Illegal hotels – New York leads the way

The Daily News reports that New York's governor signed into law a bill that makes it easier for the city of New York to shut down illegal hotels. The primary focus of the bill was to "to thwart the problem of landlords renting apartments as hotel rooms to charge more than rent laws allow" although a not insignificant consequence is likely to be a clamping down on websites that aggregate individuals seeking to rent out anything from a room to an air-bed to tourists as a supposedly cheaper alternative to hotel rooms.

Renting private space to "wayfarers" is a centuries long practice but the transition from private to public, as in a hotel,  initiated laws designed to protect guests while offering them "shelter" – laws that confer rights to both guests and hoteliers but also imposed liabilities on establishments. Those responsibilities are conspicuous by their absence in the allegedly peer-to-peer rental websites such as airbnb  which do not  meet the standards for hotels and do not offer many of the protections of a hostelry. Nor do they need comply with liability issues as they take refuge under the guise of being a facilitator while, at the same time, they rake in millions of dollars via fees (as much as 15% of the rental)  from both "hosts" and "guests".  

New York had other "alternative" hotel offerings such as promoted by landlords of buildings offered through sites such as this. Most of these are built and permitted for non-hospitality related uses. Apart from having similar failings in terms of a lack of fire safety systems and security for their guests, these building owners began to displace regular residents to snag higher paying tourists, many of whom ended up at the dead of night with luggage and knocked on the doors of residents when they get the wrong room.

Contrary to the popular narrative, these illegal rooms and buildings do not necessarily provide cheaper accommodation as seen from a quote in an article in the San Francisco Chronicle where a Brooklyn, NY resident charges $150 per night for her space. The average room rate for regular hotels in Brooklyn, where rates are 40% cheaper than Manhattan, in May (a busy month for hotels) was $150. 

Illegal hotels are not limited to the US or New York as this article in the Nigerian Tribune details the crackdown against them in Lagos, Nigeria. The governor there took note of the fact that "tourism is becoming a major contributor to the economy of the nation" and views the licensing of hotels as an essential part of the development of infrastructure to promote tourism and hospitality in his state.

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Vijay Dandapani

Co-founder and president of a New York based hotel company for 24 years. Grew the firm to five hotels in Manhattan and also developed a greenfield project at MacArthur airport, New York. Speaker at numerous prestigious forums including Economy Hotels World Asia, Lodging Conference, NYU, Columbia University Real Estate Roundtable, Baruch College's Zicklin School and ALIS. President and ceo of New York City Hotel Association since January 2017.

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