New York City council members are once again moving to end the ban restricting the operation of hostels i.e. rent-by-the-bed short-term accommodations - as reported by the Wall Street Journal.
The ban was originally implemented in 2010 during the early days of Airbnb, and was aimed at curbing illegal short-term rentals in the city. It also put four dozen hostel operators out of business.
Here is the official city definition of a hostel:
"[a] hostel-type accommodation is a Class B occupancy consisting of (i) the rental of sleeping spaces (beds) to two or more individuals in the same dwelling or sleeping unit on a transient basis, with rent charged or collected separately from each individual occupant of the dwelling unit, or (ii) any transient accommodation with common or shared bathing and/or toilet facilities.
Certain lawmakers now want to lift the ban and establish a separate division that would licence and regulate hostel-type developments in the city.
The following are reasons why lifting the ban now makes sense:
The city now has more data and tools at its disposal to regulate illegal rentals. Airbnb and NYC had recently come to an agreement on sharing data to help identify operators renting spaces outside of local laws. Better data makes enforcement more surgical; a sweeping ban on hostels is a blunt measure that could cause more harm than good longer term.
Finding a clean bed for foreign visitors, students, and young professionals is a challenge. Current options range from overpriced couches and private bedrooms to shoddy one-star hotels in far-flung neighborhoods. New York City should build positive life-long relationships with future generations, by ensuring quality short-term accommodations at affordable rates. The issue of hostel regulation becomes more about tourism management instead of code compliance. In other words, should New York welcome or discourage budget travelers?
Institutional money and brand standards would help inject more supply, but also higher quality standards into New York’s budget accommodations category. The 2010 ban grandfathered in hostels that had been in operation prior to 1956. A total of 38 hostels are currently listing in NYC, based on a search using hostelworld.com.
More competition would help ensure that these properties are maintained over time. The hostel as an asset class has evolved. Branded chains are emerging. For example, lifestyle hostel chain Selina was born out of Latin America and has now raised over $350 million since 2015. The Generator brand of hostels continues to invest heavily in the U.S market. Blended hospitality concepts want to offer dorm-style options.
The ban is also an economic development issue. More and better quality budget accommodations would drive tourism dollars to the outer boroughs. Attracting visitors to different parts of the city would, in theory, help support local businesses with additional tourism spend.
There is clearly corporate money to be made with a lift of the hostile ban. Vested parties had lobbied the city to revise the ban. HostelWorld has reportedly spent in upwards of half a million dollars to push for the change. This is not necessarily a bad thing, if it helps bring more and better quality budget accommodations into New York.
It seems like the city is now running out of reason to keep the ban.