Video: Minister Fahy On Vacation Rental Market

January 25, 2017

“There is an untapped potential here in Bermuda, a vacation rental market that can be a source of revenue and security to many Bermudian households”, according to Minister of Tourism, Transport and Municipalities Michael Fahy.

Minister Fahy said today [Jan 25], “This would be a fantastic opportunity for Bermuda and also increase the overall number of beds Bermuda has to offer, provide options for travellers and utilise a model which has caught on all over the world.”

19-minute live video replay of Minister Michael Fahy:

Statement from Minister of Tourism, Transport and Municipalities Michael Fahy

With long-held traditions of home ownership and hospitality, Bermudians have, for decades, opened their homes to paying guests. The rest of the world has now caught on to what Bermudians have known all along; for a genuine and immersive experience, a home stay can be an attractive alternative to staying in a hotel.

Enabled by new technology, the vacation rental and ‘home sharing’ industry is taking off. A recent report by Research and Markets estimated that the industry was worth $100 billion globally in 2017, and was forecasted to grow to $170 billion by 2019.

One of the biggest operators in this space is Airbnb, which currently operates in 34,000 cities and 191 countries.

As the Minister of Tourism, I recently met with executives from Airbnb and other companies active in this space, and we are now evaluating a groundbreaking proposal for partnership to make this exciting opportunity accessible to more Bermudian families, while ensuring standards for our visitors, and a level playing field for our hoteliers.

Bermuda Tourism Authority statistics from September 2016 show that 485 homeowners are already active in this space, with 821 bedrooms on offer. The Ministry, BTA, and our potential partners all believe that the opportunity is much greater. We have been studying a white paper produced in 2015 by the Bermuda Tourism Authority that has surveyed the industry, and we are considering the BTA’s recommendations as to how we can develop this sector.

One of the BTA’s central findings was that our regulatory framework has not kept up with the industry’s evolution. Many home owners who host are operating in an ambiguous ‘grey area’ – indeed, a ‘Vacation Rental’ is not even defined in Bermuda law, while some others are almost certainly operating in a way that contravenes the existing Hotel act.

Another finding was that a lack of quality, health and safety standards was a barrier to some visitors and a potential risk to Bermuda’s reputation. Finally, a lack of direct marketing and promotion of the sector – because those visitors do not contribute to the BTA fee that supports the tourism marketing of Bermuda – was both a barrier and an opportunity.

We are in discussions with home sharing companies to understand how they have partnered with other jurisdictions to ensure these properties are regulated – including what minimum requirements, if any, there should be and to provide other resources for interested Bermudians. If adopted, these changes would begin to level the playing field for vacation properties and home sharing relative to Bermuda’s regular hotel properties.

Airbnb has been a leader in helping jurisdictions address some of the challenges that critics have leveled at the home sharing industry. In particular, they, and other home sharing operators, have developed straight forward mechanisms to enable the collecting of taxes and fees directly from visitors in a way that does not inconvenience home owners, but ensures that the costs of supporting tourism are shared equitably by all who benefit. There already is a strong and viable precedent for this around the world, and we are exploring how we can implement this in Bermuda.

Another concern raised about home sharing is the impact on house prices and rental costs. A 2016 study commissioned by Airbnb and conducted by independent researcher GEWOS, however, found that home sharing has no significant impact on the housing market, while offering local residents the chance to balance the books and afford their own homes. A U.S. Airbnb study went even further, with 19% of Airbnb hosts across 10 cities – that’s about 16,000 homeowners – reporting that the income they made from hosting helped them avoid foreclosure or eviction.

We will soon have more to announce about how families can participate in this sharing economy, and what we can expect from our partners. There is an untapped potential here in Bermuda, a vacation rental market that can be a source of revenue and security to many Bermudian households.

This would be a fantastic opportunity for Bermuda and also increase the overall number of beds Bermuda has to offer, provide options for travellers and utilise a model which has caught on all over the world.

The BTA has already consulted with the Bermuda Hotel Association, the vacation property rental industry, realtors and the general public through discussion forums and surveys.

There have already been discussions relating to standards, quality control, safety, liability, promotion and competition.

