Here’s How Much More Money Mississauga is Now Making From Airbnb
While technology is always evolving, the past few years have been particularly notable for what is now commonly referred to as "disruption."
Age-old industries have been rocked by e-commerce and related technological growth, and some have struggled to adapt more than others. Taxi companies have demanded justice and compensation from municipalities following the legalization of ridesharing companies such as Uber and Lyft. Some print media companies have been forced to cancel publications and lay off dozens of employees after struggling to compete with online news platforms.
Traditional traveller accommodations such as hotels, motels and bed and breakfasts have been affected by the rise of short-term accommodation platform Airbnb—a company that allows private citizens from around the world to rent their homes to tourists temporarily.
But while some companies and organizations have fought disruption, others have found a way to make them work in their favour—including the City of Mississauga.
The city is officially $190,000 richer (and that number is expected to climb) because of Airbnb.
So, how did this happen?
Around this time last year, the City of Mississauga implemented a four per cent Municipal Accommodation Tax (better known as a MAT or "hotel tax").
The new tax is the result of Bill 127, which was passed by the previous provincial government. The bill allows municipalities to charge a transient accommodations tax, which a hotel or other short-term accommodation facility will pass onto a guest and then remit to the city.
"This new revenue tool is an opportunity for the City of Mississauga to generate important funds that will be reinvested in an accountable, transparent and dedicated way toward undertaking important city-building initiatives to grow and diversify our local economy, strengthen our tourism industry and showcase our many celebrated attractions, festivals, heritage, culture and businesses" Mayor Bonnie Crombie said in a statement that was released in 2018.
On Oct. 1, 2018, the city extended the tax to apply to short-term rental such as Airbnb.
And so far, the results have been positive.
"We've collected $190,000 for the city in the first six months [since the tax was introduced]. It's not nothing, it's something that any community can use," says Alex Dagg, director of public policy for Canada, Airbnb. "That's from Oct. 1 to April 1. I would assume that those revenues will go up over time. It was smart of [the city] to collect the MAT on online accommodation."
Dagg said Airbnb signed an agreement with Mississauga that allows the platform to collect the tax on the city's behalf.
"This takes the burden off of the individual [who is listing their home on Airbnb]. Mississauga was great to deal with, and we agreed to do all the collection, and we handle all the administrative work. So if you book an Airbnb in Mississauga and it costs $100 a night, it will now cost $104. We collect the money and remit it to Mississauga every quarter."
Mississauga is not the only city with this kind of partnership with Airbnb.
"It shifts an administrative cost to us and our platform, but we have 500 partnerships like this all over the world, and we collect and remit on behalf of our host’s communities in various jurisdictions. Mississauga has been thoughtful of this and was an early adopter of this tax," Dagg says.
In Ontario, Airbnb collects MATs in Ottawa and smaller communities such as Sudbury, Cornwall, Windsor and Barrie.
The agreement between the city and the company makes sense, as Mississauga has a wealth of Airbnb listings. In fact, the company says there are around 1,600 active listings in the city.
"We see quite a bit of activity in Mississauga. We think our guests tend to stay for fairly long periods, so we think it's a lot of families visiting their family members," says Dagg. "If your family doesn't have extra bedrooms for guests, it's a good solution."
Perhaps somewhat surprisingly, Dagg believes that MATs are a good thing—especially since cities are often in need of more revenue tools.
"We collect taxes like this all over the world, and we think MATs are a good way to generate tax revenue from this kind of activity. We try to work with communities where we can, and we pay a similar tax in B.C. and Quebec. It's province-wide in those jurisdictions."
Dagg hopes Airbnb's move to collect and remit the tax to municipalities will compel other major travel companies, such as booking.com and Expedia, to do the same.
"We think they should come to the table too."
Dagg says the city could expect to see more money from the MAT now that summer is finally here.
"People tend to travel more in the summer. Airbnb activity is growing everywhere; people see it as a great way to travel. Mississauga residents get to earn income from the platform. It can help them afford their mortgages or their rent. A host will also recommend local businesses such as coffee shops and restaurants to their guests," Dagg says.
While Airbnb has made travelling easier for countless travellers (and helped hosts earn extra money at a time when the cost of living is rising), the platform has been criticized for eating up rental inventory in major Canadian cities and for indirectly causing disruptions through unruly tenants.
Dagg says the company has worked hard to ensure the platform is safe for everyone and that tenants are vetted to prevent problems before they occur.
"Hosting on Airbnb is a big responsibility. We have a new tool where you can be reviewed, so we make it hard for [poorly reviewed tenants] to use the platform again. We use machine learning tools to try to predict behaviour as well," Dagg says.
Overall, adverse incidents are rare.
"There have been more than 400 million guest arrivals in Airbnb listings to date, and negative incidents are extremely rare," Airbnb said in an email to insauga.com.
"Trust and Safety is its own department with offices spanning the globe. Our team is made up of engineers, 24/7 response agents, data scientists, product managers, designers, law-enforcement liaisons, crisis managers, and victim-advocacy specialists, in addition to policy, privacy, cybersecurity, insurance, and fraud experts--all working together to keep our community safe."
Airbnb says that to help prevent bad actors from ever accessing our platform in the first place, each and every Airbnb reservation is scored ahead of time for risk.
"We have a real-time detection system that uses machine learning and predictive analytics to instantly evaluate hundreds of signals to flag and then stop any suspicious activity. When we detect potentially concerning behaviour, our team takes a range of actions, including removing a user from the platform entirely," Airbnb says.
As Airbnb has grown more popular, it's also faced pushback from condo boards who have banned or restricted Airbnb units in some buildings.
Dagg hopes that, over time, condo boards can see the benefits of home-sharing while looking out for the best interests of the residents they represent.
"Condo boards have the authority to act democratically in their own buildings. Homesharing is still kind of new, and it's important to have healthy discussions at condo boards about what's appropriate in buildings," says Dagg. "It's really helpful for families to have access to home sharing and be able to share their space in a condo or apartment."
But while condo boards might take longer to come around to home-sharing, Dagg says cities—and the City of Mississauga—have been open to the opportunities that the service can represent.
"We’ve worked with Mississauga for some time, and the mayor and the mayor's office is great to work with. We have a constructive relationship with the city," Dagg says.