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LONDON (Reuters) - For British student Carly Connor a trip to London for a city break would be impossible if she had to pay for a hotel so instead she rents a room in a Londoner's home.
Connor, 26, is among a growing number of people taking advantage of a surge in the number of homeowners offering to rent out a room for a night or longer, with the cash a welcome addition to recession-squeezed budgets.
This new wave of hospitality sweeping the travel industry was sparked by the success of "couch surfing", where people could go online to book a free bed in a home, and is being led by a blitz of new websites that let tourists bypass resorts and hotels.
"A lot of the time you find yourself with a host who is more than happy to point you in the direction of a few local hot spots that you otherwise would have missed entirely," Connor told Reuters.
But the increasing popularity of peer-to-peer rentals has lawmakers on the alert in some countries, scrutinizing tax, health and safety, and rental infringements.
Martin Buck, a director at ITB, the world's largest travel fair, said the popularity of homestays was fueled by websites like Airbnb, Wimdu, 9flats, and HouseTrip, where users post listings for short-term rentals of all or part of their home.
Listings on Airbnb, the biggest site, have surged to about 300,000 in 192 countries from 10,000 in late 2009, with the website taking a cut on all bookings. The listings include everything from New York apartments to Costa Rican tree houses.
But Buck said unregulated homestay sites and concerns that these were actually illegal hotels was a hot topic in many places including Berlin, the headquarters of Wimdu and 9flats.
"There is talk in some areas of Berlin of prohibiting it," he told Reuters. "But can you really prevent people from using their privately owned homes as they want? It raises a whole lot of constitutional and human rights questions."
Renting out a room is legal in London, up to a level.
The British government's "Rent a Room Scheme" allows householders to earn 4,250 pounds($6,400) a year tax-free from letting furnished accommodation.
For the past year, Peter Tompkins has charged about 700 pounds ($1,100) a week to rent a spare bedroom in his apartment in the clock tower above London's St Pancras train station from where views stretch to St Paul's Cathedral.
Tompkins said he uses Airbnb to rent the room, reassured by the company's 600,000 pound insurance guarantee to hosts, as well as a 24-hour support line. He said it was important to have a professional relationship with guests akin to a hotel.
"I think you ought to behave as a hotel or regulated organization would, but I am conscious that there's no regulation on me. I just try and behave well," he told Reuters.
The growing popularity of Airbnb, which has processed around five million paid overnight stays since 2008, is starting to cause friction with some lawmakers.
According to Inc., a U.S.-based magazine focused on growing private companies, Airbnb made around $100 million in 2012, with the estimate based on the site's six to 12 percent commission on each room booked.
Wimdu is Airbnb's next-biggest competitor with 150,000 properties on its books since it began in 2011. It would not divulge its revenues. Rival 9flats has 90,000 properties.
Airbnb, set up in 2008, maintains the law needs to distinguish between people who occasionally rent out rooms and landlords who illegally run residential buildings as hotels.
Airbnb is currently lobbying authorities in Washington, DC, for a review on rental laws in the United States, seeking to craft a model for cities across the world to follow.
Company spokesperson Christopher Lukezic said he understood this movement was "growing within unchartered waters" as in the previous homestay trend, couch surfing, no money changed hands.
"Our typical host is a regular resident, who, on average, is only renting out their home for a few weeks a year, helping them to make ends meet," Lukezic told Reuters.
"Not only does it help increase the number of tourists who can afford to visit a city but it also creates economic prosperity for the citizens of the city who are hosts, often in parts of the cities where there are no hotels."
While lawmakers are raising concerns about the home-stay trend, the travel industry is unperturbed as it does not expect to see any profit squeeze on hotels.
Robin Chadha, chief marketing officer of CitizenM, a Dutch boutique hotel group with a growing portfolio across Europe, said services like Airbnb have made city trips more affordable for longer stays and family groups.
"But hotels will always be safer, offer more facilities and offer service, which apartments cannot," he said.
Additional reporting by Victoria Bryan, Editing by Belinda Goldsmith