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  • Writer's pictureErika Andresen

Ecosystems, Political Costs, and a Black-ish Swan

I’ve previously written about the costs associated with political maneuvers. If you don’t remember it, it’s here. I am going to show how a law intended to solve one problem created a monster of another with huge financial implications.

 

It’s never looking at the answer and stopping, you must look beyond in everything, especially business continuity…which only was made worse by a Black-ish Swan (it's a micro black swan).

 

There is a housing shortage in New York City. A lot of it was attributed to airbnb’s taking up available real estate. A law was passed, which was strongly supported by the area hotel lobbyists (yes, get rid of our competition), to prevent short term stays under 30 days in residential locations. There was an immediate impact…not from the housing market being instantly flooded with people unloading their Airbnb homes. There was now a slight fraction of Airbnb listings for short term rentals in NYC. This created only one place people could go for short stays: hotels. Hotels were getting back their business!

 

But wait. Something happened. Governors from southern states were bussing immigrants up to NYC unannounced. Since NYC has a law they need to offer housing to everyone, they started entering long term contracts with hotels to house both migrants and homeless. Entire hotels were now filled with non-tourists. What did that do?

 

Drive tourists to compete for even less rooms. Oh, the hotel lobbyists also made it so no new hotels could be built without great difficulty and zoning. What is the impact of this supply/demand? You got it: increased room rates. Even lower quality hotels are charging at least 10% more per night because they can get away with it.

 

Ok, so why should you care?


This an example of how what started out well-intentioned (as are most laws….but also look at who is supporting it) to stop one crisis created another crisis when a black swan showed up on a bus from Texas. If you’re a business that provides tours to NYC as a product, you’re now increasing your costs (if you can) or shrinking your profits to keep your clients.

 

Sometimes ignorance is bliss but not when you’re running a business.



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