Caribbean Short-Term Rental & Property Regulation Update: July–December 2012

Six Things to Know

• Airbnb growing toward 300,000 listings globally; Caribbean expansion remains early stage
• HomeAway post-IPO expansion continues; VRBO dominant for Caribbean family vacation rentals
• Jamaica’s traditional villa rental market performs strongly through peak winter season
• Sharing economy discourse growing in academic and media circles; hotel lobby on alert
• Jamaica stopover tourism reaches approximately 1.96 million for full year 2012
• Jamaica’s Rent Restriction Act has no bearing on vacation rental sector, practitioners confirm

Airbnb’s Early Caribbean Footprint

By the second half of 2012, Airbnb was well into what would prove to be its period of most rapid growth, adding hundreds of thousands of listings annually as the platform’s brand awareness expanded from early-adopter tech communities into the mainstream travel market. The company had raised a US$112 million Series C round in July 2011 at a valuation of approximately US$1.3 billion, and was deploying that capital into host recruitment, market development, and platform technology improvements. Global listing counts were growing rapidly — from approximately 50,000 at the end of 2010, through 150,000 by the end of 2011, and approaching 300,000 by the end of 2012.

In the Caribbean, Airbnb’s presence was still in its early stages relative to the island’s total vacation rental market. The company had made its first deliberate efforts to recruit Caribbean hosts in 2012, with Jamaica among the markets receiving attention from the platform’s market development team. The results were modest: a handful of early-adopter Jamaican property owners — concentrated in Negril, Montego Bay, and Kingston — had listed their properties on the platform and were generating their first bookings from the US and UK markets that Airbnb’s marketing was reaching most effectively. The listings were predominantly at the budget-to-mid-market level — studios, one-bedroom apartments, and small houses — rather than the luxury villa segment that HomeAway and VRBO dominated.

HomeAway Post-IPO: Caribbean Market Development

HomeAway had completed its NASDAQ IPO in June 2011, raising approximately US$216 million and giving the company the public currency and balance sheet to accelerate its expansion plans. Through the second half of 2012, the company was operating as an established public business with a market capitalisation that reflected its position as the world’s largest dedicated vacation rental marketplace. Its VRBO subsidiary remained the platform of choice for the Caribbean’s established villa rental operators, who valued the platform’s whole-property focus and its subscription model’s cost predictability.

Jamaica’s villa rental community was well represented on HomeAway and VRBO by the end of 2012. The island’s north coast villa corridor — Round Hill, Tryall Club, Montego Bay estates, and the Ocho Rios area — had long-established relationships with US-based villa rental specialists who used HomeAway and VRBO as primary online distribution channels alongside their direct marketing and travel agent relationships. Properties in the Portland and Blue Mountains area, which attracted a more adventurous traveller profile, were less thoroughly represented on the platforms but were beginning to develop their own digital marketing presences.

The Sharing Economy Enters the Policy Conversation

The second half of 2012 saw the “sharing economy” concept begin to attract serious academic and policy attention beyond the technology journalism and venture capital communities where it had been primarily discussed. Economic researchers were beginning to examine the welfare effects of peer-to-peer marketplaces in accommodation and transportation; hotel industry associations were commissioning research on the competitive displacement effects of STR platforms; and city governments in New York and San Francisco were beginning to grapple with the regulatory implications of large-scale residential property being operated as de facto commercial accommodation without the regulatory requirements that applied to licensed hotel operations.

For the Caribbean hotel sector, the emerging critique of the sharing economy from housing advocates and traditional hospitality businesses in major US and European cities was providing intellectual ammunition for its own advocacy on the regulatory level-playing-field issue. The argument that STR operators were gaining an unfair competitive advantage by avoiding the compliance costs that regulated hospitality businesses faced — an argument that applied with equal force in Jamaica as in New York or Amsterdam — was becoming more credible as evidence from multiple markets accumulated.

Jamaica’s 2012 Tourism and Accommodation Performance

Jamaica’s tourism sector registered approximately 1.96 million stopover arrivals for the full year 2012, continuing the recovery trajectory from the recessionary period and moving the island toward the 2-million milestone that had been a long-standing aspirational target for the Jamaica Tourist Board. The hotel sector’s performance was healthy, with new all-inclusive room inventory in Montego Bay and Ocho Rios that had been in development through the post-recession period beginning to come online.

The STR sector’s contribution to Jamaica’s 2012 tourism accommodation figure was growing but remained unquantified. The absence of any registration or reporting requirement meant that the aggregate scale of STR operations — total listings, total nights booked, total revenue generated, total guests hosted — was invisible to the Jamaica Tourist Board and the Ministry of Tourism in any formal statistical sense. Industry estimates suggested that the sector was generating tens of millions of US dollars annually in accommodation revenue, but the figure was an approximation derived from platform-level data that was not officially compiled or validated.

Jamaica’s regulatory posture toward the STR sector closed 2012 unchanged: no registration requirement, no licensing framework, no dedicated tax guidance, and no formal policy development underway. The island had observed the first stirrings of the global regulatory debate — New York’s illegal hotel enforcement, San Francisco’s early regulatory conversations — without taking any step toward designing its own framework. The sector would continue to grow without that framework for several more years.