BERLIN: When you book an Airbnb room in London, around a third of the $100 saving you make over the price of an average hotel room is due to tax advantages which favour Airbnb’s business model, according to research by the Financial Times.
The price advantage comes at a time when Airbnb is increasingly competing with hotel groups. Research from Morgan Stanley in November reported a higher than expected “cannibalisation of traditional hotels” over the past year, citing survey findings that 49 per cent of Airbnb users in the US, UK, France, and Germany had replaced a hotel stay with a stay booked through the online group.
Airbnb says one of the key benefits of what it calls “home sharing” is to reduce costs for travellers and to help hosts earn extra income. But hoteliers complain they face unfair competition, as a result of tax differences and gaps in regulatory enforcement of everything from hygiene to disabled access and fire safety.
The extent to which Airbnb’s business model benefits from tax advantages is particularly evident in London because the UK has very high rates of business property taxes and value added tax on hotel stays, combined with generous tax exemptions for owners renting rooms in their homes and for small businesses.
VAT and property taxes account for up to 17 per cent of the price of a typical London hotel room, after the recovery of VAT paid on costs. The VAT on most Airbnb stays can be as little as 0.6 per cent because the UK only levies the tax when businesses sell more than £83,000 per year — a threshold reached by very few Airbnb hosts. It is otherwise only payable on Airbnb’s booking and service fees.
