during the winter,” said our informant, who asked not to be named.

Airbnb Inc. began in 2008 when a couple of young men found themselves strapped for money and rented out air mattresses on the floor of their studio during a convention weekend in San Francisco. The company now has offices on every continent except Antarctica, a website that marked its 10 millionth booking in June 2012, and a current valuation on the order of $14 billion. Both host and guest must register with Airbnb to participate, and the identification of each is available to the other. Afterward, both sides rate the transaction, and their ratings become part of their online identities.

Other websites, Homeaway and Craigslist among them, also offer short-term lodging in Norfolk: a cottage on Tobey Pond for $275 a night and a luxury house with an indoor swimming pool for quadruple that amount.

Is the sharing economy the wave of the future and a step toward saving the planet by using existing resources more fully? Or is it a plague on the economy and a threat to public safety that needs to be stamped out? The Norfolk P & Z will hold further discussion at its next meeting, on December 9, with a public hearing to follow, possibly in January.