Wednesday, October 07, 2015

STR/AirBnB: Pay No Attention to that Corporation Behind the Curtain

I've been reading reports, proposals and talking to people for and against short term rentals all week. I've been paying attention to this phenomenon for longer than that but our city had a hearing recently and I watched every minute: which by the way was about all the time they gave each citizen commenter to make a comment. I think the actual limit was 4 minutes. Definitely not enough for many to make a point pro or con.

I had a long conversation with someone I know and respect who is on the other side of this issue. I understood the issues and arguments which the friend presented clearly and fairly. I empathized, but still respectfully must disagree.

I went from that conversation into reading a report that had been mentioned a couple times during the meeting at City Hall. While this report was written to lay out the issues Los Angeles is having with the AirBnb/STR model, many of the issues they're having are pertinent to us here in New Orleans. I am putting this link in plain view so you don't have to guess which hyperlink takes you to it:

As I read reports and articles, I started putting together a list of questions I'd like answered before any kind of ordinance or compromise is reached. I'll be putting those questions in a post to follow this one so that this one doesn't get unwieldy. This post deals with the way in which AirBnb enters a market and subsequently deals with that market. Frankly it's brilliant strategy, albeit one with which I fundamentally disagree.

Entering a Market

There are a couple of STR companies out there. The quotes and strategy sections are aimed at AirBnB, but it appears that the others like VRBO or Homeaway, kind of come in on the coattails of AirB's entry strategy.

First we need to look at the AirB mythology: One of the founders was renting an apartment in San Francisco, there was a conference coming to town that some people he knew were going to attend, they couldn't find hotel rooms as the hotels were booked up, so he put an air mattress in his room and so the company, the concept and the myth were created. The myth of the airbed in a shared room, or even a spare room, is no longer the reality in most of the AirB listings, nor is it desirable from the company's point of view. It is, however, a nice bootstrap entrepreneurial story and it's the basis of the warm and fuzzy “everyman” corporate persona they cultivate. When they enter a market it isn't with bells and whistles. They enter it with your neighbors' faces.

From the report: “This generally involves packing a room with dozens of hosts. Armed with compelling stories, these hosts detail the ways in which renting out their spare rooms has enriched their lives and saved them from economic ruin. The hosts seem motivated by a combination of financial self interest and a sincere belief that they compose a beleaguered community. This gives AirBnB a group of personal, heartfelt and therefore effective spokespeople that most corporations can only dream of.”

Stage one, our neighbors' faces, which is exactly what we saw at the City Hall meeting the other night. It's effective. That is followed by a second stage, which was also seen the other night when we saw a well organized and funded group, and a couple of attorneys connected with that group, ceding time to each other for comments. Even that group is part of the playbook, again from the report: “(Their) philosophy is evident in much of AirBnB’s marketing, from its founding myth about the air mattress to its use of hosts as spokespeople. To build up this base, AirBnB has hired political field operatives in addition to contracting with traditional PR firms. A simple LinkedIn search shows that AirBnB’s preference has been for hiring staffers with experience managing political campaigns.” (This whole philosophy stems from a book titled The Culting of Brands: How to Turn Customers into True Believers written by Doug Atkin, who is also AirB's “Global Head of Community”--another example of a warm and fuzzy corporate persona—sounds so much better than VP in Charge of Client Base Growth or something.)

So at City Hall we saw the playbook in action: some of our neighbors and friends, and a local STR professional PR campaign making comments at the mic. Our neighbors were impassioned and in some cases emotional. The organized PR group sounded pragmatic, and commented as though they were presenting “suggestions” about something that was already a done deal with mere details to be worked out down the road.

The brilliance of this model is that none of us wants to be seen as unfriendly or unfair. We're all struggling, so our thinking goes, and we don't want to lose friendships that matter to us. Those of us opposed to STR are seen as jealous or petty, unable or unwilling to understand the “real” issues. We're cast as some sort of socialist property taking mob who incessantly meddle, involving ourselves in their private business. It silences some of us.

Taking Advantage of Momentum in the New Market

That model also casts the “hosts” as a benevolent bunch who are just trying to make ends meet. It may be true for some, though not the majority. That is the fallacy. Behind every host, every short term “tenant”, is the corporation. A very large, very profitable corporation that comes to a market, encourages people to undertake an activity that is illegal in that market, leaves those people to be the face of it, while it rakes in eye popping profits taking a cut from both the host and the “tenant.” AirBnB's IPO in 2014 was analyzed in all major economic/business journals in terms of stock value and projected profits. They boasted 1.5 million listings in some of the reports, but we are fooled into looking at our neighbors, our market, our city coffers and limit our looking to those places, fight it out among ourselves ignoring the giant treasure chest in the corporate sky, profits that help none of the above mentioned groups, only the shareholders and the corporation who hides behind their “hosts” and “tenants.”

