Should you keep your lodging license or roam free on Airbnb ?

Every Innkeeper has asked themselves, why should I have a lodging license and be a compliant business in an unruly marketplace? To be a licensed Bed and Breakfast business, you have to pay State and Town fees, be inspected by the health department and the local fire department, take State mandatory safety classes, have business insurance, pay sales tax, pay personal property taxes on every item in the lodging, have a public hearing each year, have a merchant account, maintain and advertise a website, pay monthly charges for booking engines and have contracts with third party vendors. In addition, every utility in your residence is charged as a commercial account. Even start-up costs, such as a mortgage, will be at a commercial rate. In contrast, there are properties that have absolutely no costly constraints that rent rooms on Airbnb, Couchsurfing, VRBO, and HomeAway. In addition to the low barrier to entry into the lodging business, these properties fly under the radar because towns have proven that enforcement is difficult. Even on the State level, there seems to be a lack of interest in regulation of unlicensed properties. In 2015, The Maine State Legislature Health and Human Services voted 12-0 against the passing of LD 436 that would have put some State restriction on short-term rentals. Even the Governor of Maine is against regulating short term rentals and has gone as far to say that he would eliminate all lodging requirements for all lodgings. So why should current lodging businesses keep their license? I thought long and hard about this and think I can actually justify it.

1. You are already on the radar of your State and Town. You can scream and shout about how unfair the system is, but you are in that system. When you bought your business, the ordinances were in place. Towns can enforce laws on properties they know about. Figuring out who is breaking the law is a very time-consuming process. Airbnb listings do not have addresses and sometimes do not have any photos. A tattle tale procedure has evolved in towns. Neighbors have to report suspect activity in their area. If you were to change your licensed property to an unlicensed property in my town, Camden Maine, the Town ordinance would allow you to have only 2 guest rooms (3 guests max) in your owner occupied house. To sell more than 2 rooms on Airbnb under the Town’s radar, could be a challenge. If you are going to rent the entire house instead of the daily room rentals, then you can legally only rent the entire house for a minimum of 6 nights. If renting your house weekly brings in the same amount of money as it does to rent it nightly, then you might actually want to consider losing the license. One Bed and Breakfast in Camden has gone this route already. Instead of complaining about the process, try to work together with other lodgings to change the ordinances or work to have an ordinance put in place that allows you to compete better in this changing business environment. Ordinance are not written in stone.

2. You have a great network and buying power. The Lodging industry has many associations that you can join. There are smaller associations like the Maine Innkeepers Association (MIA) and larger ones like Professional Association of Innkeepers International (PAII), American Hospitality and Lodging Association (AH&LA), and Association of Independent Hospitality Professionals (AIHP). These associations have established relationships with industry vendors and can help you get deals on everything from merchant accounts to bed sheets. There are also member forums and Facebook pages. The Facebook page, Bed and Breakfast Owners & Innkeepers, has over 1,300 members from all over the world.

3. Airbnb has limits. Airbnb’s business model is different than other 3rd party vendors. Airbnb was initially created as a sharing economy platform. The platform is not set up to compete with Expedia and Booking.com. The Airbnb online platform limits multi-unit, real-time reservations. Airbnb does not sync with most booking engines. In 2015, Airbnb finally connected to a Channel Manager, MyAllocator. The connection to MyAllocator is not perfect yet. The sync time of Airbnb and MyAllocator is hourly, not real time. You could potentially have a double booking. Another limitation is that you cannot upsell extra amenities on Airbnb. You can sell a room night and that is it. In addition to the possible double booking and no amenities charges, payment for that room night is sent to you after the person has stayed. There are no summer deposits to help you get through the tough winter months.

4. Grow your business and possibly sell it for a profit. If you already have an established, licensed lodging, make it the best lodging you can. Be creative with your branding and work hard at customer service. Real estate has traditionally been a great investment. Hopefully, you can ride the wave of real estate ups and downs and sell at an optimal time. There are some Airbnb Empires that can garner a great sales price for a residential property, but Airbnb empires are few and far between. Most are in cities and require major upfront capital to start or maintain.

At the end of the day, Innkeepers are professionals in hospitality. True hospitality is about all around customer service. The costly regulations and timely inspections are for the safety and comfort of your guests. When you deal with complete strangers in a casual setting, something is bound to happen and insurances are your safety net. If your business is flying under the radar, then it is probably lacking the structure for a safe and memorable experience.

Kristen Bifulco

About Kristen Bifulco

Kristen Bifulco owns the Camden Windward House Bed in downtown Camden Maine. Her Innkeeping style includes traditional and Airbnb methods. Kristen moved to Maine in 2005 originally to buy a farm, but by luck ended up owning a Bed and Breakfast.