The Impact of the Lodging Tax on the 2019 Cape and Islands Rental Season
As of this writing, we’re just past the end of the 2019 summer vacation rental season on Cape Cod and the Islands. How are things looking? It seems to depend on who you ask. But if your bookings were off this year, it’s likely due to the new lodging tax.
Although bookings this year are off from last year, 2018 was an exceptionally strong year, the strongest on our site since 2013. And despite the turmoil caused by the new tax, most homeowners are booking their homes and adapting to the new reality. This is not to say that all homeowners have been unaffected by the tax, however, and there is ample evidence that those who did struggle this year believe the tax, not sharks or larger inventory, is to blame.
Breaking News: NJ exempts direct bookings!
Fellow vacation rental homeowners on the New Jersey Shore fought back against the negative impact of their new lodging tax, and won! Legislation JUST passed in New Jersey to grant exemptions from their newly minted, short-term rental tax to homeowners advertising on marketing sites like ours, which allow for direct booking between homeowners and their guests. Rentals processed through booking sites like Airbnb, HomeAway, and VRBO, however, will still be taxed. Read the full article here, and stay tuned as we learn more.
A look at 2019’s numbers
Overall, bookings on our site are down 2.2% from 2018. This includes all regions (Cape Cod, Martha’s Vineyard, and Nantucket) as well as all 3 seasons (spring/summer/fall). But for the summer (the lion’s share of a homeowner’s revenue) alone, bookings are off 3.5% (spring bookings were actually up 4.3% and fall so far are up 0.7%).
In general, inquiries (not bookings) in July were UP 4% from last year, and the volume of vacationers using our site was the strongest this July since 2012. We believe this is due in part to the fact that cost-conscious vacationers were particularly incented to find a reduced rate rental at the last-minute this year due to the added tax. Vacationers are savvy shoppers and realize they can book directly with homeowners on WeNeedaVacation.com and thus avoid the 5-20% booking fees that major sites like Airbnb, HomeAway and VRBO charge.
Sharks vs. Lodging Tax: Debunking some common theories
Despite claims in the press to the contrary, here’s what we DON’T think has had a negative effect on rentals this season:
- Sharks: The fact is, sharks aren’t affecting the number of vacationers – they are just affecting HOW we vacation. Outer Cape beaches and others are filled! But beachgoers are exercising the necessary caution to avoid swimming in deep waters. Given the booking numbers, particularly on the Outer Cape versus the rest of the C&I region, we feel that the shark situation has had very little impact on bookings.
- Inventory: The number of short-term vacation rental homes has risen steadily, but gradually, for the past 15-20 years, not overnight from last year to this. In fact, after reaching the highest number of homes on our site last year, our inventory actually decreased this year. Note: Of all of the reasons homeowners have given us for not renewing their subscriptions this year, the lodging tax was the most common reason (17%). Also significant are those who said they are no longer renting (14%) and those who are selling their home (9%).
What we DO think might have had a negative effect on rentals this season: the 9.7%-14.45% lodging tax.
- There’s little doubt that our unprecedented, extraordinarily high inquiry numbers last December (up 44% over December 2017) should be attributed to the impending tax (effective as of 1/1/19).
- While summer bookings are off 3.5%, spring rentals, which were exempt from the tax, were up as much as 4.3%.
- The feedback we’ve heard from our hundreds of homeowners specifically blames the lodging tax for lost bookings from either past guests or new prospects.
Lately, sharks and the inventory of rental homes are being cited by those who lobbied for the tax as being responsible for the lower bookings. The “click bait” of the sharks, in particular, has simply provided them with a great opportunity to divert attention from the real culprit: the tax.
Drawing some early conclusions
Although overall booking numbers are not significantly down on our site, there’s no doubt that the new tax has created considerable upheaval for you, the homeowners, and for vacationers as well. A Hyannis homeowner, for example, who has listed with us for many years, told us,
“This year as many as 6 repeats said they couldn’t return because of the tax.”
– Hyannis Homeowner
And the press lately has indicated that tourism is definitely off this season.
For many of you, though, this year was just as good as years past. A homeowner who lists three properties in New Seabury told us,
“Our rentals are about the same as last year at this point. We have not lowered our price and have not had anyone comment either way on the lodging tax issue.”
– New Seabury Homeowner
Vacationers may have scaled back their choice of rental homes to less expensive options or waited until the last minute to book their rentals. And, in some cases, you have reduced your rates to mitigate the tax, or have even agreed to pay the tax.
Keep in mind that Massachusetts is the last state in the Northeast to impose a lodging tax on short-term rentals, although most nearby states’ rates are not as high:
|New Jersey||11.62% *|
* (Now only applicable to rentals booked via online booking sites such as Airbnb, HomeAway, and VRBO.)
What’s in store for the 2020 season?
Despite the fact that there will be no exemptions from the tax as there were this year (if leases were signed prior to 1/1/19 or for rentals prior to July 1st), the trend continues wherein early planners are starting earlier than ever. Perhaps this indicates a proclivity for discerning vacationers to get the right home at the right price.
What should homeowners do to succeed going forward?
Get started NOW for 2020! Given the growing trend over the past few years towards earlier bookings:
- Enter your pricing and availability for next season.
- Contact your 2019 guests and request a commitment from them earlier than usual.
- Offer incentives to past guests if they commit early for next year.
- Take fresh, new pictures while the grass is green and there are leaves on the trees.
- Consider offering as many amenities as possible including air conditioning, online payment options, and flexible dates (in the shoulder seasons).
- Set up a free Owner Special to promote a special offer or incentive to book by a certain date.
There’s a lot of competition out there, but we’re ALL subject to the new lodging tax. Don’t let it prevent you from successfully renting your home.