Caribbean Short-Term Rental & Property Regulation Update: July–December 2018

Six Things to Know

• Jamaica’s 2018 stopover arrivals approach 2.5 million, a new record for the island
• Airbnb surpasses five million listings globally as platform expansion continues at pace
• Japan’s Minpaku Law takes effect June 2018; Tokyo loses tens of thousands of listings
• Jamaica villa rental market deepens; new supply concentrated in Negril, Portland parishes
• Airbnb introduces host-only fee option; platform restructures compensation model
• Caribbean islands watch Japan STR regulation case study with growing interest

Jamaica’s Sustained Tourism Growth

Jamaica’s tourism sector completed 2018 with another year of record or near-record performance. Jamaica Tourist Board figures indicated that stopover arrivals for the full year were approaching 2.5 million, building on the records of the prior year and continuing the island’s sustained growth trajectory from the early 2010s. The United States remained overwhelmingly the dominant source market, and the continued strength of the US labour market—with unemployment at historically low levels through the second half of 2018—supported robust leisure travel spending among the American consumer cohort that was most likely to choose Caribbean beach destinations.

The short-term rental sector was an increasingly significant participant in this growth. The combination of Airbnb’s expanding marketing reach, the growing proportion of younger travellers who preferred STR accommodation to all-inclusive resort products, and the visible success of early-mover STR operators in Jamaica’s prime tourism zones had drawn significant new supply into the platform-economy accommodation market. New listings were appearing with particular frequency in the areas that had established themselves as Jamaica’s STR strongholds: Negril’s Seven Mile Beach corridor, Montego Bay’s western hotel strip, the Blue Mountains approaches from Kingston, and the relatively undiscovered eastern coastline around Port Antonio and the Rio Grande valley, which was attracting a more adventurous traveller profile that skewed toward villa and self-catering accommodation.

The villa sector at the top end of the Jamaica STR market continued its traditionally strong performance. Properties marketed to the US upper-middle and affluent market through specialist villa rental agencies—many of which predated the Airbnb era by decades—reported healthy occupancy in the peak December-January window and in the spring break period. These properties typically did not list on Airbnb at all, relying instead on long-established relationships with US-based travel agents, villa specialists, and direct repeat-booking clients. The distinction between this traditional villa market and the newer platform-economy STR sector was increasingly significant in analysing Jamaica’s overall vacation rental landscape.

Japan’s Minpaku Law: A Global Regulatory Landmark

The most significant STR regulatory development of 2018 anywhere in the world occurred not in the Caribbean but in Japan. The Minpaku Law—Japan’s new regulatory framework for private accommodation—came into effect on 15 June 2018, capping the number of nights per year that residential properties could be used for STR at 180, requiring registration with prefectural governments, and mandating that operators meet specified health, safety, and neighbourhood management standards.

The law’s effect on Japan’s STR market was immediate and dramatic. In anticipation of the June implementation date, Airbnb was required to notify all Japanese hosts that unregistered listings would need to be taken down by the effective date. The platform removed approximately 80% of its Japan listings in the days before 15 June—a reduction from approximately 62,000 active listings to around 13,000 that either had obtained the required registration or were otherwise compliant with the new framework. The sudden, large-scale removal of listings from one of Airbnb’s most important Asian markets was a stark demonstration of the power that a determined regulatory authority had to reshape a platform’s inventory.

The Minpaku Law was closely watched by regulators and policymakers in other jurisdictions who were considering their own STR policy responses. Its most important lessons were structural: that a licensing and registration requirement, if implemented with a credible enforcement mechanism including platform compliance obligations, could fundamentally restructure a STR market that had grown outside the regulatory framework. The Japan case also illustrated the costs of regulatory intervention applied at scale and speed: the disruption to hosts who had built businesses on Airbnb without adequate notice of the regulatory change was significant, and the approach generated criticism from platform operators and host advocacy groups about the pace of implementation.

Airbnb Reaches Five Million Listings

Airbnb announced in mid-2018 that it had surpassed five million active listings globally across more than 191 countries—a milestone that the company characterised as evidence of the platform’s reach and the depth of the community of hosts who had chosen to participate in the sharing economy. The five million figure was a compound of remarkable growth: from approximately 50,000 listings in 2010, through 1 million in 2013, 2 million in 2015, and 3 million in 2016, to 4 million in 2017 and five million by 2018.

The growth in Airbnb’s listing count reflected a maturing in the platform’s operator base. By 2018, the archetypical Airbnb host was no longer a homeowner renting a spare room or a primary residence during vacation. A growing proportion of listings were dedicated short-term rental units operated by hosts with multiple properties—often referred to in the industry as “professional hosts” or “multi-listing operators.” Airbnb’s own data acknowledged that a significant share of its nights booked globally were accounted for by these professional operators, a reality that was complicating the platform’s political positioning as a tool for individual homeowners rather than a marketplace that functioned, in practice, as much as a hospitality industry channel as a peer-to-peer sharing service.

In the Caribbean, Jamaica included, the multi-listing operator segment was growing. Property owners with the capital and management capacity to operate two, three, or more STR units were displacing single-property hosts in the platform rankings and accounting for a disproportionate share of total nights booked. The concentration of platform revenue among larger operators created a different competitive dynamic than the egalitarian “sharing economy” narrative suggested, and set up the structural tensions that would animate the next phase of STR policy debates in markets where housing supply pressures were more acute than in Jamaica.

Jamaica’s Regulatory Environment: Unchanged

Against the backdrop of continued market growth and significant international regulatory activity, Jamaica’s formal regulatory position on STRs remained unchanged through the second half of 2018. The JTB had no registration or licensing framework that applied to vacation rentals. The TAJ was not actively enforcing income tax or GCT compliance within the sector. The Rent Restriction Act remained irrelevant to the vacation rental market. No ministerial statement, legislative proposal, or consultation paper on STR regulation had been publicly issued.

The position of the hotel sector, which had been making the competitive-disadvantage argument with increasing persistence, received acknowledgment in industry forum settings but had not translated into formal policy commitments. The Ministry of Tourism’s focus remained on growing overall visitor numbers and expanding hotel room supply rather than on the regulatory architecture of the non-hotel accommodation sector. As the end of the decade approached, Jamaica’s STR market was the largest and most commercially significant unregulated accommodation sector in the Caribbean—and one of the largest in the Western Hemisphere—without any prospect of that changing in the near term.

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