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Second-Home Rental Market, Property Management Companies and Government Grapple with Evolving Industry

According to people intimately involved in the industry, protection is needed to ensure the thriving second-home vocational rental sector can withstand growing pressures from global giants such as AirBnB and VRBO.

Subsequent to a Memorandum of Understanding (MOU) the Government is reviewing it is expected that they will begin to receive VAT from AirBnB (the world’s largest listing of vacation rentals by owners) as early as January 1, 2019.

While there are concerns over the impact that Airbnb-type operations have on the traditional hotel segment, Minister of Tourism Dionisio D’Aguilar downplayed those fears. “I think it’s really just a new market,” he added.

“I think that there are people who don’t want to travel to traditional hotels who probably would not have come here had it not been for an Airbnb-type product, such as large families looking to economize and want to buy their own food. I would like to think that it is a new channel of revenue.

“We have to take into consideration that there are customers using up seats to come to the country that are not contributing to our traditional hotel sector. We don’t collect information from Airbnb customers so I have asked my Statistics Department to review the Airbnb MOU (Memorandum of Understanding), what they promised us and to start to get information from them so we can intelligently address this second home rental market. It’s an evolving industry.”

However, two of the largest property management companies in Hope Town said that they feel Mr. D’Aguilar is not listening to the people who are involved in the industry and that without legislation to protect them, AirBnB could potentially shut down property management companies putting Bahamians out of work and lowering the quality of the tourism product.

Carrie Cash of Elbow Cay Properties said that the significant difference between booking websites like AirBnB and VRBO and local property management companies comes down to quality service.

“When AirBnB sells you the room they are done,” she said. “There are no additional benefits to booking through their site, and we often have to assist their customers on the ground because they are not given all the information they need before travelling and while they are here.”

She added that without property management companies there is no one available to assist the guests when they arrive, no caretakers to ensure the rental is clean and maintained, no one to call when something breaks or power goes off.

Mrs. Cash said “We should be concerned about the quality of our tourism product, and having a property management company involved locally makes the difference in ensuring they have good experience and will return.”

She said that they ensure, no matter what challenges come up, that the visitor leaves satisfied, something a booking site doesn’t care about.

Samara Albury of Hope Town Hideaways noted that when the room tax was taken away from vacation rentals in 2015 (after only being collected for about two years) “it created a vacuum where government wasn’t collecting any taxes for rentals, and at that time they weren’t sure how to treat vacation rentals.”

She noted that after several meetings trying to figure out how VAT would work in their industry “we were told that only homeowners who made over $100,000 in income in a year would need to register, charge and remit VAT.”

“They are now only getting tax on a handful of rentals and it seems that they are hoping to capitalize on AirBnB’s popularity to somehow make up for the lost revenue; they are trying to figure out how they can do that with VAT,” she said.

Mrs. Albury said “I feel like vacation rentals need to be treated like real estate, you should be required to have a Bahamian broker rent vacation properties; that’s the only way you can make it consistent across the board.”

She said that “AirBnB doesn’t care about the end product, you need someone who is there from the beginning to the end, otherwise you have no control over the quality of the tourism experience.”

“The only way you are going to guarantee that government collects taxes from all the properties is through making it a requirement to work through a Bahamian property management company,” she added.

AirBnB is like running a hotel with no staff; after the room is booked there is no other value service given to the visitor.

Mrs. Albury said “We sent a list [to BREA (Bahamas Real Estate Association)] of our perspectives on what we see different things causing, and even recommendations on what we feel would help secure and grow the industry, but we understand they have been unable to arrange a meeting with D’Aguilar.”

Mrs. Cash also noted “Even if you’re not collecting tax, the end product is better when you have a property manager involved.”

She echoed the sentiment; “Put a law on the books to say that if you are going to rent your home you have to hire a Bahamian Property Management company located and registered in the Bahamas; and the obligation to collect taxes can be on the property management company instead of an Airbnb.”

“Local companies collecting taxes would be far more reliable than depending on Airbnb to report and remit taxes collected.”

She concluded that “If Airbnb is allowed to do what they are doing they can put all of these property management companies out of business, we can’t compete on a global level.”

She added that in the end, Airbnb doesn’t care about customer service, their part ends when a customer books a home.

According to data collected on AirBnB via data and analytics website AirDNA the vacation rental site current lists 2035 active home rentals, of which 178 are listed for Abaco.

The Central Bank of The Bahamas’ monthly report for August, released on Monday, said vacation rentals continued to grow in popularity among stopover visitors with average daily room rates (ADR) jumping by 1.8 percent to $319.77. Airbnb bookings increasing 41 percent year-over-year for August.

“Indicative of the growing popularity of the short-term private rental market, data from Airbnb showed a 41.2 percent increase in booked listings via the Airbnb platform during August for all Bahamas in comparison to the same period in 2017,” the Central Bank said in its report.

“These results are also influenced by the fact that more properties are listing on the site each year. In terms of the broad trends in the major markets, the number of listings in Exuma firmed by 54.7 percent, while gains of 37.8 percent, 34.8 percent and 28 percent were noted for New Providence, the Abacos and Grand Bahama, respectively.

Meanwhile cities across the world are experiencing mixed feelings over AirBnB’s success, with residents concerned with a variety of issues caused by unregulated vacation rentals.

At the very least, like The Bahamas governments worldwide will be pushing for a closer partnership with Airbnb. However, the effectiveness of such partnerships is questionable, since Airbnb seems keener to protect its users’ privacy than to assuage local governments’ concerns.

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