Dear Sir,

I was shocked to read the recent headline on March 20 regarding the new holiday-rental licence fees.

Imagine my further shock to see the deed is now done (The Royal Gazette, March 27, 2023, page two) and then to see on the next page that the same minister — who defends the new $1,500 to $2,500 fee per unit on individual Bermudians to raise $500,000 a year — rationalises at length giving large developers concessions measured in hundreds of millions of dollars and lasting ten to 20 years. Add to this that the holiday-rental industry gets essentially zero direct support from the Bermuda Tourism Authority or Ministry of Tourism that other accommodation operators get.

There is something badly wrong with this picture.

Bermuda desperately needs more tourist accommodation to boost the number of visitors on island, and to boost air demand and restore the incoming flights we have lost.

We have a surplus of small “bedsit” apartments and one-bedroom-style units that were built in the days when we had far more expatriates on island. These were, in many cases, built to help Bermudian homeowners pay their mortgages. They are not suitable for families and the rents would be too high for single Bermudians, so the idea that repurposing them for holiday-rental use is robbing locals of affordable housing is a nonsense.

The holiday-rental option came along at a perfect time to help the Bermudians who owned the properties and simultaneously help dig tourism out of the deep hole it is in.

In addition to that:

• There is no equivalent to this very large per-bed fee when it comes to other visitor accommodations — hotels, guesthouses, fractionals, condos. Perhaps an annual $1,500/bed fee should be imposed on them, too

• Every stick of wood, bag of cement, piece of pipe, tile, sink, tub, window, gallon of paint, carpet, chair, bed, mattress, curtain, dresser, table dish, spoon, fridge, stove, dishwasher, pot and bar of soap used to build and run these holiday-rental units pays full customs duty. Holiday-rental owners don’t get any duty reductions, forgiveness or any kind or “loan guarantees” from the Government. We holiday-rental owners already pay our own way

• Every hour of construction work and every hour of maintenance and housekeeping is either done by the owners or purchased from a Bermudian service provider at retail prices. Holiday-rental owners don’t have large squads of imported workers to construct and maintain their properties. They employ other locals

• Holiday-rental owners already pay a room-night tax to the Government in exactly the same way as hotel operators do, in spite of getting none of the benefits that hotels get

• Visitors who choose holiday rentals for their stay are not the same holidaymakers that would choose a hotel. Aside from the cost, they are simply looking for a different kind of experience. They are far more interested in exploring Bermuda and Bermudians in a way that only Bermuda can offer. They want to feel like they are living in a local neighbourhood rather than a curated environment. They explore the historical and cultural amenities much more thoroughly. They actually shop more than hotel visitors. Holiday-rental beds and the visitors who prefer them are a market segment that complements our tourism product in a way that other accommodations do not

While there is a certain amount of overlap between the traditional Bermuda cottage colony, guesthouse property and a holiday-rental property, the sad truth is that the number of available cottage colony and guesthouse rooms — especially in the medium price range — is nowhere near what we need.

It is important here to also point out that many holiday-rental units are offered for only relatively short periods during the year — while the owner is working reduced hours and can do the maintenance and housekeeping. But not while they have children home from school or other guests; not while they are travelling; not over holiday periods; and not when they have friends or family visiting. Clearly a one-time licence fee in such cases is manifestly unfair and regressive.

I understand that the holiday-rental label covers a wide spectrum of accommodations:

• At the small end are the “true” Airbnb units that are not separate dwellings, but rather “efficiency” rooms within a person’s home. These units don’t even have separate annual rental values; they are literally a Bermudian welcoming a visitor to their home

• There are the units that are attached to a local residence. These are typically the bachelor apartments or one-bedroom, “in-law units” built as part of the home or adapted when a child or relative needs a separate — or smaller — place.

• There are a large number of “investor-built” holiday-rental units that have been typically created by renovating older homes or derelict properties into multi-apartment residences, expressly to be offered as holiday-rental units. These are quite different in configuration and architecture from what would be built for local residences, and the economics of the renovation rely on revenues that are two or three times what a Bermudian renter could afford, so the idea that these could be on the local market — especially at reasonable rents — is just wrong

• There are free-standing cottages and even medium and large homes that are also offered for holiday rental. Typically, these are offered for limited periods during the year when owners are off island, on holiday themselves, between longer-term rentals, when estates are in probate or when a property is being offered for sale. I know many Bermudian families, dating back 50 years and more, who routinely offered their homes for rental for three to six when they themselves were on holiday or visiting family abroad. The revenue not only paid to maintain the property but actually contributed substantially to their holiday budget as well. Visiting groups or families would often co-ordinate holidays with them to rent the same home year after year, and would equally often become true friends as well

Some way of taking into account that a unit is rented for only part of the year has to be found.

The “bands” of ARVs mentioned are a token move towards fairness at the level of the size of the property, but completely wrong in the case of units that are an integral part of a person’s home. If my home has an ARV of $90,001 and I put a spare bedroom and bath with a separate entry on Airbnb for three or four months a year at $100/night, I would have to pay $2,500 for the licence. If someone puts a four-bedroom home on short-term rental all year through a local agent for $15,000/month, they would pay the same licence fee. This is manifestly wrong.

In spite of all the concessions and support that hotels receive that holiday-rental owners do not, the existing holiday-rental tax is the same as that for hotel rooms. It may be unfair to holiday-rental owners, but it works and it works seamlessly. Most importantly it is fair. If you get $1,000/year from a room rental or $100,000/year from a house rental, you pay the same portion of your revenue to the BTA.

The right way to increase the Government’s revenue for holiday-rental rooms is to increase the room tax. Simple, easy, equitable, fair, obvious.

Of course, the question then becomes why individual Bermudians who invest their own money, who pay all the duties and taxes, and who hire other Bermudians should pay a higher tax rate than a big foreign corporation does when it takes millions and millions of dollars out of the economy in profit on fractional-ownership units, condos and villas built with subsidies often on reserved and protected land that no Bermudian would ever be allowed to develop.

There should be no holiday-rental licence fee. The room tax should be raised on all visitor accommodations.

Nothing else passes the smell test.

JAN CARD

Smith’s