Vacation rental supply fell on Oahu and the number of visitors reporting vacation rental stays dropped by about half in September, the first month since the city’s crackdown on illegal rentals took effect.
Ordinance 19-89, which took effect Aug. 1, makes it illegal to advertise a vacation rental that is not properly permitted or not inside a hotel-resort zone.
It also raised fines for recurring short-term rental violations to $10,000 per day from $1,000 per day. Since enforcement began, the city has issued 166 notices of violations for advertising unpermitted short-term rentals and 24 notices of violation for renting an unpermitted rental. Only 10 notices of order, which come with potential fines, have been issued by the city to owners who failed to take timely corrective action.
According to a vacation rental report released Thursday by the Hawaii Tourism Authority, Oahu’s supply of available vacation rental units in September dropped to 241,811 unit nights, a decrease of 19% since July, 8% since August and 7% since a year ago. At the same time, the vacation rental supply on Maui, Hawaii island and Kauai posted monthly and year-to-date gains.
“While supply continued to grow in August and September for the other three counties, Oahu saw the decrease in supply that I would have expected to see with Ordinance 19-89,” said Erik Kloninger, whose firm Kloninger & Sims Consulting LLC assisted Transparent Intelligence in preparing HTA’s first Hawaii Vacation Rental Performance Report, which is slated to be released monthly.
An island highlight released Thursday by HTA also indicated that the number of Oahu visitors who said that they planned to stay in a vacation rental house had dropped. In July, 64,389 visitors reported that they planned to stay in an Oahu rental house. However, that number fell to 51,669 in August and to 32,740 by September.
While those numbers could prove meaningful over time, it’s still too early to determine how the decrease in visitors planning vacation rental house stays on Oahu relates to the ordinance. To be sure, similar declines were reported for rental house stays during the same period on Hawaii island, Kauai and Maui.
Jennifer Chun, HTA director of tourism research, said part of the reason for the across-the-board drops could be that July is a peak tourism season, while September is a softer shoulder season. Due to seasonality, HTA typically doesn’t compare month-to-month changes, Chun said.
“The number of people staying at a hotel in September is lower than July, too,” Chun said. “Are there impacts? I’m sure there are because I’ve read in the paper that there are, but it’s too hard to see it in the data.”
What’s clear from the historical data is that Hawaii has experienced record levels of visitor arrivals over the last seven years but posted only minimal increases in traditional lodging units, such as hotels, condominium hotels and timeshare resorts.
“If we go from 7 million to 10 million visitors but hotel occupancy stays the same, we know they are staying in vacation rentals,” said Keith Vieira, principal of KV & Associates, Hospitality Consulting. “It was time to get a better handle on it, and we’re obviously starting to do that.”
Though vacation rentals are credited with bringing more visitors to the state, the challenge is making sure they are paying their fair share and covering the cost of the additional strain extra visitors bring. In general, HTA data has shown that vacation rental visitors tend to spend less on their Hawaii visits than tourists who stay in more traditional accommodations.
Kloninger said the new monthly data will allow HTA to provide regulatory and spending insights through the real-time tracking of a market that has “become so big and such a hot-button issue around the world.”
The issue has certainly divided Oahu, as evidenced by the large number of Bill 89 testifiers, who often provided conflicting viewpoints.
Critics told lawmakers that the spread of illegal vacation rentals is bad for tourism because it makes it harder to control quality and more difficult to ensure that hotel workers keep good-paying jobs and benefits. They contend that vacation rentals drive up housing prices and change the character of residential neighborhoods for the worse.
Proponents argued that vacation rentals, even illegal ones, were good for Oahu because they add capacity to the isle’s tight accommodations market, generate taxes, fuel visitor spending and create jobs. Some viewed the choice to turn homes into vacation rentals as a property right that allows residents and investors to benefit from Hawaii’s lucrative lodging market.
Dire warnings have been issued about potential tourism drops. The Oahu Alternative Lodging Association has estimated that the new law could cause Oahu to lose between 50,000 and 80,000 visitors per month.
The Economic Research Organization at the University of Hawaii last month updated its state forecast indicating that “Oahu tourism is set to take a significant hit from the recent crackdown.”
Oahu’s short-term rental regulation also was brought up during recent earnings conference calls for Alaska Airlines, Hawaiian Airlines and Southwest Airlines. However, the impact remains uncertain.
Peter Ingram, Hawaiian Airlines’ president and CEO, said during last month’s third-quarter earnings call that “as of right now we haven’t really been able to see any impact on demand that we can attribute to the changes in regulations around vacation rentals. … We continue to see robust demand for travel to Hawaii from North America and from our international destinations.”
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VACATION RENTAL SUPPLY
Vacation rental supply, or monthly unit nights, has fallen on Oahu since the county’s crackdown on short-term rentals. During the same period, and for the year, vacation rental supply grew on Maui, Kauai and Hawaii island.
July supply | Aug. supply | % change from prior month | Sept. supply | % change from prior month
Oahu: 298,595 | 274,886 | -8% | 241,811 | -19%
Maui: 286,577 | 305,246 | +7% | 312,810 | +9%
Big Island: 196,857 | 204,690 | 4% | 219,294 | 11%
Kauai: 123,225 | 132,396 | 7% | 139,370 | 13%
Source: HTA Hawaii Vacation Rental Performance Report
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YEAR-TO-DATE SEPTEMBER 2018 TO SEPTEMBER 2019 SUPPLY
September 2018 | September 2019 | year-over-year % change
Oahu: 262,709 | 241,811 | -8%
Maui: 251,489 | 312,810 | +24%
Big Island: 191,202 | 219,294 | +15%
Kauai: 103,073 | 139,370 | +35%
Source: HTA Hawaii Vacation Rental Performance Report
