In 2023, New York City implemented restrictions on short-term home rentals, significantly reshaping the hotel industry landscape. This move has allowed hotels to capitalize on diminished competition, resulting in historical increases in average room rates.

Rising Hotel Prices Post-Ban

By September of that year, the average cost of a hotel room hit a record high of $417 per night. Consequently, a week’s stay surged to an astonishing $2,919—67% higher than the average American’s monthly rent.

At such elevated prices, consumers might expect luxury services, perhaps even a personalized performance from the cast of a Broadway show.

Lobbying Efforts and Legislative Action

The hotel industry has long advocated for stringent regulations against platforms like Airbnb. A report from The New York Times in 2017 outlined concerns from hotel executives about competitive pricing, particularly during key events when they historically could charge premium rates.

New York City’s enactment of Local Law 18 effectively restricted the short-term rental supply, amplifying the pricing power of hotels due to reduced competition.

Similar Trends Elsewhere

New York’s actions are part of a broader trend, as cities like New Orleans, Santa Monica, and others consider imposing similar restrictions on short-term rentals. This growing pattern could further constrain competition across various markets.

The Role of the Federal Trade Commission

Despite these developments, federal regulators, particularly the Federal Trade Commission (FTC), have not yet addressed the anti-competitive nature of New York City’s law. Historically, the FTC has taken a strong stance against public restraints that limit market competition.

In the past, the agency challenged regulations in areas like the taxi industry, which served to protect local operators from ride-sharing competition, promoting more choices for consumers and lower prices. This past precedent presents implications for the current lodging situation.

A Call for Bipartisan Action

Advocates argue that combating such public restraints on competition should transcend partisan politics. According to recent polling from the Chamber of Progress, a majority of Americans prefer that the FTC protect their financial interests by curbing consolidation that elevates costs.

Addressing laws such as New York City’s Local Law 18 could present the FTC with a unique opportunity to act in a unified manner across the political spectrum, enhancing consumer protection without necessitating legal battles.

Economic Implications and Future Steps

The financial ramifications of these regulations are considerable, with New York City hotels set to gain approximately $380 million as a result of reduced competition. Meanwhile, local Airbnb hosts have reported a dramatic 60% decline in income, and tourists face rising expenses.

It is suggested that the FTC should investigate whether such pricing structures violate competition laws and provide guidance to other cities contemplating similar measures.

Regardless of motivation, whether consumer advocacy or political alignment, FTC commissioners can positively impact this situation and promote fair prices and enhanced choices for consumers.