Short – term local rentals: How short-term rentals could affect St. Albert’s hospitality industry

Frequent traveler Nicole Brenda can’t say enough great things about staying over in a short-term rental. “It saves money,” says Brenda, who’s sacked out at many of these joints, including several in Alberta. “It’s less expensive than staying in a hotel, and we’re supporting local people instead of a big chain.”

She isn’t alone in her praise. Short-term rentals have been a boon to travelers like Brenda in recent years, thanks to the emergence of the share market in the hospitality industry. Spearheaded by online service Airbnb, this latest wave in home-based accommodation is expected to generate more than $170 billion worldwide this year.

With roughly a dozen St. Albert residences on board and hundreds of others in Edmonton and surrounding area, those who facilitate short-term rentals see it as a convenient supplementary source of revenue. While a short-term rental is often mistaken for a more traditional bed and breakfast spot, it differs greatly in that it doesn’t require licensing, permits or such mandatory stipulations as owners needing to live on the premises being used for lodging.

“It’s a great source of additional income you wouldn’t otherwise have,” said Edmonton businessman Chris Vilcsak, who admittedly doesn’t own a short-term rental in St. Albert, but has reaped returns on a domed home he has in Sedona, Arizona, where it’s available for tourists to rent. Like almost all of the St. Albert locations, Vilscak enjoys a cash flow via registration on Airbnb, by far the largest short-term overnight rental in the market, with more than six million listings available in at least 190 countries. A distant second is Expedia-owned VRBO (formerly Vacation Rentals By Owner) boasting some two million rental options and TripAdvisor Rentals’ FlipKey, with more than 800,000 locations worldwide.

“Airbnb has been spectacular for me,” said Vilcsak, who’s more than willing to entice others to get in on the action. Registration is free on the Airbnb website, which gets a three percent share of all booking revenue. Parting with that take was probably worth it for those already with Airbnb in Edmonton last November during the Grey Cup festival. Roughly 2,000 bookings collectively yielded $180,000 during the event, the biggest-ever revenue generator for Airbnb suites in the city that weekend.

While owners and an eager traveling clientele are sold on short-term rentals, more community-minded critics claim that bringing in strangers overnight poses the risk of attracting an undesirable contingent into the neighbourhood. Others critics include hotels and B&B outlets, declaring the short-term rental trend is another way to sidestep licensing, regulations and taxes that more traditional hospitality competitors have to follow.

Despite panic that short-terms rentals are eating into the hospitality market, a 2018 paper by economics professor Assandé Adom, published in the Journal of Applied Economics and Business Research, found that the inclusion of sharing-oriented players was far too new to indicate any considerable disruption in the overall market. Still, that finding may not be enough to convince Eric Hesse, who owns a St. Albert-based bed and breakfast establishment with his wife.

“Starting last summer, things had just dropped right off,” said Hesse who reportedly enjoyed greater returns throughout most of the 20 years that the family’s City View service has been around. “We had less than a quarter of the business than we did previously. I think Airbnb is taking over.”

Outside the hospitality industry, though, there’s far more evidence that short-term rentals dramatically affect vacancy rates in the rental market and drive up the cost of monthly rent, adding to the overall shortage of affordable housing in cities. To owners, it’s a no-brainer option that enables them to make more per night from short-term rentals than from monthly rentals and annual leases. In many cases, owners have far fewer responsibilities than in a traditional owner–tenant relationship.

Cities worldwide have long been grappling with this latest accommodation trend and it’s only been recently that major centres have taken action. Los Angeles finally tightened rules on Airbnb pricing, the maximum number of stays for all short-term rental locations, as well as health and safety regulations in 2018. Amsterdam followed suit with similar measures in January.

At present, an owner does not need to have a business licence to host a short-term rental in St. Albert, but that policy could change at any time. Provided owners are not renting more than three rooms in one home simultaneously, they do not need to charge the four-percent Alberta tourism levy, which hotels and traditional B&Bs must collect. Owners are also supposed to report earned income on their taxes, although policymakers are concerned that most short-term rentals exist in a grey market and don’t bother reporting that revenue.

Grey markets also worry condominium boards, wary of suite owners who rent out their space to total strangers and the potential risk that brings to other residents. Edmonton lawyer Robert Noce noted that because government regulation is effectively silent on short-term rentals, each condo board must figure out for itself how to deal with short-term rentals.

And while booking platforms offer general policy coverage to owners of short-term rentals, insurance experts say that may not be enough to cover more serious claims like fires and floods involving a guest. At minimum, an owner must carry an extra endorsement on the homeowner’s policy, although an insurer might be prompted to get a client to also carry commercial insurance. That said, such a side gig must be known when a homeowner policy is being drawn up to avoid the consequences associated with damage should a serious incident take place.

It’s a situation that even traditional bed and breakfast owners like Hesse know so well.

“Our insurance company said that we had to get car insurance, because if we have a car accident and the insurance company can prove that you were on your way to the store to get butter for your bed and breakfast, you could be in trouble,” he said. “So that cost us a couple hundred a year just for that.”

However, Vilcsak believes the near-instant reporting features on short-term rental websites isolate and stop offenders immediately and permanently. “A guest who’s causing problems will never be able to rent again,” he said. “The risk to owners is small. People aren’t going to trash your house.”

Perhaps because many people have heard stories about both unscrupulous hosts and destructive guests, booking services have ramped up their efforts to ensure both sides of the short-term rental transaction feel safe and secure. Airbnb now requires both hosts and guests to provide government-issued documents to verify their identities. Additionally, visitors seeking short-term rentals are more attracted to locations where ratings are higher and guest comments are more positive.

Pressure from annual events such as music festivals and sports tournaments may create unusual demand, but in suburban locations like St. Albert, year-round short-term rentals exist primarily for the convenience of people visiting friends and family, scouting for potential employment and making other ordinary trips—a role hotels and traditional B&Bs also fulfill.

And so far, extreme cases involving short term rentals have been incredibly rare in this neck of the woods. Recalled brenda in her experience, “the only bad one was a lady who locked up the toilet paper!”

Want to Host a Short-Term Rental?

Airbnb is a sideline for most people, whereas VRBO tends to be a full-time business. There is in fact a how-to book for setting up a travel-hosting business, if you’re so inclined, but here are the basics.

• You set the price. Airbnb takes a percentage of your rental fee, plus a fee from your guest. VRBO charges owners either an annual fee (if they are regular hosts) or a percentage per rental (for part-time hosts).

• The system depends on trust between host and guest. Airbnb checks out its guests; hosts set rules for their space and have the right to refuse a reservation. VRBO allows hosts and guests to communicate before the rental, and either party can cancel if things feel uncomfortable. Hosts are also vetted to ensure safety and prevent fraud. Honest reviews and local validation are crucial to everyone’s safety and success.Learn more at www.airbnb.ca/b/homes-earn, www.vrbo.com/lp/learn-more or www.flipkey.com (choose List Your Property).

The Dark Side of Short-Term Rentals

In late 2017, Vancouver’s city council introduced a bylaw, which came into effect in April 2018, requiring any owner listing a property on a short-term rental website to have an annual licence (costing $49). Fines for non-compliance could be as high as $1,000 per day. In March 2019, the city began going after violators, and now more than 800 owners face various actions, including steep fines. Vancouver officials feel such punitive measures are justified by the city’s extremely low long-term rental vacancy rates, which hovered below one percent in 2017 and 2018 and are exacerbated by absentee ownership.