Rental furore: Part 3

The tourism impact of short-term rentals (STRs)

By Mark Ameerali

In 2016, tourism Kelowna commissioned a survey of the visitors to Kelowna and compared the results from 2011.

Here are the highlights:

  • 1.9 million total visitors to Kelowna
  • 8,350 direct jobs linked to tourism
  • $240 million in earnings from those jobs
  • $810 million in total economic output
  • $142 million in tax revenue

At the same time, Tourism Kelowna conducted an intercept survey of visitors and found that 9.7 per cent of visitors used STR and 6.1 per cent listed bed and breakfasts (which were likely listed on STR sites) as their primary accommodation while in Kelowna.

This means that nearly 16 per cent of the figures above are driven by STRs.

When a visitor stays with an STR host, the money spent by that visitor goes directly into the community.

Any accommodation fee is paid directly to a member of the community and the dollars spent by the host are spent back into the community, multiplying the effect of the spending many times over.

Compare this model to the corporate or franchise model hotels follow. The profits from hotel chains in Kelowna are siphoned out of the city and re-distributed to hotel executives, shareholders, and/or a very small group of franchisees.

I’m not suggesting this shouldn’t happen; I’m simply suggesting the sharing economy introduces another more egalitarian option to the mix and this is a good thing.

How are STRs impacting hotels

Since 2011, the number of people staying in hotels has increased 11.4 per cent from 42.8 per cent of visitors to 47.7 per cent of visitors. Hotel revenue per available room has increased over the period from 2011–16, yet according to the Tourism Kelowna study, the average visitor has spent less money on accommodation.

This strongly indicates that the STR market is bringing new types of visitors to the city by creating a new more affordable accommodation category.

This is supported by a study conducted jointly between Boston University and fUSC, which showed that a one per cent increase in Airbnb bookings only resulted in a .05 per cent decrease in hotel revenues.

That would indicate that for every 100 Airbnb listings created, five fewer hotel rooms are booked. (The rise of the sharing economy: Estimating the impact of airbnb on the hotel industry. Boston University and University of Southern California, Nov 2016)

While this data was U.S. based, the same findings are reflected here in our local data. It suggests that Airbnb seems to be more of a complement than a competitor.

When the hotels seem to reach a healthy occupancy rate is where STR become sort of a secondary market.

With a local economic impact between $80-$128 million, STR is the fastest growing slice of the accommodation pie and the only slice growing besides the hotel industry.

So who really are the victims of STR?

  • Is it the host who has more money to support their own living costs and rent it back to the community?
  • Is it the vacationers who can better afford to visit Kelowna and spend more of their dollars on enjoying their vacation instead of on accommodation?
  • Is it the tourism industry or the local restaurants and shops that are seeing more visitors than ever before?
  • Is it the students, who have more options when trying desperately to find a place they can live for eight months of the year?
  • Is it the government that sees an increase in tax revenue from all of the above?
  • Is it the evacuee that has thankfully been setup with free accommodation through Airbnb emergency services?

All these groups benefit greatly from the increase in economic activity driven by STR.

The unfortunate fact is we simply don’t have enough long-term rental stock at this point in time, so vacancy is down, rents have increased and it’s bad press for the city.

But let’s not cut off our nose to spite our face.

Let’s recognize the blessing we have in the STR opportunity and be thankful for it. 


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