Vacation rental guests contributing less to Hawaii tourism economy

Guests staying at vacation rentals in Hawaii aren’t exactly big spenders.

The popularity of mobile apps and websites such as Airbnb, VRBO and HomeAway are part of the reason arrivals to Hawaii are soaring and costs to come here are declining, according to new data from the Hawaii Tourism Authority. While most of the nearly 10 million visitors who came to Hawaii’s shores last year stayed in hotels, guests in these traditional accommodations aren’t keeping pace with the growth in overall visiting arrivals.

It might be one of the biggest changes to hit Hawaii tourism since the advent of jet travel brought what had been an exotic, expensive destination within reach of the masses. When jet travel opened to Hawaii in 1959, carriers cut passenger travel times, and the isles started to see more passengers traveling here at a lower cost than ever before.

While the advent of jet travel took travel counts to Hawaii beyond what could be imagined, the rise in Hawaii visitors staying in alternate lodging has caused tourism to grow beyond what current hotel capacity would allow.

Vacation rental advocates say the shifting market is filling a demand for rooms, helping to grow tourism and allowing residential owners to carve out their own piece of the tourism pie. A main complaint by opponents is that the growth of this kind of tourism provides less than it takes.

Outpacing hotels

A point neither side argues is that alternate lodging growth is outpacing traditional lodging. In 2018 more than 5.9 million visitors to Hawaii said that they planned to stay in a hotel during their stay — a gain of more than 3% from 2017. Still, the gains paled in comparison with the robust growth from alternate accommodations, which occupy a smaller but rapidly expanding footprint among Hawaii lodging choices.

Visitors in 2018 who planned to stay in a vacation rental house grew to 949,516, a 24% rise from 2017. During the same period, B&B guests rose 12% to 117,087, while guests staying in private rooms in private homes climbed 19% to 150,897 and those staying in shared rooms in private homes rose 39% to 49,054.

Even at their current footprint, HTA President and CEO Chris Tatum said alternate accommodations, especially unregulated ones, have caused a dip in visitor spending. April marked the sixth month in a row that more visitors came to Hawaii than the previous year while creating less economic benefit. Arrivals have been growing since February 2017, but tourism spending has been falling every month since November.

“If we don’t take a position on it, (lower spending) may be the new reality,” Tatum said.

Here’s why: In 2018, HTA data shows, the typical hotel guest was spending $115 on lodging per day compared with guests staying in rental homes, who spent $85 per day on lodging; or those in B&Bs, who spent $77; or those staying in private rooms in private homes, who spent $54; or in shared rooms in private homes, who spent $53.

Likely to spend less

Unfortunately for Hawaii’s coffers, visitors staying in alternative lodging also spend less overall, which likely contributed to 2018’s average daily spending of $201 per person, a gain of just over 1% from 2017.

Last year visitors who stayed in rental houses told HTA that their total daily spending — including lodging, food and other costs — was $179, or 24% less than their average hotel counterpart, who spent $234. Visitors staying in private rooms in private homes reported daily spending of $149, which was 36% lower than spending by hotel guests. Guests staying in a shared room spent $147 daily, or 37% less than the average hotel visitor to Hawaii spent on a daily basis.

B&B visitors, who behave more like the state’s higher-spending hotel guests, reported they spent $186, or 21% less than those people in hotels.

“In general, people who stay in a hotel are looking to be pampered and not necessarily looking to cook themselves, so many of them dine out for most or all meals. So that typically means they spend more on food, which leads to higher spending numbers,” Tatum said.

Tatum said a reason why customers of vacation rentals and other alternative accommodations spend less daily is that they tend to “do a lot of things on their own” and are “looking for different experiences” from visitors who are staying in traditional lodging.

“They create their own activities and they cook for themselves, so the more that expands, obviously, your spend per person is going to continue to go down on average,” Tatum said.

The exception is spending at B&Bs, which last year fell behind only spending at hotels and condos.

