Thursday, March 13, 2014

Studies Find Short-Term Rentals Bring Enormous Economic Benefits to Chicago, St. Joseph, Michigan

(Republished from an email released by the Short Term Rental Advocacy Committee)

Studies Find Short-Term Rentals Bring Enormous Economic Benefits to Chicago, St. Joseph, Michigan

Last year, short-term rentals in Chicago generated $108 million in overall economic activity and created 920 jobs; $24 million in overall economic activity and 300 jobs in St. Joseph

In the Lake Michigan hamlet of St. Joseph, Mich. and Chicago—America’s third largest city—residents and local tourism economies are enjoying the enormous economic benefits of short-term rentals, according to two economic studies commissioned by the Short Term Rental Advocacy Center (STRAC).

In Chicago, short-term rentals generated $108 million in overall economic activity in 2013 with $70.6 million of that activity attributable to visitor spending on short-term rentals and related on food, recreation, transportation and other expenses, according to the study by TXP Inc. For every $100 a traveler spent on short-term rentals, they spent an additional $69 on food, $24 on transportation, $59 on shopping, and $48 on arts, entertainment and recreational activities.

The study also found short-term rental activity created 920 local jobs, primarily in restaurants and bars and in the arts, entertainment and recreation sectors. Beyond the $70.6 million in direct and indirect spending on short-term rentals, that activity has a multiplying effect on the local economy in the form of increased wages, which are spent in those local communities.

TXP’s study looked at short-term rental listings of Airbnb, HomeAway and FlipKey in Chicago. Those companies had a combined 171,000 nights booked in Chicago and surrounding Cook County in 2013 across 3,620 properties. While the average visitor stays in Chicago 2.4 nights, short-term renters stayed an average of 4.5 nights and had an average party of 2.5 people. Those figures, coupled with an all-time high hotel revenue and occupancy rate last year, suggest short-term rentals address a different market segment than traditional lodging options.

“Chicago’s hundreds of events, unique attractions, vibrant culture and nightlife attract a range of visitors with diverse interests and budgets,” said Jon Hockenyos, president of TXP and an economist that has conducted dozens and dozens of local economic impact studies. “While the number of short-term rentals pale in comparison to the number of hotel rooms and overall housing stock, short-term rentals provide important variety to visitors and play a key role in the future of Chicago’s future tourism growth.” 

St. Joseph

While the Lake Michigan destination of St. Joseph, Mich. has a population of just 8,311 compared to the 2.7 million residents of Chicago, its residents are nonetheless enjoying the benefits of short-term rentals.

According to a separate study conducted by TXP, an Austin, Tex.-based economic analysis firm, St. Joseph and the surrounding Berrien County experienced $24 million in overall economic impact from short-term rentals in 2013. Visitor spending on short-term rentals and related activities amounted to $22.2 million and supported 300 jobs. The higher overall economic impact figure reflects the multiplying effect short-term rental spending in the local economy, namely in the form of increased wages.

“Like in Chicago, short-term rentals in St. Joseph provide much needed diversity to visitor housing options and are key to the continued growth of St. Joseph’s tourism economy,” Hockenyos said.

Short Term Rental Advocacy Center member companies—Airbnb, HomeAway and FlipKey—listed in 695 properties on its sites, leading to 18,000 nights booked last year. This data also revealed that the average short-term rental party size was 5.7 people staying an average of 3.3 nights. Those figures, rising hotel occupancy rates and hotel revenue suggest that short-term rentals and traditional lodging sources are not in conflict with one another.

"Tourism is very important to St. Joseph and Southwestern Michigan. Visitors spend money at restaurants and they shop at our local stores thereby strengthening our local economy,” said Torrence Moore, a local homeowner who is part of a local group advocating for fair and reasonable regulations. Last year, the city passed a restrictive measure to forbid new short-term rentals in residential neighborhoods. 

"St. Joseph needs to have an adequate number of housing options to meet the demand from families coming to St. Joseph,” Moore added. "Currently there are only two hotels in downtown St. Joseph, and short-term rentals offer a solution. However, we risk losing the strong economic benefits of short-term rentals and families will choose surrounding towns with good, fair and responsible short-term rental policies. We believe there’s a better solution for regulating short-term rentals in St. Joseph."

The Short Term Rental Advocacy Center commissioned TXP to assess the economic impacts of short-term rentals attributable to STRAC members’ customers (termed “participating short term rentals” in the reports) in St. Joseph, Mich. and Chicago. The reports capture visitors spending on short-term rentals in those markets, as well as related spending and the broader implications on those economies, but not necessarily all short-term rentals.

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