Short-term rental tax revenue in Galveston swells on COVID trend | Local News


Short-term rentals generated 42 percent of $16.1 million collected in hotel occupancy tax revenue in the 2020 fiscal year, a significant jump from 30 percent in 2019, according to data from the Galveston Park Board of Trustees, which oversees tourism.

The surge in popularity this year might be related to COVID-19, but vacation rental operators already were seeing an uptick in business before the pandemic. Some argue it’s a long-term trend likely to have significant effect in Galveston, where the short-term rental industry is booming and the city relies heavily on hotel occupancy tax revenue to promote tourism.

The reasons travelers are choosing vacation rentals over hotels vary but can most likely be traced to the pandemic and remote work and school, according to industry observers. The increased popularity in some cases is increasing friction between residents and vacation renters while also putting economic pressure on traditional hotels.

In the 2019 fiscal year, short-term rentals made up 30 percent, $5.4 million, of the $18.2 million in hotel tax revenues, according to park board records. Vacation rentals made up 29 percent of $18.7 million in hotel tax revenues in 2018.

The hotel tax is a 15-cent levy on every dollar spent on overnight lodging. Some of that money goes to the state and the rest stays in Galveston to drive overnight tourism to the island.

Even with hotel tax revenues down this year because of decreased travel, short-term rentals made up $6.7 million of the $16.1 million in revenues, 42 percent.

Between June and September, vacation rentals were more than half, $3.2 million, of the $6.1 million collected in hotel tax revenue, according to the park board.

About 2,500 vacation rentals are registered in Galveston, according to the park board.

Nationwide, vacation rentals have grown in popularity in the past 20 years. But since the pandemic began, more people are turning to short-term rental units — as opposed to hotels or bed-and-breakfasts — if they choose to travel at all.

This summer has been the busiest on the books for rental company Ryson Real Estate & Vacation Rentals, which has been in business for 20 years, CEO Liz Overton said. The company manages about 240 properties.

Bookings usually taper off after Labor Day. But this year, booking remained strong through October, she said.

Victory Vacation Rentals, which manages 14 properties, was booked solid from May 1, when governments lifted pandemic restrictions, until a few weeks ago, reservations manager Diane Knotts said.

People generally are making their bookings at the last minute this year, within a few weeks of their trip, Knotts said.

“It’s a safe alternative to get out of your house, to get away and do something,” Knotts said. “You’re in a house with your own family.”

More people are choosing vacation rentals this year if they decide to travel, said Claire Reiswerg, co-owner of Sand ‘N Sea Properties.

“It was probably the busiest summer on record for Sand ’N Sea,” Reiswerg said.

Many of the people making weekend trips are coming from places only a couple of hours away, Overton said.

“We’ve always been a drive-to market, but we definitely have grown that,” Overton said. “Houston is just a massive place. That’s definitely where the bulk of our travel has come from.”

Part of that has to do with Houston rediscovering Galveston, said Mary Branum, president of the Short Term Rental Owners Association of Galveston.

“It’s close to home,” Branum said. “They can get home within an hour or two.”

There’s a view among renters that they can more easily separate themselves from other people when staying in their own unit, Branum said.

That has been a blow to hotels.

People have been tending toward rental units where they can truly separate from other people, which means many island hotels have far lower than typical occupancy, said Marty Miles, complex general manager for seawall property Hotel Galvez & Spa and downtown hotels The Tremont House and Harbor House Hotel & Marina at Pier 21.

“Mid-week is really poor, like in the teens,” Miles said. “Weekends are probably 20 to 30 points lower than usual.”

Miles also thinks people might be choosing vacation rentals to have enclosed rooms for virtual working or online school. It’s probably easier to have multiple people working online in a house than in a single hotel room, he said.

Group and meeting business — a lifeblood of hotels — probably won’t return until far into next year, Miles said.

“I don’t believe it’s going to be any significant change in business demand until second quarter next year,” Miles said. “I don’t think we’ll see 2019 levels of demand until 2022.”

But the surge in popularity in vacation rentals could also exacerbate complaints from residents about renter parking and noise.

“We definitely saw that this summer in a lot of West End neighborhoods that are really struggling to balance the vacation rentals and homeowners,” Overton said.

This summer, some residents in Pirate’s Beach subdivision, home to many vacation rentals, even proposed banning them over concerns about a few problem properties.

The complaints were about noise, trash and cars parked on the street.

“Sometimes, there will be bad owners or smaller companies that are not doing their due diligence,” Overton said.

The industry can find ways to make the trend work for both visitors and Galvestonians, Overton said.

Branum thinks the high interest in vacation rentals will persist even past the pandemic, she said.

People who hadn’t stayed in vacation rentals before the pandemic might have decided to try them out this year, Branum said. And if they liked the experience, they’re more likely to book a vacation rental again, even post-pandemic, she said.

Although it’s hard to predict, the heightened demand might continue for some time, Reiswerg said.

“There’s a lot of people saying it will last through 2021 and into 2022,” she said.

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