Short Term Rental Operators Are Exiting The Market Amid Recession And Legal Restrictions
The number of properties listed as short term vacation rentals has declined by as much as half compared to pre-pandemic levels, but the numbers may be deceiving.
Hawaii’s hotel industry had a bad year. Hoteliers were hit hard by the COVID-19 pandemic, with more than three-quarters of hotel rooms across the islands empty in the normally-busy month of December.
Bookings for vacation rental properties are also down, but much less than for traditional hotels.
While only one-quarter of Hawaii hotel rooms were occupied over the end of year holiday season, 40% of vacation rentals had tenants.
That still represents a substantial decline from the 2019-2020 holiday season. The specific numbers vary, but all islands saw occupancy rates down between 25% and 50% percent year-over-year.
Notably, the number of properties being used as vacation rentals has also declined on all islands.
Erik Kloninger, a visitor industry analyst who consults for the Hawaii Tourism Industry, told HPR that the City and County of Honolulu and Hawaii County posted the largest declines in vacation rental supply.
“Oahu had the biggest decrease at about 49%, half as many vacation rentals as 2019,” Kloninger noted.
“The other county that saw a big decrease was Hawaii Island, where the supply decreased about 43%.”
In contrast, Maui and Kauai Counties saw the vacation rental supply contract around half that magnitude, down 21% and 23% respectively.
Kloninger suspects the extra declines on Oahu and Hawaii Island were driven by government policy in conjunction with the COVID-19 pandemic.
County officials on both islands increased legal restrictions on short term rentals and penalties for violators in 2018. The constraints on rental activity and increased penalties for violators likely combined with the pandemic recession to produce the major drop in supply.
However, Kloninger also cautions that the data taken at face value may be deceiving.
The reason is that although fewer people have been coming to Hawaii since the start of the pandemic, those who do visit are staying longer periods of time.
That could potentially skew the data on short term rentals, which is gathered by scraping property listings from booking platforms like VRBO and Airbnb.
With guests staying in a property longer than in previous years, a vacation rental could actually be occupied even if it is not listed on booking platform.
“A particular house might have been removed from Airbnb or VRBO,” Klonginger noted, “but there could very well be someone renting that house right now and they’re not staying there for a week, they’re staying there for 3 months or 6 months.”
Whether these changes to the vacation rental market are permanent remains to be seen.
Economic forecasts predict Hawaii’s visitor industry will remain below 2019 levels for the next several years, with the short term rental market likely to follow suit.