Caribbean Short-Term Rental & Property Regulation Update: July–December 2015

Six Things to Know

• Expedia acquires HomeAway for US$3.9 billion in December, reshaping vacation rental landscape
• Airbnb crosses two million global listings; Caribbean inventory expands across island markets
• San Francisco STR ordinance in force since February 2015; compliance rates disappointing
• Jamaica stopover arrivals track toward 2.1 million for 2015, sustained growth momentum
• Barcelona STR licence freeze now one year old; city pursues platform data-sharing deal
• Caribbean hotel sector observes Expedia-HomeAway deal with concern over platform power

Expedia Acquires HomeAway: A Watershed for Vacation Rental Platforms

The most consequential corporate event in the vacation rental industry’s history to that point occurred on 2 December 2015, when Expedia Group announced the completion of its acquisition of HomeAway, the parent company of VRBO, OwnersDirect, Abritel, and a portfolio of other vacation rental platforms, for approximately US$3.9 billion in cash and stock. The deal had been announced in November 2015 and completed with regulatory approval within weeks, making it the year’s defining transaction in the online travel and accommodation marketplace.

HomeAway had been founded in Austin, Texas, in 2005 and had gone public in 2011 in an IPO that raised approximately US$216 million and valued the company at approximately US$2.8 billion at listing. In the four years between its IPO and the Expedia acquisition, HomeAway had consolidated the fragmented vacation rental marketplace through a series of further acquisitions, assembling a portfolio of regional platforms that collectively made it the world’s largest dedicated vacation rental marketplace by listing count, with approximately 1.2 million listings across more than 190 countries at the time of the Expedia transaction.

For the Caribbean vacation rental market, the Expedia-HomeAway combination was a significant structural change. HomeAway and its VRBO subsidiary had been the dominant platform for Caribbean villa and large-property vacation rentals throughout the early 2010s, particularly for the US family vacation market that was the Caribbean’s most important source segment. The prospect of the combined HomeAway-Expedia platform—which could now offer Caribbean vacation rental properties within an integrated online travel marketplace alongside flights and car hire—created potential for a significant increase in the distribution reach and booking conversion rates for Caribbean operators using the platform.

Airbnb Passes Two Million Listings

Airbnb crossed the two million active global listings milestone in 2015—a figure the company publicised as evidence of the sustained growth momentum that was making it one of the most consequential companies in global travel. The growth trajectory was steep: from approximately 50,000 listings when it first gained significant attention in 2010, through one million in 2013, to two million by 2015 and an anticipated three million by 2016. The company’s Caribbean listing inventory was a beneficiary of this global growth, with Jamaica, Barbados, the Cayman Islands, and the Eastern Caribbean island chain all seeing meaningful expansions in Airbnb-listed property inventory through 2015.

The company’s valuation in private fundraising rounds had by 2015 exceeded US$25 billion, making it the most valuable startup in the world’s sharing economy and one of the most valuable private technology companies globally. Airbnb’s growth was being driven not only by host supply expansion but by its investment in platform features that improved the booking experience: professional photography services for listings, improved search and discovery tools, expanded payment options, and the development of the Superhost programme that created a tiered quality signal for guests navigating a large and variable inventory.

For Jamaica specifically, 2015 was a year of meaningful Airbnb market deepening. Listings that had been established in the 2013–2014 period were accumulating reviews and building the performance history that determines platform visibility. The cohort of Jamaican hosts who had been early adopters of the platform were by 2015 beginning to demonstrate that Caribbean STR listings could achieve the consistently high review scores and repeat booking rates that Airbnb’s algorithm rewarded with premium search placement. This cohort effect would prove significant: the Jamaican hosts who established strong listing performance in 2014–2016 would hold competitive advantages into the high-growth period that followed.

Jamaica’s Tourism Sector: Sustained Momentum

Jamaica’s tourism sector maintained strong growth momentum through the second half of 2015. The Jamaica Tourist Board’s full-year data would confirm approximately 2.12 million stopover arrivals for 2015, a new record and a continuation of the unbroken growth streak from the recessionary trough of 2009–2010. The hotel sector was performing well—occupancy rates and average daily rates were healthy, new hotel construction was planned or underway at multiple sites on the north coast, and the major all-inclusive operators were reporting positive forward bookings for the 2015–2016 winter season.

The STR sector was a growing complement to the hotel market rather than a direct competitor to most of the established operators. The segments of the market that Airbnb was attracting—younger travellers, independent holiday-makers, longer-stay guests seeking a more authentic local experience—overlapped only partly with the all-inclusive resort market’s customer base. The more significant competitive tension was between the STR sector and the boutique hotel and guesthouse segment, where the pricing and experience propositions were more directly comparable.

Barcelona’s Licence Freeze: One Year On

Barcelona’s November 2014 freeze on the issuance of new STR licences had by the end of 2015 been in place for approximately one year, and the city’s approach to enforcing the freeze was intensifying. The municipal government had initiated a process of pursuing Airbnb and HomeAway through administrative fines for hosting unlicensed listings in the city, issuing fines that the platforms contested as disproportionate and legally uncertain. The confrontational dynamic between Barcelona and the platforms had attracted significant international media coverage and was establishing Barcelona as the leading example of a European city willing to take direct enforcement action against platform operators rather than relying on voluntary compliance.

The Barcelona case was significant for the Caribbean STR regulatory debate because it demonstrated the full cycle of a regulatory response: the initial growth of an unregulated STR market, the political response driven by housing advocacy and hotel industry pressure, the adoption of a licensing framework and then a licence freeze, and the escalation to enforcement action against platforms when compliance rates were inadequate. Jamaica was at the earliest stage of this cycle—the growth phase—and the Barcelona experience suggested that deferring regulatory engagement did not avoid the eventual policy confrontation but merely delayed it and potentially made it more disruptive when it arrived.

Jamaica’s Regulatory Landscape: Status Quo

Jamaica ended 2015 with its STR regulatory framework entirely unchanged from where it had stood when the platform economy arrived on the island. No licensing requirement, no registration system, no platform-level tax collection arrangement, and no formal policy engagement with the sector’s growing size. The Expedia-HomeAway acquisition had not produced any government response about the implications for Jamaica’s accommodation market. The Airbnb growth milestone had not prompted any review of the island’s accommodation regulatory framework. The international regulatory developments in San Francisco, Barcelona, and other cities had not generated any public discussion of their relevance to Jamaica’s policy environment.

The political conditions for regulatory action remained unfavourable at the end of 2015. Tourism was growing, the STR sector was popular among a politically significant property-owning middle class, and the administrative infrastructure for a registration and licensing system did not exist. The regulatory agenda that the hotel sector was quietly advocating—and that the broader policy community was not yet mobilising around—would remain unaddressed through the years that followed.

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