The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian vacation rental website developer yesterday voiced concern that the Government’s plans to impose VAT on “the full package” will undermine the industry’s affordability and competitiveness.

Iain Rodgers, owner of BahamasBNBs, told the Eleuthera Business Outlook conference that he and others were hoping the Davis administration does not replicate the resort industry’s “very costly fees and taxes” in their sector where listed properties have more than doubled since 2019.

“VAT is a hot topic within the vacation rental market at the moment,” he said in response to an audience question, acknowledging that the tax is presently only being applied to the fee that the likes of Airbnb and VRBO are charging the property owner for the listing. It is not being levied on the rental rate paid by the tourist, something which Chester Cooper, deputy prime minister, has served notice that he plans to change.

“At the moment they are only taxing what the host is gaining, not the entire package,” Mr Rodgers affirmed, “but we know there are talks in future of taxing the entire package for the rental through VAT. We hope the taxing from VAT on those rentals doesn’t go in the direction of the resort and hotel market, where it’s very costly in fees and taxes for the jurisdiction.

“We want it to be affordable, and we hope it doesn’t go in the direction it is potentially going at the moment.” Mr Cooper, though, has already voiced his intention to roll-out a list of registered vacation rentals - possibly featuring up to 10,000 properties - in time for next month’s Budget which is due to be unveiled on May 25.

And the deputy prime minister added that the Government was planning to amend the law so that VAT is levied on the full value of the rental rather than just the commission paid by hosts to the likes of Airbnb and VRBO. The hotel and resort industry has long called for there to be a taxation ‘level playing field’ with vacation rentals, arguing that the latter sector needs to pay its fair share of contributions towards maintaining Bahamian infrastructure.

While some in the vacation rental sector have pushed back against increased taxation, and what they view as a ‘revenue grab’ by a cash-strapped government, Mr Cooper said recently there was unlikely to be “a significant impact on demand” from vacation rental clients now having to pay an increased rate via 10 percent VAT.

Instead, he described it as a “win-win”, as more formal regulation and oversight will enable Bahamians to receive government assistance to participate in the industry, thereby increasing local ownership, while the Government benefits from tax revenues generated.

“I take a view that we must do both,” Mr Cooper said, when asked whether vacation rentals would be negatively impacted by higher taxation and regulation. He added that the Government would seek to assist Bahamian vacation rental owners via the likes of the Small Business Development Centre (SBDC), Bahamas Entrepreneurial Venture Fund and Tourism Development Corporation.

“But in the meantime we must render to Caesar what is due to Caesar,” the deputy prime minister said, “and many of these vacation rentals, the money is paid into an account abroad. They come in, bring their food and there is very little economic impact left for the community where vacation rentals exist.

“It has to be an equitable distribution, and we’re simply asking for 10 percent, which is the VAT paid by the vacation renter. The impact, if there’s an increase in the cost of the vacation rental, we don’t think that will significantly impact demand and, therefore, this is going to be a win-win. A win-win for the individual doing the renting, because of the support provided by the government agencies, and a win for us because of the taxes collected.”

Mr Rodgers, meanwhile, drawing on data obtained by the Central Bank from AirDNA, said vacation rentals had more than doubled in the past three years despite COVID-19, growing by 112 percent from 3,300 listings in 2019 to 7,000 this year. Some 73,800 guests booked a Bahamian vacation rental in 2019, and this growth pace had continued with 10,000 Airbnb reservations for February 2022.

Average daily room rates stood at just over $450, making it a high-yielding sector, while Central Bank data for the period ended March 2021 showed vacation rental bookings were up 65 percent. Mr Rodgers said other data sources showed the vacation rental business had increased by 27 percent in The Bahamas over the past year, with “most of the growth coming from Nassau”, highlighting domestic tourism’s importance as a source of customers and bookings.

The BahamasBNBs developer said Nassau was the most popular destination, followed by Exuma, north Eleuthera, Freeport and central Eleuthera in that order. Yet when it came to occupancy, the island leader was central Eleuthera followed by Spanish Wells, north Eleuthera and Harbour Island.

Providing further data to showcase that vacation rentals are “on the up”, Mr Rodgers said AirDNA data showed total room nights sold for the 2021 first quarter had “more than doubled” to 290,770. “The trend continued in January 2022 when total room nights sold rose more than two-fold to 113,559,” he added.

Pointing to the sector’s rapid post-pandemic recovery, Mr Rodgers said total room nights sold had increased from 39,917 in November 2020 to 95,440 a year later. And data from Shore Concierge, a Bahamian company, revealed a 10 percent increase in the daily booking rate since the pandemic began compared to end-December 2021. And “the market is up 60 percent for December 2021 compared to December 2020”.

BahamasBNB was described as a Bahamian-owned and developed site dedicated to promoting Bahamian rental properties and associated experiences. Mr Rodgers said it was designed to be “an all-in-one vacation company” giving visitors the ability to book both their accommodation and itinerary.

He added that it was presently in “phase one” of its roll-out, which began last year with the uploading of vacation rentals and second homes to the site and their marketing. Bahamas BNB is now “moving to introduce” bookings, and “phase two” will involve developing a list of experiences and services.