Let us say you are in the widget market. Your widgets sell well, and you make a good profit off them. You and other widget makers are happy. Then a company invents the widget+ and is selling lots and lots of them. You don’t want the people to buy a widget+; you want them to buy your widget. What do you do?
You could pour a lot into research and development to make a better, less expensive widget – but that would take a lot of resources. Plus, even when you were done, people still might not want what you produce. The widget+ might still outsell your product. No, there’s a much cheaper way of making sure people prefer your product – bribe government officials to put the screws to your competition.
The story of Uber, we know, is one of buying and selling politicians on all sides, both to grant it market access, and from the Taxicab industry, to keep it from them. Our system allows for this open bribery as long as no one calls it bribery, and that the cash not be placed directly in the hands of the elected officials, but with their campaign committees, exploratory committees, leadership PACs, Super-PACs, dark money, 527 groups, etc. We all know what it is though – pay to play, and the hotel industry has been doing quite well with buying politicians to help it stop Airbnb from succeeding.
Called Uber for the housing market, Airbnb is an app and network that allows people to rent residential space, from rooms to whole houses. It has provided extra income, and a convenient way to find short term rental for many. Launched in 2008, users can now list or book accommodations in 191 countries, and to date, over one hundred and fifty million people have stayed in the more than three million listings. Some of those people would have stayed in hotels, so the hotel people are not pleased.
“Airbnb has brought hotel pricing down in many places during holidays, conventions and other big events when room rates should be at their highest and the industry generates a significant portion of its profits, said Vijay Dandapani, chief executive of the Hotel Association of New York City, which works with the American Hotel and Lodging Association.” A fundamental law of economics is that if you increase the supply of something and the demand is the same, then prices will fall, and that’s what happened to hotel room prices and consequently, hoteliers’ profits. As Reason magazine quotes Steve Hafner, CEO of travel booking website Kayak.com, “The hotels that used to be able to gouge you by taking the price way up, because of limited supply, don’t have that same ability anymore because of the additional inventory that Airbnb has brought online.”
The hotel people decided to buy some elected officials to turn the beast of government against Airbnb and recapture those lost profits through higher prices once the competition was made illegal. Via an expose of the effort published by the New York Times, we see a fascinating tale of how this bribery and corruption work. The campaign against Airbnb was successful, and we learn the credit goes to the American Hotel and Lodging Association (AHLA) for buying the right people. Airbnb “became a Federal Trade Commission target last summer after three senators asked for an investigation into how companies like Airbnb affect soaring housing costs. In October, Gov. Andrew M. Cuomo of New York signed a bill imposing steep fines on Airbnb hosts who break local housing rules.” Those are but two of the “achievements” the hotel industry has made with their “$5.6 million annual budget for regulatory work.”
Thanks to leaked documents produced by the AHLA for their membership, we see them taking credit for these and other victories against the free market. In Chicago, “[t]he complicated ordinance passed by the city council and signed by Mayor Rahm Emanuel imposed new taxes on short-term rentals, required Airbnb users to open their homes to inspection even without any suspicion of wrongdoing, and gave landlords and condo associations the authority to ban Airbnb rentals by registering with the city.”
“This is rent-seeking at its worst. Rather than compete fairly, hotel lobbyists are scrambling for the chance to use government force to benefit themselves and outlaw their competition -these anti-home-sharing laws benefit the most politically well-connected at the expense of most hardworking or the most needy,” says Christina Sandefur, vice president of the Goldwater Institute, the Arizona-based free market think tank that has teamed up with the Illinois-based Liberty Justice Center to challenge Chicago’s Airbnb rules – via Reason
Perhaps the senators who made the calls for the hotel industry have perfectly valid reasons, unconnected from campaign donations. After all, anything could have motivated them to ask the federal government to crack down on this private company and its users. “Ms. Feinstein’s office referred requests for comment to Mr. Schatz’s office. Mr. Schatz’s office and Ms. Warren’s office did not respond to requests for comment.” Indeed. If there’s a reason other than money, then by all means let’s hear it.