Vacation home rentals in the Bahamas is a growing niche segment of our tourism industry. You would imagine that the local government, when faced with a slowing tourism industry (due to global economic conditions) would be seeing ways to encourage new corners of the tourism industry to spring up and supplement the resort/hotel revenue that has lately been slowing our entire country’s economy. However, our government seems to be paying heed to the increasingly nervous local hoteliers who feel that niche market success threatens their own struggling business. These hoteliers feel that these small-scale operations (like second homes which are being placed on the vacation rental market) have an unfair advantage because they are not subject to the 6% hotel stay tax.
The Bahamas government should tread lightly in how to handle the regulation of the second-home owner and vacation rental market. It is an industry that is burgeoning worldwide, being a sort of re-invention of the European Bed & Breakfast industry. Abaco and Harbour Island have built profitable and stable economies on this business model. Abaco in particular sees over 100,000 extended stay visitors per year, and might just surpass Grand Bahama in visitor numbers in the coming years, despite not having any large resorts or hotels. This economic model would seem to be worlds better than the “Anchor Resort Project” that was touted in the recent past by both sides of Parliament – which resembles “having all the eggs in one basket.” If one homeowner gets into financial trouble the tourism industry in that region continues to survive and thrive, but if the sole anchor project on an island goes belly up, the entire island economy is pushed into jeopardy.
Several Caribbean islands actually encourage second-home owners to rent out their properties to vacationers by offering reduced rate on their annual property tax. Those who choose not to rent actually pay more in property tax than those who do. These particular island governments recognize the benefits of this tourism segment to their respective economies. The spin-off income that trickles down through the economy as a result of the vacation rental market is much more diverse than that of a large scale mega resort. It appears that the Bahamas government is considering the opposite direction with increasing the tax burden on second-home owners that do rent. BREA is currently lobbying government on this issue on behalf of the second-home owners, one of the most lucrative sectors of the Bahamas real estate market. BREA’s president, William Wong, has already met with the Minister of State for Finance, Zhivargo Laing, on this issue and the property tax issue with promising results.
The Bahamas government should be looking at ways to develop a B&B industry in addition to working to attract luxury resort brands such as the Ritz-Carlton and Four Seasons. Many political pundits are often calling for more Bahamian ownership of the tourism industry, and this is the perfect avenue for Bahamian ownership in that industry. Government ownership of hotels is a model that does not work in the Bahamas, the Nassau Beach on Cable Beach, and the Lighthouse Hotel and Marina in Andros being prime examples of this. However, putting the ownership in the hands of individual Bahamian entrepreneurs is a perfect solution to spreading risk and facilitating the growth of wealth for its citizens. The keystone to making this work is a support network provided by government in the form of promoting and marketing the product and maintaining the standards of the individual operations, and being a liaison in putting together travel agents and booking companies with the new B&B product. Ireland has a wonderful streamlined B&B association network, which assists with getting customers, lobbies government on their behalf, and sets a minimum room rate so that all of the operations can be profitable. The Bahamas should learn from Ireland and replicate their fully functioning system.
Many thanks to Dwayne Wallas for his thoughts and contribution to this post.