When all is said and done, the hosts are on their own. The markets they enter have to figure out how to deal with it as the housing market is affected, as neighborhoods become frayed, as jobs are lost in the legal hospitality sector. AirB and its ilk bear no responsibility for safety, insurance, disputes, thefts, destruction of property (except in very limited and hard to prove instances), or injury. Hosts are subcontractors, any cleaning crew the hosts might employ are subcontractors. The corporation pays no permitting fees, no licensing fees, no taxes, nor do they routinely comply with the laws regarding handicapped access. It's not their problem bro. Caveat emptor you hosts and travelers. Whatever you encounter is not our problem, besides we already got our cut off the top.

In the Los Angeles study it is noted that some of the negative impact of this STR model hasn't really been factored into the discussion: “UCLA Anderson School of Business study found that the high cost of housing has a generated a statistically significant drag on job creation in Los Angeles. Fewer rental units, a drag on job creation, a reduction in tax revenues and a qualitative assessment of AirBnB’s effects in neighborhoods are key elements that must be considered before a accurate judgment of the company’s impact can be rendered.”

Having that Market over a Barrel

That isn't really being done. Instead cities have been overrun and the STR problem becomes a crisis before any kind of in depth study or discussion is had. City Councils and zoning departments find themselves already behind the curve playing catch up or proposing some kind of patchwork “solution” or “compromise” that doesn't work or is unenforceable before the ink is even dry on the ordinance.

For its part, AirB waits for critical mass, then? From the report: “AirBnB often approaches cities with the promise of remitting a monthly fee equal to the TOT in exchange for the passage of regulations that legitimize their business model. The rationale behind this offer is that cities will be adding new revenue to municipal coffers. However, this revenue is mostly reallocated from hotels which would have remitted these taxes anyway.” (TOT is the Transient Occupancy Tax in Los Angeles. I'm sure New Orleans has something akin to it.)

At that point, the corporation sees that market as a done deal and if pushed to provide actual numbers of listings in the market area, or the number of hosts who are homesharing vs turning entire units into de facto hotels, they demure until a city forces the issue with subpoenas. They obfuscate, routinely offer numbers that are often half of the real numbers, and force a municipality to spend their dime to get the real data.

I urge you to read the report in the link above. I can't possibly toss all the numbers out for you, besides, why reinvent the wheel when so much of what's in that report is pertinent to us. It also does a great job explaining the safety issues, job displacement, housing crunches, rising rents, the tax dollars lost (then sort of found then spent on subpoenas and enforcement), and many things I hadn't considered but that need to be.

The AirBnB “business model” is cynical, effective and highly profitable for them. One doesn't see logo emblazoned tshirts and tote bags, nor are the hosts treated like franchise owners and supplied with AirB stationery and pens. The hosts are on their own. The travelers renting from them are on their own. The markets they enter are on their own. The neighborhoods they fracture are on their own. Neighbors and friends, City Councils and zoning commissions, will get no help from them in terms of dealing with their model.

A local tour guide told me he'd been doing an impromptu survey: after asking where the tourist is from he asks them where they're staying. If they are staying in an STR, they look down and almost whisper. Many hosts try hard to do the same. One I know told her guests to tell anyone who asked that they were old friends from college.

Whisper. Pay no attention to the corporation behind the curtain, pulling levers and forcing municipalities to deal with them on their terms only and after the fact. They have nothing to do with all this. It's on you, whether you like it or not. Just look at those faces. They are your neighbors.

(I'm still compiling my list of questions that I think need to be answered or at the very least addressed. I'll have that posted in the next day or two.)

Monday, October 05, 2015

Unsolicited Advice to the Northeast in the Aftermath--Now Relevant to South Carolina's Flood Victims

It was suggested I re-post this for those of you struggling in the aftermath of the horrendous flooding in South Carolina. I can barely look at the news photos. Too gut wrenching, but I am thinking about you, and all you'll be dealing with going forward. This post was originally written to the Hurricane Sandy folks, who by the way, are still very much struggling in many areas. Although the Springsteen lyrics aren't geographically tied to you in South Carolina, the sentiments below them do. Please know that those of us here in New Orleans understand, and we hope that our experience can help you as you make your way through this tragic time.

“Tonight I'm gonna take that ride
Across the river to the jersey side
Take my baby to the carnival
And I'll take her on all the rides

`cause down the shore everything's all right”
Song by Tom Waits
Heard in the head of a Jersey Girl in the voice of
Bruce Springsteen,  Jersey Girl

No. It's not all right and you probably can't get across the river right now anyway.

