What Happened?
Cities big and small are reaping economic rewards and increased tourism thanks in part to short-term rentals. Chicago and St. Joseph, Michigan, have both reported a jump in revenue after supporting low-commitment housing options.
The Goal
According to studies conducted by the Short Term Rental Advocacy Center short-term rentals accounted for $108 million in economic activity in Chicago last year. About $70.6 million of that activity was traced back to visitor spending on short-term rentals, as well as food, recreation, transportation and other costs. The short-term rentals attracted the visitors to the city, and then throughout their visit they generated economic activity. For every $100 spent on renting a place short term, an additional $69 was spent on food, $24 on transportation, $59 on shopping and $48 on arts and recreation.
Furthermore, enabling visitors to engage in short-term rentals also increased local job growth by 920 in 2013 to support a booming tourism industry. The majority of the job creation stemmed from restaurants, bars, the arts, entertainment and recreation sectors. As tourism takes off, the local economy enjoys more long-term boosts such as increased wages.
The studies showed the average Chicago visitor typically stays in the city for 2.4 nights. Short-term rentals checking out the Chicago sites, however, averaged 4.5 nights per stay with 2.5 people per group. For a city like Chicago with so many events throughout the year, short-term rentals make it easy and economical for visitors to enjoy popular happenings for a few days at a time.
St. Joseph’s Take
St. Joseph, Michigan, is a fraction of the size of Chicago yet still benefitted from adopting a short-term rentals market. The study of St. Joseph’s plan revealed $24 million in overall economic activity stemmed from short-term rentals in 2013. About $22.2 million was spent by visitors throughout their stays, and 300 jobs were created to support demand.
In St. Joseph, the average short-term rental party size was 5.7 people staying an average 3.3 nights. Because hotel occupancy rates have remained strong, the studies suggest short-term rentals fill a void rather than compete with the local hospitality industry.
What’s So Special About Short-Term Rentals?
The Short Term Rental Advocacy Center explains that many cities have restrictive laws making it difficult for residents to engage in short-term rentals with tourists. If these regulations were adjusted to accommodate the alternative housing option, more cities may reap economic benefits similar to those seen in Chicago and St. Joseph. The advocacy center points out:
- Growing tourist markets are outside of traditional vacation spots, and the local hospitality industries must support the boom in interest
- Home renters generate about $26,000 per year in income
- Short-term rentals generate private sector economic activity as well as tax revenue for local governments
- One in five Americans have plans to use a short-term rental on their next summer vacation
PhoCusWright found in 2012 12 percent of American adults stayed in vacation rentals, which generated $23 billion in economic activity.
Alternative Housing
Gov1 has kept a close watch on various housing innovations such as corporate housing and accessory dwelling units.