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Home My WebLink AboutCOM 0236.149 2024-2026bill V CCtM, 9-1y, June 2, 2025 Hawaii County Council Office of the County Clerk 25 Aupuni Street Hilo HI 96720 RE: Bill 47 Aloha Council Members, KLONINGER & SIMS CONSULTING COUNTY CLERK COUNTY OF HAMU = I RscsiZ2� Time [ I : V a.M , Date JUN 0 3 2025 My name is Erik Kloninger. I am a Honolulu -based hospitality consultant. I was retained by TravelTech, a trade association representing vacation rental platforms, to estimate the economic impact of the spending by visitors to Hawaii Island who stayed in vacation rentals in 2023. The attached report summarizes our findings. Our firm takes no position on proposed legislation. Our study provides policy makers with an understanding of the significant economic activity generated by visitors to Hawaii Island who stay in short-term rentals. Mahalo, Erik ta6S3". n". 'o � Ref. To.: Ref. � $P KLONINGER & SIMS CON ULTING LLC June 2, 2025 Mr. David Edmonson Senior Vice President, State Policy & Government Relations TechNet 4633 Old Ironsides Drive, Ste 320 Santa Clara, CA 95054 Dear Mr. Edmonson, Hawaii County is currently considering new regulations on short-term rentals. TechNet has asked Kloninger & Sims Consulting to analyze the 2023 economic and fiscal impact of Hawaii County's vacation rental industry. This report summarizes our findings. Thank you for the opportunity to study this important issue. Regards, �4 Erik Kloninger Kloninger & Sims Consulting LLC Kloninger & Sims Consulting Page 2 of 12 Background Visitor spending is a major driver of Hawai`i's economy. During 2023, visitors spent $20.8 billion, according to the State of Hawaii Department of Business, Economic Development & Tourism ("DBEDT"). Tourism is Hawai`i's largest export sector, representing 17.2% of the state's GDP when including direct and indirect spending, rising to 23.6% when induced spending is included, according to the most recent DBEDT analysis. In recent years, increasing numbers of Hawaii visitors have chosen to stay in vacation rentals. While vacation rentals have long been a component of Hawai`i's accommodation mix, the advent of vacation rental platforms such as Airbnb and VRBO has contributed to the growth of Hawai`i's vacation rental market. Our analysis of vacation rental visitors' spending provides an understanding of the role that vacation rentals play in Hawaii"s visitor industry. Hawaii County has had a short-term rental licensing system in place since 2019. Recently, the county has been considering changes to the program for licensing short-term rentals, specifically a new requirement that would require hosted short-term rentals to be licensed. TechNet has asked us to study the economic and fiscal impact Hawaii County short-term rental market. Key Findings • Visitors staying in short-term rentals represent a significant share of the state's total tourism market, with visitors staying in short-term rentals spending an estimated $6.1 billion in 2023. • On any given day in 2023, about 29.6% of the visitors in the state stayed in a vacation rental. • Short-term rental visitors likewise represent a significant share of Hawaii County's visitor spending, which totaled $1.3 billion in 2023. This visitor spending translated to $2.4 billion in total economic activity on Hawaii Island during the.year, as well as an estimated 14,200 jobs on the island. • Spending by Hawaii Island short-term rental visitors in 2023 generated an .estimated $24.8 million in County General Excise Tax ("GET") and Transient Accommodations Tax ("TAT"). • Proposed new regulations on short-term rentals that reduce the supply of rentals will likely have a negative effect on the visitor spending, employment and taxes generated by visitors staying in short-term rentals on Hawaii Island. The magnitude of the impact can be better quantified once a there is a specific policy change being considered. Kloninger & Sims Consulting Page 3 of 12 2023 Hawaii Vacation Rental Visitor Arrivals In 2023 the State of Hawaii welcomed about 9.5 million visitors, which translated to about 85.6 million visitor days. Vacation rental visitors accounted for 25.4 million visitor days statewide, or 29.6% of the state's visitor market. Vacation rental visitors accounted for 17.7% of visitor days on Oahu during the year, the lowest share among the counties. Hawaii Island had the highest vacation rental market share in 2023, representing 43.7% of the market. For the purpose of this study, we have defined Vacation Rental visitors as visitors who indicated that they stayed in either a Rental House, Bed & Breakfast, Private Room in a Private Home, Shared Room in a Private Home or Vacation Rental Condo. 