Barcelona just declared war on Airbnb

Barcelona just declared war on Airbnb

Wolf Street

DON QUIJONES, WOLF STREET / http://www.businessinsider.com/barcelona-just-declared-war-on-airbnb-2015-8?IR=T

Barcelona’s new activist mayor, Ada Colau, is long accustomed to making powerful enemies. Before being elected to City Hall, in May’s local elections, she was best known for founding and running the Platform for Mortgage Victims (PAH), an advocacy group that gives legal advice to Spanish homeowners facing foreclosure. It has led the public battle against a legal superstructure that is perniciously rigged in favor of the banks. And thus it has drawn the ire of the Spanish government.

Now Colau, once the scourge of government ministers and police forces up and down the land, is the big boss of Barcelona’s city administration and its police forces. And she has her sights set on a very different target: her home city’s multibillion-euro tourist industry, in particular the unlicensed apartments advertised on websites like Airbnb and Booking.com

The Price of Success

One of Colau’s first actions in office was to introduce a one-year ban on new tourist accommodation. The move affects hotels, hostels, B&Bs, rental homes, and all other businesses that offer beds for visitors to the city. The moratorium had been widely anticipated, as Colau had already made statements in the past about the need to ration the huge influx of tourists to the Catalan capital.

Few, if any, European cities have witnessed such a massive tourist boom as Barcelona. In 1990 the city, with a permanent population of just over 1.5 million residents, attracted 1.7 million tourists. By 2014 that number had mushroomed to close to 7.5 million – almost a five-fold increase.

This boom in tourism has brought with it a huge amount of money. According to Mastercard’s Global Destination Cities Index, Barcelona rakes in over $12 billion a year from tourism and is the third-ranked European city in terms of tourist expenditure, just behind the two global powerhouses of London and Paris. However, this money has come at a price, as the documentary film Bye Bye Barcelona documents.

As many local Barcelona residents are all too fond of complaining, Barcelona is fast becoming a theme-parked city that is reaching the very limits of its physical capacity. Rents in many neighborhoods are surging as real estate owners and developers focus their attentions almost exclusively on meeting the much more profitable needs of short-term visitors.

Another downside of Barcelona’s tourist boom has been the widespread closure of traditional, often family-run shops as decades of rent controls came to an abrupt end last year. As a consequence, the city is fast losing its distinctive character – the same character that attracted tourists in the first place – in the face of homogenization that accompanies the arrival of multinational chain stores.

Not even the economic crisis was able to slow down the growth of tourist accommodations: from 23,719 hotel beds in 1991 to 37,224 in 2003 and 69,128 in 2013. There is also an undetermined number of unlicensed apartments that are being rented out to tourists through specialized P2P websites. And it is these apartments that are now drawing the unwelcome attention of city authorities.

The Big Shakedown

In a press conference last week Barcelona’s deputy Mayor Geraldo Pisarello Pin launched a new pilot scheme. People caught running unlicensed apartments through websites will be offered the chance to have 80% of their fine canceled if they allow the city council to use the apartment as social accommodation for three years.

In other words, the city council gets to pocket a much-reduced rent for three years while providing accommodation to local residents who are currently priced out of the renting market. When the three years are up the landlord will be presented with a choice: either pay off the fine through his or her own funds and reclaim possession of the apartment or continue offering the property as social accommodation until the council receives the equivalent of full payment of the fine.

Through this new shakedown scheme Colau intends to kill three birds with one stone: first, to dampen the demand for tourism in Barcelona by cutting off one of its main attractions, cheap, unlicensed apartments; and second, to expand the city’s stock of social housing, thus keeping her core constituency happy; and third, to score a few brownie points among the owners of Barcelona’s hotels, hostels and B&Bs, some of whom feel threatened by the exponential rise of house-sharing schemes.

For Colau, it’s a potential win-win-win. For the owners of unlicensed apartments, it could well be an offer they can’t refuse, especially for fines for operating an unlicensed apartment running as high as €90,000. The average fine clocks in at around €15,000. Also, as El Economista reports, the council will demand that the primary intermediaries – platforms like Airbnb and Booking.com – hand over all the data they possess on the listed tourist apartments that do not have a council registration number.

Failure to do so will result in a fine for each unlicensed apartment offered through their websites. If the company refuses to cooperate, the City Council may even initiate proceedings to prevent online access to the site from the entire Catalan territory (ha!).

Such threats are reminiscent of New York’s recent hissy fit over the site. Airbnb eventually compromised with authorities there and handed over data on all their hosts. However, by withholding key personal data, the house-sharing platform deprived New York authorities of the opportunity to individually prosecute unlicensed landlords.

Other global cities, such as London and Amsterdam, have been much more accommodating with Airbnb, with their councils rewriting legislation to allow local residents to rent out their first home without fear of sanction.

Top Airbnb destination Paris even hosted this year’s edition of the San Francisco-based company’s annual host get-together, at which the city’s first deputy mayor Bruno Julliard expressed the Parisian authorities’ desire to continue to work closely with the P2P house-sharing site. How long this close collaboration lasts is a matter of debate, especially in light of a Reuters report about the threat Airbnb poses to Paris’ luxury hotels.

A Heavy Toll

The threat to Airbnb’s Barcelona market, however, is much more immediate. With over 16,000 registered dwellings Barcelona is far and away the most popular Spanish destination for the platform’s users and is tied with Los Angeles as the fifth most popular global destination with guests.

In an attempt to pre-empt the council’s actions, last year Airbnb conducted and published research on its operations in Barcelona. According to the study, tourists that visit using Airbnb tend to stay in the less visited areas of the city; a fact Airbnb has suggested is dispersing tourists’ euros around the city in a more equitable manner. Airbnb also estimates that there has been a total of €175 million of activity in the Catalan capital, a fact that might be caused by Airbnb guests staying 2.4 times longer and spending 2.3 times more money than typical tourists.

However, given the scale and intensity of local opposition to continued growth of tourism in Barcelona, neither this data nor the pleas of unlicensed landlords, many of whom use the money to help pay their bills and stay in their homes, are likely to elicit much sympathy.