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Can Chicago's Old-School Bed-And-Breakfasts Survive Airbnb?

By  Alisa Hauser and Ariel Cheung | March 16, 2017 6:13am 

 A selection of Chicago bed-and-breakfasts (clockwise from top left): Ray's Bucktown Bed and Breakfast, House of Two Urns, Longman & Eagle, Celeste Celebrity Suites, Villa Toscana and Old Town Chicago Bed & Breakfast.
A selection of Chicago bed-and-breakfasts (clockwise from top left): Ray's Bucktown Bed and Breakfast, House of Two Urns, Longman & Eagle, Celeste Celebrity Suites, Villa Toscana and Old Town Chicago Bed & Breakfast.
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Provided/Google Maps

CHICAGO — After 25 years running House of Two Urns bed-and-breakfast, Kapra Fleming knew exactly who to blame for the demise of her business.

And she didn't hold back.

"Politicians in Chicago have conspired against licensed B&Bs, and so like many others, we were forced into closing," Fleming wrote in December. "Mayor Rahm Emanuel's lenient Airbnb ordinance allows thousands to compete against Chicago's licensed B&Bs."

Fleming, an outspoken critic of Airbnb, is not alone. Some of Chicago's oldest B&B inns have closed in the last five years, while others have sought creative ways to keep customers coming in the age of Airbnb just as the city clamps down on the previously unregulated home-sharing market.

While the online marketplace for short-term lodging has exploded since the Airbnb website launched in 2009, Chicago is still home to a healthy stock of old-school B&Bs that predate the Airbnb crowd. In peak years, as many as 24 licensed B&Bs were operating in Chicago, city data shows.

Last year, there were still 20 holdouts. But Fleming is no longer one of them.

In an ironic twist, she turned to Airbnb to find guests in December after closing House of Two Urns, the B&B she opened at 1239 N. Greenview Ave. in 1991. She said Airbnb profits pale in comparison to her listings before the website peaked.

"The bookings I'm getting for Airbnb in winter are less than they were 24 years ago" for single-night room rentals, Fleming said. Her three rooms now rent for $49-$69 per night apiece on Airbnb.

Soon she hopes to get out of the guest-hosting game for good and convert the building into three-bedroom, two-bath apartments with long-term tenants and rent them for $2,600 per month.

It might go without saying, but breakfast is no longer included.

What about that second 'B'?

Then again, it rarely is for Airbnb rentals, despite what its name suggests. Although more than 300 Chicago rentals list breakfast as an amenity, few actually serve food to visitors.

But a home-cooked breakfast is the norm at places like Ray's Bucktown Bed and Breakfast at 2144 N. Leavitt St. Owner Ray Reiss converted his former photography studio and home into an 11-room hotel in March 2005.

Reiss said he offers guests "a full cooked breakfast ordered off of a menu," along with bottled water, coffee, tea and free parking — which the city requires as part of his license — along with use of a sauna and steam room.

Reiss' add-ons are among the above-and-beyond offerings many full-time B&Bs now say they must offer to distinguish themselves from part-time renters and condo owners who list their units sporadicall and with bare-bones amenities.

"It's a matter of choice" for guests, said Laura Yepez, owner of Wicker Park Inn. "We provide guests with a safe home environment and are fully staffed. We do daily cleaning, a free continental sit-down breakfast. You can get to know others that are staying here. There are people that have met through the inn and have remained friends."

But those are by no means requirements for renters. To travelers booking a room through Airbnb, Yepez advises: "Buyer beware."

Still, the price comparison is tempting for the thrifty-minded, with Airbnb rooms going for as low as $28 close to Wicker Park Inn, where prices range from $127 to $254 per night.

Reiss said customers "take their chances" when they book with Airbnb, and mistakes made by the online home-sharing service often bring him new business.

"We are constantly getting calls at the last minute because Airbnb reservations screwed up, or the person who was offering it got in trouble for renting out their condo or apartment and had to cancel," Reiss said. "It's silly to compare Airbnb to bed-and-breakfasts, which are real businesses."

Ray Reiss of Ray's Bucktown Bed and Breakfast, with staff at a new "North Wing" debut in 2011 that added five rooms. [DNAinfo/Alisa Hauser]

Tightening regulations

New regulations for Airbnb owners, delayed and watered down by legal challenges, finally took effect on Wednesday. They levy an extra 4 percent tax on Airbnb hosts, limit the number of units in buildings that can be rented out and require for-profit hosts and operators like Airbnb to register for a license. A spokesman for the company called the final legislation "a model for other cities."

RELATED: City Effort To Ease Airbnb Regulations Moves Forward

The City Council passed the hastily assembled "compromise" in June, upsetting aldermen who felt the law failed to rein in what 43rd Ward Ald. Michele Smith called "the newest scheme for real estate investors."

Some, like Fleming, blamed the mayor for his eleventh-hour proposal and its relaxed take on regulating Airbnb rentals in Chicago.

"The city just legitimizes Airbnb because it's so huge, and they have no way of controlling it," Fleming said.

She also complained that Cook County "dramatically hiked property taxes" on licensed B&Bs, driving up costs for them, while it failed to apply the same expenses to Airbnb owners. Last year, the county increased property taxes to 25 percent for inns that aren't owner-occupied.

"So when your client base is eroded heavily on one end and taxes are upped thousands or tens of thousands a year on the other end, there is no survival in the middle," Fleming said.

