published Sunday, March 23rd, 2014

Couchsurfing trend spurs calls for taxes, regulations to even playing field with hotels

Tom and Gabrielle Sweets (with son Isaac) are among about 40 Chattanooga families who rent a room in their home to budget-minded travelers through the Airbnb.com.
Tom and Gabrielle Sweets (with son Isaac) are among about 40 Chattanooga families who rent a room in their home to budget-minded travelers through the Airbnb.com.
Photo by Doug Strickland.
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    Tom Sweets works on plumbing in a basement room he plans to rent..
    Photo by Doug Strickland.
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Strangers have been staying in Tom and Gabrielle Sweets' spare bedroom on and off during the last two years, trooping in from out of town and dishing out $45 a night for the privilege of a private room and bath in the couple's Chattanooga home.

"We've met people from Australia, New Zealand, New York, Washington state -- it's been a blast," said Gabrielle Sweets. "We both love to travel ourselves, and we love meeting interesting people."

The Sweetses are one of about 40 families in Chattanooga who have listed their homes on Airbnb.com, a website that allows anyone to rent a room, a house, a suite or even just a couch to travelers who'd rather stay in a local home than a traditional hotel.

The stay-local trend has taken off in the last few years, with dozens of websites like roomorama.com, flipkey.com and couchsurfing.org popping up to facilitate bookings. Travelers are drawn in by the chance to save money by staying in the homes -- which are often significantly cheaper than area hotels -- and the chance to connect with a local expert off the beaten tourist paths.

Airbnb, the industry leader, is by far the most popular site in the Chattanooga area. More than 3 million people booked rooms through Airbnb worldwide in 2012, and the company now boasts more than 300,000 listings -- anywhere from Mentone, Ala., to Kampala, Uganda.

The Sweetses started on a whim, Tom said. He heard about the idea at dinner and later that night took a few photos with his smartphone and uploaded them to Airbnb. Their first guests were Bob and Russell, a couple who just wanted to sit and chat.

"Some people really do like to talk," Tom Sweets said. "Some people want to just go in and go to sleep."

Tom and Gabrielle quickly found that hosting was an easy way to make a little extra money and discovered they enjoyed meeting diverse people. Gabrielle would sometimes put mints on the pillows or give guests a list of Chattanooga restaurants as an extra welcoming touch.

But then Tom had a crisis.

"At like the second or third guest, I freaked out," he said.

Was this even safe?

He googled around and found a few horror stories: guests who had wrecked homes and destroyed property while hosts were out of town. Sure, Airbnb offers every host a free $1 million insurance policy on some covered property. Sure, the room they put guests in had its own entrance and separate key. And sure, he and Gabrielle vetted every guest through their online Airbnb profile and reviews before accepting the reservation. But what if they got it wrong?

He put a little lock on the outside of the door to the bedroom that connects to his kitchen, just for a little extra peace of mind.

"If you think about it, if someone is going to be a psychopath and want to hurt us, they can come in through our windows, through whatever," he said. "If someone wanted to take the door of the hinges, I guess they could."

He shrugged. Trust is what makes sites like Airbnb work.

And they are working -- especially well, even, in big cities like New York City or Chicago. Even Nashville. In fact, the Internet-driven industry is working so well that hoteliers are crying foul. In Nashville, hotels are losing anywhere from 5 to 10 percent market share to Airbnb-type arrangements, estimated Greg Adkins, president and CEO of the Tennessee Hospitality Association.

"We're starting to lose a significant share to these folks," he said. "In the industry, we're really concerned that they do their business on the same, level playing field as a hotelier does."

Hotels pay state and local hospitality taxes, for starters. They're required to carry liability insurance, they have business licenses, they're inspected twice a year by the state health department.

"If you hold yourself out as a business owner, then you should have to pay your taxes and provide a safe place, be inspected and have insurance," Adkins said. "Our concern is a level playing field, but mostly the safety of the guest. And anyone who is on Airbnb and advertises crosses the threshold of being a business."

