What Does Airbnb Popularity Spike Mean For Ocean City? Concerns Abound For Rental Industry

What Does Airbnb Popularity Spike Mean For Ocean City? Concerns Abound For Rental Industry
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OCEAN CITY — An online platform that enables people to rent homes, rooms and apartments with ease and without the help of a rental agent is starting to catch on in Ocean City, but not everyone is pleased about it.

“They are here, and we are concerned,” said Daria Uhlig, Ocean City Vacation Rental Manager with Long and Foster. “With sites like Airbnb, customers have fewer protections. In our business, we operate at a high level of responsibility both legally and ethically. Without us, guests are more vulnerable to falling prey to scams.”

A Growing Trend

Currently, there are more than 175 listings in Ocean City on the popular website Airbnb, and across the Delmarva Peninsula, there are more than 300 listings. They range in price and length of stay, (the average is a little more than $200 a night), and users, once registered, can contact the owners personally and set everything up for their getaway to the resort without the help of a rental agent.

Still, the number of listings in the resort pales in comparison to major cities around the world, as Airbnb has become a multi-billion dollar phenomenon since its humble beginnings in 2007, offering its 10 million registered guests more than half a million listings spread across the globe in almost 200 countries.

Stephan Kenny is the president and founder of the property management company Ocean Point, Ltd. He says Airbnb is to the rental industry as Uber is to the taxi industry.

“It’s a convenient way for owners to rent their units out but it circumvents the permit process and the commission paid to rental agents,” said Kenny. “It sort of flies under the radar so it’s hard to quantify the impact of it. The city can’t track it, rental agents aren’t seeing it and in many cases, condo associations aren’t even aware that it’s happening.”

But unlike the Uber debate, which only impacts the taxi industry, the proliferation of Airbnb into this coastal economy may already be taking tax revenue dollars out of the city’s pockets.

Approximately $13.8 million is expected in tax revenue this year and an additional million dollars is collected in licensing fees that rental units must pay in order to be listed, according to Ocean City budget manager Jennie Knapp, who hinted that the town is cautiously monitoring Airbnb’s growth in the resort.

“The annual price to list your unit is $141”, said Mike Sherman, Ocean City’s licensing inspector. “There are approximately 8,000 condo units that are licensed in Ocean City alone.”

In addition to the city possibly being cut out of its share in the transactions, the rental agents are losing their industry standard 16% commission as well.

“Personally, I’d rather have someone with experience renting my unit because they can properly vet the potential renters,” said Kenny, “but owners are turned on by the profits and the nature of the site makes it hard for the city to track what is happening.”

Kenny first found out that units were listed on Airbnb a few years ago when police officials were called to a unit and they tried to contact the owner of the condominium.

“There is usually a little sticker that is visible when you are a licensed rental unit, and if something happens, the police will call the number of the owner or the agent and notify them of the problem,” said Kenny, “but what was happening is that there was no sticker and no one to contact, so they called me, and that’s how I found out Airbnb was here.”

Technology Has

Changed The Game

However, local real estate industry workers admit that the “rent by owner” trend has been on the rise for years, thanks to the Internet and that is changing the proverbial game entirely.

“As technology advances, there is always an anticipated impact,” said Christopher Mitchell, Regional Vice President at Coldwell Banker Vacations. “A growing number of visitors find that they prefer the online booking experience and companies must adapt to ensure that the information the customer is looking for is readily available and easily accessible. I think the market itself is changing and that companies who are able to adapt and offer real-time online booking options, with detailed property listings and quality descriptions and photos, will successfully place themselves in a position to accommodate these changes.”

Truly, online bookings are up with every passing year, but some rental agents, like Daria Uhlig with Long & Foster, say that while most people are searching for a place to rent on the Internet, people still want to deal with a person on the phone to actually book the unit.

“Airbnb doesn’t really rank in the top searches on the Internet in Ocean City yet,” she said, “so, it may not have as large of an impact here as it does in major cities because so many people want that security of knowing what they are getting and knowing that someone is just a phone call away if something goes wrong, especially if they are on vacation.”

Christopher Mitchell at Coldwell Banker mirrored those sentiments.

“We feel that the real niche is in having a versatile operation that offers consumers both an impressive online booking option, and the ability to speak directly, either in person or by phone, to local industry experts that can offer even more information on the properties and the destination itself”, he said.

‘The Great Unknown’

However, when it comes to the “great unknown” of the licensing issue concerning Ocean City listings, Sherman says the town has that covered, and added that to his knowledge, all of those Ocean City listings on Airbnb are legal under town law.

“Airbnb came up on my radar about a year ago, and I was able to look at the address and figure out if the unit offered on the site was licensed with the town with a quick search,” said Sherman. “The ones that weren’t, I sent a written correspondence, and they quickly complied.”

