There's no hotel in Raleigh's Five Points neighborhood, but visitors can rent a spacious room with a bathroom, a double bed and a private entrance in Greg Stebben's house across the street from Lilly's Pizza for $80 a night on Airbnb.
Across town, Doris Jurkiewicz, owner of Raleigh's Oakwood Inn, where the nightly rate is $139–$189, estimates she's lost 35 to 40 percent of her business over the last two years. She blames that decrease on the emergence of short-term online rental companies like Airbnb.
"It's becoming very hard for me to survive against the WalMart of bed and breakfasts," Jurkiewicz says of Airbnb, which globally, offers more rooms for rent than even the biggest hotel chains, such as the Hilton. Many of Jurkiewicz's neighbors are using the service to rent rooms in their homes.
Like many cities, Raleigh is grappling with how to regulate Airbnb and companies like it. Unlike hotels and traditional bed and breakfasts, Airbnb is unregulated in most places. In Raleigh, Airbnb hosts don't collect or pay state or local sales tax, or the local hotel occupancy tax, which in Wake County is set at 6 percent. Airbnb rentals aren't required to get a business license or special-use permit. Nor do they have to submit to health and safety inspections. Hosts don't even have to tell their neighbors that they're renting rooms, though the information is publicly available on Airbnb's website.
With hundreds of rooms for rent in Raleigh, Airbnb, valued at $10 billion, is becoming a major competitor with hotels and traditional lodging services, appealing to tourists and the business community alike. Locally, hotels have not been affected by the rental interloper.
But the service has also met with resistance. A new national group, Neighbors for Overnight Oversight, which has a local chapter in Raleigh, formed last summer. NOO lists no names of neighbors nor organizers on its website, but it is represented by the Results Company, a Raleigh public relations firm. A partner in the firm, Jonathan Felts, formerly served as McCrory's federal liaison to Congress and as a deputy assistant to President George W. Bush.
Neither NOO nor Felts returned multiple calls and emails from the INDY.
"If the city doesn't do something about Airbnb, I really don't know if I can survive," says Jurkiewicz, who invited Felts to a recent Oakwood neighborhood meeting on NOO's behalf. (Jurkiewicz says she is not a member of NOO.) "Airbnb way undercuts my price. I am losing my business, my livelihood, my retirement."
Airbnb's clash with the city began with Stebben, who owns a house in the Five Points neighborhood. Stebben, a tech journalist, and his wife, Jo Ann, began renting out a spare room on Airbnb this summer, following discussions with the city's zoning department. "The city said, 'we don't know if (Airbnb) is legal or not,'" Stebben says. "And the next thing they said was, 'We're not going to go on the website and hunt people down and give them a citation.'"
Stebben says the room has been rented nearly every weekend since he listed it on Airbnb. But in October, the city received an anonymous complaint about the Stebbens using their property to host Airbnb guests. A Raleigh zoning inspector told City Council that local zoning ordinances don't address the issue of short-term rentals. City Council, realizing it needed more time to evaluate the situation, issued a violation notice to Stebben, but said it wouldn't levy fines on him until after Jan. 31. City Council granted Stebben an indefinite stay last week, after members unanimously voted to send the issue to the Law and Safety Committee for further study.
Dennis Edwards, President and CEO of the Greater Raleigh Convention and Visitors Bureau, says the effect of short-term online rental companies on hotels is uncertain. In fact, the numbers don't reflect any significant negative effect at all.
"The good news is, in 2014 our hotels actually had an incredible year," Edwards says.
Wake County's overall hotel occupancy rate of 68 percent is higher than the 2013 national average of 62 percent, according to the American Hotel and Lodging Association. (The national average occupancy rate for 2014 is not yet available).
Wake County hotel occupancy was up 6.7 percent over 2013; occupancy tax collection increased 15.2 percent over the same time period. (In Wake County, a portion of the occupancy tax is used to market Wake County to increase tourism; the rest of it goes into an inter-local fund to pay for projects like the PNC arena, the Convention Center, various sports stadiums and parks and expansions at the Natural Science Museum and the North Carolina Museum of Art.) And the Average Daily Rate—the 2014 average rental income per paid occupied room—was up 5.5 percent
Edwards calls the 2014 numbers "exceptional," and says they were driven by business and leisure travel, convention meetings and sporting events. However, he says it's not surprising that the Oakwood Inn, with its limited number of rooms, "saw an impact because it is most similar to what Airbnb would offer."
