Vacation rentals have been the centerpiece of several local discussions about housing, between a growing shortage in living spaces available to the workforce and a growing spotlight on the “sharing economy.” But just how much have vacation rentals grown in Summit County, an area historically populated by VRBOs prior to the recent spike nationwide?
“Certainly vacation rentals have grown,” said Mark Waldman, owner of Summit Mountain Rentals. “But it’s only growing as fast as the units grow.”
Nationwide, the number of available vacation rental units has increased astronomically in recent years, with 340 million rentable nights available in 2012, according to a study of U.S. vacation rentals from 2009 to 2014 by travel market research company PhoCusWright.
The same study reported that the rentals account for more than one-fifth of the U.S. lodging industry, though inventory has grown faster than demand. According to statistics from HomeAway on vacation rental trends, the market was up 25 percent and at a post-recession high as of 2014.
Summit, however, is in a unique position, with growth hemmed in by the available space between the mountains. With just a handful of hotels throughout the county, vacation rentals have historically accounted for a significant chunk of the lodging industry.
“In Breckenridge and Summit County, it can’t grow that much,” Waldman said. “It can only grow by the number of units built, and not that many new units have been built. … Unlike other areas, it’s the primary source of occupancy for tourists.”
His company manages about 3,000 reservations, or about 15,000 guests per year, helping clean homes and market rentals for a commission.
One area of growth within the county was summer rentals, with the less-traveled season becoming more popular to visitors in recent years.
“Our summer is growing great,” Waldman said. “In the winter, it’s hard to determine if demand has increased or if customers are willing to pay more.”
Breckenridge financial services manager Brian Waldes commented on the industry’s unremarkable growth in the area, noting that the town had not seen a large increase in the number of licenses in the past year.
“Over half of our lodging is homes,” he said. “That’s always been a huge part of the lodging equation in Breckenridge.”
According to a June 2015 report by the Colorado Association of Ski Towns (CAST), vacation rentals accounted for 41 percent of Breckenridge’s total estimated units, with 2,911 vacation rental listings and 7,187 estimated units in the town. In Frisco, vacation rentals contributed to just six percent, with 184 listings for 3,167 total estimated units. However, Frisco just requires one business license for vacation rental management companies, as opposed to each property.
Regardless, Frisco saw an increase in tax collections from vacation rentals between 2010 and 2014, up from 28 to 31 percent of all lodging sales tax collections.
Frisco revenue specialist Chad Most said that of 1,000 active sales tax accounts in the town, about 20 percent were registered as vacation rentals (202 active licenses). Of those, about 180 were for individual property owners, and 22 for property management firms.
“I would say also that our business is growing. It’s not leaps and bounds but it’s growing,” said Scott Wilson, co-owner of Twin Season Vacation Rentals, a smaller management company. “It’s waxed and waned over the years. In terms of a general trend, we’re not seeing a big change in the number of people who are investing in second homes here.”
THE SHARING EXPLOSION
“Vacation rentals, in a very real sense, started in Breckenridge,” Waldman explained. “The people who founded VRBO were trying to rent their unit in Breckenridge.”
Several years later, during the recession, vacation rentals started to pick up national attention.
“This may sound strange, but I think the recession was one of the big catalysts for the sharing economy,” said Adam Sherry, co-founder of Evolve Vacation Rental Network, a Denver-based rental management company. Evolve works with more than 1,500 homeowners across the country, recently starting with just over 50 in Summit County. “We’re sort of a counter-cyclical business in a lot of ways. The worse the economy gets, the more people need and want to rent out their homes.”
He added that nationwide, the vacation rental model started to take off within the last year.
“Now it’s sort of drafting on the excitement that’s been around the share economy,” he added.
For vacationers, renting out a private residence is an increasingly appealing option nationwide. According to HomeAway, the largest segment of growth is with the younger crowd, travelers ages 18-44; more than half of all rental travelers are between the ages of 25 and 44.
While the majority of visitors (78 percent) still prefer hotels, just over half of vacation-rental users are “cross-over hotel customers.” In 2014, 52 percent of vacation rental users considered a hotel first.
