The short-term rental debate continues to rage in our area and exerts its presence in the City Council election. In the new “sharing economy,” numerous services have become part of daily life in the last five years: Uber and Lyft ride services, Vacation Rental by Owner (VRBO) and Airbnb for short-term vacation lodging, are among the most well-known.
In November of 2015 the Residents of Old Wilmington (ROW) drafted a letter to the Wilmington City Council to request short-term rentals advertised on Airbnb and VRBO sites be prohibited from operating in Wilmington’s Residential Historic District. Since the discussion has spread to almost every corner of the City of Wilmington and New Hanover County. Originally City Council expected to pass a resolution to address regulations for short-term rentals in residential districts in August of 2016. Currently, it looks to be on course for October 2017.
In the midst of all the excitement, a year ago, on October 1, 2016, I opened the The Top Shelf Loft above the bookstore as a nightly rental. At the one-year anniversary mark, it seemed like a good time to weigh in on the conversation with a little bit of what I have learned this year.
I should start by stating The Top Shelf is in downtown’s central business district (CBD), not the residential historic district. Consequently, we applied to change our zoning of the second floor of the building from residential to lodging—which meant we had to do a walk-through with the city and county. We applied for a room occupancy tax (ROT) number to report the ROT collected for both the loft and the bed and breakfast I hope to open in the next year. We add the sales tax for the loft to our monthly sales-tax remittance to the state.
I get asked a lot of questions from people about how we actually operate. Where do we advertise? Is it on Airbnb? How is it going? (That usually means: Are you making any money?)
So, yes, we do advertise on the big three: Airbnb, VRBO and TripAdvisor. We also have a separate website. When we began, we used a booking software with the site. However, the people who owned the software could not figure out their billing, and after multiple months of getting double billed, we cancelled our relationship with them. Since we are already set up to process credit cards through the bookstore, we decided the service they provided was not essential.
Airbnb has been far and away the best of the four options. We have just actually booked our first stay with VRBO. We have yet to complete a booking with TripAdvisor, though it has sent us some referrals who have elected to stay with us and book directly, rather than through their service. Something that surprised me is the prevalence through both VRBO and TripAdvisor of the scam booking: We receive a request to book with a request to pay by check instead of online. We are requested to send an address and name to receive the check, etc. Some are more obvious, with four names and addresses of a family copied and pasted into the request—which would not ever be part of the usual conversation. Some are a bit more sophisticated. We haven’t had such happen with Airbnb.
Surprisingly, for the most part, younger guests (20s age group) on Airbnb have been far more pleasant to deal with than older adults. After some time spent discussing it with millennials and older members of staff the theory I have come up with is, younger people are far more aware of the repercussions of the online review world. Since Airbnb lets hosts review guests, they take it more seriously than older adults who seem to come in with an attitude of entitlement. So that bit of sociology has been interesting to watch.
The horror stories I have heard from people about short-term-rental guests made taking this leap difficult. Outside of one bridal shower that left penis stickers on the wall and covered every available surface with penis-shaped confetti, we have had pretty good experiences. (Really, I could go the rest of my life without trying to pry penis confetti out of the grooves in a hard wood floor.) We have met some very nice and thoughtful people. We have been part of birthdays, weddings, anniversaries, military balls, and family reunions. All experiences have been really lovely.
However, it is a lot of work, and don’t let anyone say otherwise. Anyone considering opening a short-term rental should ask if he or she would ever consider a job cleaning hotel rooms. Because that is essentially what renters do. Laundry? Yep, that, too. With tight turn-arounds, it can get nerve-racking. We rent a parking space in the library parking deck for our guests to use, and invariably once a month the gate isn’t working. When we try to talk with Lanier Parking, the company that manages the deck, they tell us it is a problem with the county. And these are just part and parcel of what is involved.
One of the issues in the ongoing discussion of short-term rental relates to the room occupancy tax and sales-tax collections. From the beginning, I have been paying both ROT and sales tax on each rental night. But a few months ago I noticed bookings through Airbnb have a significant fee that gets added on top of our listing price; the fee is noted both as ROT and sales tax.
Wait a minute, I thought. Does that mean Airbnb is remitting ROT and sales tax? Does that mean it has been getting paid twice? Are they really doing it, or are they just saying they are doing it?
Neil Gaiman has said several times one of the reasons he became a writer is because writers can ask questions. I wanted to know: Does New Hanover County actually receive a check from Airbnb each month?
So I called the tax department. They transferred me to finance, who transferred me to Ruth Smith, chief communications officer for New Hanover County. Smith arranged for me to meet Lisa Wurtzbacher, New Hanover County’s CFO.
OK, I thought. This could be interesting.
Turns out my relatively straight-forward question was anything but simple to answer. The short of it: Yes, Airbnb sends a check for ROT.
However, it doesn’t come with any break down for which property it covers—which seems a little insane since they clearly have the info. Apparently, several companies send checks to the county with very little, if any, accompanying documentation. So, tentatively, Airbnb is paying ROT. The followup question: Do short-term renters get credit for it? Probably not.
It’s an issue of concern for a number of finance departments around the state who are grappling with issues related to short-term rentals. Obviously, the county is grateful for the tax revenue, but they would like to be able to properly account for it and allocate it. Which brings up the next question: What is ROT used for? In a weird way, it is like a closed-loop system. ROT is collected on rooms rented to visitors to the area. It is then spent on beach renourishment and marketing efforts to draw more tourists to spend money here. Obviously, our beautiful, well-cared-for sandy beaches are a big draw; investing in them has proven to be worthwhile for us. If we don’t invest in promoting them, and the many other fascinating aspects of visiting here, no one will know.
Actually, from a small-business owner’s perspective, it is kind of great to get to benefit from services paid for by customers that generate more customers. Tourism is a fascinating and difficult beast to quantify: Each visitor needs food to eat and transportation, not to mention a place to stay—which runs the gamut from staying in a friend’s living room to the KOA camp ground, to the a beach front hotel room, to the Greystone Inn and everything imaginable in between. Over and over again, we have been surprised at how many people come with big family groups and opt to stay with us because of a full kitchen to accommodate an assortment of food restriction and needs.
Yet again, here is my two cents on the STR debate: Regulate them like a bed and breakfast, with fire inspections, tax collection, and city and county approval. Playing on a level field is not only fair for everyone but safer for the guests, the owners and the nearby neighbors.