News Story

State's Tourism Agency Sees Tourism-Boosting Lodging Service as a 'Threat'

Pure Michigan negative about Airbnb

“Victoria of East Lansing” describes herself as a postdoctoral scholar who opened up her home to travelers as a way to pick up some supplemental income. She never considered such a thing before hearing about Airbnb, which describes itself as “a trusted community marketplace for people to list, discover, and book unique accommodations around the world.”

Founded in 2008, Airbnb is analogous to the better known “Uber” and “Lyft” ride-sharing apps, which connect individuals who need to get somewhere with others who have a car and want to earn money. This service does the same for homeowners with an extra room and travelers looking for an alternative to regular hotels, or a place to stay when there’s no room at the inn.

Airbnb was the subject of a breakout session at the “Pure Michigan Governor’s Conference on Tourism” in Grand Rapids this week. Perhaps not surprisingly for a conference focused largely on traditional companies who may feel threatened by an innovative upstart – the event’s promotional materials did not cast Airbnb in a favorable light:

“They don’t pay taxes and are largely unregulated, but they do make money! Learn about the threats posed by Airbnb and similar peer-to-peer lodging businesses during this Tuesday morning Tourism Track breakout session.”

Victoria, who preferred not to divulge her last name, described what she likes about Airbnb in a message:

“All I use is Airbnb. I didn't think of opening up my place to visitors as a source of income until I heard of Airbnb. I also feel very safe with the system since they let you see reviews of a user (both as a host and as a guest), and the number and type of verifications a person has. I have to say, now that I have started hosting, I am enjoying the experience quite a bit.”

But Michigan’s official tourism advocate looks at it from the point of view of the existing hotel and lodging businesses the conference serves. From that perspective, entrepreneurs such as Victoria and Airbnb look like threats.

“The point is that this consumer-driven change impacts the established hospitality and tourism industry,” said Nathan Pilon, spokesman for Travel Michigan. “The question for the industry is, what will they do to meet this competitive challenge?”

Victoria says she has mixed emotions about her entrepreneurial success.

“I feel conflicted about the fact that my ‘helping myself financially’ affects local businesses. At the same time, I deeply hope I can keep this source of income until my first decent paying job,” she said. “People need lodging for different reasons and, in the past, all a visitor had were hotels or B&Bs, which meant that one or the other would get that client. Airbnb created many options for travelers and I don't think the number of clients grew as fast as the options have. For this reason, I think local businesses have been affected negatively by Airbnb. In addition, I've heard guests tell me they'd rather stay at a home than at a hotel. This means that the group of people who did not use to have options to stay but in a hotel now can do otherwise.”

Mark Perry, a scholar at The American Enterprise Institute and a professor of finance and business economics at the University of Michigan-Flint, took issue with the state’s claim that Airbnb is not regulated.

“Airbnb is highly and vigorously regulated by one of the most competent, capable and experienced group of regulators imaginable – the travelers who find lodging worldwide using the Airbnb website and the Airbnb hosts around the world who welcome guests into their homes,” Perry said.

“After each stay, travelers rate their hosts, and the hosts rate their guests, which is a very efficient and effective form of regulation,” he continued. “If hosts aren’t providing good service and value for their guests, their ratings will reflect that and future customers will have access to those rating before they make a decision. Likewise, the hosts rate their guests, and guests who misbehave in any way will receive poor ratings, and future hosts will be leery. That form of regulation is what has allowed Airbnb to expand and grow – travelers can assess the quality of accommodations based on the ratings from previous guests, and the hosts know what to expect when they accept a guest traveler in their home or apartment.”

According to Perry, rather than seeing innovations like Airbnb as an opportunity to expand and broaden tourism in the state, Pure Michigan seems to be protecting the “travel status quo” and engaging in crony capitalism.

“Pure Michigan should be supporting and embracing Airbnb as a way for Michiganders to travel the world and have access to 1 million listings at all price points in more than 30,000 cities in more than 190 countries around the world,” Perry said. “At the same time, it’s a way for Michiganders to open their homes, apartments and cabins to guests from around the world, and become part of a growing international travel community. Airbnb represents the future of travel, and for Pure Michigan to ignore this exciting development or try to stop its inevitable growth would be a disservice to the citizens of Michigan.”

“Tourism will increase in Michigan the more choices for lodging travelers have, and adding Airbnb options to the traditional hotels/motels/resorts is just a way to increase the number and variety of lodging options available, and ultimately increase travel and tourism in the state,” he said.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.