CHAPTERCASE 3 Part II EVEN THOUGH AIRBNB IS. at $31 billion, one of the most valuable private startups in the world and offers more accommodations than the three largest hotel chains (Marriott, Hilton, and Intercontinental) combined, not all is smooth sailing. In particular, PESTEL factors discussed in this chapter are creating major headwinds for Airbnb. Take regulation, for example. In 2016. New York state strengthened legislation first passed in 2010 that makes it illegal to rent out entire apartments in residential blocks in New York City for less than 30 days. It remains legal if the renter is living in the apartment at the same time, so "True space sharing" is still possible. Fines start at $1,000 for the first offense and rise to $7,500 for repeat offenders. Paris, Berlin, and Barcelona face similar problems and have passed laws with even stiffer penalties, fining offenders up to $100,000. This legislation creates major problems for Airbob because New York City is by far its largest market, with more than 50,000 accommodations available for rent. In 2018, the city of New York went a step further and sued residential brokerage firms (as well as some of their employees) for allegedly using Airbnb in an illegal apartment rental scheme that earned them an estimated $20 million The issue for Airbnb is that about one-third of its listings in major metropolitan areas such as New York City are from hosts with multiple offerings in the same city. Commercial landlords realized quickly that it is more profitable to convert some apartments into short-term rentals and to offer them via Airbnb than to sign long-term rentals with just one tenant, which often fall under some form of rent control. Although this tactic increases the landlord's return on investment and profits, it creates all kinds of negative externalities. Neighbors complain about noisy tourists partying all night. Some apartments get ransacked or are used for illegal activities such as drug deals and prostitution. New Yorkers expressed their frustration by scrawling on Airbnb posters: "The dumbest person in your building is passing out keys to your front door!" Hotel chains and resort owners have challenged Airbnb in courts and lobbied local governments to pass regulations to limit or prohibit short-term rentals some of which already have. Residents in New York City, San Francisco, Berlin, Paris, and many other cities have joined this lobby, arguing that companies like Airbnb contribute to a shortage of affordable housing because they turn entire apartment complexes into hotels and quiet family neighborhoods into daily, all-night party venues. Airbnb is also being criticized for accelerating gentrification in some cities.* Pape IDO