Short-Term Vacation Rentals – Vital Economic Contributor

The Travel Technology Association and Hawaii economic consultant Kloninger & Sims released the results of a study they conducted on the economic impact short-term vacation rentals have on both Maui’s economy, and their impact throughout the state.

You should be aware that there’s a major battle brewing over STVR’s on Maui, which is the latest county trying to unfairly eradicate an important segment of tourism in our state.  Maui Mayor Richard Bissen has proposed to phase out approximately 7,000 short-term rentals that were grandfathered a zoning exemption a quarter-century ago and recodified in 2014.  Those units are designated as being on the “Minatoya” list.  Maui County could lose up to $91.8 million in annual tax revenue and up to $280.9 million in total tax losses if all short-term rentals are discontinued in the county.  If other counties followed suit and phased out short-term rentals, the State could lose as much as $554 million in annual tax revenue.

The study also underscores the significant economic activity short-term rentals contribute to Maui and Hawaii yearly.  The analysis found that short-term rental guests in Maui County directly spent $2.2 billion in 2023, resulting in $4 billion in economic activity.  Across Hawaii, short-term rentals generated $11.3 billion in economic activity in 2023 and 66,000 jobs.

If all short-term rental units on the Minatoya List are phased out, Maui County could incur the following annual economic and fiscal losses:

• $53.3 to $91.8 million in real property (RPT), transient accommodations (TAT), and general excise tax (GET) to Maui County
• $1.3 billion in economic output
• 7,800 jobs

If all short-term rental units in Maui County are phased out, the following annual economic and fiscal losses could occur:

• $128.3 to $280.9 million in RPT, TAT and GET to Maui County
• $2.2 billion in economic output
• 23,000 jobs

If all short-term rental units throughout the state are phased out by the counties, the following annual economic and fiscal losses could occur:

• $803.3 to $955.9 million in taxes to the State and Counties, that includes:
• $554 million in State TAT and GET
• $121 million in all counties GET and TAT surcharges
• $128.3 to $280.9 in Maui RPT
• $11.3 billion in economic output
• 66,000 jobs

“Roughly a third of all visitors to Hawaii use short-term rentals. On Maui, that ratio is even higher,” said Erik Kloninger, economist and partner of Kloninger & Sims. “Reducing the number of short-term rentals would limit accommodation options and likely lead to a decrease in visitors, resulting in job losses across various sectors of the economy and a significant shortfall in tax revenue for Maui County and the State.”

Why are our political leaders cutting off their noses to spite their faces?  I know it’s an old expression, but it fits here perfectly.  "Cutting off one's nose to spite one's face" is an expression used to describe a needlessly self-destructive overreaction to a problem.

Why are they doing it?  I have spoken to countless people throughout the state, those inside politics, real estate, and tourism, and have concluded two reasons.  First, the hotels in Hawaii are very connected to our government with huge lobbying efforts.  The hotels have always seen STVR’s as competition and want 100% of the tourists to stay at their properties.  Second, the government is pandering to the loudest voices in the room.  Right now, that group is the local activists demanding Maui take from the rich and give to the poor.

A group of brave real estate agents on Maui have spoken out about the absurdity of the mayor’s plan.  Most of the projects targeted were built for vacation use and are not suitable for long-term living.  Many don’t have parking stalls, or insufficient ways to cook in the unit.  They’re not homes!  And when you consider the monthly carrying costs of maintenance fees and lease rent for some, these units are the least affordable properties on the island.  But that doesn’t matter to the activists.  They want the government to pay for them to live in the units – not pay themselves.

You may not think you have a dog in this fight, but you are wrong.  Owners of STVR’s enlist the services of lots of other small businesses.  People that clean, transport people, and anyone involved with food are all contracted by the owners of STVR’s for their guests.  If you derive any income connected to tourism, what the government is trying to do will affect you.

How can you get involved?  Start with talking with your friends and neighbors.  They most likely don’t know the facts behind this issue.  The government has been great shaping the story as greedy mainland owners taking valuable housing away from locals.  This is inaccurate and deceiving.  Next, let your politicians know your thoughts.  Start with your county council representative, then your state representatives.

Collectively, we can make sure the people we somehow elected to represent us don’t screw things up for us (again).