A new report sponsored by the Spanish tourist trade body EXCELTUR argues that private holiday rentals need to be better regulated, not least because the Government is missing out on millions of euros in lost taxes.
Better regulation of private holiday rentals could increase Government revenues by 800 million euro, finds a new study sponsored by EXCELTUR (The Alliance for Excellence in Tourism, a non-profit trade organisation), and prepared by consultants EY (formerly Ernst & Young) and the law firm Tourism & Law.
The report estimates that if VAT was charged on private rentals, the state would raise an additional €367 million per year. And if private landlords were to include their earnings in income tax declarations, that would generate an additional €432 million, giving a total of €799 million extra tax revenue for the Spanish state each year.
Describing tourist lettings as a “highly lucrative business undergoing explosive growth” the report reveals that tourist rentals already offer the biggest supply of accommodation to tourists with 2.7 million beds available, compared to 2.4 million in hotels.
PROBLEMS TO REGULATE
The general thrust of the report is that the holiday rental sector needs better regulations to solve a host of problems, from unfair competition to friction with locals, and shortchanging the Spanish taxman.
The report makes ten recommendation for better regulation at a national, regional and local level, most of which would increase the burden of regulations on private landlords closer to levels in the hotel business. That would discourage many landlords and reduce competition for hoteliers.
The report reveals that 1 in 11 homes in the centre of the 12 Spanish cities analysed are rented out to tourists, “gradually pushing out the resident population” they say.
Holiday rentals cause problems for local residents, says the report, providing statistics to back up this claim. 59% of residents with high concentrations of tourist rentals suffer a lower quality of life as a consequence: 80% are affected by noise, 70% by dirtier streets and communal areas, and 42% by greater insecurity.
Spanish hoteliers consistently argue that holiday rentals without regulations and tax breaks like a VAT-exemption present unfair competition for hotels.
The report quantifies the price advantage that holiday rentals enjoy over hotels. Holidaymakers spend an average of 22 euro/bed/day in tourist rentals, and 31 euro/bed/day in 3-star hotels. The average daily spend in short-term rental homes is 80 euro/day compared to 149 euro/day in hotels.
Another source of unfair advantage, says the report, is that many holiday rentals are offered in the cash economy via P2P platforms like Airbnb (see chart below for P2P market share by operator), without respecting any regulations, and evading taxes, depriving the Spanish state of as much as €800 million a year.
EXCELTUR say the holiday rental business needs a regulatory framework that is “clear, specific, concrete, and proportional,” and make some sensible recommendations like a national legal framework to reduce the current patchwork of regional laws that confuse landlords and tourists alike. Other recommendations, like charging VAT on holiday rentals, and standardising licenses, and health and safety regulations, would also reduce the supply of private homes offered for rent to tourists, or ensure that many landlords continue to operate illegally.