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Bahamas ‘May Need’ Vacation Rentals Tax

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

The Minister of Tourism yesterday said the Bahamas has to keep a “close eye” on the booming Airbnb vacation rental market, suggesting the Government may have to levy a room tax on it to maintain a ‘level’ playing field’ with the hotel industry.

Speaking with Tribune Business, Obie Wilchcombe said that the increasingly popular Airbnb and vacation rental segments are impacting Bahamian hotel occupancies, as many destinations struggle to get a handle on the trend.

“We are finding a mechanism to make sure we could monitor it better,”Mr Wilchcombe said. “We began it last year when we asked all Airbnbs to register with the Ministry of Tourism, along with private home owners.

“The thrust is they pay no taxes. We have to monitor it and ensure that they are properly managing it, because the Government may have to consider securing

something similar to a hotel room tax.”

Mr Wilchcombe added: “We have to pay attention to the Airbnb segment. More and more travellers are seeking the Airbnb. Many people are moving away from the hotels and are more into private rentals; that’s a trend globally.

“In one country they have already had to outlaw it because it’s impacting the tourism industry. People are coming but hotel occupancies are dropping. There are a large number of private homes in the Family Islands, and some in New Providence as well.”

Airbnb is an online marketplace and network that enables homeowners to list/rent short-term stays in their residential properties to tourists, with the cost set by the property owner.

Prominent Bahamian realtors, such as Mario Carey, have already urged the Government to get a better regulatory grip on the vacation rental market, warning that it is losing potentially valuable tax revenues.

And a recent study by Oxford Economics, on behalf of the Bahamas-based Organisation for Responsible Governance (ORG), called for the Bahamas to exploit the growing second home and vacation rental market, suggesting the benefits could be “quite substantial” for government taxes, land values, construction and foreign currency inflows.

“According to the Airbnb data, there are currently 908 active Airbnb rentals in the Bahamas with an occupancy rate of 17 per cent,” the study said.

“This implies a total of 56,000 room days of rentals. We further assume an average of two people per Airbnb property, and a total of 6.7 nights per visitor to the Bahamas, for a total of 16,700 tourists to the Bahamas currently staying in Airbnb out of 1.5 million overnight visitors.

“With an average spending of $1,500 per overnight visitor to the Bahamas, this implies spending of $25 million by those staying in Airbnbs, including their spending on the Airbnbs themselves.”

The Oxford Economics study said an increase in visitors equivalent to 50 per cent of current Airbnb activity would add 8,350 tourists annually, and $13 million in visitor spending.

Excluding 50 per cent of that $13 million from its analysis, as that represented lease costs, the ORG study said: “The full economic impact - direct, indirect, and induced - of additional spending by these new tourists is estimated at $9.8 million of additional GDP and 225 new jobs.

“The sectors most affected are community, social and personal services, which receives 35 per cent of the GDP impact and 50 per cent of the jobs impact, and hotels and restaurants, which receive 23 per cent of the GDP and 18 per cent of the jobs impact.”

Meanwhile, Mr Wilchcombe asserted yesterday that this nation’s tourism sector has enjoyed a ‘strong’ first quarter despite the Central Bank’s suggestion to the contrary. 

The regulator, in its March 2017 economic report, said: “Indications are that tourism sector performance weakened in the first quarter of 2017. Data from the Nassau Airport Development Company (NAD) showed passenger traffic at Lynden Pindling International Airport contracted by 6.5 per cent - net of domestic departures - during the three months to March 2017, compared to a 4 per cent gain in the prior year.”

Describing the later Easter 2017 as “a factor”, the Central Bank said returning US passenger numbers fell by 7 per cent during the three months to end-March 2017, compared to a 5.5 per cent improvement last year.

Other international departures were down 3.9 per cent, following a 3.4 per cent decline a year earlier. LPIA’s second quarter departure traffic will provide a much clearer indication of the tourism industry’s performance, as it will include the peak Easter weekend.

    Mr Wilchcombe told Tribune Business: “We have been strong; tourism has been doing extremely well this year. Our arrivals numbers are up.

“We have had a number of conferences and events that we didn’t have last year, and we are going to get a strong summer and winter season. There is growth around the islands. What you might see is the impact  of the hurricane on Grand Bahama, which could be affecting overall numbers.

The opening of Baha Mar will also have a positive effect.”

Comments

The_Oracle 2 years, 5 months ago

That's it Obie, tax it out of existence to level it with hotels! Idiot. Hopefully soon to be gone.

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