“They’re actually providing you that meal, so to me that’s a higher level of serv­ice than some vacation rental where you’re getting no extra service,” said Jennifer Chun, director of tourism research for Hawaii.

Tatum added, “Bed-and-breakfast — they’re still just renting a room, so they don’t have a kitchen to use, so they’re probably still going to go out to eat.”

Tatum said understanding these nuances is important to managing tourism. That’s why Tatum said HTA has commissioned a new study on vacation rentals and their financial impact. HTA plans to share information annually with legislators and community leaders “so that they can make educated decisions,” he said.

Inequity in spending is a major reason that some Hawaii residents are increasingly dissatisfied with tourism, said Koolauloa resident KC Connors.

“We are getting increased tourism and getting less revenue,” Connors said. “There’s a strain on services, overcrowding at beaches and parks, fewer affordable rental rooms for our janitors and 7-Eleven workers. Some months we’ve had as many as four rescues at Crouching Lion. There’s a feeling that we aren’t getting enough back to make up for all that we have lost.”

Community pushback

Connors isn’t alone in her concerns. The rise in alternate lodging has sparked pushback from communities across Hawaii that are frustrated by the spread of tourism, which once mostly occupied Hawaii’s resorts, into residential neighborhoods and places where public infrastructure and resources become strained.

“The community is not excited about (vacation rentals), and they believe it’s tourism driving these folks. And that’s not the case; it’s being driven by platforms that are pushing them out there. So we believe that if it becomes legal, it needs to be the decision of the legislators, Council and residents, not the platforms,” Tatum said.

This year the state Senate passed a bill that would require websites like Airbnb to collect and pay taxes on behalf of short-term vacation rental hosts, but it’s still unclear whether Gov. David Ige, who has until June 24 to finalize his intent-to-veto list, will sign it. Supporters favor using the bill to ensure that vacation rentals are paying their fair share — a move that they expect would add millions to Hawaii’s tax coffers.

However, opponents fear the measure would make it more difficult for counties to enforce zoning laws. The process certainly has been contentious on Oahu, where more than 100 people turned out Friday before the Honolulu City Council Zoning, Planning and Housing Committee to testify on two vacation rental measures.

Vacation rentals have been such a charged issue that Oahu hasn’t taken any action on the topic since issuing a 1989 moratorium on vacation rentals. The city Department of Planning and Permitting estimates there are 6,000 to 8,000 illegal vacation rentals but only 816 legal ones outside of resort zones.

The committee allowed a bill to move forward Friday that would allow 1,715 newly permitted hosted vacation rentals on Oahu but no new whole-home transient vacation units. They also kept another bill in the running that would crack down on illegal vacation rentals without providing a path for them to become legal.

Connors said she doesn’t favor expanding B&Bs but said she supports enforcing current laws. Still, if either measure gets passed, it would seriously affect Oahu’s vacation rental industry.

Airbnb said in a statement, “Vacation rentals always have been an important part of tourism in the islands but this policy will completely ban this activity. Airbnb supports reasonable regulations and we remain committed to working with the city to achieve a balance that protects the economy while preserving neighborhood character.”

Airbnb cited a 2016 study prepared for HTA by JLL that said, “Fifteen percent of respondents indicated they would not have made the trip to Hawaii at all if it had it not been for the alternative accommodations option.”

The hosting platform also noted that a study last year, commissioned by the Travel Technology Association and conducted by Kloninger & Simms Consulting, found that without alternative accommodations outside of resort zoning, Oahu could suffer annual losses of up to $336 million in household income, 7,000 jobs and $1.2 billion in economic activity.

“Alternative accommodations are playing an increasingly vital role in Oahu’s visitor industry as more guests travel to the island and hotel occupancy rates are near max capacity,” Erik Kloninger, Kloninger & Sims principal, said in a statement. “Efforts by lawmakers to significantly reduce the number of accommodations will have a significant effect on the island’s economy and hurt hundreds of local businesses that benefit from the revenue these visitors bring in.”