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Some Rotorua motels say they are the quietest they have ever been with one having to drop its room rates by $35 a night and cut back staff hours.
They blame the Airbnb and Bookabach market for hurting business and have even noticed sports teams choosing the short-term rentals over motels.
Manager of Alpin Motel & Conference Centre on Sala St, Tinica Graves, said it had dropped its room rates from $120 to $85.
It had seen a 10 per cent drop in bookings.
"It's a heck of a big drop.
"The owner watches the market and is dropping the prices all the time. We're just not filling the rooms."
She said they were having to drop back cleaners' hours as there weren't enough rooms to clean.
A woman from a netball team had stayed at the motel because she wanted "a real bed", while the rest of her team were staying in bunks at a home advertised on Bookabach, Ms Graves said.
Another motelier, who didn't want to be named, said Rotorua was now known as "a discount town".
"This winter has been one of the quietest in three or four years.
"A big part of it is from Airbnb and Bookabach. It's taking work away from us.
He said they had "already been fleeced" by online accommodation booking sites.
"You just can't make money like that. It's like everyone is fighting over the scraps.
"My staff are saying to me 'I'm not getting the hours you promised'. But I just can't give it to them."
He said it was disappointing the homes being used for short-term accommodation were taking housing stock away from locals.
But a man who advertises his home on Airbnb with his wife said it was quiet because it was the low season and whenever there was an event on there were no vacancies in town.
He said younger international travellers appeared to prefer renting from Airbnb.
"Some of our guests say that some of the motel offerings in town for what you are requested to pay are quite dated, shabby and in need of makeovers."
The Rotorua Daily Post reported yesterday a woman renting out her home on Bookabach had been told by Rotorua Lakes Council that she needed to start paying business rates instead of residential. She received a $10,000 rates bill.
Homeowners must pay the higher rates if renting to paying guests for more than 100 days.
Rotorua Top 10 Holiday Park owner Jasmine Adams said in her view holiday home owners should pay the same rates as other businesses did.
"Our council are too generous with the 100 days and it's not monitored anyway.
"Holiday homes are a huge contributor to the families in our community having no homes to rent. Fix the issue - make these home owners pay to run a commercial business or go back to renting."
When asked about the debate between motel and holiday home owners, Airbnb's head of public policy Australia and New Zealand, Brent Thomas, said travellers wanted a more affordable and authentic form of travel.
"Airbnb is growing the whole tourism pie in Rotorua and right across New Zealand. It's empowering Kiwis and visitors, giving them both more choices. It's allowing people and families who otherwise wouldn't be able to travel to actually go and experience new places.
"In stark contrast to mass junk food tourism, Airbnb spreads benefits of the tourism boom to the people, businesses and places that traditionally missed out."
He said some hosts relied on Airbnb as their economic lifeline, earning on average an extra $4450 a year.
"Local cafes, restaurants and shops also benefit with Airbnb guests staying longer, spending more and staying outside traditional tourist areas."
Two more motels will stop being contracted by the Government for emergency housing.