According to PhoCusWright, the top three reasons travelers considered vacation rentals were the home-like amenities (58 percent), added room or space (49 percent) and value for their money (47 percent). Vacation rentals are especially appealing to larger groups with longer stays, with the average rental stay at 5.8 nights.
For homeowners, the reason for renting comes down to more than money.
“We have found that, in essence, it’s never really the money,” Waldman said. “Money is always the first question, but it’s really the last reason (homeowners) choose a company.“
According to HomeAway, 77 percent of vacation-home buyers said they planned to rent their future properties short-term. The top motivations were not the profit, but low real-estate prices and a personal or family retreat.
“You don’t buy up here to rent. You buy up here to vacation,” Waldman added. “In Summit County, if you own a second home, I have yet to meet anyone who really has to rent it to afford to own it.”
Cynthia Wilson, co-owner of Twin Season Vacation Rentals, said that while homeowners will not make a profit off of vacation rentals, it can help offset the cost of mortgages, HOA fees, taxes and insurance.
“There was a time in the ‘70s, ‘80s, where they could make a profit,” she said. “But for various reason, it’s harder to make a profit. But they can offset their costs.”
The typical profile of a short-term rental owner is a second-home owner, who lives in the Midwest and uses their vacation home in Breckenridge five weeks per year.
“For us, its been particularly interesting because I would say about 60 percent or even more of our clients are first-time renters,” Sherry said. “Some just bought the property and want to put it on the rental market. Some have owned it, maybe even for generations, and haven’t thought about it.”
TAXATION AND REGULATION
In Summit County, homeowners looking to rent out their home short-term (less than 30 days) are required to register as a business, paying sales and lodging taxes. So far, local governments have been able to enforce taxation for most renters, with 99 percent of units estimated to be in compliance in Breckenridge, according to 2011 statistics from CAST.
“We’re scanning VRBO sites and Airbnb. We compare addresses with property tax schedules. We are out there looking,” Waldes said. “Breckenridge does have an audit program. We do scan through those things.”
While most will give homeowners an initial warning, each town indicated that they were on the lookout for those not in compliance. Other cities outside of the state, such as San Francisco, have succeeded in obtaining millions in back-taxes from vacation rental sites.
“I spend 2-3 weeks of every year trolling these websites and contacting folks,” Most said. “We get 2-5 calls per week for folks voluntarily coming into compliance.”
Communities statewide are also determining the best way to ensure vacation rentals have a minimal impact on neighborhoods, between managing parking and maintenance.
“We’re looking at how many people should be allowed in short-term rentals for safety,” town manager Bill Efting said. “They’re not all having issues. But some are parking three cars on the lawn, having a bonfire in middle of street… it’s crazy stuff.”
The shortage in workforce housing has also been a focus of the discussion around short-term rentals. While some long-term rentals may have been converted into vacation rentals, the number is difficult to track.
“I think that there have been some long-term rentals turned into vacation rentals, there’s no doubt about that,” Efting said. “But that’s not the only factor. There’s more construction, more business, busy ski areas. It all adds to housing shortage, it’s not just one thing.”
In Breckenridge’s property database, long-term rentals have held steady at nine to 10 percent of all housing inventory, despite fluctuations with new construction and conversion into vacation rentals, according to CAST.
In a few cases, there have been properties converted from short-term to long-term rentals, for a number of reasons.
“I do field maybe one or two calls per month of folks who said we tried short-term rentals but long-term rentals are more stable,” Most said. “Sometimes, more stable revenue is nice for some folks.”
The biggest benefits to long-term rentals include fewer maintenance fees, management fees and potentially more reliable tenants as well.
“There are lots of barriers for (short-term rentals),” Waldman said. “The biggest barrier is you have to furnish the property. And you have to furnish it nice.”
While there is certainly a correlation between the rise of the sharing economy and vacation rentals, Waldes added it might not necessarily be the primary driver of the housing shortage.
“(Housing) has always been an issue; it’s kind of coming to a crux,” he said. “There’s a correlation but I don’t know if that’s the cause.”