Deregulation of Hotels: A Smart Move for All

April 14, 2015 Posted by Patrick Marvin - No Comments

Last Monday, a senior adviser to Governor Paul R. LePage revealed that the governor may submit a bill next legislative session that would eliminate all government regulations and licensing requirements on lodging establishments.

Given the current trend of government increasing regulations at an exponential pace, this announcement should come as welcomed news for consumers and vacationers all across Maine.

Contrary to our American values, our government is growing larger and larger, and is increasingly inclined to regulate and control all aspects of businesses (even the size of a glass of beer) and dictate as much of the free market as possible.

Rather than accept our American traditions of capitalism, self-sufficiency, and competition, and allow individuals and consumers to solve problems for themselves, our government is instead enacting a plethora of regulations that push American individuals and families the sidelines.

Even worse is the fact that although regulations are supposedly enacted in the name of consumer protection and public safety, they are increasingly used by government to protect established businesses from start-up companies.

For example, this recent revelation about Governor LePage’s desire to scale back big government came at a public hearing on a bill that is designed to crack down on competition for the hotel industry.

The bill, LD 436, is intended to regulate short-term home rental businesses such as Airbnb, a website which connects homeowners who want to rent all or part of their homes to eager customers and vacationers.

Airbnb has seen an explosion of activity in recent months, as the site has proven to not only be a cheaper alternative (rooms in Maine can be rented for as little as $30 a night) but also because it often has more options and greater flexibility than traditional hotels.

Although this is good news for consumers, who benefit from increased choices and competition, it’s bad news for hotel owners, including Rep. Richard Malaby (R-Hancock), who owns the Crocker House Country Inn, and is one of the co-sponsors of LD 436.

“It’s a competitive issue, I’m not going to try to hide that,” Malaby admitted to the Portland Press Herald.

Predictably, there would be less competition for Malaby and other hotel and inn owners if this bill is passed, as Airbnb would be virtually wiped out in Maine. In order for many homes to meet state regulatory standards, and obtain the license that would be needed to be listed on airbnb, many would have to invest thousands of dollars in costly upgrades and improvements.

This not to say that properties listed on Airbnb are unsafe (the company has numerous safeguards and protections in place) but it’s simply unreasonable to expect homes to have the same plumbing, ventilation, and lighting systems as hotels.

But the elected officials sponsoring LD 436 don’t buy that logic.

Although Malaby admits inns such as his are “hurting,” he contends that this bill is really about ensuring consumers receive the same safety protections from Airbnb as they do from establishments which are subject to government regulation.

However, when you look at the data, lodging regulations don’t appear to have any effect on consumer safety whatsoever.

For one, hotels and inns which apply for a lodging license in Maine have a 100% acceptance rate, meaning the government isn’t excluding sub-standard establishments or shutting down the worst offenders. The Department of Health and Human Services confessed that it “does not recall any lodging license being denied.”

That doesn’t mean that lodging establishments in Maine are perfect and there are never any issues. In 2014, there were a total of 50 lodging complaints on the roughly 1,325 registered lodging establishments in the state.

But worst of all, none of this information is easily accessible, and it is only available upon request from the DHHS.

If an individual or a family is looking to stay at an inn or hotel in Maine, there is no easy way to check if that establishment has been cited for health or safety violations.

So what can we learn from all of this regulatory mess?

First, regulations clearly do little to protect consumers.

Regulations are not the silver bullet to the rare problems that arise in the lodging industry. Even though literally every establishment that applies for a government license receives one, issues with consumers still arise, and complaints are still made on these establishments.

And while a lodging complaint will likely results in a dreaded call from the DHHS, the motivation for establishments to enact significant change as a result of a complaint is minimal at best.

The DHHS rarely, if ever, revokes a lodging establishment’s license (an official with DHSS couldn’t remember the department ever revoking one) and it is highly unlikely that a potential consumer will find out about these grievances or issues, as information on lodging complaints is only available upon request.

Instead of requesting data from DHHS on lodging complaints, consumers will likely turn to online hotel review sites, and decide for themselves which establishments meet their standards of quality.

Second, regulations inherently place certain businesses in the marketplace at a disadvantage, creating an unfair imbalance.

Every inn and hotel in Maine is different, and has a different level of revenue. They each have unique profit margins, and have a different ability to make capital upgrades and improvements.

Therefore, meeting state regulatory standards (however easy it may sound) and purchasing the equipment necessary to obtain a state license is a different level of difficulty for every lodging establishment.

While large hotel chains may have no difficulty meeting the necessary requirements, small inns and bed and breakfasts may have to devote a larger share of their budget to appeasing bureaucrats in Augusta.

And when a new unregulated business pops up, that’s a problem for everyone else. As Rep. Malaby told The Ellsworth American about sites like Airbnb “The fact is that they are clearly unregulated. I am clearly regulated.”

Third, the answer to the problems caused by regulations is not to create more regulations, but to eliminate regulations.

The solution to the problem described by Rep. Malaby is not more regulation and red-tape. Big government, and the confusion and inequalities it causes, is not cured with a bigger government.

Instead, the inequalities created by government are eliminated by completely leveling the playing field, removing regulations, and allowing free market economics to return this industry to a balance. Every hotel, inn, motel, and shared-room should have to stand on its own, and thrive because it delivers the best product to consumers, not because it receives protection from the government.

The free market, by definition, is a level playing field where every business must compete for consumers without government intervention.

America has thrived by embracing capitalism and the free market, and allowing competition to power our great country forward.

Lawmakers in August must remember this fact, and recognize that deregulation is a beneficial move for all.