My high school years in Bergen County are peppered with memories not of classrooms and despotic Vice Principals, but of subway rides into Manhattan, afternoon rides on the Staten Island Ferry (cheap fun for a truant), and hustling rides ten to a car down the Garden State Parkway to Asbury Park and Seaside Heights, which were never called by name, only referred to as “The Shore.” I picked splinters out of my feet after walking the now destroyed boardwalk in barefeet like an idiot. I was kissed sweetly in the sand that has now buried cars and shifted houses off their foundations. I rode the rollercoaster that now sits in the Atlantic. At least I think that's the one I rode after being dared.

My last decade has been shaped by the Federal Flood, otherwise known as Hurricane Katrina. The landscape around me has changed since then in both good and bad ways. My interior landscape is forever changed by that experience.

I heard Seaside Heights' Mayor Bill Akers on CNN this morning. He said that when he hears what's going on in other areas his heart goes out to them. His voice broke when he said he was trying to keep emotion out of it. For now. I was on my dry couch in New Orleans in tears.

We here in New Orleans watched the NASA shots of Sandy headed your way. She was huge, well organized, aimed at you and we knew how that felt. She was perfect, as Katrina was, actually beautiful when viewed from the safety of a distant satellite lens. We saw the targets on your backs and understood, possibly as no other group of people can.

Initially there was some bitter grousing about our having had to defend our City's right to exist and be rebuilt, something you might not have to do. We weathered the nasty comments about our being idiots living below sea level, and even nastier comments about tax payer money being wasted on morons and ingrates and freeloaders. These comments were ubiquitous after Katrina, but we wouldn't wish what you're dealing with on anyone because we've been there.

We endured extreme heat, while you folks have to deal with unbelievable cold, as the power went out and stayed out. We are also a city in which some people don't have cars, so we understand the New Yorkers who are utterly stranded as the Subway tunnels have turned into something better navigated by gondolas than train cars. We know as we see aerial views of Asbury Park, Seaside Heights, Atlantic City, and all the coastal towns that what we're seeing in no way shows us the length and breadth and depth of the devastation. We know you aren't overstating it when you say it looks like a war zone. We understand the loss of everything you own. We know the tears you'll shed as your kids' yearbooks and baby pictures are gone forever. We understand your toughness, your determination to rebuild, your compassion for your neighbors and your statements about your family being fine and your losses were “only stuff.”

We get it.

Now for the unsolicited advice:

Expect unexpected consequences. One or more of your leaders will let you down. Right now the adrenalin is flowing and you're all in shock, as are your leaders, who really seem to be doing a great job. It's down the road when the issue becomes money and contractors and the actual rebuilding that you'll be let down by someone. Be prepared to deal with the anger.

Have patience. Your power will come on when it comes on, and all the ranting and raving in the world cannot change that, nor can you expect a timetable from your utility companies. Just two months ago we went through Isaac and the utility issues were exasperating. I say this to you as someone who sat on the porch waiting for bucket trucks, or at least information, in the aftermath of several hurricanes now. Don't waste your energy (no pun intended) calling them or expecting one of them to say Thursday at 9AM. It won't happen. Cuddle up and keep each other warm. Oh, and expect your utility rates to jump as the utility companies go to your local civic leaders and ask who's going to pay for all this repair. It will never come out of the utility company's profits, it will come out of your wallet. That I can guarantee.

Try not to slug your Insurance Adjuster. As I watched the storm coming in the other night, there was footage of a building in Chelsea. The entire facade had fallen down, and this was before Sandy's actual landfall. What I heard, in terms of reasons for the facade falling, was familiar: coulda been rain, coulda been shoddy workmanship, coulda been wind, coulda been anything: and so the parsing began. What happened here, and what will no doubt happen there, is that whatever you're covered for, it will be the OTHER reason that caused the damage. If you're covered for wind, it will be deemed water damage or vice versa. Don't count on your insurance carrier to be compassionate. They won't be. In fact you may find your rates hiked, your policy canceled, your payout to be a pittance that wouldn't even cover one month's car payment. Expect that coverage in your area will be curtailed with some companies refusing to write a policy at all. No amount of righteous outrage about the premiums you've paid for years will alter any of this. Your carrier will go on the news, make statements about wanting to help, tell you that you're in good hands, then send you a letter saying they're dropping you at the same time that they issue their quarterly report on profits. Expect it.

Advocate for your Area. Don't let the officials make all the decisions as the rebuilding process gets started. Get involved, start neighborhood associations, make yourself heard, fight for your little spot on this planet. If you don't, monied interests who view disaster as a profit making opportunity, will show up and barrel some ordinance through your City Council; you'll be really upset after the fact. Get in front of this. You've got a little time. First you have to clean up, but remember what I'm saying as the process moves forward. Without your voice, your advocacy, some things will be proposed and moved into your reality so fast your heads will swim, and they won't always be things you would like to have happen. Governor Christie said today that for a guy his age, the iconic parts of the Shore will never be the same. They're gone. He's right. Just don't let people, especially people who aren't from there, determine what will be put in place, no matter what city, town or borough you live in. Ask us about the “iconic” French Market some time when you get a chance, and that's just one little thing. Your sense of community is what will see you through. Without it you'll be steamrolled by developers with wads of cash and connections. Carpetbaggers don't just come to the South.

