- Special Projects
During its annual investor day conference in December, the chief executive of Hawaiian Airlines corroborated something that should come as no surprise to people living on Oahu’s North Shore or new tourist meccas like Kailua and Lanikai.
Websites such as VRBO and Airbnb, Hawaiian’s CEO Peter Ingram said, have been key to allowing Hawaii to accommodate the nearly 10 million visitors the state now hosts each year.
“If you had asked me five or six or seven years ago, when we were below 8 million visitors, I would have said it would be difficult to grow without seeing more investment in hotel infrastructure in Hawaii,” Ingram told a stock analyst who had asked about Hawaii’s hotel market and short-term rental platforms.
But tourism has boomed despite little growth in hotel rooms and timeshare units. Much of the growth, Ingram said, is because of short-term vacation rentals.
At the same time that there is heightened criticism of Airbnbs and other vacation rentals, most of which operate in defiance of laws meant to protect residential neighborhoods, there is growing acknowledgement of just how entrenched — and economically important — they’ve become in the state’s leading industry.
Tourist destinations like New York, Santa Monica, New Orleans and Barcelona have all imposed regulations on short-term rentals, the Hawaii Appleseed Center for Law and Economic Justice noted in a study published in November.
Maui residents lashed out against operators of Airbnbs and others in November by voting to impose tough penalties on illegal vacation rentals. A crackdown appears to be looming on Oahu, where short-term vacation rentals are growing rampantly in some neighborhoods. The Honolulu City Council has a half-dozen regulatory measures to take up when it reconvenes this month.
Although it’s clear short-term rentals are a major player, Ingram noted, there’s not a lot of good data on exactly how many there are.
Part of the challenge is that, for all of the advertising online, many of the advertised units are illegal, said Jennifer Chun, director of tourism research for the Hawaii Tourism Authority. That agency oversees a state tourism marketing plan and conducts extensive visitor research.
The HTA has produced an inventory of statewide visitor accommodations, but the document relies on hotel managers, property managers, condominium associations and others to return surveys and may not capture many small operators renting properties on Airbnb, Chun said.
In order to get a handle on the online rentals, the HTA conducted another study gathering data from the three main online brokers: Airbnb, HomeAway and TripAdvisor’s Flipkey and removed duplicate listings to avoid double counting. According to the study, between 5 percent and 15 percent of the homes in Kailua and Lanikai have been turned into visitor accommodations.
It’s even more dramatic on the North Shore, where more than one of every four homes are tourist rentals, HTA says. The vast majority of the rentals are illegal under Oahu’s land-use law, which generally prohibits short-term rentals outside of resort zones like Waikiki and Ko Olina.
This is clearly having an impact on the state’s economy, the University of Hawaii’s Economic Research Organization said in an economic forecast for 2019 published in December. UHERO’s executive director, Carl Bonham, said the organization has gotten data from Airbnb to analyze the costs and benefits of the rentals.
“We’re working on it pretty hard,” Bonham said.
Meanwhile, a national study cited by UHERO’s outlook supports concerns that rentals are driving up housing costs. Titled “The Sharing Economy and Housing Affordability: Evidence from Airbnb,” the study used data from Airbnb, the real estate site Zillow and the U.S. Census Bureau to study the effect of short-term rentals on real estate markets.
It found a 10 percent increase in Airbnb listings led to a 0.4 percent increase in rental prices and a 0.76 percent increase in home prices, although the impact was higher in zip codes with a smaller share of owner-occupiers.
Still, the impact in Hawaii is in dispute. A March 2018 report by the Hawaii Appleseed Center for Law and Economic Justice estimated up to 93 percent of vacation rentals in the state were whole-home rentals, and most were rented out by non-residents. In response, Airbnb called Appleseed’s data “unfounded and patently false.”
“Other recent studies have shown that Airbnb’s activity in the state has minimal impact on the availability of housing for local families,” the company said in a statement at the time. “What’s more, data shows that visitors using Airbnb are critical to the Hawaii economy and spent an estimated $649 million while visiting in 2016.”
Others insist the proliferation of vacation rentals is affecting the market.
“You cannot compete as a home buyer with a cash buyer from China or a cash buyer from New York City who’s coming in to buy a house and use it as a mini-hotel,” said Kekoa McClellan, Hawaii spokesman for the American Hotel and Lodging Association.
While residents might be squeezed, tourists — and businesses like airlines that depend on tourists — seem to be benefitting.