Travelers who stay in Chattanooga hotels pay a full 17 percent in state, county and city taxes: 4 percent in lodging taxes to Hamilton County, 4 percent in lodging taxes to Chattanooga, then 2.25 percent in local sales tax and another 7 percent in state sales tax. That money funds the Chattanooga Convention and Visitors Bureau and is used to bring more tourists to town.

Airbnb renters pay nothing, typically, even though Tennessee state law can already be interpreted to require owners of short-term vacation rentals -- as Airbnb-type lodging is legally classified -- to pay hospitality taxes. Adkins said that interpretation is a win, but the laws still need to be strengthened and enforced.

Whether or not the grassroots Airbnb movement could withstand being slapped with extensive rules and regulations is debatable -- much of the appeal for travelers is in the rooms' cheap prices and authentic, distinctly-not-hotel environments. In New York City, Airbnb-type rentals continue to thrive despite the city's aggressive attempts to shut the below-the-radar industry down.

The city has issued over 6,000 citations to hosts, citing everything from fire and safety infractions to violations of the city's subletting laws. Yet about 15,000 people still list their homes and rooms for short-term rentals in the city, according to the Associated Press.

In Chattanooga and Hamilton County, short-term vacation rentals are illegal under most zoning. They're defined as a "single-family detached dwelling that is rented in part or in its entirety on a daily or weekly basis for not more than 30 days," according to the zoning code. And they're forbidden in most single-family neighborhoods.

In the city, short-term vacation rentals are only allowed in R-3 and R-4 zones, which typically include a mix of apartments, single-family homes, beds and breakfasts, day cares, offices and parks. And in the county, would-be hosts are only legal in agricultural and rural residential zones with a special permit. But short-term rentals are allowed without a special permit in R-3, the county's apartment and town home zone.

It's a complicated web of laws and regulations that hasn't kept up with the skyrocketing popularity of Airbnb-type lodging, which falls solidly into the under-the-table economy of yard sales, babysitting and off-the-books workers.

The laws are lagging behind technology, and enforcement is lagging even further.

"We don't just go searching for these things," said Gary Hilbert, Chattanooga's director of land development office. "If we get a complaint, then we'll go and investigate. But otherwise, we don't go hunting for these kind of things."

If homeowners are found to be violating the zoning code, Hilbert's office alerts the homeowners to the violation and orders them to stop. If the homeowners continue, they're issued a citation -- usually around $50 -- and have to show up and pay court costs in municipal court. The total fine for a single citation is usually around $150, Hilbert said.

That'd be about a three-night loss for the Sweets, and is nothing but pocket change for Chattanooga's hoteliers.

Right now, everything in Chattanooga's short-term rental market is small scale, with hosts like the Sweets accepting a guest or two a month. The Airbnb trend certainly hasn't grown enough in Chattanooga to be a bona fide threat to hoteliers, said Bill Mish, general manager at the DoubleTree Hotel by Hilton.

"Everybody has likes and dislikes," he said. "Some people like staying in a bed and breakfast with the cats running around. Some people like staying in the finest hotels in the world. That's why we have so many brands within brands. You throw that all in there and this is just another niche."

But as it grows, it should be regulated like every other niche, he said.

As for the Sweets, they've taken a hiatus from hosting on Airbnb. After their son was born, the Airbnb room became the nursery and moving the crib in and out to host guests was too much hassle. Now the couple is renovating a room in their basement, turning the space into a bedroom suite with a separate outdoor entrance and its own bath.

When finished, it'll be perfect for Airbnb.

"The fact that we knew we could rent that room out on Airbnb helped us make the decision [to renovate]," Tom said. "If we can pull a couple thousand dollars from Airbnb off that room, it'd be really nice. And that room we could rent for a little more too."

Contact staff writer Shelly Bradbury at 423-757-6525 or sbradbury@timesfreepress.com.

about Shelly Bradbury...

Shelly Bradbury covers police and crime in Chattanooga and Hamilton County for the Times Free Press. She's been with the paper since 2012, working first as an intern and then as a business reporter. She is from Houghton, New York, and graduated from Huntington University in Huntington, Indiana, with a bachelor’s degree in journalism and minor in management. Before moving to Tennessee, Shelly previously interned with The Goshen News, The Sandusky Register and The Mint ...

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