As the debate over vacation rentals in Hawaii continues to rage, we came upon interesting data confirming it’s not only the state and the hotel industry that are less inclined towards Hawaii vacation rentals. It’s visitors as well. This comes as the landscape of Hawaii accommodation options is on the brink of big change. Recent legislative proposals and statements from Hawaii’s governor reflect an effort to address the proliferation of short-term rentals, particularly those owned by non-residents.
In last month’s State of the State Address, Hawaii’s governor underscored an urgency for transitioning short-term rentals into the local housing market. Citing data that showed a significant portion of such rentals are owned by non-residents, Governor Green emphasized the need to prioritize local families’ access to housing over lucrative short-term rental profits. This sentiment reflects the perceived impact of short-term rentals on Hawaii’s housing affordability and availability. The state’s research arm, however, isn’t exactly of the same opinion.
Hawaii vacation rental interest by visitors has been in decline for years.
The above graph reflects visitors interest in Maui vacation rentals (blue) and Kauai vacation rentals (red). That is based on historical Google search data over the past twenty years.
Hawaii vacation rental performance has been under-performing, reflecting a complex scenario. In 2023, Hawaii reported a decline in both demand and occupancy.
For those visitors considering these accommodations rather than Hawaii hotels, increased vacation rental pricing adds yet another complexity. While vacation rentals continue to offer benefits such as cost-sharing and kitchen-based savings, Hawaii visitors should be aware of unexpected costs (which you should also check for hotels), and potential inconsistent quality and service issues. Careful vetting of vacation rental accommodations is essential to ensure legality, affordability and value for travelers, especially considering the high degree of variability in fees and amenities offered.
How did Hawaii vacation rentals fare in 2023?
Last year, the Hawaii’s vacation rental market underwent notable shifts. The short-term rental supply reflected a 14.5% decline compared to pre-pandemic 2019. However, despite this relatively small decline in supply, demand for Hawaii vacation rentals experienced a more substantial decline of 35.5% compared with pre-Covid.
Another interesting aspect is that the average daily unit rate before taxes and fees went to $301 in 2023. That was a surge of 45.1% compared with pre-Covid. The ongoing increases in pricing are influenced by various factors including increased operating costs, lower occupancy, and other market dynamics.
In terms of the short-term rental occupancy rate for 2023, statewide it was at just 55.9%, which represented a considerable 24.6% decline compared with 2019.
Legislature seeks to eliminate Hawaii vacation rentals.
Hawaii’s Legislature is exploring various measures to further regulate vacation rentals. House Bill 84, introduced in the previous session and carried forward into 2024, aims to grant counties greater authority to begin phasing out short-term rentals.
HB84 “Makes explicit the counties’ authority to enact ordinances to amortize or phase out permitted, nonconforming, or otherwise allowed short-term rentals in any zoning classification. Includes swapping, bartering, or exchange of a residential dwelling, or portion thereof, in definition of “short-term rental” for this purpose.”
The Hawaii Hotel industry wants to curb vacation rentals for its benefit.
The Hawaii Lodging and Tourism Association (HLTA) has emerged as a strong advocate for stricter regulations on vacation rentals. Led by President Mufi Hannemann, HLTA represents a significant portion of Hawaii’s hotel industry and has long sought to limit competition posed by Hawaii vacation rentals. HLTA says its membership “includes 169 properties representing 50,000 rooms.” With Hannemann now also chairing the Hawaii Tourism Authority (HTA), there is concern among some that his influence may further tilt the scales in favor of hotel interests.
Visitor and resident sentiment on the Hawaii vacation rental issue vary widely.
Some express frustration at the perceived targeting of vacation rentals by policymakers and industry lobbyists. Concerns about rising hotel prices and the potential impact on local residents’ livelihoods are particularly prevalent among those who rely on small-scale vacation rental income to make ends meet. Others, however, point to the imposition of vacation rentals into otherwise residential communities and the negative impact on Hawaii’s long-term resident housing.
The state’s research arm, UHERO, says that about 5% of Hawaii’s total housing is short-term rentals, although it varies greatly by island. It also concludes that short-term vacation rentals on Oahu, for example, may result in an increase in overall housing cost by 5%.
As the debate over vacation rentals in Hawaii continues, the future of short-term accommodations remains uncertain. As efforts to address housing affordability and regulate tourism continue, policymakers are faced with complex legal, economic and social dynamics.
Please let us know where you stand on Hawaii’s intentions for vacation rentals.
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I can only speak for our property, south of Hilo. In 2016-7 We built, landscaped and furnished a 3-bed 2-bath 1400 ft2 home with a 40X12 lap pool on 1 acre for just under $500,000. We began renting it as STVR in 2018. Our goal was to break even, with rental ncome. We average about 200 rental days annually, and we we visit for maintenance and our own use twice a year. We have nearly all 5-star reviews. I surveyed our guests asking how many would have considered Hawaii for a vacation if they could only stay in a hotel or resort. 100% responded ‘No’. We do not serve the same market. We have not made local housing inventory more expensive. We have put 10s of thousands of dollars annually into the local economy and the tax coffers.
So much talk about money going out to off island owners when Ten times more money than STRs is going out to massive off island hotel corporations. These same corporations are the ones trying to push out the little guys STRs who are offering less expensive accommodations. More expensive accommodations at hotels means less money spent on the local economy
There are so many unlicensed illegal STRs. Close those and problem solved. Don’t change the rules and go after those whole followed the rules
Totally agree! Why punish law/ policy abiding citizens?