It’s not just the people getting good deals at Airbnbs, which UHERO’s Bonham calls “home-share rentals,” or HSRs. People staying in hotels probably saved money, too, as the online vacation rentals have dampened rising hotel room rates.
At a time when visitor arrivals have outpaced new hotel rooms, and the hotels have maintained high occupancy levels, room rates should have exploded.
But that hasn’t happened, Bonham said. Hotel occupancies have been holding steady around 80 percent or higher, as the number of annual visitors has nudged toward 10 million, Bonham notes, and room rates have nudged upward too, averaging more than $250 per night. But he wonders whether the rates would have been even higher without the home shares.
“Did the rise of HSRs force hoteliers to keep a lid on room rates?” UHERO’s 2019 economic forecast asked. “Did HSRs take the place of long-term rentals and increase residential rental rates? These are some of the questions we hope to answer as we continue to analyze the impact of HSRs on the local economy.”
Maui residents didn’t need another study to motivate them to act.
In November, voters amended the Valley Isle’s county charter to increase the fine for operating an illegal vacation rental to as much as $20,000 for an initial penalty, plus $10,000 per day if the owner keeps renting the place. There are estimated to be 3,000 to 8,000 illegal rentals on Maui, according to The Maui News.
Now, Oahu policymakers are poised to take action, as well. The Honolulu City Council is considering seven separate bills, which generally represent one of two philosophies.
One measure introduced by City Council Member Ron Menor, focuses on enforcing the current land-use law. Menor’s bill would make hosting platforms like Airbnb submit monthly reports to the planning department with the names and addresses of vacation rentals listed on the sites, and it would give private residents the right to enforce zoning laws in court rather than depending on the planning department to take action.
By contrast, a measure supported by Mayor Kirk Caldwell would crack down on whole-home rentals run by absentee owners with a $25,000-per-day fine, but would let more homeowners legally rent out part of their properties as vacation rentals. The bill would make rental operators register with the city and impose higher property taxes for them.
Cade Watanabe, an organizer with Unite Here Local 5, said the hotel workers union supports Menor’s bill as a way to keep the industry strong and help with Oahu’s housing shortage. With as many as 10,000 short-term rentals on the island at a given time, the bill could bring thousands of homes back onto the market, he argues.
“Whatever the number is, it will make a bigger dent in terms of housing than any other initiative the city or state is trying to do,” he said.
But Bonham notes that wiping out as many as 8,000 visitor accommodations, many with multiple rooms, would be a blow to the tourism industry. Prices for hotel rooms and remaining short-term rentals would likely go up, Bonham said. The result would be “we’d have a reduction in the number of people here.”
McClellan, the hotel industry spokesman, said the hotels generally support Caldwell’s plan, but only if there’s a cap on the number of short-term rentals allowed. He said the industry recognizes that residents sharing rooms in their homes is different from absentee investors renting out entire houses, “which are essentiality hotels in our communities,” he said.
The industry hopes the City Council will pass something. To maintain the status quo will simply let platforms like Airbnb and the illegal rentals they support become more entrenched in the community, McClellan said.
“It’s clear that the platforms would prefer no bills to pass because their business model thrives on the absence of regulation,” McClellan said. “They can operate on the black market. They make money on the black market.”
But the government does little about it, he said.
“We wouldn’t treat drug lords the same way,” McClellan said.
Matt Middlebrook, Airbnb’s head of public policy for Hawaii, did not respond to phone calls and an email requesting comment.
A big unknown is how fast traditional hoteliers might step up to fill demand for hotel rooms if the government cracked down.
There’s been some growth in more traditional accommodations, including a 418-unit Grand Islander timeshare at the Hilton Hawaiian Village in Waikiki. HTA notes that several projects have been announced that could bring thousands more new rooms to Oahu’s hotel inventory.
Properties announced for Ko Olina Resort would add 1,200 hotel rooms and almost 1,000 condo hotel units, but HTA reports there’s not a firm date for when any of these will be finished. The same goes for a long-planned expansion of Turtle Bay Resort on the North Shore.
“Maybe they would be happening if we hadn’t seen so much growth in the home-share industry,” Bonham said. “I think we would have seen more of an effort to get these things off the ground.”
There are upsides to being a nonprofit as we carry out our public-service mission. We don’t have a paywall on our site, charge a subscription fee, or clutter our articles with ads. But this also means that reader support sustains every aspect of what we do. Without you, we don’t exist. It’s as simple as that. By donating, you’re supporting everyone on staff—and allowing unbiased, factual, honest journalism to thrive. If you value our work, will you make a tax-deductible donation today?