Rent by owner market getting more professional
EAGLE COUNTY — The online lodging business has exploded in the past few years. And, like most things on the Internet, after a wide-open start, the business seems to be maturing. It’s also becoming more regulated.
The town of Vail earlier in 2015 passed limited regulations on rent-by-owner businesses. People who rent their homes or other units were already required to pay town lodging taxes. As of Jan. 1, those people will need a town business license.
As of Friday, town of Vail Finance Director Kathleen Halloran said in an email that the town already has added about 54 of those licenses this year, and that new applications are coming in at a rate of about five per week.
After a search of online listings, the town mailed postcards about the new regulations to property owners who have units available. The town also ran advertisements about the new regulations.
Those regulations were the offshoot of an effort that included former Vail Town Council member Dale Bugby, the owner of Vail Resort Rentals, a long-established property management company.
That effort started with lodging managers asking the town for regulations that would have required those in the rent-by-owner business to meet near-hotel standards regarding safety and cleanliness.
The council eventually came to a decision to regulate lightly, while still ensuring that property owners pay lodging taxes, the largest single portion of the town’s sales tax pie.
While the rent by owner business has grown, it’s difficult to get a good idea of just how many units are out there.
Ralf Garrison is the managing director of Destimetrics, a Denver-based market research and consulting company that tracks resort-area lodging.
Garrison said quantifying just how many units are available is difficult, in part because many listings are duplicated on the major sites, VRBO.com and Airbnb.com.
Another problem with accurately tracking rent by owner units is the fact that many owners will put “Vail” in their listings to draw more business.
“A guy in Copper Mountain can list his unit as suitable for Copper and get three inquiries a week,” Garrison said. “If he lists it as suitable for Vail, that goes to 10.”
PROS AND CONS
Garrison said that the rent by owner market is a two-edged issue for communities such as Vail.
On one hand, rent by owner units can add extra capacity to the town’s lodging base. That’s important. Vail is essentially filled up on most busy weekends, and a few weeks during the busiest part of the ski season. But the town’s occupancy levels drop well below 40 percent in May and October. Garrison said hotels like to see year-round occupancy levels of 65 percent or more before building anything new. Vail’s averages don’t hit that level.
So rent by owner units add needed inventory to the town’s bed base during busy times.
On the other hand, if people shift their second homes from long-term rentals to short-term lodging, that takes badly needed rental housing out of the mix.
But, Bugby said, after the initial explosion of online rentals, the market seems to be maturing.
Regulation is part of that process — many towns and cities regulate online rentals more strictly than Vail does. But owner and renter expectations are also evolving.
Garrison said the major companies are “professionalizing” as they grow, and, in the case of VRBO, are acquired by other companies.
That company was essentially first to blossom in the online rental business and was acquired by another firm, HomeAway. HomeAway was then acquired by Expedia, a more broad-based company that provides access to lodging, flights, rental cars and other services.
Bugby, who advertises his company’s listings on the major rent by owner sites, said he’s happy to see Expedia now in control of VRBO.
“There’s a lot more burden on the owner to act more like a hotel,” Bugby said. That means owners have to be more professional in how they list their property.
Airbnb hasn’t yet been swallowed by another firm, but that company now has more rooms in its worldwide listings than the Marriott hotel group. It’s professionalizing as it grows, too.
“But that’s the Internet,” Bugby said. “It’s whatever you can get away with until there’s rules.”
As the industry matures, the market is maturing, too.
“The world is changing fast,” Garrison said. “Until you understand (a product), it’s disruptive.”
Vail Daily Business Editor Scott Miller can be reached at 970-748-2930, email@example.com or @scottnmiller.