With hotel prices soaring nearly 20 percent in the last four years, websites such as Airbnb.com that offer short-term rentals, typically at a fraction of the price of hotels, are booming.

For homeowners like Gaston and Alexas de los Reyes, it's a way to earn a little extra money. Through Airbnb, they rent out a studio in their Philadelphia home.

"It's very reliable and significant source of income for us," Alexa de los Reyes said.

For travelers, it's a way to save money. In New York City, a one-night stay in a one bedroom, one bath apartment runs as low as $100 through Airbnb. A hotel room in Times Square, on the other hand, could cost as much as $700 a night.

But now some lawmakers in cities like New York, Portland and San Francisco are crying foul, suggesting these types of rentals in their towns are basically "illegal hotels."

New York's Attorney General faced off with Airbnb in court today, alleging that many of the rentals in New York City are illegal and that they cost the state tens of millions of dollars in unpaid sales taxes.

Airbnb calls the case a "government sponsored fishing expedition" and says it is "proud to stand up for our hosts who share their homes and against this over-broad, government sponsored fishing expedition."

Hotels are also joining the fight against Airbnb.

"These illegal facilities are impinging on available housing stock, lost revenue for the city and potential job losses for the tourism industry," a spokesperson for the Hotel Association of New York told ABC News.