RELATED: 'Illegal Hotels' Targeted By Chicago Airbnb Opponents

In 2003, the city homed in on B&Bs, imposing $250 licenses and city inspections on them. An ordinance defined B&Bs as owner-occupied rentals with 11 or fewer guest rooms that could be rented for 32 days or fewer. Food requiring "minimal preparation" can be served from 5 a.m. to 2 p.m.

Chicago was quicker to regulate the Airbnb market. While the company launched in 2009, the concept caught on in Chicago a few years later, with about 200 rooms available each day by 2013 in what was largely an unregulated and underground market.

Airbnb.com: friend or foe?

"When Airbnb started, it was a rollover of couch-surfing, and most people have never heard of that," Fleming said.

Yepez said the great thing about Airbnb is that it has "opened people's eyes to a more homey situation."

"It's become more mainstream to be staying in an apartment or house versus a hotel," said Yepez, who opened her five-bedroom inn at 1329 N. Wicker Park Ave. in 2004 after taking it over from the owner who started it in 2001.

Yepez's inn, in a historic home on a historic street, is one block from Wicker Park's namesake park and close to the Bloomingdale Trail's 606 park.

"It's become a prime area because it's such a hot spot, and there are a lot of young families in the area," Yepez said. "A lot of folks who are visiting those families would rather stay in the neighborhood and spend more time with the people they are visiting. We have a lot of repeat customers."

Along with Two Urns, four other bed and breakfasts in operation for at least a decade have closed in the last three years: Flemish House of Chicago (Gold Coast), Hutchins House (Kenwood), Gold Coast Guest House (Near North Side) and Olita Kins Bed & Breakfast (Lincoln Park).

Others with long histories that have closed since 2010 include The Ardmore House (Edgewater), Joy's Joy Victorian Bed and Breakfast (Lakeview), University Quarters (Woodlawn), and Windy City Urban Inn (Lincoln Park).

Laura Yepez, owner of the Wicker Park Inn at 1329 N. Wicker Park Ave. with her children Rafa and Jene Rose Wright. [DNAinfo/Alisa Hauser]

Standing out in a crowd

B&B's that survive are mostly in trendy neighborhoods like Wicker Park, Lakeview, Lincoln Park and Gold Coast, although a few have flourished in Bridgeport and Rogers Park, where there's less competition.

"My business hasn't had any great falloffs [since Airbnb became available in Chicago], and I don't know if it has been impacted," said Reiss, who has run Ray's Bucktown Bed and Breakfast since 2005.

Meanwhile, new trendy hotels and other bed-and-breakfasts have joined the fray in his neighborhood, like The Robey and Longman & Eagle in Logan Square, adding additional layers of competition.

Reiss, whose inn maintains an active social media presence, is among B&B owners who have adapted to a more online-focused business model, or have rebranded their simple B&Bs as a more luxurious experience.

Celeste Celebrity Suites bought the former Flemish House Bed and Breakfas at 68 E. Cedar St. for $2.2 million in 2015 and spent $760,000 on updates before suing the city over delays in licensing.

The celebrity-themed B&B  opened after the lawsuit was dismissed in June, and the company operates a second inn across the street at 67 E. Cedar St. Rooms come with fully stocked kitchens and a washing machine and ooze style, with feather pens and chandeliers complementing Marilyn Monroe and Al Capone-themed rooms.

 

Sometimes the struggle is just too real.

A post shared by Rays Bucktown B&B (@raysbucktown) on

The B&B reboot

Other B&B owners have fought to preserve the quaint, old-timey charm that draws people to inns, hoping guests will understand that their prices can't compete with someone renting out a spare bedroom.

That's a big hope: Although Airbnb has begun rolling out luxury listings in far-flung locations as well as curated "experiences," its bread-and-butter in big cities like Chicago are well-placed, bare-bones units priced cheaply and easy to book online.

That's an about-face for the owners of some of the city's longest-running B&Bs, like Fleming.

"When I started, there was no internet, really," she said. "The only way you could find us was by looking at whatever bed-and-breakfast publications there were. People would go to libraries and look at a 1- or 2-inch directory."

When she opened House of Two Urns in the early '90s, there were very few B&Bs in Chicago, Fleming said. Many thought the idea of an "urban" B&B was unreasonable. Why go downscale in a city full of fancy hotels?

"Everyone [back then] thought that a B&B was out in the country somewhere," she said.

Since then, Fleming's Wicker Park neighborhood "changed a lot."

"Demand is high, and everyone is joining in," Fleming said. "I can't afford to charge $250 per night and have spa services like some other bed and breakfasts have."

As for competition, Yepez said there are "a lot of Airbnbs" in the immediate vicinity of Wicker Park Inn, based on the Airbnb "heat map" that shows neighborhoods, but not specific addresses.

Yepez said her inn has off-street parking and offers to locate a secure parking spot for guests if requested.

"We are fully staffed to meet our guests’ needs at any time of the day. And we provide inside knowledge on the best places to go that only a local would know," Yepez said.

But when it comes to the bottom line, "I will never compete with Airbnb charging $75 a night, or a hostel," she said.

"I believe competition can be healthy, and it has made me stand out to offer more amenities and more service," Yepez said. "I have felt [the impact of Airbnb] for sure, but I am able to compete."

Contributing: Linze Rice