2023 State of Hawaii Visitor Days, Vacation Rental Visitor Days by County & Share of Vacation Rental Market County Total Visitor Days Vacation Rental Visitor Days Vacation Rental Visitor Days Percent of Total Oahu 40,627,690 7,171,614 17.7% Maui 20,478,555 7,972,472 38.9% Kauai 10,544,252 4,132,337 39.2% Hawaii Island 13,945,651 6,092,977 43.7% State 85,596,149 25,369,399 29.6% r Source: Kloninger & Sims analysis of DBEDT data Kloninger & Sims Consulting Page 4 of 12 At $2.9 billion, lodging spending accounted for the largest share of the $6.1 billion in 2023 statewide spending by visitors staying in a short-term rental, followed by food and beverage spending at $1.3 billion. 2023 Total State Vacation Rental Visitor Spending by Cate ory Category 2023 Vacation Rental Visitor Spending Lodging $2,939,800,000 Food & Beverage $1,274,700,000 Entertainment $570,200,000 Transportation $706,700,000 Shopping $524,500,000 Other $54,700,000 Total $6,070,400,000 Source: Kloninger & Sims analysis of DBEDT data 2023 Visitor Spending by County Maui County vacation rental visitors spent an estimated $2.2 billion in 2023, followed by Oahu's vacation rental visitor spending of $1.6 billion. We note that spending in Maui County achieved the highest vacation rental visitor spending despite the temporary pause in tourism to West Maui following the catastrophic wildfire that destroyed Lahaina on August 8. Governor Josh Green paused West Maui tourism following the fire, with a phased reopening that started in October. Spending by vacation rental visitors topped the $1 billion mark on both Kauai and Hawai' i Island. 2023 Total Vacation Rental Visitor Spending by County $2.5 Billion $2 2 B Island Source: Kloninger & Sims analysis of DBEDT data Kloninger & Sims Consulting Page 5 of 12 2023 Statewide Visitor Spending by Accommodation Type Visitors spent $20.8 billion in the State of Hawaii in 2023. Visitors staying in hotels accounted for the largest share of the spending, 49.0% of the total. Vacation rental visitors spent an estimated $6.1 billion, or about 29.2% of all visitor spending for the year. Timeshare visitors accounted for 8.2% of spending, while Condo Hotel visitors accounted for 5.2%. 2023 Hawaii Island Visitor Spending by Accommodation Type Spending by visitors staying in a short-term rental accounted for 37.0% of Hawaii Island's total visitor spending in 2023. Hotel visitor spending represented the largest share, at 43.2% 2023 State of Hawaii Visitor Spending & Share by Accommodation Type aHotel $10.2 Billion 13Vacation Rental $6.1 Billion oTimeshare $1.7 Billion o Condo Hotel $1.1 Billion o Other $1.7 Billion .Source: Kloninger & Sims analysis of DBEDT data I 2023 Hawaii Island Visitor Spending & Share by Accommodation Type C Hotel $1 AB oCondo Hotel $19M oTimeshare $240M oShort-Term Rental $1.2B o Other $380M Source: Kloninger & Sims analysis of DBEDT data Kloninger & Sims Consulting Page 6 of 12 2023 Hawaii Island Short -Term Rental Visitor Spending by Category Lodging spending accounted for the largest share of 2023 spending by Hawaii Island short-term rental visitors, at about $590M. Food & Beverage ($276M) and Transportation ($207M) spending were also large contributors to the $1.3B in total spending. 2023 Hawaii Island Short -Term Rental Visitor Spending by Category Spending Category 2023 Hawaii Island Short -Term Rental Visitor Spending Lodging $590,100,000 Food & Beverage $276,300,000 Entertainment $125,700,000 Transportation $207,300,000 Shopping $92,700,000 Other $11,200,000 Total $1,303,300,000 Source: Kloninger & Sims analysis of DBEDT data Kloninger & Sims Consulting Page 7 of 12 Economic Impact Applying the multipliers developed by DBEDT, $1.3 billion in 2023 spending by Hawaii Island visitors staying in short-term rentals generated $2.4 billion in total economic activity, $669 million in personal earnings and supported about 14,000 jobs. The calculations of these figures is in the appendix to this report. Fiscal Impact Based on our estimates of 2023 spending by visitors staying in Hawaii Island short-term rentals, we have calculated the associated GET and TAT. According to this analysis, the GET and TAT associated with 2023 spending by visitors staying in Hawaii Island short-term rentals totaled $24.8 million. The table below details the 2023 Hawaii Island spending and GET/TAT tax generation by category. 