Questions outnumber answers as Airbnb, Uber arrive in Central Mass.
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As shared economy services such as Uber and Airbnb work their way westward from Boston, everybody from insurance agents to hotel owners are bracing for impact.
“This will put some small businesses out of business if it's not controlled properly,” said Paul Sacco, president and CEO of the Massachusetts Lodging Association.
A couple searching in early August on Airbnb for a place to stay in Central Massachusetts the weekend of Aug. 22-24 had their choice of 29 establishments, ranging from $39 per night for a futon in a living room of a Worcester apartment to $175 per night for a two-bedroom bungalow along Lake Quinsigamond.
And residents of Ashland, Framingham, Holliston, Natick, Sherborn, Sudbury and Wayland can use the Uber mobile application to request a ride anywhere in Central Massachusetts.
“From a consumer's perspective, these new business models are transformational and exciting,” said Saul Kaplan, founder of the Business Innovation Factory in Providence.
Jeff Schiebe, an entrepreneur-in-residence at Clark University's Innovation & Entrepreneurship program, said Uber came up in every single class during a recent course he taught about consumer relationships and marketing.
He contrasted Uber's willingness to refund customers when things don't go right with a traditional taxi, where there's no recourse for bad service.
“If you're an existing player in the industry that is being disrupted, it's a huge wake-up call,” Kaplan said.
Sacco, though, sees hotel and motel owners playing by a completely different set of rules than those listing property on Airbnb.
Even the smallest bed and breakfast has to comply with routine inspections, stringent fire safety codes and the Americans with Disabilities Act, Sacco said, all of which drive up expenses. A listing on Airbnb, though, doesn't have to deal with any of this.
“We want a level playing field,” Sacco said. “We want them to adhere to the same safety regulations as a lodging establishment.”
Massachusetts is also one of just five states to not require lodging taxes on most Airbnb rentals, said Rob Stephens, CEO of HotSpot Tax Services in Denver.
The commonwealth's lodging laws — which include both a 5.7 percent statewide tax and a municipal tax ranging from 4 to 6 percent — apply only to establishments renting out four or more rooms, which Stephens said encompasses very few Airbnb rentals.
Impact on hotels?
Schiebe, however, doesn't think hotels will be too negatively affected by Airbnb. He believes the traditional lodging and Airbnb markets are sufficiently differentiated, with the older generation and those traveling for business usually opting for the reliability of a hotel.
“People go to a hotel because they want a restaurant, they want room service, they want a spa,” Schiebe said.
It's not only hotels, though, struggling to keep up with the pace of change. Cities, towns and insurance companies have also largely been caught flat-footed.
Lodging rental sites such as Airbnb don't fit into Worcester's existing zoning ordinances, which only address bed-and-breakfast operations, said John Kelly, the city's commissioner of inspectional services.
Kelly said city attorneys are currently in the process of developing more guidelines for these uses.
“There's really no law against that now,” he said.
But for insurance purposes, online home rental services are classified the same as a bed and breakfast and therefore aren't covered under a personal homeowner's policy, said Joanne Stoll-Pizzano, service manager for property and casualty insurance at the Protector Group Insurance Agency in Worcester.
Someone renting units on Airbnb would need a commercial insurance policy to cover any losses, said Stoll-Pizzano, which usually costs double or triple that of a personal policy.
Plus it's much harder under a commercial policy to get coverage for valuables such as jewelry or engagement rings, said Bill Trudeau, president and CEO of the Insurance Center of New England, which has operations in Gardner.
“Even though it costs more, the coverage might not be as broad,” he said.
Still, Stoll-Pizzano said renting rooms on Airbnb with commercial insurance could be profitable as long as the homeowner was able to rent space regularly throughout the year.
And some personal policies allow for rentals of a secondary or seasonal home, particularly to family members, on a minimal basis, Trudeau said. n
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