House guests who pay shake up travel industry

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Planning a Toronto getaway this Labour Day weekend? If you're looking to spend no more than $130 a night, a Holiday Inn room with a queen-sized bed will set you back $129.99 plus tax. But for $15 less, you can stay in a unit with gleaming wood-panelled floors, a spacious bedroom, a full kitchen and a private backyard. Oh, and the linens are a step up from the scratchy terrycloth and percale at the discount hotel chain.

The second option isn't a unit in a hotel - it's the basement of Lorna Hegarty's home.

Ms. Hegarty, a 52-year-old business coach, lists the room through San Francisco-based Airbnb.com, a popular service for short-term rentals that has facilitated more than two million nights of bookings since its launch in 2008. Yesterday, the company announced its second round of funding: a whopping $112-million from three firms. Before this boost was announced, Forbes magazine predicted Airbnb would have more rooms than Hilton International by next year based on its current growth of 1,000 new listings each day.

Along with competitors Roomorama and HomeAway, Airbnb has shaken up the accommodations marketplace dramatically in the last few years. The rooms on offer are a fresh update on the traditional B&B: same small-scale lodging and hospitality, but usually without the faded floral wallpaper, granny quilts and retired couple as managers. But they're different from B&Bs in that some are operating in a legal grey area: Many hosts don't declare the income or pay business taxes.

The draw for travellers? They can book spacious suites or even full houses for far less than they'd pay at a hotel. For those offering accommodations, playing the vacation-rental game can be far more lucrative than renting to long-term tenants.

But with the perks come risks for both parties: It's often a crapshoot for bargain-hunting guests, since quality isn't as tightly regulated at a stranger's house as in a major hotel chain. For hosts, maintaining a suite can be a time-consuming, stressful job that is unlawful in some municipalities.

Ms. Hegarty says managing the unit in her large, west-end Toronto house is possible because she often works from home. While the fall and winter months are wide open, she was booked up for most of July and has already reserved the suite for half of August. She's not simply offering guests a crash pad, but playing hostess to many international travellers.

And that social nature is why many travellers choose these options over cookie-cutter hotels.

Mat Dwyer, a resident of Mississauga, Ont., who runs a photo digitization firm, turned to the site a few months ago when he was planning a Canada Day weekend in Ottawa. An expensive hotel room was not an option.

"That concept of being able to really stay in something that gives you the culture and the experience - that's awesome. I'd do that anywhere I go, really. It's going to beat the hotel not only in terms of price, but experience," he says.

But Mr. Dwyer reached out to six hosts in Ottawa and all said they were unavailable - not booked up, but unwilling to play host because they had made personal plans for the long weekend.

When playing host is a second job for those offering accommodations, expectations of professionalism must be adjusted. And it works both ways.

Davy Dai, a 32-year-old computer programmer, lives in the back unit of a large guest house in downtown Toronto. He has posted ads for the eight rooms available on Craigslist, Kijiji, Roomorama and Airbnb.

"Some people, they'll check in and give you $50 and promise to give you all the money tomorrow and they may never show up or they'll return home in the middle of the night," he says.

Two guests left graffiti in his bathroom once, and another tried to move the air conditioner in the unit instead of asking for assistance.

But more damaging than personal interactions is when guests leave negative reviews online. On Airbnb, listings are sorted by default according to recommendations. Unlike popular hospitality rating site TripAdvisor, Airbnb does not allow hosts to post public replies to guests in their defence. Their only recourse is to write reviews of guests that are posted to the guest's page on the site.

For Josee Tremblay, a full-time property investor in Vancouver, the occasional guest who leaves a mess behind is worth it for the cash.

She got into the short-term rentals game after the housing market crashed and the market was flooded with property owners desperate to rent out.

"I didn't want to follow the pack and reduce my rent drastically," she says. "I decided to do some research to see ... what I could do to up my chances of getting more money."

Even when the private studio unit under her house is only booked for half the month, she can make more than $1700 per month. She has a townhouse in Surrey she rents for $62 a night as well.

During the Winter Olympic Games in Vancouver last year, demand for housing was so strong that Ms. Tremblay was able to list the unit - which usually goes for $104 per night in high season and $59 in low season - for $180 per night.

While Vancouver is in the top 10 among the 16,000 cities listed on Airbnb in terms of bookings (Montreal comes in at 13 and Toronto at 19), it's technically illegal to rent out your property for less than 30 days without a business licence according to city bylaws.

The bylaw is in place to protect legitimate hotels and B&Bs, says Will Johnston, director of licences and inspections for the City of Vancouver.

"It's also a compatibility issue in a neighbourhood," he explains. "Ensuring the property is zoned ... as [a single-family unit] that is the use, it's not a bed and breakfast."

While the penalty for breaking this bylaw is a maximum fine of $2,000, it is loosely enforced. The city only investigates a particular suite or house if it receives a complaint.

During the Olympics, municipal officials loosened the rules and allowed residents to purchase temporary permits for $102 to rent out their units for January, February and March, 2010.

A series of bylaws in Wasaga Beach, on the shore of Georgian Bay, prevents homeowners in a designated residential zone from renting their houses for less than 30 days. In nearby Blue Mountain, another popular tourist area, the Ontario Municipal Board recently approved a ban on short-term rentals by homeowners outside designated zones.

Roomorama co-founder Jia En Teo, who splits her time between offices in Singapore and New York, says municipalities should relax rules to make the accommodations marketplace more competitive.

"My stronger feeling about that is having a resource like this makes it much more accessible and affordable for people of different budget types to travel," she says.

Though his Ottawa plans fell through, Mr. Dwyer is giving Airbnb a second shot. He's planned a trip to Boston for December and already booked a charming brownstone to share with his girlfriend and another couple for the weekend. He hasn't yet met his host, but he's willing to take a gamble since the price is only $110 (U.S.) per night.

"That was my girlfriend's objection. She said, 'What if they come in at night and kill us?' I said, 'Well, I think that would be in the reviews somewhere. Forty people before had liked it.'"