The Dispatch reached out to more than a dozen individuals who list properties on the Airbnb site to find out why they chose the sharing site over one of the more visible and traditional options.

Of the nine responses, eight of them were owners who had just begun to list their units on the site.

Jon, a property owner who asked his last name not be named in this story, said he’s just getting started with Airbnb and he’s anxious to see how he’ll do financially once he gets his first rental.

“It’s worked for friends of mine in cities so I thought I would give it a try with my unit at the beach,” he said.

The issue many rental agents in Ocean City have with Airbnb has been echoed globally as several major cities, like New York City and Barcelona, have tried to fight back.

In October 2014, New York Attorney General Eric Schneiderman released the findings of a three-year study on Airbnb listings in New York City and found that an estimated 72% of the listings on Airbnb’s site were considered “illegal rentals.” The reason is that New York City law cites that owners and tenants must rent their apartments or homes for a minimum of 30 days.

In Barcelona, Airbnb was fined 30,000 Euros for breaching local tourism laws, and the company is under fire in a growing number of other American cities like San Francisco and New Orleans for violating similar local housing laws and regulations. Some cities are in the process of tweaking their current housing laws to take into account the presence of Airbnb listings and to level the proverbial playing field.

But, if people are using Airbnb as yet another way to come to Ocean City, and they are using it responsibly and legally, some would question why there is a concern about this at all.

Opponents, though, say this isn’t all about the money, and they point to the meteoric growth of the company and what that could do to the entire industry.

Airbnb started in 2007 as two guys renting out three air mattresses on the floor of their San Francisco loft apartment as a way to help make their rent payment each month.

By 2012, Airbnb had overtaken Hilton Hotels in nights booked, boasting over four million guests on the service and 300,000 listings in 192 different countries, and continues to grow rapidly today.

A recent study in Texas suggests that if Airbnb continues to grow at its current rate, with its listings more than doubling each year, the impact on budget hotels’ takings will be more than 10%. The study says that while the larger hotels will easily stay afloat and may not feel a pinch at all, smaller hotels could be pushed into the red.

Furthermore, other industry analysts have opined that if Airbnb can find a way to integrate with online travel agencies like Expedia and increase the share of its hosts that provide instant booking confirmation, business hotels may find themselves a formidable competitor they can no longer ignore.

Daria Uhlig with Long & Foster says she and many of her colleagues at Long and Foster have been contacted personally by people at Airbnb who are trying to get licensed Realtor listings on the site along with the individual efforts of the homeowners.

This fact, and Airbnb’s reasonably new approach to take a bite out of the corporate travel market, shows that the company is not just for couch surfers anymore. But, when questioned about this alleged future strategy, and the correspondence with Ocean City agents, Airbnb did not respond to numerous requests for a comment.

What Will Ocean City Do?

Will the city act aggressively to ensure that even though there is a popular new way to rent a room or unit in Ocean City it’s being done legally and fairly?

While that fact remains to be seen, Uhlig says there is nothing to stop rental agents from joining in on the action.

“Commission happens when a guest is procured,” said Uhlig. “It doesn’t matter what site the booking comes from. That’s why most Realtors and rental agents put all of their inventory online.”

Christopher Mitchell with Coldwell Banker thinks the city may take a more proactive approach than it did in the Uber debate last summer.

“There were many discussions over the last two years regarding vacation rentals in the R1 zoned neighborhoods in Ocean City,”, said Mitchell. “Suggestions were made to improve how the city can enforce existing restrictions in these areas, and the existing rental guidelines throughout Ocean City, which will give city officials more options to ensure properties are following the rules. I would envision Ocean City officials taking a stronger stance on enforcement moving forward for all rental properties.”

Yet, while the question remains what the city’s next move will be, coupled with skepticism and debate over what a few hundred listings will really do to the market as a whole, things could all change rather quickly if the number of listings grows at a rate that even slightly mirrors the skyrocketing growth of Airbnb itself.

About The Author: Bryan Russo

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Bryan Russo returned to The Dispatch in 2015 to serve as News Editor after working as a staff writer from 2007-2010 covering the Ocean City news beat. In between, Russo worked as the Coastal Reporter for NPR-member station WAMU 88.5FM in Washington DC and WRAU 88.3 FM on the Delmarva Peninsula. He was the host of a weekly multi-award winning public affairs show “Coastal Connection.” During his five years in public radio, Russo’s work won 19 Associated Press Awards and 2 Edward R. Murrow Awards and was heard on various national programs like NPR’s All Things Considered, Morning Edition, APM’s Marketplace and the BBC. Russo also worked for the Associated Press (Philadelphia Bureau) covering the NHL and the NBA and is a critically acclaimed singer/songwriter and composer.