Updated: Aug 16, 2020
Expedia management has just concluded a year long negotiation with Unite Here local hotel workers union hammering out limits on vacation rentals as well as permit requirements and enforcement approach. It is not unusual at the end of a negotiation for all parties to be happy the negotiation is over, but not happy about all of the details.
But this is not happening in this case. Expedia seems delighted with the final product. In a recent message to STR owners, more specifically to Vrbo property owners, the proposal is promoted unabashedly by Vrbo management.
Dear Vrbo property owner or manager, In recent years, the San Diego City Council has attempted to regulate the short-term rental industry, including a now overturned ban on secondary home short-term rentals. San Diego short-term rental owners and managers have been left not knowing how they might be regulated. Added with the uncertainty from COVID-19, now more than ever, we need clarity in our marketplace--especially if we plan to provide a responsible path to recovery for communities and travelers alike. Councilmember Dr. Jennifer Campbell invited Expedia Group and UNITE HERE to the table to negotiate a compromise and provide much-needed certainty to all stakeholders involved. The negotiations resulted in a memorandum of understanding (MOU) that outlines a proposed framework for regulating short-term rentals in San Diego. This is a good deal for our industry, and we strongly believe the MOU strikes a fair compromise between the needs of San Diego homeowners, managers, travelers, government, and the community at large. The key benefits of the MOU include:
A permit system which allows one short-term rental permit per person or LLC;
An allowance for short-term rentals to represent up to .7% of the City’s total housing stock (allowing for growth over time);
An exception for short-term rentals to represent up to 30% of the housing stock in Mission Beach; and
Certainty you are legally operating your short-term rental.
We encourage you to support this MOU. Regulatory certainty for short-term rentals in San Diego is long overdue. Candidates for the upcoming city council elections have expressed interest in burdensome regulations for short-term rentals including bans. If we don’t move this compromise forward, we may see a future without traditional vacation rentals in San Diego. Now is the time to act on this compromise. To show your support for the MOU, please use the button below to quickly share your thoughts with the San Diego City Council.
If you have questions about the MOU, please email email@example.com or join the local short-term rental advocacy group ShareSanDiego.org for the latest updates. Thank you! Vrbo Government Affairs
HAS VRBO CUT A DEAL WITH THE CITY THAT ENSURES THAT THEY ARE THE ONLY PLATFORM OPERATING HERE?
WHY IS THERE SUCH A PUSH FOR SHORT TERM RENTAL REGULATIONS? November 3 is only 85 days away, so why not wait and allow the new mayor, who will be responsible for enforcing the new regulations, the opportunity to weigh-in. And there are other reasons to wait. The COVID pandemic has clearly had a short-term impact on the demand for short term rentals, although the industry close to the coast has recovered somewhat in the July and August time period. But, the vast majority of visitors to Mission Beach have come by automobile from Arizona, Nevada, Eastern California, Los Angeles and other areas within a 600 mile radius.
Based on AirDNA data, a sharp drop off in demand for short term rentals will occur beginning in September as shown in the graph below. Also, as stated above, it is unlikely that airlines will be used for tourism purpose to San Diego. The second graph below shows the recent SDIA operations with the blue line on top back in March and the most recent line in grey as of 8-2 to 8-8. Note that while there has been some recovery since the end of April, that recovery seems to have plateaued at less than fifty percent of the weekly operations pre-COVID.
Two other graphs of interest are shown below, which show historical average daily rate and seasonal occupancy. There are two points of relevancy shown. Downtown is the number one tourism location year around, but particularly in the non-summer months. In the first graph, the most affordable location for short term stays is downtown, by far. In addition, the downtown has the highest year around average occupancy. With a very large number of permanent residences downtown, the 2300 current
STR listings is barely noticed. Frankly, investors should be focusing on the downtown, and if there is to be a carve out, let it be there. Based on the information provided above as well as the proliferation of listings downtown shown in the picture below, perhaps it might make sense for vacation rental management companies to modify your business plans or face extinction. Also, September might be a very good time for short term rental owners/investors to switch to long term renters.
