TORONTO — Many years after the popularity and proliferation of short-term rentals began to hit the hotel industry’s bottom line, these platforms are back in the hot seat.

This time, measures to rein in short-term rentals are all about enforcing the rules and potentially easing Canada’s affordable housing shortage.

But traditional hotels – and the travel advisors who book them – could benefit too.

In its 2023 Fall Economic Statement, released last week, the Canadian government said it intends to deny income tax deductions for expenses incurred to earn short-term rental income – in provinces and municipalities where short-term rentals are prohibited – and to do the same when short-term rental operators don’t play by the rules, in provinces and municipalities where short-term rentals are allowed.

The federal government also wants to support municipalities that are cracking down on non-compliant short-term rentals.

Simply put, the government wants short-term rentals back on the long-term housing market. As Housing Minister Sean Fraser told CBC: “If there’s tens of thousands of units we can turn into not a competitor for a hotel for a few nights but a home for a family in a community, it’s incumbent on us to do everything we can to use those properties for homes.”

In Montreal, Toronto and Vancouver alone, there were an estimated 18,900 homes being used as short-term rental properties in 2020, according to the government’s number crunching: “These are not spare bedrooms in someone’s home – they are entire houses and apartments that are being used for tourists to rent – in many cases, only for a few days a week.”

MONEY TALKS

Money talks, and the impact under the new proposals would be significant. The government gives an example of a Quebec investor who owns and rents out – but doesn’t live in – three downtown Montreal condo units, in an area of the city that only permits occasional short-term rentals of a primary residence. With the government’s proposed crackdown, the investor would have to pay tax on their $120,000 short-term rental revenue, which would cost about $33,100 in additional federal tax per year.

This move, at a federal level, follows short-term rental crackdown measures at lower levels of government across Canada, including B.C. and Quebec.

And it’s not just here at home that short-term rental sites are under the microscope. The long list of cities around the world looking at or passing regulations to limit or restrict short-term rental opportunities includes New York City, where Local Law 18, also known as the ‘Airbnb ban’, garnered plenty of headlines when it went into effect this past September.

THE TRAVEL ADVISOR CONNECTION

So what does all of this have to do with travel advisors? While there’s nothing stopping a travel agent from booking short-term rental stays for their clients – and there can be ways to make money going that route – the DIY vibe promoted by platforms like Airbnb, Vrbo and the like lends itself to B2C consumer-led bookings, not travel agent bookings. Fewer short-term rentals on the market mean more travellers will be booking traditional hotels and resorts, industry partners with a long history of working with (and paying) travel advisors.

Hotel companies have been speaking out about short-term rental platforms and the lack of a level playing field for years.

“I have never objected to the idea of a private homeowner renting out a room in their principle residence to make some extra income,” Robert C. Housez, General Manager, Chelsea Hotel, Toronto, tells Travelweek. “I do object to the idea that an individual can operate multiple residential units as a ‘ghost hotel’. This allows them to operate at an unfair advantage to a traditional hotel by avoiding commercial taxes and industry regulations.”

Officially, Toronto allows residents to short-term rent up to three bedrooms in their principal residence, in any housing type (house, apartment or condo), for an unlimited number of nights per year or the entire home for a maximum of 180 nights per year. The dwelling must be their principal residence.

Toronto also has a mandatory Municipal Accommodation Tax for hotels and short-term rental operators. The MAT, which provides funding for Destination Toronto, increased from 4 to 6% effective May 2023.

Housez says that while he doesn’t feel Toronto needs to follow what New York City has done with outright bans, “I think that the City of Toronto needs to be more aggressive in enforcing their short-term rental regulations and toughen the penalties for non-compliance. Consistent enforcement should solve most of the problem.”

“UNDERESTIMATED THE NUMBER OF UNITS”

Sara Anghel, President and CEO of the Greater Toronto Hotel Association (GTHA), tells Travelweek how she recently outlined research for the Mayor and her executive committee showing the untapped potential in collecting MAT from short-term rentals. “The City [of Toronto] we believe has underestimated the number of units that are being rented out,” says Anghel.

A letter submitted on Oct. 30 by Anghel and the GTHA to the city cites stats from advocacy group Fairbnb that show a heavy concentration of short-term rentals in certain downtown Toronto neighbourhoods: “For example, Spadina-Fort York, with over 2,000 units, makes up about one-third of Airbnb’s total Toronto properties; 600 STRs are located within just three condo buildings, raising serious concerns about ‘ghost hotels’ eating up the urban housing supply.”

The GTHA notes that recent statistics from Inside Airbnb, a third-party website that tracks Airbnb listings, estimate that over half (53.6%) of Toronto’s listings are unregistered. “This creates an unfair environment where hotels are paying 100% of MAT, while a portion of [short-term rentals] are evading this requirement.”

The GTHA closed its letter with a call to the City of Toronto to invest more resources in compliance and enforcement, levy meaningful fines on short-term rental platforms for illegal listings and look at density-based caps on the number of listings per neighbourhood.

AIRBNB WEIGHS IN

Travelweek reached out to Airbnb – just one of many short-term rental platforms, but no doubt the most visible – for its take.

Nathan Rotman, Policy Lead, Canada, Airbnb, says Airbnb has worked with lawmakers to address community concerns across Canada. “However, home-sharing regulations are not the solution to Canada’s housing crisis,” he says. “The reality is the majority of Airbnb Hosts in Canada [83%] share one home to supplement their income, and listings represent less than 1% of the country’s housing stock. Many Canadians earn extra income through home sharing to make ends meet at a time of increasing inflation, interest rates and cost of living.”

Rotman also noted that Airbnb is driving tourism outside tourism hubs, with nearly 50% of Canada home to Airbnb listings in areas that have no hotels.

He added: “Hosts pay taxes on the income they earn. Airbnb collected and remitted over Cdn$177 million in 2022 on behalf of Hosts, including nearly $70 million in GST in the last six months of the year. In Toronto, we collected over Cdn$7 million, an increase of approximately 170% from 2021.”

While hotels are pushing back against myriad rule-dodgers on the short-term rental front, some of the biggest names in the hospitality industry are at the same time taking an ‘if you can’t beat ‘em, join ‘em’ approach.

That increases an agent’s chances for commissionable opportunities.

Marriott, the biggest hotel company in the world, offers Homes & Villas by Marriott Bonvoy. Another big player in the traditional hotel space, Accor, owns onefinestay.

And earlier this fall, Hyatt Hotels Corporation announced the launch of its brand new short-term vacation rental platform, Homes & Hideaways by World of Hyatt, that will feature private homes and remote hideaways in the U.S.

This story appeared in the Nov. 30, 2023 issue of Travelweek