2023 Estimated Hawaii Island Short -Term Rental Visitor County Taxes by Category Hawaii Island 1 3.0% 1 0.545% 2023 Estimated Spend County TAT County GET Surcharge Total Hawaii County GET & TAT Lodging $590,100,000 $17,703,000 $3,218,259 $20,921,259 Food & Beverage $276,300,000 $1,506,872 $1,506,872 Entertainment $125,700,000 $685,537 $685,537 Transportation $207,300,000 $1,130,561 $1,130,563 Shopping $92,700,000 $505,563 $505,563 Other $11,200,000 $61,082 $61,082 Total $1,303,300,000 $17,703,000 $7,107,875 $24,810,875 Source: Kloninger & Sims analysis of DBEDT data Kloninger & Sims Consulting Page 8 of 12 Analysis of Hawaii Island Supply of Short-term Rentals The supply of short-term rentals on Hawaii Island increased between 2018 and 2023, as shown in the table below. We note that the supply decreased in 2020 and 2021 before again increasing in 2022 and 2023. Hawaii Island Short - Term Rental Supply Year Count 2018 7,051 2019 7,150 2020 6,649 2021 6,616 2022 6,943 2023 8,302 Source: Visitor Plant Inventory Prior to 2020, the Visitor Plant Inventory included a supplementary analysis of units listed on short-term rental booking platforms. This supplementary analysis provided data on the various types of short-term rentals. In 2019, 28.2% of Hawaii Island's short-term rental supply consisted of hosted rentals, highlighted in green in the following table. 2019 Mix of STR Types on Hawaii Island Count Share VR House 3,078 39.5% VR Condo 2,521 32.3% B&B 69 0.9% Private Room 1,124 14.4% Shared Room 30 0.4% Other 971 12.5 % Total 7,793 100.0% Estimated Hosted 2,194 1 28.2% Source: Visitor Plant Inventory Kloninger & Sims Consulting Page 9 of 12 According to data provided by Hawaii County's Department of Planning & Permitting, there are 4,842 licensed short-term rentals on the island. The total supply of short-term rentals on the island was 8,302 in 2023, according to data from the Visitor Plant Inventory. This implies that there were 3,460 unlicensed short-term rentals on Hawaii Island. Of the 3,460 unlicensed short-term rentals, we estimated that this included 2,337 hosted rentals, by applying the 28.2% figure from the detailed 2019 data. Our analysis is summarized in the table below. Analysis of Current Supply of Hawaii Island Short -Term Rentals Short -Term Rental Unit Types Count Share Source Licensed Has Non -Conforming Use Certificate ("NUC") 932 11.2% Hawaii County DPP Has No NUC 3,910 47.1% Hawaii County DPP Total Licensed 4,842 58.3% Hawaii County DPP Unlicensed Estimated Hosted (currently no license required) 2,337 28.2% Estimate based on 2019 data Other 1,123 13.5% Calculated (Total unlicensed supply less hosted supply) Estimated Total Unlicensed STRs 3,4.60 41.7% Calculated (Total STR supply less licensed supply) Total Short -Term Rentals 8,302 1 100.0% DBEDT 2023 VPI (Lighthouse) Sources: Visitor Plant Inventory, Hawaii County Planning Department, Kloninger & Sims Estimated Impact of Reduction of Hosted & Other Short-term Rental Supply The proposed bill would require all short-term rentals in Hawaii County to be licensed by the county. This would affect the estimated 3,420 unlicensed short-term rentals on the island, which likely include a mix of hosted rentals, properties being rented for more than 30 day periods and properties that are unlicensed and operating in violation of the current law. If the county passes a law requiring all short- term rentals to be licensed, it is likely that some portion of the unlicensed supply will not continue to operate as short-term rentals. Hawaii County passed a 2018 bill regulating short-term rentals, which allowed for the licensing of short- term rentals that had been operating as long as they had been paying their GET and TAT and the property did not have any open building permits. Short-term rental hosts who had not been paying their GET and TAT or whose property included unpermitted construction would not have been able to obtain a short- term rental license and dropped out of the short-term rental market. It is not known the extent to which any new regulation of Hawaii County's short-term rental market will have on the supply of or demand for short-term rentals on the island, other than that it will likely Kloninger & Sims Consulting Page 10 of 12 reduce the supply of unlicensed short-term rentals by some amount. The table below illustrates the overall impact on the supply of Hawaii Island short-term rentals if 50% or 100% of the current supply of