There are other issues that require answers, such as why was Brigette Browning, president of the hotel workers union, representing the residents and the hotels and motels in San Diego. I assume Ms. Browning knows that there are 55,000+ hotel rooms in San Diego. I also assume she knows how many staff that represents, including those union workers she represents. But, I was surprised to find out that nationally only 3.2 percent of hotel staff are in unions! I suppose Ms. Browning also recognizes the dip in the two hotel room metrics in the two charts below. We know from the City auditor that there were 16,000 short term rentals in San Diego last year. We also know that now there are about 10,000 STR listings in San Diego. How many hotel rooms would this equate to if there were no STRs. Let’s come back to this question. From our own research, there are 3,884 STR bedrooms in Mission Beach currently (Host Compliance data). Let’s assume that the number of people staying in a STR bedroom is the same as a hotel room, so
3,884 hotel bedrooms or hotel rooms. Let’s take the national average of 332 rooms per hotel “in the upper upscale chain type.” That then equates to more than 11 new hotels, all paying their TOT. This would then require about 2,000 hotel workers, or new jobs, just for Mission Beach. On the other hand, only 3.2 percent of hotel employees are members of a union nationally. So, again, I am not sure what Ms. Browning’s incentive is compared to a hotel manager, or hotel association representative. And, again, I think it would be much more difficult for Ms. Browning1 to present a case when negotiating with Expedia compared to a Hotel and Motel Association Representative. Coming back to the question at the beginning, 16,000 STRs throughout the City would yield about 39,800 hotel rooms, or 120 new hotels. That is a lot of jobs that Councilmember Campbell is throwing out the window, not to mention a substantial amount of income from TOT. Almost two years ago, the mayor’s one plus one, or everyone, was released for community review and consideration. It also included a carve out of Mission Beach, which resulted in an immediate reaction from residents of Mission Beach. No way, Jose! But, it is most likely what turned around the City Councilmembers to vote against the mayor’s plan and support the primary only plan was the lack of an enforcement plan, not to mention there was no mention of penalties for operating a short term rental without a permit. It became obvious after a short review that the rationale for the Mission Beach carve out had little or nothing to do with history of STRs in Mission Beach as much as it did the high percentage of TOT certificates there. Because TOT certificates convert to permits. But there was also concern in the mayor’s office that if the permit requirements were too stressing, given the $950 annual permit fee, no one would sign up. So permit requirements and enforcement sections were gutted. We see the same trend in the Campbell negotiated MOU, and so, without permit requirements and enforcement, we have regulations destined for failure. In conclusion, we need to wait for the election on November 3rd to determine who will be our next mayor. If Councilmember Bry is victorious, as she should be given her extraordinary education and experience in the business world, then there will be an opportunity to enforce the code in earnest. But, for now, we need to wait. There are far more reasons to wait than to push forward, including, 1. 2. 3. The demand for short term rentals is likely to drop off substantially beginning in September, a. Shift from short term to long term in virtually all areas of the City, with the possible exception of downtown, b. No dramatic up-turn in flights to San Diego bringing tourists is expect this year and may be not until the COVID vaccine is well established in mid to late 2021, Given that the downtown is the number one tourist destination in San Diego, it has the most affordable short term rentals and has the highest year around occupancy, if any area of the City is to be carved out, it should be the downtown, Any negotiations with the platforms should be lead by the hotel and motel association representatives, who have much more at stake than Unite Here, with only 3.2 percent of all hotel workers nationally in a union. 1 Ms. Browning is currently engaged in litigation against Evans Hotels located in Mission Beach, which is her incentive to carve out Mission Beach.
4. The data shows that the City will do much better financially if the code is enforced and all short-term rentals are prohibited in San Diego. Finally, VRBO has chosen to align itself with Share San Diego, a Jonah Mechanic website. Mr. Mechanic is also owner of SeaBreeze, a vacation rental management company in San Diego with a questionable reputation. But Mr. Mechanic was not done there. The State of California and the County of San Diego have made it clear that there are rules and regulations that short-term rentals must adhere to during this pandemic to continue to operate. One of these is that short-term rentals are not allowed to make a jacuzzi available to renters. The picture below clearly shows the visitors in the past few days using the Jacuzzi provided by SeaBreeze in the front year of the short-term rental with the rental company name on the structure. This owner was warned in a letter not to provide a Jacuzzi several weeks ago. It is clear that Mr. Mechanic talks a good talk when it comes to compliance, but he has no interest in walking the walk.
Gary Wonacott Mission Beach MBTC Past President “The meaning of life Is to give life meaning” (CWM)