When getting ready to finalize your annual budget, a common strategy is to take current budget line items that will continue, add a cost of inflation, and add any additional investments you plan on making on new line items.
But due to the rapid growth of the short-term rental (STR) market across the world, including in your community, you will need to review the budget for your STR program more carefully than more stagnant programs.
How (and how much) to budget for next year’s program
For cities and counties who are renewing with Host Compliance, there are a number of factors that go into the new contract cost. The following need to be considered before submitting your budget for your STR program.
What growth are we seeing?
You can easily determine the amount of STR growth in your area by identifying how many additional listings have been added in the last year compared to your original contract. You can identify this through a report (instructions here), or through the Rental Units and Listings / Week graph in your dashboard (below the main dashboard map). These trends will give you a good sense of the increase of STRs in your growing community you’ll need to accommodate in your budget. To accomodate for spikes in listings and units, we look at an average for the last 10 or 12 months.
How do I estimate my renewal program costs based on my current program?
Based on your growth of STR Units and Listings, you’ll be able to estimate how much your renewal will increase. Here’s how to calculate your new program cost:
In year 1, renewal fees are based on the prior 10-months monthly average for STR Listings
In year 2 and beyond, renewal fees are based on the prior 12-months monthly average for STR Listings
Therefore, if your community has an increase of 20% of STR listings, you can expect to budget an additional 20% for your Address Identification Module.
All other services:
In year 1, renewal fees are based on the prior 10-months average for monthly STRs Units
In year 2 and beyond, renewal fees are based on the prior 12-months average for monthly STRs Units
Some products, such as the Mobile Permit Registration , have a minimum spend.
These services are priced in tiers, and will change if there is a substantial change in the amount of STR units in your community.
Based on the growth in your community, and your previous contract value, you should be able to calculate how much to budget for. If you need additional support in calculating this, please reach out to [email protected].
Why do prices increase as the amount of STR listings increase?
Host Compliance, along with a well constructed set of regulations, is the most scalable way to manage short-term rental compliance. This means you can expect even higher revenue returns from the short-term rental market as it grows, as the investment into additional resources will be minimal comparatively. However, there may be additional costs to managing your STR program that is reflective of the growth in your community if there is a large jump in STR Rental Listings and Units. This is because additional listings and units require more data storage, analysts, and other resources on our side. Since customers who invest in Host Compliance often see a 10x return on their investment, this just means you’ll expect more revenue to offset any additional fees. Please contact your account director at [email protected] if you’d like more clarity.
What additional services might help the results of our programs?
With a growing and changing STR landscape, you may want to consider bringing on some additional services.
Registration, Permitting, and Tax Collection
If your registration and tax collection process is cumbersome and confusing, it may be deflecting hosts from being fully compliant, and increasing the amount of enforcement needs. Host Compliance offers a platform and customization services for online registration, permitting and tax collection that could save you valuable time and resources. We’ve implemented this for hundreds of communities, so we can get you up and running significantly faster, and more cost-effectively, than managing in-house.
“The short-term rental registration and tax collection website that Host Compliance built for us is streamlined, easy to navigate, and could not have been constructed in-house as efficiently and as cost-effective.” - City of Pasadena
As the amount of STRs grows in your community, the need for residents to contact the local government about party houses, non-compliant host, and other problems grows as well. If you don’t have a 24/7 system in place for residents to give feedback or flag STR Hosts currently, consider Host Compliance Hotline services. With Hotline services, you’ll give residents a voice, while maintaining streamlined and consistent management of this area of government.
“It is a lot easier to handle a case with the evidence Host Compliance supplies. The 24/7 Help Desk staff are professional and pay attention to detail on inbound calls.” - City of South Lake Tahoe, CA
Compliance Monitoring and Outreach
Knowing who is operating short-term vacation rentals in your community is only half the battle. Enforcement includes educating operators, monitoring for compliance, investigating cases of suspected non-compliance, and communicating to those operators that fail to follow ordinance. With our Compliance Monitoring and Outreach module, you can put all this on auto-pilot so you can focus your time and energy on working with your community.
“Host Compliance is an incredible value. Automation of compliance information delivery via Host Compliance just works, and works well.” — Town of Jackson, WY
Would adding a module really have an impact on our program?
From what we’ve seen, customers using additional modules have dramatically higher compliance rates than address identification only customers. We’d be happy to walk you through the best options available for your specific city or counties need. Let us do the work!
Why an STR program should stay in the budget
You may need to justify the additional cost, or the STR program as a whole, to another party or department. To make it easy for you, we’ve outlined some of the key reasons why so many of our customers continue to invest in Host Compliance.
It’s revenue positive
Many short term rental programs tend to recover enough revenue annually to fund their own growth without increasing headcount, such as:
A county in California made its annual systems costs back in revenue in less than a month, and continued recovering additional revenue through the year.
Placer County, CA reported TOT collection was up by $3 million from the year prior. Their contract with Host Compliance accounted for less than 10% of that amount.
Within the first eight months of working with Host Compliance, Denver, CO was able to collect $1.1 million in additional revenue from new permits and business licenses.
Beaver Creek reached an 82% compliance rate with previously non-compliant hosts, generating revenue from 201 additional units
Mendocino County’s Treasurer-Tax Collector added 100 additional STR businesses, and add $240,000 to the county’s hotel-bed tax revenue with Host Compliance. They saw revenue generation of ten times the cost expended.
Even with these returns, it’s important to set aside sufficient funds to assure monitoring and compliance tools are growing as your community grows.
The problem is growing
The experience of staying at Airbnb-style accommodations continues to grow in popularity. In fact, STR tourism is expected to increase by more than 20% in 2020 and many areas are likely to see a rise in active STRs.
The proliferation of STRs across North America remains a serious point of contention. From disrupting neighborhoods and infringing on homeowner’s property rights to negatively impacting the local economy, there are countless incentives for local governments to regulate and invest in enforcement management of short-term rentals.
Thankfully, by partnering with Host Compliance, you’re well prepared for any new or changes to platforms, STR growth, or enforcement of changes to your ordinance. For cities and counties that are pro-active like yours, the growth of STRs isn’t all bad–it presents more opportunities for revenue recovery and tourism–since you have the proper controls in place.
Expert knowledge and guidance
To best support our customers in this constantly evolving short-term rental landscape, we continuously enhance our short-term rental services with feedback from more than 250 of our customers. We work with all STR Platforms, from giants like Airbnb to niche providers like BoutiqueHomes to keep on top of changes to the platforms and industry. With us, you can focus on running your city or county instead of chasing platform updates. In order to continuously improve Host Compliance in this way, we operate as a Software as a Service (SaaS), and on annual contracts.
We hope this short guide is a helpful tool for setting your short-term rental program budget for next year. If you have any questions, please reach out to us using the contact information below. We’re here to give you all the support you need to be successful.
HOST COMPLIANCE, LLC
1037 NE 65th St #81158
Seattle, WA 98115
Ph: (415) 529-6291
Email: [email protected]