We don’t see the growth in vacation rentals as a threat to Bermuda’s traditional hotels, but rather as a complement to an industry that has served us well over many years.

As we build a new economic model for Bermuda, we have to build upon what we hold dear in tourism – build on our past successes with new avenues to pave the way to our tourism renaissance.

We’ve already seen our visitor numbers on the right trajectory. We are right now waiting on the tourism performance figures for December. But I can tell you I am highly optimistic that we will achieve tourism industry growth for the 12th consecutive month. We are excited about 2017 with The America’s Cup, Tall Ships and the arrival of super yachts. This is a good time for Bermuda to shine.

Fully developing the Vacation Rental and home sharing market will give us a chance to continue to build on that through the development of the strategic objectives of the National Tourism Plan.

We can:

  • Better position ourselves to families and the younger millennial market
  • Convert cruise ship passengers to air arrivals and improve visitor spending
  • Build quality and island pride, because visitors will post online reviews of their properties
  • Create jobs and business development
  • Stimulate industry and add value to the Bermuda home

We believe this level of tourism development will also be a substantial part of re-focusing Bermudians on the large variety of employment and entrepreneurial opportunities that can be realized through a highly-successful visitor-based sector.

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Comments (15)

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  1. aceboy says:

    There are a number of us who have been doing this for years now, so it isn’t something new. In fact Bermudians basically pioneered the industry. Anyone over the age of 50 would probably remember the tents that used to form a community in the dunes between Chaplin Bay and Horseshoe Bay. Many people would rent their homes for the summer and camp.

    So, let’s be clear.

    BUT, I fully support the collection of a tax on the Vacation Rentals.

    Many will see this as a *cash grab* and in a way it is, but look at it this way:

    In order to attract visitors we have recognized that we need a Tourism Ministry and more recently a Tourism Authority. Millions of dollars are spent to get people to vacation here.

    Hotels and Guesthouses pay an occupancy tax and a tax to the BTA, which is collected by the properties and remitted to the respective beneficiary. These funds are used to keep the people coming. They are coming to enjoy the asset we Bermudians pay to enjoy (through Land Tax and Duty).

    Why should the AirBnB guests get a freebie?

    You don’t need to tell me that these visitors are price sensitive. We have been doing these rentals for a long time. But to be sustainable and to ensure that anyone in the tourism industry gets equal benefit from the activities of the BTA in advertising and social media a tax should be paid and a light touch regulation imposed.

    We welcome competition, it is a good and healthy thing and will mean everyone will have to “up their game” to stay in the business and be profitable. But we need to be very careful and ensure our reputation is kept to a high standard.

    • sid says:

      Feeding the Tourism Authority bureaucracy by taxing tourists more is the last thing Bermuda needs. The tourism tax drives away more tourists than the Tourism Authority brings in.

      For the $23 million/year cost of the Tourism Authority, Bermuda could have its own airline flying in hundreds of extra people to Bermuda every day — for free!

      For $23 million, the Government could give every tourist to the island a hundred dollar bill to spend wherever they want – that would bring in tourists!

      • jiggs bda says:

        Glad you are not the government

      • aceboy says:

        I never said the BTA was perfect, but to their credit they have managed to get the word out about how close we are to the major markets we seem to have ignored for years.

        The increased occupancy in the vacation rental space, which is undeniable, is a direct result of that. 70-80% of our guests all say the same thing “We never knew Bermuda was so close.”

        I don’t know what the previous administration spent all the money on, but the BTA have done a good job of putting Bermuda back on the tourism map.

        They have done a better job, even with the warts they have (and they have a bunch), than the previous 2 or 3 decades of a Tourism Ministry.

        You need to look up the cost of running an airline. 23 million doesn’t even buy part of one plane. Flying people in free? You are delusional with that load of nonsense. Absolute BS.

    • sage says:

      Having not enjoyed zero fees and regulation I don’t agree. Hotels pay no duty on items they import whereas I have “bought Bermuda” (200%+ mark up) in most cases trying to set up for VR, just in time for the new fee. I say no to new fees or taxes, just sensible safety rules, if it ain’t broken don’t fix it.

