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Messages from the President

Evaluating the Impact of Vacation Rentals - August

By: Anna Tanski, President/CEO | August 3, 2015

Family vacations are all about togetherness, until it comes to sleeping arrangements. Separate bedrooms, a private pool and large living room enticed us to book a private home during our recent trip to Florida. Having a full kitchen meant not having to eat out for every meal, which saved money. The extra space provided room to relax without costing more than a hotel. The comforts of home at competitive rates are the marketing highlights that motivate travelers to book vacation rentals.

But not all rentals are alike. The primary companies offering these type of accommodations are Airbnb and HomeAway. Homeaway also operates a subsidiary, VRBO.com, which stands for vacation rentals by owner. The rentals on HomeAway are typically second homes specifically purchased with the intent of renting out in one-week increments; the owners do not reside at these properties. Vacation rentals represent an $85 billion industry worldwide, according to Carl Shepherd, cofounder of HomeAway.

Airbnb is a booking company for individual or shared rooms within an owner-occupied residence and offers single or multiple night stays. Non-traditional listings commonly include couches for rent or a shared room, but my recent search found a backyard tent in Duluth and the back of a van in Manhattan (for $99 per night!) complete with directions to nearby public restrooms. Airbnb is on pace to generate more than 500 million bookings in 2015, making it the largest lodging company in the world, though it doesn’t own or manage a single property.

This is big business, which also represents a big headache for local municipalities tasked with creating and enforcing regulations on these properties. To be properly licensed, hotels, traditional bed and breakfasts and vacation homes in Duluth undergo health and safety inspections. They must be permitted and are required to collect lodging and sales tax.

When the Duluth City Council recently voted to impose a moratorium on new short-term rental licenses for up to one year, it was to grapple with the explosion of primarily Airbnb inventory within the city that is operating under no set regulations or ordinance. Duluth and cities around the country are struggling to create consistent policies that ensure these businesses are providing safe accommodations, abiding by codes and collecting appropriate taxes.

Consumers expect a destination to offer the type of lodging they prefer to stay in. Based on the remarkable growth Airbnb has experienced in its short seven-year existence, there’s clearly a demand for this type of offering. It may not appeal to every traveler, but that’s why it’s essential Duluth provides visitors the broadest selection possible to ensure their preference is available.

However, since addresses are not included on Airbnb, policing this inventory and enforcing regulations is a challenge for cities. Unless the property is easily recognizable or a neighbor submits a complaint, there’s no easy way for cities to identify properties operating under the radar. This is where city leaders face the task of creating an ordinance that can realistically be enforced.

Banning Airbnb outright has not been successful in communities such as Santa Monica, Cal., where there are currently 56 properties still operating in clear violation of the ban. Duluth features 52 properties on HomeAway, but it’s difficult to tell exactly how many listings are on Airbnb because the number fluctuates based on the dates entered in the search. It ranges from 28 to 58 depending upon availability; plus there’s some crossover with owners listing the same property on both sites. This represents significant inventory in our market, particularly when you multiply this quantity by 365 days.

As our city navigates the challenges presented by this evolving issue, it’s important to recognize the positive impact new business can bring to our community and new visitors we can attract as a result.


Anna Tanski, President/CEO