Tourism Economics Study Boosts Vacation Rentals and Downplays Local Concerns

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A couple of days after the Visit Greater Palm Springs tourism board approved a resolution to oppose a referendum in La Quinta, California that would place tighter restrictions on vacation rentals, the tourism board promoted a board-commissioned Tourism Economics study that reads like a cheerleading pamphlet for the short-term rental industry.

In so doing, neither the Oxford Economics tourism research unit nor its tourism board client seem to have received the memo that destinations around the world are increasingly involving local communities in crafting visitor policies. It’s not about tourism above all else anymore.

In a post-Covid world, after years of overtourism in some destinations, such as Barcelona and San Diego, California, where critics at times decry an Airbnb and Vrbo onslaught, aren’t the locals supposed to be more than an after-thought?

However, the unvarnished reality — OK, let’s face it — is that status quo thinking remains hardened at most tourism boards, and the actual execution of a new world order in tourism policy might be aspirational, but exaggerated.

The assumptions that Tourism Economics made in its study, published October 13, seem to be that nearly everything about tourism and accelerated visitor spending are positive for communities in the U.S., including in La Quinta, and that anything that blunts these dynamics are negative.

In writing about the pending tightened vacation rental restrictions in La Quinta, a golf destination about 25 miles from Palm Springs, California, Tourism Economics stated: “The proposed regulations on STRs (short-term rentals) would result in massive economic losses. Within 10 years, La Quinta would experience a 122,000 drop in annual visitors (-55 percent), $102 million less in visitor spending (-62 percent versus the baseline), 530 fewer jobs and $9.5 million less in local tax revenues.”

All of these are conclusions that are not unwelcome bullet points for Visit Greater Palm Springs, which paid for the research.

Neighbors for Neighborhoods LQ (La Quinta), a community group, supports the upcoming ballot measure that would phase out currently grandfathered-in vacation rental permits, and ban new ones when they are “non-hosted” in certain non-exempt areas of the city.

The group’s concerns revolve around disruptions to residential neighborhoods, including “all-night parties,” crime, and rising rental and home prices, said Donald Nimis, a spokesperson for the group.

Nimis said housing in La Quinta is geared toward both middle-income as well as affluent residents, but the middle class areas get the brunt of the adverse impact from vacation rentals because they already aren’t permitted in more luxurious Homeowners Association-led developments. The density of vacation rentals in the city in non-gated communities ranges from 5 to 11 percent, Nimis said.

In its defense of the short-term rental and tourism industries, Tourism Economics cited findings that short-term rentals were responsible for only 1 percent of a 14.9 percent increase in U.S. housing prices, relying on pre-Covid 2014-2018 data, which seem like ancient history in the annals of the sprinting and expanding global vacation rental industry.

In contrast to Tourism Economics almost dismissing the impact, a U.S. Federal Reserve regional bank CEO recently cited investors turning homes into short-term rentals, and thereby constraining the supply of long-term rentals, as a contributor to an affordable housing shortage in New Jersey, as an example of trends taking place elsewhere.

“Tourism is important but so is residential housing,” Nimis said. “A policy where you repurpose residential housing for tourism really is self-devouring,” he said.

When it comes to Tourism Economics’ projections for drop-offs in visitor spending, jobs, and tax revenue over the next decade if voters pass the ballot measure, Nimis argued that the research neglects the economic impact of long-term renters, some with plenty of California-generated disposable income to spend at the local Costco or area restaurants, who might move into dormant vacation rentals.

“Their basic assumption, in my opinion in calling all of that economic loss, is that housing will remain empty after this law passes,” Nimis said.

Adam Sacks, the president of Tourism Economics, countered that tightened regulations on short-term rentals in the Palm Springs area would negatively impact local residents.

“The losses would directly hit residents and their quality of life through multiple channels: a weaker real estate market, lost jobs and income, declines in tax revenues (and associated government services), and some loss in the amenities and attractions that depend on visitors but certainly improve the quality of life for residents,” Sacks said.

Sacks said that in many cities and towns in the area second homes account for 30-40 percent of the housing stock.

“The mostly single-family homes with private pools that are rented short-term in these communities do not translate into affordable housing if not being rented,” he said.

But a housing squeeze might indeed contribute to rising rental rates and home prices — more than the 1 percent vacation rental contribution that Tourism Economics claims for the U.S. Who actually believes that number? C’mon.

Sacks said it wouldn’t necessarily follow “that residents would automatically fill in the gaping hole that would be left by visitors” in the near term.

He said there has been a lot of community engagement through working groups and city council subcommittees in the greater Palm Springs area, and its study was designed to contribute to the conversation about vacation rental and tourism issues among both residents and policymakers.

It’s clear that vacation rental policies can’t be one-size-fits-all in communities around the world. My Uber driver in Punta Cana, the Dominican Republic said Tuesday there is plenty of residential housing outside area tourism zones so the more visitors, the better.

On the other hand, it is irrefutable that there are many cities in the that are disadvantaged by excesses in short-term rentals — even as, in many cases, indigenous homeowners owners generate much-needed income — as they tighten the availability of affordable housing or these destinations get overrun by tourists.

What’s clear, though, from the Visit Greater Palm Springs-commissioned research, is that old and discredited assumptions about unfettered tourism being the panacea for economic development have to give way to more nuanced approaches that give local residents more power over policy.

After all, Barcelona’s tourism boss recently got fired, and some attribute the axing to a poor relationship with the locals on fashioning visitor policies.

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