Recently the University of Hawaii’s Economic Research Organization released a report warning that Hawaii’s economy is at a standstill and faces serious headwinds due in part to the uncertainty created by Oahu’s overly punitive short-term rental regulations (“Economists: Airbnb Crackdown Will Likely Cause Big Drop In Oahu Tourism”).

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This report is a wakeup call for lawmakers in Oahu and across the state, but it shouldn’t come as a surprise.

The UHERO report echoes the findings of other reports, including one we commissioned by Oahu-based Kloninger and Sims, which predicted Oahu’s short-term regulations would cost the Oahu economy more than $1 billion in economic activity and up to 7,000 jobs, and another by the Oahu Alternative Lodging Association which warned the new laws would lead to 50,000-80,000 fewer visitors per month.

In the nearly three months since the law went into effect, UHERO estimates there has been a “greater-than-8% drop in Oahu’s overall visitor plant inventory.”

Despite the visitor industry being the biggest economic generator for the state and ongoing efforts by the Hawaii Tourism Authority and others to increase tourism to the islands, Oahu lawmakers enacted hotel-backed short-term rental regulations that run counter to their efforts and threaten the livelihoods of residents and small businesses owners who rely on the income from visitors staying at alternative accommodations.

Leaders across the visitor industry see the writing on the wall and are sounding the alarm.

Demonstrators in Opposition to City Council Bill 85 and 89 stand along King Street.
Demonstrators in opposition to City Council Bill 85 and Bill 89 along King Street in July. Cory Lum/Civil Beat

In recent earnings calls with investors, executives from Hawaiian Airlines and Alaska Airlines expressed their concerns about Bill 89. Peter Ingram, President and CEO of Hawaiian Airlines explained that the crackdown on short-term rentals, “…will either make it potentially more expensive or more difficult for people who want to have those sort of accommodation experiences and that may manifest itself in some pressure on demand from North America.”

While our local economy struggles with the impacts, many of the predictions espoused by proponents of the law — including a claim that a reduction in short-term rentals would alleviate housing affordability — have not come to fruition. In a recent interview with KITV, local market researcher Rick Cassidy explained, “People really claimed [short-term rentals] were taking units out of the market, but I didn’t see that.”

Most concerning of all is that the UHERO report notes the ultimate effects of the ordinance could yet be larger and remain to be seen. Mayor Kirk Caldwell and Oahu lawmakers have an important decision before them — allow the full negative impacts of Bill 89 to unfold at the expense of our local economy and jobs, or work to amend the regulations in a way that addresses community concerns and balances the role short-term rentals play in supporting our visitor economy.

The former would go a long way in proving they have the best interest of all Oahu residents in mind and are not beholden to the hotel interests who pushed for these regulations.

The vacation rental community believes there is a better path forward and remains ready and willing to work with local lawmakers to prevent any further damage to our local economy.

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