Government proposal for new holiday rental fee shows ‘lack of focus’ – OBA
New legislation imposing an annual fee on holiday rentals could deal a blow to a struggling industry, according to the One Bermuda Alliance.
The Government has tabled the Vacation Rentals Fees Act which will introduce fees for a holiday rental certificate ranging from $1,500 to $2,500 on holiday rentals.
Craig Cannonier, the Shadow Minister of Tourism, said: “We are not in a position as a country where we are physically doing well, and until we get to that point we’ve got to be very, very careful about how we apply fees.”
Under the legislation, properties with a rental value of $22,800 or lower would have to pay $1,500 for an annual certificate.
Properties with a rental value between $22,801 and $90,000 would pay $2,000 and properties valued $90,001 and higher would pay $2,500.
Mr Cannonier said that the holiday rental industry was still relatively young and made up of many people who rented their properties as a way to help pay off mortgages.
He said that the fees could discourage people from having holiday rentals and that it was another tourism hit after the Travel Authorisation forms, which were discontinued last November, put a strain on the industry.
Because the Fairmont Southampton was not expected to reopen for several more years, Airbnbs and other holiday rentals were essential to assist in supplying more beds, said Mr Cannonier.
Recently, the transport minister Wayne Furbert said there were roughly 2,500 hotel beds compared with 10,000 “in the good old days”.
The legislation, said Mr Cannonier, was made out of desperation and showed “a lack of focus on where we need to be”.
Higher fees would be appropriate after revenue had been built – but he added that “tourism is at an all-time low and we’re asking people to pay more”.
“We need to be doing as much as we can to get the industry up on its feet. The Government gives from one hand and then takes from the back door with the other.
“They come out the front door saying, ‘we’re giving you this, we’re giving you that’, but then you look out the back door and you’re paying more money.”
Since the end of 2018, Airbnb has collected 4.5 per cent in vacation tax directly from guests who book Bermudian rentals.
At the time, it was said that the money would be used to help promote Bermuda's tourism industry and will include “destination marketing” on Airbnb to target a bigger audience of potential tourists.
One person who operates two Airbnbs near Hamilton, said that the new fee would add “more cost and complexity” to the increasingly difficult task of running a holiday rental.
The operator, who asked not to be named, said that operating his Airbnbs had gone “from a relatively simple and seamless way of welcoming visitors to Bermuda for an affordable price, to the point where I am going to have to take a hard look at whether it still makes financial sense”.
He added: “From a cost perspective, this reduces the margin of profit which has already been cut down. This is one more expense along with land tax, insurance and general maintenance.”
The renter said that his properties offered seasonal income, faring well in the summer months but struggling to bring in cash during winter.
He said that because of the proposed fee, he may have to increase prices in the summer or put one or both properties on the long-term rental market for an easier income.
He said that this could be the Government’s long-term strategy – but added that it “may be a case off cutting off your nose to spite your face”.
“People still need money in their pockets to pay rent, and that money first comes from foreign exchange earned by tourism and international business, who are my main customers.
“Airbnbs have been critical in helping tourism survive during and since the pandemic, so it makes no sense to drive people out of the market now, but I fear that is what will happen.”
Many holiday renters hit back against the proposed $1,500 minimum annual fee to register their properties.
One concerned Airbnb host, who asked not to be named, said that short-term rentals offered needed beds that supported the tourism market.
He added that holiday rentals needed to be encouraged instead of deterring potential rentals with fees, particularly because they were “an avenue to draw in much needed capital from external sources”.
The host said: “Many Airbnbs offer an option for families with young children who would not come to the island without these units.
“Besides, short-term rentals currently are taxed; any additional tax is targeted and detrimental to a Bermudian’s choice of what they do with their property.”
The host said that they were “just trying to make ends meet, pay bills, and survive while offering options to visitors – with no thanks to the Government trying to reach into our pockets again”.
One Facebook commenter noted that the proposed fee would be five times the land tax already paid on their property.
Another suggested a lack of consultation that might have gone into the Bill.
A Facebook commenter wrote: “If the registration tax fee starts at $1,500, that’s me done.”
Another said: "Oh my goodness. Are they crazy or what. That is way, way higher than my land tax. I won’t be able to rent if that is correct.
“In any case, most of us only have guests for several months of the year.
“They keep talking about the island not having enough beds for guests, if this is correct there will be even less beds …”
One commenter suggested that the Bill had been proposed to discourage short-term rentals.
But they added: “Not to say that it will encourage many to revert to long term. The consumer always foots the bill and this new tax will only cause nightly prices to increase.”
The new fee was mentioned in the Budget last month and at a press conference Vance Campbell, the tourism minister, said it “may” or “may not” lead to a decrease in holiday beds.
He added: “We have projects that are out there that will be bringing beds on line. Based on what you can charge for vacation rental, I don’t know the exact fees, but the fees are not meant to be prohibitive to discourage people from continuing.”
Asked about the legislation on Friday, a ministry spokesman said: “The significant point to note is that vacation rental fees for property owners have never been applied before.
“Moreover, as recently announced in the House of Assembly, vacation rental fees will be equitably assigned according to the ARV of each property.
“Given how these fees will be determined, we do not anticipate property owners being dissuaded from renting their premises as vacation rentals.”
“As reported during the recent budget debate in the House, Government projects $500,000 in revenue from these fees.”
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