Tovin Lapan
Tovin Lapan

The latest data from the Hawaii Tourism Authority show increased demand for vacation rentals as the state works out a deal for more tax information from Airbnb. 

Comparing September 2019 to September 2018, the number of available nights in vacation rental units in the Aloha State increased 13%, to roughly 913,000, led by a 35% jump on Kauai in total unit nights.

Demand also grew 18%, to more than 622,000 unit nights, working out to an occupancy rate of 68%, an increase of approximately 3 percentage points.

The report defines vacation rentals as "the use of a rental house, private room in private home, or shared room/space in private home," but does not distinguish between permitted and unpermitted properties. The report tracked 33,118 units statewide, representing 57,524 bedrooms.

The average daily rate (ADR) for Hawaii vacation rental units was $194, up nearly 13% from September 2018. By comparison, hotels statewide had a 78% occupancy rate in September, with an ADR of $247.

In June the Honolulu City Council, which governs the island of Oahu, passed new restrictions and regulations on short-term rental units. The impact of those changes may already be manifesting, as Oahu was the only county in the state to report a drop in availability, falling roughly 8%. Meanwhile, vacation rental nights in Waikiki, which as a resort area has different policies, soared 19%. Overall demand for short-term rentals on Oahu dipped slightly (down 0.5%) to nearly 176,000 nights, but the occupancy rate on Oahu increased 5 percentage points, to nearly 73%, the highest rate among all four counties, as ADR rose 18%, to $160.

Maui County led in available unit nights with 313,000, a 24% increase year over year as demand on the Valley Isle also rose 33% to more than 226,000, for an occupancy rate of 72%. Hawaii Island also saw significant increases in both supply and demand (15% and 24% respectively).

Hawaii has experienced record levels of visitor arrivals over the last seven years, with 2 million more visitors expected in 2019 than in 2013. Much of that additional traffic has been absorbed by short-term rental units, which have grown quickly while the stock of other types of accommodations has remained relatively stable. 

Between 2017 and 2018, according to the HTA, Hawaii visitors' use of a short-term rental units grew 23% and represented 12% of visitor arrivals in 2018.

Each of the four counties has their own short-term rental ordinance, and Oahu's market is still stabilizing after the measures implemented this summer. A state bill that would have required booking platforms like VRBO and Airbnb to collect state taxes passed the legislature earlier in 2019 but was eventually vetoed by Gov. David Ige. 

The first week of November, Hawaii state officials announced they had struck a deal with Airbnb to obtain more information on the rental market. 

The state filed a subpoena seeking information on the hosts using the platform in an effort to crack down on tax evasion. Airbnb and the Hawaii Department of Taxation reached an agreement on the scope of the information sharing that was approved by the courts. The state has argued that many Hawaii hosts have been illegally running their businesses without permits.

Prior to the new Oahu law, Honolulu had an estimated 800 legal vacation rental units and approximately 10 times as many illegal listings. The state tax department said it found hundreds of listings without proper licensing and tax collection procedures. Details of the agreement filed in state Circuit Court last week said Airbnb will provide the Department of Taxation with the records of the 1,000 hosts who made the most revenue from 2016 through 2018, according to the Associated Press.  

Under the agreement, Airbnb will provide the state with anonymized data for hosts who had more than $2,000 in annual revenue from 2016 to 2018. The state may then request individualized records for these hosts. The company will give hosts two weeks' notice before releasing the information to the state, and the host may file a legal motion challenging the transfer of records.

The deal also calls on Airbnb to send a written notice to hosts who generated $2,000 or less in annual revenue informing them of their tax obligation and instructing them to obtain a license to collect general excise tax and a certificate of registration to collect the transient accommodations tax.

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