Caribbean Short-Term Rental & Property Regulation Update: January–June 2016

Six Things to Know

• WHO declares Zika a global emergency in February; Caribbean tourism bookings soften
• Airbnb growing rapidly toward three million global listings as Caribbean inventory expands
• Expedia begins integrating HomeAway; Caribbean hosts adjust to platform ownership shift
• Jamaica STR market active despite Zika headwinds; independent travellers maintain bookings
• San Francisco STR ordinance implementation stumbles; Airbnb challenges host-data rules
• Caribbean hotel sector cites Zika impact asymmetry with unregulated STR competitors

Zika and the Caribbean Tourism Market

The first half of 2016 was dominated, for Caribbean tourism, by the rapid spread and international recognition of the Zika virus. The WHO’s declaration in February 2016 of a Public Health Emergency of International Concern—following the identification of a probable causal link between Zika infection during pregnancy and microcephaly and other congenital neurological conditions—triggered a wave of travel advisories and media coverage that immediately affected forward booking behaviour in Jamaica’s primary source markets.

The US Centers for Disease Control issued guidance recommending that pregnant women avoid travel to all destinations with active Zika transmission, which by February 2016 included virtually every Caribbean island. The guidance was subsequently extended to recommend that couples considering pregnancy take precautions during and after travel to Zika-affected areas. The practical effect on the Caribbean accommodation market was immediate: bookings for honeymoon travel, babymoon packages, and family travel with pregnant women or women of childbearing age softened noticeably in the weeks following the WHO declaration.

Jamaica’s STR market was affected but not uniformly. The segment most directly impacted was the romance and honeymoon travel market, where Jamaica had been successfully positioning itself as a premium destination. More broadly, the independent traveller and adventure-tourism demographic that formed a significant part of the Airbnb customer base was less deterred by the Zika advisory than the family and romance segments, and Jamaica’s platform-economy listings saw a less severe booking softening than the all-inclusive hotel sector reported for some of its key market segments. STR operators who responded to the Zika period with flexible cancellation policies, transparent health information, and targeted rate adjustments generally fared better than those who maintained pre-Zika pricing and booking rigidity.

Airbnb’s Caribbean Expansion Continues

Through the Zika disruption, Airbnb continued expanding its Caribbean listing inventory. The platform had passed two million global listings in 2015 and was tracking toward three million by the end of 2016. Jamaica remained one of the platform’s more active Caribbean markets, with listings growing across the established resort zones and beginning to establish meaningful density in new areas including the south coast parishes between Kingston and Black River, the Blue Mountains, and the Falmouth area along the north coast.

The Airbnb host community in Jamaica had by 2016 developed an internal social infrastructure that the platform’s earliest Caribbean operators had lacked. Online communities—Facebook groups, WhatsApp networks—had formed among Jamaican Airbnb hosts, creating informal channels for the exchange of operational advice, pricing guidance, guest review assessments, and regulatory intelligence. These communities provided the social infrastructure through which Jamaican hosts discussed the regulatory environment, shared information about JTB inspection activity (which was essentially zero for the STR sector), and debated the emerging policy conversations happening in other jurisdictions.

The platform’s investment in Jamaica’s market was also reflected in its local operational presence. Airbnb maintained market development relationships with Caribbean operators and had on occasion hosted educational events for Jamaican hosts in partnership with local tourism bodies. The company’s engagement with the Jamaican market at this level was commercially motivated—it wanted to grow high-quality listing inventory in a destination with strong demand—but it also gave the platform a degree of institutional relationship with Jamaica’s tourism sector that would eventually become relevant to any regulatory discussion.

The HomeAway Integration: Caribbean Platform Consolidation

Expedia’s December 2015 acquisition of HomeAway for approximately US$3.9 billion was the largest transaction in vacation rental platform history and its implications were being felt across the Caribbean market through the first half of 2016. HomeAway’s portfolio included not only the HomeAway.com brand but also VRBO—Vacation Rentals by Owner, the original dedicated vacation rental platform that had been founded in 1995 and had long dominated the US market for whole-property family vacation bookings—along with OwnersDirect in the UK, Abritel in France, and several other regional platforms.

For Caribbean villa and vacation rental operators who had been using HomeAway and VRBO as their primary distribution channels, the Expedia acquisition raised immediate questions about the future direction of the platforms. HomeAway’s traditional subscription model—in which hosts paid an annual listing fee rather than a per-booking commission—had been a significant point of differentiation from Airbnb’s commission-based model and had been one reason why established Caribbean villa operators with high average booking values had preferred it. Expedia’s corporate communications in the months following the acquisition signalled that the subscription model would be gradually phased out in favour of a commission-per-booking approach, which was a significant operational and financial change for the hosts who had structured their businesses around the subscription framework.

San Francisco’s STR Ordinance: Implementation Lessons

San Francisco had passed the first formally enacted US city STR ordinance in October 2014—a framework that required hosts to register with the city and limited STR activity to primary residences for up to 90 nights per year for unhosted lets. The ordinance came into formal effect in February 2015, making San Francisco the first US jurisdiction to both legalise and regulate platform-economy STR activity through a dedicated statutory framework.

By the first half of 2016, the implementation experience was generating lessons that other jurisdictions were watching closely. Compliance rates with the registration requirement had been much lower than city officials had hoped: the SF Planning Department reported that only a small fraction of estimated active Airbnb listings in the city had obtained the required registration. The disconnect between the registration requirement and actual compliance reflected a familiar pattern: hosts who were already operating informally had limited incentive to voluntarily step into a regulatory framework that imposed new obligations without offering material benefits.

The San Francisco experience highlighted the critical importance of platform enforcement mechanisms as a complement to registration requirements. Without an obligation on Airbnb to take down unregistered listings, the registration requirement was effectively unenforceable—hosts could ignore it with confidence that they would not be identified without the platform’s cooperation. The city was engaged in a legal and political struggle with Airbnb over the platform’s obligation to enforce the ordinance, a dispute that would eventually be resolved through new legislation requiring platforms to verify host registration before listings could go live.

Jamaica: A Market Without Rules

As San Francisco wrestled with STR enforcement, as the European cities deepened their regulatory experiments, and as the Caribbean platform market grew rapidly through the Zika turbulence, Jamaica’s STR regulatory posture remained unchanged. There was no registration requirement, no licensing framework, no platform-specific tax arrangement, and no formal government engagement with a sector that was, by mid-2016, one of the most commercially significant accommodation markets in the island’s tourism economy.

The hotel sector’s advocacy for a level regulatory playing field had been consistent but ineffective. The JTB’s mandate and institutional focus remained on the formal hotel sector. The Ministry of Tourism’s performance metrics centred on visitor arrival numbers and foreign exchange earnings from tourism, neither of which captured the regulatory gap in the STR sector. As the Zika-disrupted first half of 2016 drew to a close, the structural questions about Jamaica’s STR regulatory framework remained as open as they had been when the platform economy first arrived in the Caribbean.

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