Edwards says Airbnb does divert some customers from Raleigh hotels, because customers using the service would otherwise likely stay in them. However, he says he also recognizes the benefits of Airbnb. And, as Raleigh City Council member John Odom noted at a January town hall meeting on the topic, only 900 hotel rooms are available in downtown Raleigh; the Convention Center alone can cater to thousands of people at a time, forcing visitors to stay farther away, in Garner, Cary or Morrisville.
It's unclear how much of the opposition is real or bluster. Airbnb has been operating since 2011, but only four complaints, one unsubstantiated, have been filed with the city, according to assistant city zoning administrator Robert Pearce.
The outrage is coming primarily from the local chapter of Neighbors for Overnight Oversight—"a coalition of concerned neighbors working to ensure short-term online rental companies operate with proper oversight to keep homes and communities safe," according to the group's website. With Felts as its representative, NOO has been attending neighborhood and community meetings, including one in Oakwood.
It's not clear if NOO is paying The Results Company to advocate against Airbnb, although Jurkiewicz says the two parties had a contract. Nor is it clear who is funding NOO, and how much money it has received.
There is also little to be gleaned from the NOO's website, though it encourages site visitors to contact the group online if they've been "negatively impacted" by short-term online companies. On its blog, the NOO posts news stories and bad publicity about Airbnb from across the country, a similar technique used by critics of the controversial digital taxi services Uber and Lyft.
City Council's Law and Public Safety Committee could recommend several options to make Airbnb more palatable to critics.
"I'm very excited to be able to take this into committee and to deal with a very complex problem that I think we can really resolve," said Mary-Ann Baldwin, the City Council member who oversees the committee. She said has been a proponent of looking at the issue "from a lot of different perspectives."
For starters, hosts could be required to collect and remit Wake County's occupancy tax, which Stebben calls a "no brainer."
Airbnb already has a mechanism in place to collect and remit local taxes, as well as offering insurance protection for hosts. Airbnb guests in Portland and San Francisco currently pay an occupancy tax as part of their reservation fee. Starting in February, Airbnb guests in Amsterdam will pay a tourist tax, and they'll pay an occupancy tax in San Jose, California.
The committee could also devise an identification system for hosts and guarantee liability coverage for neighbors.
Stebben says he is confident the city will resolve the matter in a way that will allow him to keep hosting guests on Airbnb. "Instead of looking at this as a problem, the city should look at it as an opportunity," he says. "We could encourage Airbnb to do things that are not just good for Raleigh, but good for all cities." Stebben says he would have no problem charging a sales or occupancy tax in his room fee, obtaining a special permit or license, submitting to health and safety inspections and compromising with neighbors to keep operating.
"We have the opportunity to keep our branding intact as being a 21st century city of innovation," says Jeff Tippett, an Airbnb advocate and the founder of Targeted Persuasion, a Raleigh advertising firm. "We can show that we are continuing to look at ways of keeping innovation and entrepreneurship at the forefront. We should be asking, what is the minimum amount of regulation we need right now, because we can always address new issues as they creep up."
Lynn Minges, CEO of the North Carolina Restaurant and Lodging Association, which represents 1,700 lodging properties, says the group doesn't fear competition from short-term online rental companies. Nor does it seek to ban them outright. At a minimum though, she says, hosts should identify themselves and collect sales and occupancy taxes.
"There is a law on the books in North Carolina that requires any entity renting rooms without going through a licensed real estate broker to pay sales and occupancy taxes," Minges says. "Airbnb isn't doing that and it's against the law. I think Airbnb is receptive to (being regulated), we just have to require it."
It's likely that in the upcoming legislative session, the General Assembly will pass a law regulating short-term online rental services.
Last November, Minges of the restaurant and lodging association and Jurkiewicz spoke to the joint legislative Revenue Laws and Study Committee, which is reviewing the "sharing economy," including Uber and Lyft.
The Convention and Visitors Bureau's Dennis Edwards says there is a movement within the General Assembly to draft a bill to address short-term rentals on the state level, and to instruct cities about their power to regulate them.
"I understand the economic importance to homeowners to rent rooms," Edwards says. I think we all just want a fair playing field."
This article appeared in print with the headline "Get a room"