The Finance Committee advanced legislation Tuesday to require “sharing economy” companies like Vrbo to establish an agreement with the U.S. Virgin Islands to remit collected hotel occupancy taxes.
Though Airbnb has partnered with the territory’s government, charging and remitting the tax since 2017, it is the only one to do so, according to government officials. Because other platforms do not, the government loses out on money owed to the territory, officials told the committee. The amount of tax that is supposed to be remitted to the government is so significant that USVI Hotel and Tourism Association President Lisa Hamilton said the popular rental platform Vrbo may withdraw from the territory altogether if it has to pay the taxes due.
“We believe the time is overdue for Vrbo to enter into such an agreement as well. Many Caribbean destinations have approached Vrbo, which is now owned by Expedia, demanding that they collect and remit the taxes,” Hamilton said. “Because Expedia is the 800-pound gorilla in the travel arena, Vrbo has refused such agreements. The proposed legislation would include Vrbo, which we believe is appropriate. We recognize that Vrbo might withdraw from the USVI as one of the destinations they market should they be required to collect and remit the hotel tax.”
Sen. Donna Frett-Gregory asked if the government could quantify the amount of money likely lost should Vrbo pull out of the territory.
V.I. Bureau of Internal Revenue Director Joel Lee replied, “We’re talking significant dollars.”
“At the end of the day … the law says if you are here for less than 90 days you pay a hotel tax, period. It is unfair to the local establishments who do charge it, and then you are giving an edge to folks to not pay it because you don’t want to scare them off necessarily. No way,” Lee said.
Hamilton said the Tourism Association believes any loss to host properties in the territory would be “mitigated by the fact that many hosts list on multiple platforms, including Airbnb,” that already remit the hotel occupancy tax.
Bureau of Economic Research Director Allison DeGazon touched on a different angle during the hearing, though she said the bureau supported the legislation as “tourism contributes around $1 billion annually to the economy and provides over 8,000 full-time jobs.”
“Developments of a shared economy present opportunities to expand visitor accommodation options and grow the tourism economy, but they also generate negative social externalities worth mentioning,” DeGazon said.
Citing an article in the Harvard Business Review, DeGazon said Airbnb has a “detrimental impact on housing stock as it encourages landlords to move their properties out of the long-term rental and into the short-term rental market.”
The influx of these short-term dwellers “impacts neighborhoods and residents due to noise and other disturbances,” DeGazon said. But worse, “poorly managed growth of this service industry may also have a detrimental impact on the historical fabric of destinations and reduce the appeal of the areas as places to live and visit.”
Active Airbnb listings in the territory increased over 39 percent from 2018 to 2019, from 1,575 to 2,200 listings in 2019. DeGazon said Airbnb guest arrivals rose to 72,150 in 2019 from 32,600 the year before – an increase of 121 percent. The average guest stayed in the territory five nights.
“When we have legislation like this, it creates conversation. However what tends to happen is you have a situation where there is a ripple effect,” DeGazon said. “How do we strike a balance?”
Sens. Marvin Blyden, Samuel Carrion, Dwayne DeGraff, Kurt Vialet, Donna Frett-Gregory, Javan James Sr., and Janelle Sarauw were present for the hearing. Additional non-committee members also attended the hearing.