Maine Hotels Facing Stiff Competition from Online Private Vacation Rentals

Aug 21, 2014

A view of the apartment Stephanie Dunn and Mark Smith rent out using Airbnb and VRBO.
Credit Tom Porter / MPBN

PORTLAND, Maine - Hoteliers, innkeepers and municipal officials in Maine and across the country are facing serious competition from a recent explosion in private, short-term, online vacation rentals. The main player is the Web site Airbnb, based in Portland, Oregon, which helps homeowners market their property - mostly for short-term vacations.

More than 11 million guests have traveled with Airbnb since the company was founded in 2008. It now operates in more than 190 countries. Some of the biggest growth in the U.S. recently has been in Maine, according to the company:  Bookings in the state's biggest city, for example, are up nearly 330 percent this year, making Portland the fourth most popular U.S. destination for travelers.

Stephanie Dunn and Mark Smith, who rent an apartment using Airbnb and VRBO.
Credit Tom Porter / MPBN

"We're on top of Munjoy Hill, we're facing the observatory, we have views from the Back Cove and Mount Washington," says Stephanie Dunn. Dunn and her husband, Mark Smith, rent out their two-bedroom, two-and-a-half bathroom, 1,600-square-foot apartment using Airbnb and another Web site called Vacation Rental By Owner, or VRBO.

The place - which costs $380 a night during the peak season - is on the top of a four-story building and offers panoramic views of the area. Dunn and Smith themselves occupy another apartment in the building, which they own. Dunn says they renovated the apartment and began renting it out last year.

"We just starting testing it out last summer, and within a week we were already getting bookings for the end of the summer, September, October," she says. "Every weekend has been full this summer and most weekdays as well, and we're now booked through October."

The rapid growth of sites like Airbnb has prompted serious concern in some quarters. Greg Dugal says what's happening in Portland is mirrored in tourist destinations across the state. "The biggest issue that we have is that it's not a level playing field," he says.

Dugal is executive director of the Maine Innkeepers Association. The problem, he says, is that Airbnb-type bookings are mostly just for one, two, or three nights, meaning they take business away from hotels and bed breakfasts, because most of them don't follow the same codes and regulations.

Dugal points out that to offer overnight lodging in Maine, innkeepers have to be licensed and have the appropriate insurance and safety requirements, which includes fire alarms, fire exits, and food preparation certificates, if needed.

They also have to pay lodging tax. Most property owners using sites like Airbnb, he says, are not required to do this. "My people are making these sizeable investments in their properties because they're required by law, and other people are basically doing the Friday and Saturday night thing and are not adhering to any regulations," Dugal says.

"I like to think that it's just a trend and people are going to get tired of having strangers in their house," says Kristi Bifulco, who owns the Camden Windward House Bed and Breakfast. In a popular coastal destination like Camden, she says there's a lot of competition in the lodging industry. And while Airbnb properties may not undercut legitimate hotels and inns on the price they offer, they often do when it comes to amenities.

"I actually had an Airbnb owner call to say that she had a double booking on Airbnb, and if I could take it, and I said, 'Well, yes, I do have a room available for that evening.' And she said, 'Well, they're going expect a microwave, a refrigerator and use of the kitchen.' And I said, 'I can't compete with that, I have a room, with a bed.' So she called the client and said they wouldn't have these extra amenities and she wouldn't book with me."

The Lime Rock Inn in Rockland.
Credit Tom Porter / MPBN

Some towns and cities, meanwhile, are beginning to tighten up their ordinances governing private rentals. In Camden town officials have started to enforce a rule requiring a seven-night minimum stay for private rentals. And in nearby Rockland, city officials have a similar proposal in the works. Frank Isganitis is co-owner of the historic Lime Rock Inn in Rockland. He also sits on the city council.

"The city is looking to take a position that, if you're renting all or part of your property in an increment of less than seven nights, essentially nightly, you are lodging property," Isganitis says. "And so, at a minumum, there will be a standard for a license requirement, an annual inspection and proper registration with the state."

Lime Rock Inn owner Frank Isganitis.
Credit Tom Porter / MPBN

In Portland, Oregon - where Airbnb's headquarters are - city officials recently agreed to legalize short-term rentals, as long as a permit is purchased and a lodging tax paid. In Portland, Maine, city spokeswoman Jessica Grondin says the legality of short-term private rentals is a vague area that hasn't really been a problem in the past, "but given the recent popularity, our planning staff has begun discussing how zoning might apply to this use in various parts of the city."

Downtown property owners Mark Smith and Stephanie Dunn - who privately rent out an apartment on Munjoy Hill - insist they are not violating any ordinances. That's because the building - although residential - is not zoned as such, says Smith, because it's a four-story, four-unit structure.

"That puts us into commercial building code, so we have a full sprinkler system," Smith says. "The alarm system communicates with the fire department, the same way a hotel would, and that's unrelated to us doing any kind of short-term rental. That was just building code. We are a commercial building."

But, he admits, hotels may have a legitimate gripe when it comes to smaller residencies offering short-term vacation rentals that are not zoned for commercial use.

Airbnb declined to comment for this story.