Wine Country hoteliers reveal impact of short-term rentals on tourism business

Vacation rentals will not be ignored. They have infiltrated the lodging industry at lightning speed, thanks to a multitude of online marketplaces.

The trend is being led by the formidable Airbnb, Inc., a San Francisco-based $31 billion company with plans to go public this year. Airbnb has about a dozen competitors in the space, including VRBO (Vacation Rentals By Owner), HomeAway and FlipKey. When people talk casually about renting an Airbnb or VRBO, those are synonyms for property rentals. It's kind of like Kleenex being the ubiquitous name for tissues.

In the North Bay, depending on who you ask, short-term rentals - defined as a stay of less than 30 days - are a blessing, a curse or a nonissue. Healdsburg, a popular tourist destination in Sonoma County, has lost hotel business to short-term rentals, said Circe Sher, a partner at Piazza Hospitality, which develops and manages a host of properties. Some of Piazza's properties are in Healdsburg, where the company is based. They include Hotel Healdsburg, H2, The Spa Hotel Healdsburg and Harmon Guest House.

“There's definitely been examples where people would opt to book a house rather than book at one of our hotels because of the rate,” said Sher, who declined to share numbers. “It happens year-round, but definitely more in high season and with people who are traveling for weddings.”

High season is generally June through October, with a spike at wine grape harvest time, which is key in Healdsburg as the city is situated among the Russian River, Dry Creek and Alexander valleys - among the county's premier wine-producing regions.

Piazza has stepped up its marketing efforts and use of its social media channels to promote its' properties' value and experiential offerings, such as spas and restaurants, she said.

Long-term, Sher said she anticipates the growing prevalence of short-term vacation rentals to reduce occupancy and lower average daily room rates at Piazza's properties.

Our selling and positioning advantage with Airbnb (and other online platforms) is the level of services. Brian Gipson, Farmhouse Inn

Like Piazza's Healdsburg properties, Farmhouse Inn, a boutique hotel located in the Russian River Valley community of Forestville, has seen big groups opt to stay at short-term rentals, said Brian Gipson, director of sales and marketing, but not enough to have a large impact on its business. Farmhouse Inn doesn't specifically market against short-term rentals, focusing instead on engaging with past guests and its top feeder markets, comprised of the Bay Area, Los Angeles, New York, Dallas and Chicago, Gipson said.

“Our selling and positioning advantage with Airbnb (and other online platforms) is the level of services, the unique and intimate relationships we enjoy with the community to create lifetime memories,” he said.

Gipson also noted that visitors who choose to stay at a short-term rental through Airbnb or a similar service don't have access to any formalized plan for managing unexpected natural disasters, such as fires, floods, power outages and mandatory evacuations that Sonoma County has gone through the last several years.

In Marin County, the majority of visitors come for the day, something the Marin County Visitors Bureau plans to address in 2020, according to its 2019 annual report. Such regulations currently vary among the county's towns and cities; some allow rentals, such as San Rafael, while others like Sausalito don't.

From a tourism perspective, short-term rentals are an important part of the lodging mix, said Tim Zahner, executive director of Sonoma Valley Visitors Bureau. But, he noted, there are some caveats.

“Those operators who are in compliance with local government regulations and respect the neighbors - collect taxes, operate where zoning allows, have adequate management - can be a good option for travelers like multigenerational families or those who like a kitchen and other amenities,” Zahner said. “The challenges include those who don't comply with local regulations or respect the neighbors, as hotels can't operate that way, and it reflects poorly on those rentals who are good actors.”

Claudia Vecchio, president and CEO of Sonoma County Tourism, said the presence and growth of short-term rentals in the county has affected its hotel industry.

“The lodging sector most impacted are bed and breakfast properties; however, many of these have teamed with Airbnb or VRBO to offer rooms as part of those programs,” Vecchio said.

Sonoma County Tourism doesn't yet have a complete picture of the vacation rental segment for several reasons, including the fact that many of those properties do not report transient occupancy tax (TOT), she noted.

“We are working with segment researchers to obtain detailed information about the size and impact of this segment to the county,” Vecchio said.

(O)ur concerns are with the quality of vacation rentals. Linsey Gallagher, Visit Napa Valley

In Napa County, short-term rentals are illegal in the unincorporated area, Yountville, Calistoga and American Canyon, according to Visit Napa Valley, the county's tourism agency. One hundred short-term rentals are permitted in Napa, and 24 are permitted in St. Helena, according to the organization.

“While we have not yet taken a formal position on short-term vacation rentals in Napa County, due to the current restrictions and limited inventory, we do not feel they have had a significant impact on the lodging industry,” said Linsey Gallagher, president and CEO for Visit Napa Valley. “Generally, our concerns are with the quality of vacation rentals, which are not always consistent with the overall quality of our Napa Valley lodging properties.”

Gallagher noted that in 2018, nearly 70% of the $2.23 billion spent by visitors was generated from overnight hotel guests, which generated $85.1 million in tax revenue for local services. In addition, overnight hotel guests generated more than $8 million in TID (Tourism Improvement District) assessments, which fund destination management budgets. “Currently, vacation rentals do not contribute to these funds,” she said.

Jennifer Chiesa, director of public relations at Meadowood Napa Valley in St. Helena, said the presence of permitted short-term rentals has no real impact on the property, including when it comes to setting its room rates.

(T)hey often falsely use our trademarks and brands. John Evans, Silverado Resort and Spa

However, the existence of short-term rentals has been a proverbial thorn in the side of Silverado Resort and Spa, said John Evans, general manager.

“We try to look at it objectively but we see no pros or upside to Airbnb, VRBO, HomeAway or Crown Realty-style rental programs operating within our competitive set,” Evans said. “What we experience is they often falsely use our trademarks and brands, knowingly, to promote their own business.”

Evans said Silverado has a large number of hotel guest rooms that are owned by private entities and, in turn, Silverado has an agreement with those private owners to manage the rental of their units. Some of those owners have elected to go with an online marketplace because their units' physical condition isn't to Silverado's standard for an upscale resort in Napa Valley.

As a result, he said, visitors who book short-term rentals through an online marketplace sometimes end up disappointed, having assumed the accommodations were like the hotel's, not someone's home.

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