How 21st century data science is helping local governments plan for tourism and services
People currently seem excited to travel. How can cities better plan for tourism in their peak travel seasons or know if they need to increase traffic control, trash collection and policing, and/or give local businesses a heads up to increase staffing? Alternatively, should they be increasing marketing and incentives to lure more people to their areas?
These are questions many city and rural tourism and planning departments are asking. Other than guestimates based on past performance and some hotel data, this information can be difficult to project. Governments are often left blindsided on projected activity, especially with the sharing economy and the rise of short-term rentals (STRs) in many markets, like those on Airbnb and VRBO.
As a result of the pandemic and the rapid growth of the sharing economy, STRs have grown astronomically in popularity and are proving to be much more dynamic in numbers, as the population can ebb and flow more readily than it would with a static number of hotel rooms. Families feel safer staying by themselves where they can cook a few meals, bring their own drinks and have no parking charges. These are just a few of the reasons STRs are rising at such a fast rate.
As the pandemic fluctuates, predictions become harder to make. There is minimal data from 2020. No one knows how long it will take for tourism to fully recover. Several cities have already reported issues with budgeting for TOTs (transient occupancy taxes). For example, Solana Beach, Calif., backed off its original TOT budget of $420,000, reducing it to $270,000 based on 2020 numbers, and then raised it again to $490,000 based on TOT caps once it saw the tourist numbers rising rapidly in 2021.
Further complicating the matter, local governments in many areas have yet to establish rules that govern STRs and others are experiencing frustration over ineffective bans on them. Meanwhile, they are not collecting occupancy tax on STRs operating under the radar. Those TOTs could help them provide the services they need to meet the influx of renters and mitigate many concerns. A good example of this is the city of La Quinta, Calif. The city council put a moratorium on new STR licenses and had approved 1,254 permits. But working with Deckard Technologies, they discovered that more than double that number of STRs were being listed on rental platforms.
According to Gil Villalpando, assistant to the city manager of La Quinta, “We discovered that more than 2,500 units were being listed as STRs on rental platforms, which means that half of them were unlicensed and we were collecting no occupancy taxes for these. Some places had a single license and were using it for five properties rather than an individual license for each property, which was the regulation. In a community where the occupancy tax is 10 percent, that meant a considerable amount of taxes were being lost.”
New technologies that can mine data using artificial intelligence and machine learning are helping to bring local governments up to speed with the sharing economy and 21st century software capabilities, and helping them to plan, manage services and maintain code compliance. For tourist areas, governments and tourism boards should strive to gain an outlook for the next three months or more.
What types of questions can governments ask of their service vendors to assess budget planning, staffing and services needed for travelers? Following are five steps rural and city governments and tourism boards can take to ensure they are planning properly and collecting the taxes mandated:
Establish a baseline assessment.
- Identify how many STRs are listed in the local area and if they are all licensed.
- Identify special designations you may need, such as the ability to view STRs by homeowner association, or by local zones that may have specific and different rules and regulations (HOAs, special tourist zones, etc.). This allows you to look at each zone to determine which ones are licensed or not, and whether they are compliant with the specific rules applicable at that location.
- Look at the number of STRs that are actively renting in the community and where they are located.
- This helps to reduce the number of licenses for properties that are not active, which may include sold properties or those only doing long-term rentals.
Identify financial expectations.
- Review daily rates charged by each property and the number of nights booked per reservation via all platforms used by STR hosts for the past quarters and the future quarter.
- This provides an excellent indication of aggregate revenue due for TOTs and whether your local government has fully collected it. You might also identify situations where taxes are being collected by the platform but are remitted to the wrong locales.
- It also allows you to forecast what you have coming in the next one to three months.
Work with a government services vendor that can project future short-term rentals so you can contact would-be hosts and correct issues before renters are in town.
- Some analytics just report on past rentals. This doesn’t help governments trying to identify trends, assess who is currently renting or identify future hosts who are unlicensed.
- With data on forecasted rentals, local governments can contact the hosts with communications educating them on the requirements, inform them on how to become compliant, and take action against those who do not within a reasonable timeline.
Don’t trust the online marketing platforms (like Airbnb and VRBO) to do the work for you.
- Some online marketplaces for STRs are currently offering VCAs (voluntary collection agreements) to local communities. They claim to collect the TOT and submit the check to local government. They do not supply data with the money on properties being paid for, saying they cannot break privacy laws. This leaves local governments unable to audit these payments or ensure the correct amounts have been paid.
- VCAs do not provide projections that allow governments and tourism boards to plan.
- Use an independent government services vendor that does analysis of public sources of information.
To resolve many collection problems and make it easy to bring STRs into compliance, ask your vendor to provide a user-friendly, online licensing and collection platform for you if you do not already have one.
With the advantages of big data science using AI and machine learning, your local government can more readily address the opportunities and challenges of short-term rentals, making it easier to work with city councils and your local community.
Nick Del Pego is CEO of Deckard Technologies and a mathematician, U.S. SpecOps veteran, seasoned corporate senior leader, avid outdoorsman and father. His mission, and that of his company, is to provide software, analytics and insights for communities to create tax equity and fairness.