Caribbean Short-Term Rental & Property Regulation Update: July–December 2016

Six Things to Know

• Airbnb surpasses three million global listings as platform growth milestone is reached
• Expedia-HomeAway integration accelerates; VRBO repositioned as family vacation brand
• Jamaica 2016 stopover arrivals reach approximately 2.18 million despite Zika headwinds
• Zika virus advisory suppresses broader Caribbean tourism; Jamaica partially insulated
• Caribbean villa market maintains premium positioning outside Airbnb platform economy
• No Caribbean government adopts STR licensing framework through H2 2016

Airbnb’s Three Million Milestone

Airbnb crossed the three million active listings threshold in 2016, cementing its position as the world’s most extensive accommodation marketplace by property count and extending its global footprint to more than 190 countries. The milestone was significant as a marker of the platform’s maturation from a niche urban home-sharing service—which is what it had been at its founding in 2008 and through its early growth years—into a genuinely global accommodation infrastructure operating across every category of tourism destination, from metropolitan centres to remote beach communities to rural mountain retreats.

In the Caribbean, Airbnb’s inventory had grown substantially from the handful of listings that had appeared on the platform when the company first began recruiting Caribbean hosts in the 2012–2013 period. Jamaica, Barbados, the Cayman Islands, St Lucia, and Trinidad and Tobago were among the markets where the platform had achieved meaningful listing density. Jamaica’s listing inventory was concentrated in Negril, Montego Bay, and Ocho Rios for the resort-facing segment, with a smaller but growing Kingston presence and early-stage listings across the less-trafficked south coast and eastern parishes.

The character of Jamaica’s Airbnb inventory in 2016 was changing from the earliest years. Where the platform’s initial Jamaican listings had been largely spare rooms and modest self-contained apartments at the budget end of the accommodation spectrum, the mid-decade growth had brought a much wider range of property types into the platform economy. Dedicated vacation rental houses with private pools, oceanfront apartments with high-end finishes, and whole-property villa bookings were increasingly available through Airbnb as property owners who had previously relied on traditional villa rental agents explored the reach and revenue potential of the platform marketplace.

Expedia’s HomeAway Integration and VRBO’s Repositioning

Expedia had completed the acquisition of HomeAway, the parent company of VRBO and multiple other vacation rental platforms, in December 2015 for approximately US$3.9 billion. Through 2016, the integration work was underway: Expedia was restructuring the combined entity’s technology infrastructure, rationalising the portfolio of acquired brands, and defining a strategic positioning for the vacation rental business within the broader Expedia Group travel marketplace.

The most significant strategic decision in the integration was the elevation of VRBO as the primary consumer brand for the whole-property vacation rental segment. HomeAway, which had been the parent brand with global recognition, was maintained but with reduced marketing investment as Expedia redirected toward the VRBO identity. The rationale was brand focus: VRBO had long been associated specifically with whole-property vacation rental bookings—the model of renting an entire house or villa for a family or group trip—and Expedia believed that positioning was more defensible and differentiated than trying to compete with Airbnb for the home-sharing and urban-accommodation segments where the incumbent had overwhelming brand recognition.

For Caribbean property operators, the HomeAway-to-VRBO transition required attention to listing management and marketing strategy. The consolidation of platform identity under VRBO meant that maintaining active, well-optimised listings on the Expedia vacation rental platform was more important than ever for operators in the whole-property segment. The transition also raised questions about the terms of engagement between the platform and hosts: Expedia was moving the consolidated HomeAway/VRBO platform from its traditional subscription-based pricing model—in which hosts paid an annual subscription fee for listing access—toward a commission-per-booking model similar to Airbnb’s transaction-fee structure, a change that significantly affected the economics of platform participation for operators who had historically preferred the subscription approach.

Jamaica’s Tourism Under Zika’s Shadow

The Zika virus had emerged as a significant international public health concern in early 2016. The WHO declared Zika a Public Health Emergency of International Concern in February 2016 following the identification of a link between the virus and microcephaly and other neurological conditions in foetuses. The CDC issued travel advisories recommending that pregnant women and couples considering pregnancy avoid travel to Zika-affected regions, which included virtually all of the Caribbean.

For Jamaica’s tourism sector, the Zika advisory created genuine headwinds. The island confirmed local Zika transmission, which meant it fell within the scope of the CDC’s advisory framework. The practical impact was most severe in segments of the tourism market where concerns about Zika were most salient: honeymoon and wedding travel, family travel with young children, and bookings from travellers with elevated health risk awareness. The broader leisure market was more resilient: young adult travellers, groups of friends, and experienced Caribbean visitors who had made their own assessment of the relatively low personal health risk from Zika for non-pregnant adults continued to book Jamaica in significant numbers.

The full-year 2016 Jamaica Tourist Board data would confirm approximately 2.18 million stopover arrivals—a result that, while below the growth trajectory of the immediately preceding years, represented a relatively modest decline from 2015’s approximately 2.12 million and was far less severe than some in the industry had feared when the Zika advisory was issued in February. The hotel sector absorbed the Zika impact through discounting and flexible booking terms; the STR sector’s inherently flexible pricing structure meant individual operators could similarly adjust their rate positioning to maintain occupancy.

The Traditional Villa Market: A Parallel Economy

One of the distinguishing features of Jamaica’s vacation rental landscape in the mid-2010s was the persistence and vitality of the traditional villa rental market that operated in parallel with and largely independently of the Airbnb-centred platform economy. Jamaica had a well-established luxury villa rental sector—concentrated in the properties of the Round Hill, Tryall Club, Montego Bay Club, and individual coastal estates around the north coast—that had been serving high-net-worth American and European visitors through specialist villa rental agencies since at least the 1960s.

This traditional sector had its own distribution infrastructure: a network of US-based luxury travel agents and villa specialists who maintained curated portfolios of Jamaica’s finest properties and sold them to a clientele that valued personal relationships, specialist knowledge, and white-glove service over the self-service platform booking experience that Airbnb offered. The properties in this segment typically included private chef and butler service, dedicated housekeeping, infinity pools, and direct beach access—an accommodation experience that commanded nightly rates from several hundred to several thousand US dollars and that positioned Jamaica at the very top of the Caribbean luxury accommodation market.

The existence of this traditional sector alongside the growing platform-economy STR market created a segmented Jamaica vacation rental landscape with very different regulatory implications. The traditional luxury villa market had long-established relationships with the Jamaica Tourist Board and the villa rental agency community, paid taxes on a more consistent basis, and operated with a degree of professionalism and accountability that the informal Airbnb sector did not always match. Any future regulatory framework for Jamaica’s STR sector would need to accommodate the particular characteristics of the traditional villa market while addressing the compliance gaps in the newer platform-economy segment.