Is Airbnb a Dealmaker or a Lawbreaker?

The short-term rental business is booming but it's also stirring up controversy.
2:01 | 04/22/14

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Transcript for Is Airbnb a Dealmaker or a Lawbreaker?
And next here tonight as we said it's David versus goliath and the prize is an affordable place to stay on a trip and some real money for the renter. Tonight the hotel industry is taking on an innovative American idea. Rebecca Jarvis tells us what's happening. Reporter: There's a battle brewing on your next vacation. On one side, bog hotels, room prices skyrocketing up more than 20 percent in the last four years. The challenger, companies like airbnb. Offering short-term rentals, typically at a fraction of the price, are booming. And tonight, the hotel industry is fighting back. Homeowners, like Gaston and Alexa de los Reyes, use airbnb to rent out this studio in their Philadelphia home. For them, it's a way to earn a little extra. It's a very reliable and significant source of income for us. Reporter: For travelers, it's a new way to save a lot of money on your next trip. In New York City, a one night stay in this one bed, one bath apartment, starts at just $200. No hotel amenities of course, but it makes up for that in location. It's just steps away from the heart of times square. Book a hotel room around here and you could be paying as much as $700 a night. New York attorney alleging it's illegal and costing tens of millions of dollars in taxes. Airbnb responds we are proud to stand up and against the overbroad government sponsored fishing expedition. These illegal facilities are impinging on available housing stock. Lost revenue for the city and potential job losses for the tourism industry. Whether airbnb is breaking the law or the mold, the competition means consumers are winning. Rebecca Jarvis, ABC news, new York.

This transcript has been automatically generated and may not be 100% accurate.

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