  2. James says:

    “Another finding was that a lack of quality, health and safety standards was a barrier to some visitors and a potential risk to Bermuda’s reputation.”
    You don’t need to worry about that. Airbnb is policed by reviews on their own site any property that is not up to scratch will not be around long.

  3. Bobby J says:

    We have been renting our house as a vacation rental for the past 2 years. Tax has been paid to the government for 6 or more guests per stay. We do have an issue of government regulating us in an unfair way as we only have the house rented for less than 3 months during the year and already pay a large land tax bill. To be able to continue to get rentals we have to keep the house in a prestine and safe condition. If the government starts to burden us with higher taxes and regulations, we will just stop renting as it will not be in our interest.

    • aceboy says:

      Land tax is paid for the privilege of owning a home, whether you rent it or not. All the hotels and guesthouses pay land tax too.

      If you don’t like the regulations and tax then shut it down. Such is your prerogative, but don’t expect everyone else to pay tax while you operate in the same space as the hotels and guesthouses and benefit from taxes paid by them, through advertising and keeping the BTA adequately funded.

    • jiggs bda says:

      Yours is probably a good reason for Government to get input, as it is the other side of the coin where you do the right thing.

      The danger of non regulation is the ones that would not be as fastidious as you are will mess things up for all concerned.

      Just sayin’

      • judith says:

        That would be true of regulation would actual maintain standards – you’d need an army of civil servants doing on site visits. It just would not pay for itself. The beauty of AirBNB, VBRO and Homeway is that they are self regulating. Standards are maintained because there is feedback on the website and TripAdvisor is a phenomenal playground for ratings. The consumer goes to these sources above and beyond all else.

    • Kevin Dallas says:

      Bobby J – You’re a great example of why I think the rules need to be updated to protect and support you.

      I think it’s fantastic that you’re renting your home and making some money from the rebounding tourism sector. It’s also good to hear you’re paying occupancy tax on six or more, but according the current law, you’re operating illegally – you need a hotel license, and that inconvenient fact has nothing to do with whether you’re paying tax.

      That puts you in a risky spot. For example, if one of your guests fall down the stairs, or accidentally burns your house down, there’s a good chance that you’ll find that your insurance has been invalidated.

      The best short term thing to do is to reduce the number of beds in your house in line with the law. The best medium term thing to do is modernise the law.

  4. Divine says:

    I agree with Bobby, I have been doing this for several years now and this is only about government and tourism getting more revenues. Will we also be getting government concessions like the hotels on customs duty for our upgrades etc. Will they pay for my advertising too?

    I am challenged already by Bermuda expensive labour costs. To keep my rates low I can’t afford to pay for many of the things the hotels pay for unless I raise my rate to $400/night which of course means the people who were visiting Bermuda will no longer visit. Actually, some of the big houses already pay taxes to government so why more regulations, don’t they have more things to do in Parliament than go after the small hardworking people who are trying to make a living.

    • aceboy says:

      Yes, it is about getting more revenue. More revenue to spend on attracting more tourists. You have benefitted from the BTA advertising over the past few years whether you admit it or not. Concessions? That is a plausible argument, however the tax rate being discussed is nowhere near the 11.75% taxes that hotels and guesthouses get hit with RIGHT NOW. 7.25% of this tax is Occupancy tax, 4.5% is the BTA tax. Paying the former tax entitles hotels to get the concessions. The 4.5% tax goes to the BTA to fund advertising etc. My guess is that AirBnB taxes will be no more than 3%, probably more like 2.5%. It is a portion of the BTA tax and pays for the advertising and promotion costs.

      What high labour costs are you faced with? Cleaning? There is a cleaning charge separate and apart from the nightly rate charged through AirBnB. It is more than enough to cover, even if you are paying $30/hour to have people clean. In fact many AirBnB hosts benefit significantly from the fixed cleaning charge because the fee is charged if they stay a week or 3 days. If you have significant turnover and don’t have a minimum night stay requirement you can do very well from the cleaning charges.

      $400 per night because of labour costs? Sorry, I don’t think you are in the same business I am in. Our units go for between $95/night and $130 per night depending on season.

  5. Average Bermudian says: