The French Senate has greenlit measures to apply value-added tax (VAT) to Airbnb and similar platforms, aiming to address perceived competition imbalances with the hotel sector.
Under the existing system VAT is levied on furnished tourist accommodations based on specific services like breakfast, regular cleaning, and the provision of household linen. The proposed amendment contends that this is “distortion of competition” between holiday rental companies and hotels, which are already VAT-subject.
Currently, Airbnb collects tourist tax predetermined by regions (usually 10%) and additional taxes depending on the departments. For instance, the Île-de-France region recently introduced an additional “Grand Paris” tax of 15%.
Finance minister Bruno Le Mair had suggested increasing taxes on Airbnb rentals, in June this year, to align them with regular, non-tourist rentals. Currently, tourist rentals, including those through Airbnb, enjoy a special tax rebate in France. Le Maire emphasized the need for fairness in taxation and expressed concerns about excessive benefits and favorable tax treatment.
Despite Senate approval, the government retains the right to reject the measure. The Senate previously endorsed a measure to regulate furnished tourist accommodations by reducing tax deductions in areas with rental pressure.
Miami startup Foothold.co has launched a real estate crowdfunding platform for investing in luxury vacation rentals.
Following SEC compliance and the finalization of its online investment processing platform, Foothold.co allows both accredited and non-accredited investors, starting from $200.
Foothold was founded in September 2022 after raising capital to invest in real estate for private investors, the company designed a crowdfunding platform to cater for accredited and non-accredited investors to invest online.
The company has announced availability starting November 8, including an investment opportunity in the “Patagonia Mirror Hotel” resort in Argentina. The company plans to extend its platform to local US investors in 2024, actively seeking partnerships with hospitality and glamping space developers.
According to its website, the company counts over 1200 investors and 21 units under development.
“Our long term vision is to create a solution to help real estate developers and architects in securing funding to turn their visions into reality. We collaborate with them to create unique short-term rentals with the potential to captivate Airbnb users,”said German Rimoldi, co-founder of Foothold.
Foothold’s concept isn’t new – fractional ownership of vacation rentals, especially in the luxury segment, have been gaining momentum.
In October last year, luxury vacation rental brand Wander launched what it called the industry’s first vacation rental REIT named “Atlas” — with an attempt to attract investors with high yield-passive income promising eight percent annual returns and 14 percent targeted total return.
Another Miami company Here.co offers a similar proposition: to allow everyone to invest in short-term and vacation rentals.
In late September, Hyatt Hotels announced that it was exiting its vacation rental management business while launching an online short-term rental platform soon. Its Destination Residences Management unit was sold to a real estate investor called Lowe, which, through an affiliate, will run it under Lowe and Coral Tree, though no price was disclosed at the time of the announcement.
Now we have the details from Hyatt’s latest quarterly report filing. From the filing, below:
“Destination Residential Management—During the three months ended September 30, 2023, we sold our interests in the entities which own the Destination Residential Management business to an unrelated third party for $2 million of base consideration, subject to customary adjustments related to working capital and indebtedness, and up to an additional $48 million of contingent consideration. The contingent consideration will be earned within two years following the sale upon the achievement of certain performance-based metrics and the extensions of certain contracts related to the rental programs and/or homeowner associations. We recorded a $28 million contingent consideration receivable at fair value in other assets on our condensed consolidated balance sheet at September 30, 2023.
The transaction was accounted for as a business disposition, and we recognized a $19 million pre-tax gain in gains (losses) on sales of real estate and other on our condensed consolidated statements of income during the three months ended September 30, 2023. In conjunction with the disposition, we transferred $10 million of cash to the buyer related to advanced deposits. The operating results and financial position of this business prior to the sale remain within our Americas management and franchising segment.”
The problem surfaced in late Summer — Booking.com’s short-term rental hosts in Europe, Asia-Pacific and Latin America cited financial hardships because the company wasn’t paying them for guest stays.
A condo hotel that was listed on Booking.com. Source: Booking.com
CEO Glenn Fogel told financial analysts last week during Booking Holdings’ third quarter earnings call that Booking.com would begin letting partners know that compensation is on the way.
Missed Host Payments
“During the quarter, some of our partners at Booking.com experienced delayed payments due to a planned upgrade to our finance and payment platforms in early July,” Fogel said. “We’ve now cleared the backlog of outstanding payment issues related to the system upgrade. We plan to provide compensation to partners who experienced an extended delay, and we recorded this in our Q3 results. We plan to communicate to all partners who were impacted by these payment delays within the next few days.”
The company won’t specify precisely how much it would be shelling out to hosts as compensation.
A spokesperson said the amount of the payments are “meaningful, not material.”
In-House Payment System Is Strategic Priority
When the reports of missed payments for hosts first surfaced several months ago, the company downplayed the issue.
But in addition to the financial pain it inflicted on hosts, the snafu was an embarrassment to the company because it has been developing its own payments system over the last few years as a strategic imperative.
Fogel: We did a very, very large change in our backend financial systems. Some things didn’t work so well. You do everything you can to make sure it’s going to be perfect. Wasn’t. Some people didn’t get paid a very, very, very small percentage. But even one person is one too many.
We have two types of customers. We’ve got the travelers and we’ve got the partners. And if we don’t provide good service to them, that’s on us. We screw it up, and there were mistakes. And if you don’t pay a very large company so much, well, it’s not a big deal.
By the way, in our agency business where we get paid by the partner who sends us money afterwards our commission, sometimes we don’t get paid on time either. So 30 days late, 60 days late, 90 days late, and during the pandemic, we didn’t get paid at all. Happens. This is not a pandemic, this is a mistake. And the thing is, for the smaller partners, partners that were really depending on that payment, I just felt so horrible.
Schaal: What kind of redress can you have for them?
Fogel: First thing is get their money as fast as you can, as fast as you can. And I’ll tell you, I get emails and I’ve read them and they are really heartbreaking. You just feel horrible when you do something wrong. And we have fixed it, it’s good now. But I’ll tell you, this is something where I say to the team, and I say that … I spoke out at a town hall for all of our 20 something thousand employees.
And I told them about this. I said, “Look, this is not the way we want to be. We got to do better. We should not ever, ever feel that this is OK.” Well, it’s only a small number of partners. That’s the wrong attitude. It’s always got to be, every partner counts. So the lesson from it was we have to do better.
The implementation of New York City’s host registration law last month has enabled one landlord to win a temporary restraining order against both Airbnb and a host from listing a short-term rental in an Upper West Side apartment building that put itself on the Office of Special Enforcement’s banned building list.
An NYC home that was listed on Airbnb years ago. Source: Flickr.com/Pietro and Sylvia https://tinyurl.com/mur8ukak
The Rosenberg & Estis law firm, which represents property manager Canvas Property Group for the building owner, characterized the temporary restraining order it obtained last month as “a precedent-setting victory.”
The two sides are slated to face off over making the temporary restraining order permanent in a New York state court in late October. The plaintiff sued Airbnb and the host, who the law firm stated never lived in the 3-bedroom Columbus Avenue apartment, for damages.
The Real Deal first reported the existence of the lawsuit, adding that a second landlord filed suit, as well.
As of late August, more than 10,000 buildings had applied to the city to be put on a list of buildings where tenants would be barred from offering their apartments as short-term rentals, and major platforms such as Airbnb, Booking.com and Vrbo would be prohibited from displaying them.
Although Airbnb and the city have been at loggerheads for years over New York’s regulations, which ban the bulk of properties that were formerly listed, Airbnb and the city are believed to be now working together on the implementation of the registration law. Airbnb counts on the city’s verification system to flag illegal listings, including those from hosts in buildings where they are barred.
Airbnb had no comment on the lawsuits on Saturday.
There have been plenty of headlines in the past few days about a lawsuit against an Airbnb guest in Brentwood, California, who has allegedly overstayed her reservation, which ended on March 19, 2022 —without paying rent for more than a year-and-a half.
A vacation rental that was listed on Vrbo. We show this for illustrative purpose, and not for any connection to the squatter issue. Source: Vrbo
The property owner filed a lawsuit in June, seeking to evict the squatter, who has supposedly performed a somewhat similar caper previously, according to published reports.
Squatter Issue Resonates in NYC
Regardless of the details of this particular case, the issue of squatters and laws in many localities that are designed to protect tenants from abusive landlords, hit home in New York City in light of the new host registration law that became effective September 5.
The New York City host registration law seeks to enforce short-term rental regulations that have existed in the Big Apple for years, but often went unheeded. Among them, owners of one- and two-family homes that are owner-occupied don’t need to register as hosts of their vacation rentals, but the minimum stay would need to be at least 30 days.
That’s exactly when squatter laws come into play. New York State law states that people who live in a property for 30 days become legal tenants, and after that time period it can become a protracted battle to evict guests — even if they are paying nothing for the stay.
This issue is a concern for New York City homeowners, many of whom live in Brooklyn, Queens, Staten Island, and the Bronx, who are seeking to rent out their properties for short- and long-term rentals to help pay mortgages and for extra income.
“Many of our RHOAR (Restore Homeowners Autonomy & Rights) members are concerned about the risk of bringing on a tenant that ultimately doesn’t pay their rent and uses NYC’s laws to delay eviction, which has been a financially ruinous experience for many of RHOAR’s members,” spokesperson Lisa Grossman told Skift a few days before the New York City host registration law became effective.
As of a few days ago, RHOAR has conducted meetings with 15 of 52 New York City council members, looking for an amendment “to allow owner-occupied one- or two-family homes the ability to do short-term rentals,” Grossman said.
In other words, these would be rentals for a night, a weekend, a week — anything fewer than 30 nights.
Dan Driscoll, co-founder and chief operating officer of luxury vacation rental business boutiq, based in Austin, acknowledged that squatters might be a problem in some urban markets, but doesn’t see it as a major problem for the vacation rental sector.
“I am not a lawyer and not qualified to give legal advice, but from my vantage point, I think the horror stories are out there, but I think these are wild outliers and fairly isolated to urban markets with unique tenant laws,” Driscoll said.
Hyatt said on Thursday it would shift its strategy in marketing vacation rentals. It plans to launch before year-end a short-term vacation rental platform called Homes & Hideaways by World of Hyatt.
Hyatt also said it intended to sell its vacation rental management business — Destination Residences Management — to a company called Lowe, which, through an affiliate, will run it under Lowe and Coral Tree.
The Homes & Hideaways project will spotlight U.S. vacation rentals managed by Lowe, such as a home by the sea in Hawaii or a ski chalet in Colorado.
To book these vacation rentals, customers have to be one of the 40 million members of the hotelier’s loyalty program.
The exterior of Grand Hyatt Vail Residences, one of the vacation rental properties that will be available through the new Hyatt offering. Source: Hyatt.
Property manager Vacasa announced its intent to conduct a one-for-20 reverse stock split that’s geared to get its share price higher than $1 per share and therefore to be continued to trade on Nasdaq.
A vacation rental that Vacasa manages. Source: Vacasa
Its shares were trading for $0.48 midday on Friday.
The reverse stock split, authorized by the Vacasa board of directors September 1, would go into effect before midnight October 2, the company said. Vacasa’s split-adjusted shares would start trading on the stock market the next day.
Several companies, including Sonder, which went public via SPACs and have seen their share prices dip below $1 have similarly announced reverse stock splits.
Ask Skift is our artificial intelligence chatbot that offers a new way for readers to better engage with our breadth of knowledge and our latest experimentation creating products travel professionals rely on. It digs into news stories, Skift Research reports, Airline Weekly issues, Skift Live events, the Daily Lodging Report, and more to answer many questions about the travel industry.
Here are three questions we asked it about Expedia’s short-term rental business.
How has Expedia’s short-term rental business changed over the last 5 years?
Over the last 5 years, Expedia has been working on diversifying its offerings, including expanding its short-term rental business. However, the company has faced challenges in integrating its various product offerings across its many brands. For instance, Vrbo’s short-term rental inventory was long siloed from Expedia’s other offerings (12/05/2022). Expedia has also made acquisitions and created new businesses to address the short-term rental market, but some of these experiments have been shut down to focus on the core business, especially during the COVID-19 pandemic (05/26/2020).
As the short-term rental industry has evolved, Expedia has had to adapt to the increasing convergence between different accommodation sectors. Platforms like Expedia and Booking.com have started to mix various types of accommodations in their search results, making it harder to define what is included in the short-term rental or vacation rental sector (12/03/2020).
Overall, Expedia’s short-term rental business has seen changes and challenges over the last 5 years as the company works to diversify its offerings and adapt to the evolving accommodation landscape.
What is Expedia’s main short-term rental brand and why?
Expedia’s main short-term rental brand is Vrbo (previously HomeAway). Vrbo operates an online marketplace for alternative accommodations, focusing on whole-home vacation rentals. It has localized websites around the world and serves as a platform for families to find the space they need to relax, reconnect, and enjoy their time away together. Expedia Group, which owns Vrbo, has broader interests in the travel industry, including other brands like Expedia.com and Hotels.com. However, Vrbo stands out as their primary brand in the short-term rental market due to its focus on whole-home rentals and family travel experiences.
What is the difference between the business models of Airbnb and Vrbo?
Airbnb and Vrbo have different business models in terms of property types and target markets. Airbnb offers a variety of property types, including apartments, private rooms, and vacation rentals, catering to a wide range of guests. On the other hand, Vrbo focuses primarily on whole homes, targeting families and larger groups looking for vacation rentals in destination resort areas.
Airbnb’s adaptable business model allows it to offer the right type of supply in many parts of the world, depending on market conditions. This diverse supply enables Airbnb to continue growing in various segments. In contrast, Vrbo’s focus on whole homes may limit its growth potential in certain markets.
Additionally, Airbnb has a broader brand recognition and attracts more direct traffic and bookings compared to Vrbo. Airbnb has also been more nimble in adapting to market changes, such as transitioning to emphasize long-term stays faster than its competitors.
In terms of host and property manager relationships, Airbnb has been trying to downplay professional hosts, while Vrbo adopts a hybrid approach, catering to both individual homeowners and professional property managers. Airbnb has been increasing its share of professionally managed vacation rental bookings but still mostly serves lower-value rentals, contributing less to overall revenue for professional property managers compared to Vrbo.
Overall, the main differences between Airbnb and Vrbo’s business models lie in their property types, target markets, adaptability, and relationships with hosts and property managers.
Vacation rental property manager Evolve is laying off 14 percent of its staff — or 164 employees.
In a memo to employees, Evolve’s chief executive officer Brian Egan wrote “We are operating in a market that has become increasingly dynamic and volatile. Specifically, marketwide supply growth has considerably outpaced demand growth, which has led to average daily rates, bookings, and revenue per property coming in below our expectations,” he said.
“This means we will be supporting fewer customers, and will generate less revenue than we planned heading into this year. As a result, we need to reduce the size of our team to align our organization and overall expense structure to this new market context.” The story was first reported by Short Term Rentalz.
Property manager Evolve’s office, as seen in 2017. Evolve
The Denver-based company announced a $100 million capital raise last February — Durable Capital Partners led the round. Evolve manages more than 30,000 vacation rentals, and it has raised $235 million. Evolve’s basic plan charges a 10 percent commission and doesn’t include housekeeping or maintenance but does include all aspects of driving rental income as an on-ramp to marketing a property on major channels like Airbnb, Booking.com, and Vrbo. Services include shooting professional photos, creating a listing, offering advice on rate-setting, and handling guest interactions.
Following the raise, in August, Evolve signed a contract with Hopper to add 24,000 homes to Hopper’s app. At the time Eric Schueller, Evolve’s senior vice president of revenue said his company seeks to get incremental bookings from Generation Z guests through the Hopper partnership, and not just shift bookings to Hopper from other distribution partners. Hopper’s guests skew younger than Evolve’s core customers, he added.
