Thanks to the Internet and sites like Booking.com, it’s never been easier to book an illegal tourist room for a night. The rise in the number of residential hotel rooms being rented illegally cast a light on the role that Internet travel sites play in facilitating this illegal practice. In many cases, law-breaking residential hotel operators aren’t hiding their illegal activity, they are advertising it – listing their illegal rooms on popular Internet travel sites like Booking.com, right next to and competing against legal tourist rooms. Call it a strategy of hiding in plain sight. But a closer look at the economics of the travel industry shows that in many ways, illegal tourist hotels and websites like Booking.com were made for each other.
Take a quick glance at trends in the tourism industry, and you’ll see why more unscrupulous residential hotel owners are motivated to illegally convert their properties and why Internet travel sites are there to promote their business. As a whole, the tourist industry is doing well
and in the next five years – barring a European economic collapse - North America is projected to attract half the world’s tourism
. San Francisco is undoubtedly poised to receive a significant portion of that business. But a look closer at the data shows
that despite boom times, hotels are fiercely competing to capture their portion of tourist spending.
The hotel industry seems to value high occupancy over a higher daily return rate, as reflected in the fact that occupancy rates are the highest they’ve been in a decade, while the average legal tourist hotel room cost $30 less per night than it did two years ago. The luxury hotels market hasn’t come down, mainly because its customers have no problem paying these types of high daily rates
, so it’s the middle class tourist hotels that are most booked.
With the high end and middle class hotels off the market, the pressure is on the lower end of the tourist market to meet the demand for rooms. It’s no wonder residential hotel owners are looking to jump into the lower end of the hotel market and no wonder that there is a market for their rooms.
But you need something to facilitate supply and demand, and that’s where Booking.com comes in. Its business model looks to aggressively expand the number of hotels in their program by offering hotel friendly commission rates and access to customers who wouldn’t be opposed to staying in a residential hotel. A part of priceline.com (Nasdaq: PCLN), Booking.com claims to be Europe’s leading online hotel reservations company by room nights sold, attracting over 20 million unique visitors each month from both leisure and business markets worldwide.
Three years ago it opened a hotel account management office in San Francisco with a goal
to connect its client hotels with international travelers, particularly with European tourists - known in the industry for valuing location over the size of a hotel room or the opulence of a lobby, two attributes most residential hotels lack, making them virtually impossible to rent to Americans or Asian tourists who tend to value both.
Websites such as Booking.com manage to evade liability because owners and operators are clearly responsible
for the content of their postings. But shouldn’t Booking.com know local laws governing residential and tourist hotels in the city, especially since they have an office here? Shouldn’t they know this is an illegal unit
? How culpable are they?
The CA Attorney General’s Seller of Travel Program has no record of booking.com being registered to sell travel in the state of California. Sure, priceline.com is registered but in that registry Booking.com is not listed as one of the companies they are doing business as. The CA Attorney General and District Attorney’s Office should look into Booking.com and others like this
that make a commission off of others’ illegal activity.
In the end, is it really any different than selling illegal goods?