Oahu vacation rental owners feeling pain of shutdown

Oahu still has the toughest coronavirus-related vacation rental restrictions of any island, but that didn’t stop owners and suppliers from fetching the highest — albeit still low— July occupancy rate statewide.

The state’s supply of vacation rentals fell nearly 56% to 397,100 unit nights and monthly demand dropped nearly 92% to 56,000 unit nights, according to a report released Tuesday by the Hawaii Tourism Authority, using data from Transparent Intelligence. Average statewide monthly unit occupancy fell 63.5 percentage points to 14.1%.

In comparison, Oahu’s average monthly unit occupancy fell 59.9 percentage points to 20.3%. Oahu also experienced the greatest July reduction in supply of any island which fell more than 63% to 108,305 units. Oahu’s demand dropped to 22,036 units, but the nearly 91% drop, wasn’t quite as steep as that experienced by Maui or Kauai.

Honolulu Mayor Kirk Caldwell still regards vacation rentals as nonessential businesses and hasn’t joined the neighbor island mayors in loosening operational restrictions. While the threat of enforcement has kept responsible Oahu owners sidelined, it hasn’t held many violators accountable. So far, the Department of Planning and Permitting has sent more than 1,000 vacation rental owners/operators warning letters based on information visitors are providing at the airport, but only about 128 violations have been issued since March and only $1,000 in fines have been collected. The DPP couldn’t say how many of these violations even came from the airport referrals.

Short-term rentals, which rented for 30 days or less and weren’t being used to quarantine guests, were allowed to operate on Hawaii island, Kauai and Maui County. The partial loosening of restrictions allowed them to tap into a small boost in arrivals from the lifting of a mandatory 14-day self-quarantine for interisland passengers.

Travel demand in July, however, was still depressed significantly by a requirement that all out-of-state passengers were required to abide by a mandatory 14-day self-quarantine. Because of the quarantines, a majority of flights were canceled in July.

Occupancy at Maui County vacation rentals fell 72.6 percentage points to 8.9%, the lowest among the islands. Maui’s supply declined more than 49% to 142,005 and demand dropped more than 94%, the most of any island, to 12,680. Kauai’s occupancy dropped 65.5 percentage points to 12.4%. Kauai’s supply fell more than 51% to 55,962, while demand decreased more than 92% to 6,944. Hawaii island’s occupancy declined 52.5 percentage points to 15.8%. Hawaii island’s supply fell nearly 56% to 90,850 and demand dropped nearly 90% to 14,314.

Munro Murdock, Hawaii Legal Short-Term Rental Alliance (HILSTRA) president, said owners and operators across the isles are feeling the pain from delays in reopening Hawaii tourism through a pre-arrivals testing program.

Murdock said HILSTRA’s membership consists of more than 60 licensed managers who represent over 1,500 legal short-term rentals and contribute north of $20 million a year in general excise (GET ) and transient accommodations taxes (TAT).

“First it was Aug. 1, then Sept. 1, now it’s Oct.1 at the earliest. It’s only a matter of time before you see a lot of companies in our industry throw in the towel. We’re coming up on six months with virtually no revenue,” Murdock said.

The drop in travel demand has hurt vacation rentals across the isles, but Murdock said regulations have hurt Oahu’s owners and operators the most. Even Oahu’s legal vacation rentals, the 808 with a nonconforming use certificate (NUC) and the additional ones located in a designated resort zone, have been banned since April 7 from advertising or renting their units for short-term rental usage during the lockdown.

Murdock said his company Love Hawaii Realty + Love Hawaii Villas manages legal vacation rentals for 30 owners. From April to August of last year, the company took in $1.5 million in gross rent, or roughly $50,741 per owner. During the same period this year, Murdock said gross rents fell to $104,259 or about $3,400 per owner. That doesn’t even cover a month of expenses for Murdock’s average owner, who likely spends from $4,000 to $7,000 monthly, he said.

Michel Rubini, who owns The Sunset Beach House, a vacation rental on Oahu’s North Shore, said he’s been devastated by Caldwell’s emergency orders. Prior to COVID-19, Rubini said the property, which has a NUC, generated about $15,000 to $20,000 a month in income, but he said he’s made “zero dollars” since Caldwell’s ban.

“Just because they shut down vacation rentals doesn’t mean that I don’t have expenses,” said Rubini, who is retired and lives in California. “My property taxes also don’t go away. I pay the higher residential A rate since it’s an investment property. I used to pay $6,000 in property taxes. Since they passed Residential A, it’s more like $22,000 a year or so and they aren’t even letting me use the property for short-term rentals.”

DPP and the city didn’t immediately respond to the Star-Advertiser about whether or not they intend to address the tax issue that Rubini raised.

Rubini said the Oahu shutdown also is dampening city and state GET and TAT tax collections.

“When I was operating, I was paying about $2,500 a month or $30,000 annually in transient accommodations taxes,” he said.