The Tribune

Small Bahamian hotels will likely have to “fuse” vacation rental homes into their business model, a Bahamian realtor is arguing, with the latter sector poised to become the market leader.

Colin Lightbourn, Engel & Völkers license partner, said there were already more vacation rental rooms on the Family Islands than hotel rooms, with such disruptive market forces likely to drive resorts into incorporating private homes into their business model.

Speaking as Engel & Völkers released its 2019 Vacation Rental Report on The Bahamas, Mr Lightbourn said the results were based on 4,200 properties listed on Airbnb and Homeaway, which he described as the most complete database on market activity in this nation.

“I believe there’s certainly more vacation rental rooms in the Family Islands than there are hotel rooms,” Mr Lightbourn said. “In fact, I believe that’s true for the entire Bahamas. And that’s factoring in Baha Mar and Atlantis.

“I’m talking here total bedrooms in house, not total houses. Just in this sample alone we are looking at over 11,000 bedrooms, and this does not include all the homes available in the market, although it is the vacation rental of the whole house that our report deals with in this instance.”

The Engel & Völkers report showed average rental occupancy rates varied from more than 70 percent in Nassau/Paradise Island to just over 40 percent in Bimini and Andros, respectively.

Average daily rates (ADR), possibly due to limited supply, were at their highest in Andros at just over $500. Abaco was next at $400, while ADRs in Nassau just breached the $200 mark.

Average annual gross rental income was highest in Exuma, standing at $90,000, which was followed by the likes of Exuma, Abaco and Andros in the $70,000 to $80,000 range. Gross annual rental income in Nassau/Paradise Island was more than $60,000.

Average occupancy rates, rental income and ADRs sometimes varied wildly on the same island. Average daily rates and annual income, for example, were far higher on Harbour Island than elsewhere on Eleuthera.

Mr Lightbourn, meanwhile, added that the vacation rental market had even expanded to inner-city Nassau, and said: “That’s interesting, especially when you’re looking at the Bahamian market overall.

“In the Family Islands, Bahamians can purchase properties that have ocean access for reasonable prices. When we did our market report in January, the average price point for somewhere like Treasure Cay was $370,000, and Treasure Cay had the most unit sales in an out island location.

“Most investments there are used for the vacation rental market because of, one, the price point, and two, the demand for vacation rentals in an area that has a marina, a beach, and access to other islands.”

The Engel & Völkers license partner said vacation rental owners likely enjoyed up to a 40 percent profit margin, with the realtor’s survey showing only gross rental income and “not what somebody is putting in their pocket”.

“I’d say you have anywhere between 30 percent to 60 percent of expenses related to the running and operating of that property. You have your basics like utilities, insurance, property tax and maintenance, management fees, house-keeping - it mounts up,” Mr Lightbourn said.

With all signs pointing to continued market growth, he suggested that small hotels - especially on the Family Islands - and vacation rentals - are likely to be pushed closer together.

“Small hotels will need to look at offering services from their hotels to the private homes,” Mr Lightbourn said. “And I think in the future that’s where the market is. The new buzzword is ‘bespoke’, and that’s going to be the experience people are looking for, which is going to really fuse the private homes and the resorts together in some capacity.”

With the Hotel Encouragement Act’s tax breaks further incentivising the private home market’s expansion, he added: “People are coming here to have a very personalised, unique, authentic experience in the island, and it opens up opportunities for younger people to get into all kinds of businesses catering to this.

“I believe our government regulators should safeguard this burgeoning industry that is obviously meeting a need in the travel experience. It offers tremendous economic benefits to a new type of entrepreneur.”

Mr Lightbourn’s comments come as the government examines how best to levy VAT on the vacation rental sector, amid concerns - especially in the resort industry - that it is not paying its fair share to finance the maintenance of critical infrastructure.

Meanwhile, confirming the vacation rental industry’s continued growth, the Central Bank of The Bahamas’ monthly economic developments report for March said: “Healthy trends were also noted in the growing non-hotel based segment of the market, typically characterised by short-term vacation rentals.

“An analysis of data obtained from AirDNA showed that the total number of room nights sold firmed by 24.3 percent to 78,160 in March, as bookings for ‘entire place’ listings rose by 22.8 percent and for hotel comparable listings by 37.3 percent.

“Over the first quarter, total room nights booked firmed by 24.7 percent, underpinned by a 22.4 percent expansion in ‘entire place’ bookings and a 42.6 percent rise in the hotel comparable segment. Moreover, all of the significant markets tracked experienced quarterly sales expansions, as room bookings for Exuma firmed by 51.5 percent, New Providence by 26.9 percent, Abaco by 21.4 percent, and Grand Bahama by 2.1 percent.

“Further, the average daily rate (ADR) firmed slightly by 0.7 percent to $141.97 for hotel comparable listings, while the rate for entire place listings softened by 1.5 percent to $341.49.”