April 19–Todd and Stephanie Samuel, visitors from Pasco, Wash., shaved hundreds of dollars off their most recent Hawaii vacation by staying in a North Shore short-term rental that they booked online.
“We’re paying $125 a day for an oceanfront vacation rental in Hauula,” said Todd Samuel, who was on his fifth trip to Hawaii.”I tell you there’s a big difference between where we are and Turtle Bay, but it’s just fine. Our main criteria was a reasonable price and a great location. We didn’t want anything too touristy.”
The proliferation of vacation rentals and bed-and-breakfasts in residential neighborhoods is filling a demand for rooms and helping to grow tourism. But new data from the Hawaii Tourism Authority show guests at these often-unpermitted rentals and B&Bs aren’t exactly big spenders.
In 2014, the typical hotel guest was spending $116.40 on lodging a day as compared with the typical rental and B&B guest who spent an average $70.20 and $73.10, respectively, according to the HTA, which compiled the data at the Honolulu Star-Advertiser’s request.
Unfortunately for Hawaii’s coffers, rental and B&B visitors also spend less overall. Last year, visitors who stayed in rental houses told HTA that their total daily spending — including lodging, food and other costs — was $149.90, or 36 percent less than their average hotel counterpart who spent $235.50. Likewise, B&B visitors reported they spent $173.60, or 26 percent less than hotel guests. If these guests had spent as much as the average hotel guest in 2014, it would have added millions more to Hawaii’s economy.
The popularity of mobile apps and websites such as Airbnb, VRBO and HomeAway make it easier for tourists to find alternative accommodations and for homeowners to rent space. Consequently the number of Hawaii visitors staying in vacation rentals and B&Bs is rising rapidly.
This trend represents a departure from the HTA’s sustainable-tourism philosophy of a decade ago, which focused on finding ways to increase visitor spending without bringing more visitors to Hawaii.
Back in those days, success didn’t mean more arrivals, it meant higher spending, said George Szigeti, president and chief executive of the Hawaii Lodging & Tourism Association.
“Hotels across the isles bought into this movement and leveraged significant funds to upwardly reposition their properties by renovating guest rooms, enhancing amenities and improving food and beverage offerings,” Szigeti said. “They are getting a better rate because they are providing a better experience.”
But while cost is certainly a factor for visitors who seek neighborhood lodging, many also desire to experience something new, different and authentic.
“It’s a different world than when Gidget came to Hawaii. Almost everyone that wants to visit already has (visited), with the average repeat traveler coming five times,” said Paul Brewbaker, principal of TZ Economics. “Why would any guy spend more on the fifth trip now that he knows all the bargains?”
Marc Goerlich had been staying in a Waikiki hotel for a $400 business rate, but switched to a Kailua cottage with a daily rate of $162 when his family joined him.
“I get the busy hustle-and-bustle in Seattle,” said his wife, Goldie Goerlich. “I like the calm. We’re about a block from the beach and there’s more of the kinds of things that we like to experience here than in Waikiki.”
Top hotel brands here say the largely unregulated rental industry is hurting Hawaii’s resort districts.
According to HTA figures, hotel usage during the first two months of 2015 dropped 1.5 percent from the same period a year ago. That was the first drop in hotel use since 2009, and hoteliers say it hurts revenue and eventually could impact jobs.
“Arrivals were up the first quarter, but the hotel industry collectively has seen lower occupancies than last year,” said Barry Wallace, executive vice president of hospitality services for Outrigger Enterprises. “We’ve had a reduction in hours and we’ve encouraged employees to take vacation.”
Wallace’s sentiments were shared by Jerry Gibson, area vice president of Hilton Hawaii and Harris Chan, vice president of operations for Starwood Hotels & Resorts. “Taking this business away from hotels directly affects the growth of quality hotel jobs,” Chan said.
At the same time, HTA data show that January and especially February were much better months for the less-lucrative transient vacation rental market, which has been rising since at least 2011.
HTA reported that 11,639 visitors stayed in a rental home and 10,413 visitors chose B&Bs in February. Those numbers are small compared to overall tourism, which totaled nearly 662,000 visitor arrivals in February, but they are growing fast. The number of visitors using a vacation rental was up 46.8 percent from a year earlier. B&B users climbed 33.4 percent.
Domestic visitors, especially from the U.S. West, were the biggest market for alternative accommodations in February, according to HTA figures. But B&Bs and rental homes in February also saw a huge spike in the international market, including Japanese visitors who tend to book the most-expensive hotel rooms with the best views.
“Hotel prices are rising and not everyone can pay them,” said Will Page, who publishes Kailua maps highlighting tourist-friendly accommodations, legal or not, and businesses. “People also are getting more comfortable with booking their own travel on the Internet.”
Outrigger’s Wallace said most of the hotel industry supports rental and B&Bs as a niche travel choice, but they want the city and state to regulate short-term rentals so owners are paying their fair share of taxes.
“We could be losing millions in uncollected taxes as well as visitor spending,” said Szigeti, who lobbied for several vacation-rental reform bills at the state Legislature and is monitoring three bills before the Honolulu City Council. “That’s not fair since hoteliers fund public improvements and support community organizations.”
Only senate Bill 519, which requires transient vacation rentals to maintain a local contact for purposes of consumer protection, has advanced out of the dozen or so bills introduced by state lawmakers this year.
Mayor Kirk Caldwell has an enforcement bill pending. Bills introduced by Councilman Ikaika Anderson and Council Chairman Ernie Martin allow for market expansion, but also include regulatory provisions.
But while lawmakers might get their arms around enforcement, Brewbaker said it is futile to resist the spread of transient vacation rentals.
“I sympathize with city officials and people on neighborhood boards, but I’m here to tell you that it’s happening everywhere … There’s a vacation unit and an accessory dwelling unit coming to a neighborhood like yours,” he said. “The sooner we figure out how to exploit this development for gain, the better off we’ll be.”
