NYC’s Crackdown on Illegal Airbnb Empires Has a New Target

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On Thursday, 18 stories above the streets of Manhattan, the rooftop bar of one of the more than a dozen Marriott hotels in Midtown played host to an unusual crowd. Some were Airbnb hosts, others repped the burgeoning homesharing startup scene, most were wannabe rental empire titans—all were members of New York City’s booming short-term rental industry interested in learning how to turn their Airbnb side hustle into a hospitality superbrand.

The event was organized by Guesty, an Israeli tech startup and Airbnb empire management platform that has taken the short-term rental industry by storm since its launch in 2013, receiving $60 million in funding in order to expand to more than 70 countries and manage hundreds of thousands of listings. As attendees nursed complimentary cocktails with kitschy names like “The Late Checkout” and “Property Management Punch,” Guesty CEO and cofounder Amiad Soto kicked off the event by touting Guesty’s recent investments in the New York market, and spoke at length about why he believed everyone should get in on the hot market before it gets even hotter.

Soto was right, NYC’s short-term rental market was booming—but what he failed to mention was that it was also largely illegal.

On Monday, just four days after Soto’s presentation, the mayor’s Office of Special Enforcement formally announced it had opened an investigation into Guesty, saying that the bulk of the company’s business in New York has likely been unlawful. As a preferred software partner of Airbnb, the city claimed in court documents, Guesty has helped facilitate the expansion of an untold number of illegal Airbnb empires in New York. It also filed an investigative subpoena seeking a wealth of records and testimony from the company about its extensive operations within the five boroughs. If granted, city officials would gain access to a trove of data, including the names, contact information, and detailed account history for all of the company’s NYC customers.

When asked whether Guesty would remain a preferred software partner, Airbnb declined to comment. Guesty did not return a request for comment.

The news marks the latest chapter in the high-profile feud between New York City officials and Airbnb. Platforms like Airbnb are typically associated with mom-and-pop-style homesharing—where a homeowner rents out a spare room to earn cash on the side, or lists their place for rent occasionally when they’re out of town—but in reality, much of the industry’s money comes from large-scale commercial operators who have transformed multiple properties or residential spaces into de facto hotels, which are rented out full-time to short-term guests through sites like Airbnb, Booking.com, and HomeAway. New York City bars rentals of an entire apartment or home for less than 30 days without the owner present in the unit, however, which make many stays illegal. City officials want to stop investors and property management companies from converting homes into de facto hotels en masse, which they say poses safety issues and exacerbates the city’s already dire housing crisis.

Unlawful operators often report finding the potential profits—which sometimes reach well into the multi-million dollar range—well worth the risk of whatever civil penalties or fines they would stand to receive if caught. To evade detection, they set up a complicated network of fake host accounts and Airbnb profiles. Guesty has supercharged this side of the industry by removing many barriers to economies of scale, allowing hosts to manage hundreds of listings across a variety of booking platforms—from Airbnb to HomeAway to VRBO—and easily control multiple host accounts through a single dashboard.

At the cocktail event Thursday, Guesty marketing manager Grace Kim described New York as “one of [Guesty’s] biggest, if not the biggest market,” and touted the high amount of customer growth the company had seen in the area since it formally opened its New York office last year.

That aligns with the city’s findings. In New York, investigations have already uncovered more than one case where Guesty’s platform played an essential role in the day-to-day operations of illegal short-term rental empires. One high-profile scheme run by real estate brokerage firm Metropolitan Property Group, which earned more than $20 million unlawfully renting 130 Manhattan apartments to over 70,000 guests until city officials caught wind in late 2018, wouldn’t have been possible without Guesty, according to the city.

Read more here.

Written by Paris Martineau for Wired.com

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