Allow yourself time to cry. And cry. Then cry some more. You'll be crying unexpectedly for a long time. Ask us. We still cry over the Flood seven years ago, and are crying as we see your devastation because those pictures dredge up visions burned into our souls that we manage not to notice on good days and can't escape on bad days. You'll find yourselves three years from now looking for something familiar, something you know you had, then get slugged in the solar plexus as you remember that it was in a box in your basement when Sandy slammed through. Give yourself permission to grieve the loss of the little things that marked your journey through life. While they don't matter much in the overall scheme of things, they do matter to you, a great deal. Don't minimize their importance in your determination to stay strong. That last picture of your Dad will haunt you if you don't allow yourself to mourn it's simple paper loss.

Don't be afraid to ask for help, you'll need it. The mental health issues related to this will not show up in force for a couple of months. Some won't show themselves until well after the rebuilding has begun. You are in for months and months of stress, and being a hearty lot, you'll manage. You'll cope. Then you'll find yourselves as we did, with a group of friends, and every 15 minutes one or the other of you will burst into tears. Don't berate yourselves over this. Help the other guy through the sobbing until it's your turn and they'll help you and understand and won't call you a pussy.

Watch your elderly family members. They will quietly weather this, but many of them will internalize it. The deaths of elderly people after Katrina skyrocketed. I am not trying to scare you. I'm just telling you what we experienced and it was not something we expected. Many of us didn't notice that the old man down the street was struggling because everything he ever knew was gone, never to return. We didn't always notice when the old lady around the way gave up, and gave in to her broken heart. It was sobering and scary and we carried guilt for being so concerned about rebuilding that we missed signs. These are the things your leaders or the media won't necessarily tell you. We've lived it. We're hoping you can avoid some of it by knowing ahead of time.

Your little ones will be scared, deeply and for a long time. They'll need a lot of help and attention. Your usually mellow child might suddenly bolt under the bed at the sound of the wind. As scary as this was and is for you, for them it's as though a big malevolent foot stomped their sandcastle of security. They're too young to understand, too young to process some of it, too young sometimes to vocalize their fears, and they'll try to be strong for you as you are trying to be for them. Make sure that your schools have some kind of program in place to deal with the trauma. If they don't have one, demand it.

Retain your sense of humor. Gallows humor will get you through a lot of things. Of course, here in New Orleans, gallows humor is our stock in trade, but I know you've got a pretty good streak in you too. Use it. You'll need it and will find it very helpful as you dig out.

Accept what people give you. Don't let your pride get in the way. We learned that very quickly as packages with cash tucked into them came to us from friends and strangers all over the country. For some of you the cash will be important as your paychecks won't be coming for a while, if your job still exists. Our initial response was, yup, pride. We don't need that, we're fine, we thought. We learned humility fast and we learned to simply say thank you and accept the help. The folks who sent it wanted to help, really wanted to help. They didn't want to give to an organization, they wanted to help us hand to hand, and they knew that if we knew of a place or person nearby who needed the help they sent more than we did, which was often the case, that we'd make sure it got to those people. You will be touched and humbled by the generosity of people and that's something else you can lean on during this trying period.

Be prepared for assholes. There will be those who make outrageous assertions about your character or your home from behind a screen as they sit comfortably a thousand miles away. They will say it's God's wrath for having gay people among you. They will say you're idiots for living at sea level. They'll make all manner of racist comments. They'll say that rebuilding boardwalks and homes on the shore or the barrier islands is wasteful folly. They'll call you freeloaders, opportunists, and worse. For every bit of great kindness you receive, there will be an equal amount of venomous hatred. Ignore them if you can or defend if you must. Understand that idiots will come out of the woodwork as fast as the volunteers who show up to help you. They are hateful cowards. Say what you must to them, unless ignoring them is easier on your psyche.

As Thanksgiving is just around the corner, I am reminded of the first Thanksgiving after Katrina. A small group of us got together for dinner at one of the few open restaurants. (Power, by the way, still wasn't on in many areas of the city.) One of our number asked quietly if we'd mind if he read something. We all said no, of course we didn't mind. He had searched for days for this passage from “Ulysses” by Tennyson:

“Tho' much is taken, much abides; and tho'
We are not now that strength which in old days
Moved earth and heaven; that which we are, we are;
One equal temper of heroic hearts,
Made weak by time and fate, but strong in will
To strive, to seek, to find, and not to yield.”

Our hearts are with you, and our tears are tears of understanding and memory. I am in hopes that the writing of this will arm you for the battle ahead as what we learned has to have some positive use. I cannot accept that it was all for naught.