unlicensed short-term rental units exited the market. If 50% of the island's unlicensed short-term rentals exited the market, the overall supply of short-term rentals would decrease to about 6,600 units or a decrease of 20.8%. If all unlicensed short-term rentals exited, the supply would drop to 4,842 units, or a 41.7% decrease. Analysis of 50%, 100% Reduction in Supply of Hawaii Island Unlicensed Short -Term Rentals Baseline No Reduction in Supply of Unlicensed STRs 50% Reduction in Supply of Unlicensed STRs 100% Reduction in Supply of Unlicensed STRs Short -Term Rental Unit Types Count Count %of Baseline Count %of Baseline Count %of Baseline Licensed Has Non -Conforming Use Certificate ('NUC') 932 932 100% 932 100% 932 100% Has No NUC 3,910 3,910 100% 3,910 100% 3,910 100% Total Licensed 4,842 4,842 100% 4,842 100% 4,842 100% Unlicensed Estimated Hosted (currently no license required) 2,337 2,337 100.0% 1,169 50% 0 0.0% Other 1,123 1,123 100.0% 561 50% 0 0.0% Estimated Total Unlicensed STRs 3,460 3,460 100.0% 1,730 50% 0 0.0% Total Short -Term Rentals 8,302 8,302 100.0% 6,572 79,2% 4,842 1 58.3% Sources: Visitor Plant Inventory, Hawaii County Planning Department, Kloninger & Sims Kloninger & Sims Consulting Page 11 of 12 Range of Impacts Due to Supply Reductions The table below applies the overall supply decreases associated with the 50% and 100% reduction in Hawaii Island's supply of unlicensed short-term rentals to the estimated 2023 visitor spending, county TAT & GET, total economic activity and jobs supported by Hawaii Island's short-term rental market. The 50% and 100% decrease of unlicensed short-term rental supply scenarios are illustrative of a range of impacts that might result from proposed supply decreases. We note that occupancy in Hawaii Island's short-term rental market averaged 47.2%, during the first nine months of 2024, the lowest occupancy rate among the counties. With more than half of the island's short-term rentals vacant at any given time, it is likely that some of the demand displaced by the reduction in supply will be accommodated by short-term rentals that would have otherwise been empty. 20.8% Decrease due 41.7% Decrease due 2023 Baseline to Loss of 50% of to Loss of 100% of Metrics Unlicensed STRS Unlicensed STRs STR Visitor Spending $1,303,300,000 ($271,600,000) ($543,200,000) County TAT & GET $24,800,000 ($5,200,000) ($10,300,000) Total Economic Activity $2,433,500,000 ($507,100,000) ($1,014,200,000) Total Jobs Supported 14,200 (3,000) (5,900) Source: Kloninger & Sims Kloninger & Sims Consulting Page 12 of 12 APPENDIX 2017 Condensed Input -Output Transactions Table for Hawaii (in $million excpet for employment, which is number of jobs) Type II final -demand multipliers Economic Impacts (from Table 2.4) Visitor Expenditures Expenditures Output ($ Earnings ($ Industry expenditures Shares $ Millions) Output Earnings Jobs Millions) Millions No. of Jobs 1 Agriculture 26.0 0.14 1.78 2.08 0.70 24.00 3.70 1.24 42.65 2 Mining and construction 0.0 - - 2.12 0.69 10.70 - - - 3 Food processing 65.0 0.34 4.44 2.21 0.50 12.40 9.82 2.22 55.10 4 Other manufacturing 63.0 0.33 4.30 1.34 0.20 4.00 5.77 0.86 17.21 5 Transportation 3,434.7 18.00 234.61 1.89 0.50 9.70 443.41 117.30 2,275.68 6 Information 21.5 0.11 1.47 1.84 0.39 6.90 2.70 0.57 10.14 7 Utilities 0.0 - - 1.69 0.31 4.60 - - - 8 Wholesale trade 125.0 0.66 8.54 1.88 0.50 8.90 16.05 4.27 76.00 9 Retail trade 2,396.3 12.56 163.67 1.85 0.55 14.10 302.80 90.02 2,307.79 10 Finance and insurance 0.0 - - 2.16 0.54 10.60 - - - 11 Real estate and rentals 1,668.6 8.74 113.97 1.55 0.23 4.70 176.65 26.21 535.65 12 Professional services 143.0 0.75 9.77 2.21 0.81 13.90 21.59 7.91 135.81 13 Business services 371.7 1.95 25.39 2.18 0.80 16.90 55.34 20.31 429.05 14 Educational services 162.7 0.85 11.11 2.00 0.86 23.40 22.23 9.56 260.06 15 Health services 172.2 0.90 11.76 2.21 0.77 14.10 25.99 9.06 165.84 16 Arts and entertainment 604.9 3.17 41.31 1.89 0.74 23.30 78.08 30.57 962.62 17 Accommodation 6,461.2 33.86 44133 2.17 0.57 10.20 957.68 251.56 4,501.54 18 Eating and drinking 1,854.4 9.72 126.66 2.17 0.66 16.80 274.85 83.60 2,127.89 19 Other services 152.2 0.80 10.39 2.37 0.80 17.10 24.63 8.31 177.73 20 Government 96.8 0.51 6.61 1.84 0.79 12.80 1 12.17 5.22 84.63 Total intermediate input 17,819.2 93.39 1,217.12 2,433.47 668.81 14,165.40 Imports 1,261.7 6.61 86.18 Earnings (Labor income) Compensation of employees Proprietor's income TOPIIS Other capital costs Total Value added Output 19.080.9 100.00 1,303.30