Rate Changes for Short-Term Accommodation Providers in Auckland

Rate Changes for Short-Term Accommodation Providers in Auckland
Industry News
June 12, 2018

Recently, Auckland Council voted in favour of changing the rates for short-term accommodation providers utilising online platforms like Airbnb and Booking.com. These changes reflect the growing tourism industry in our largest city and the increasing demand for accommodation - particularly short-term. While these rates have been in place for a while now, they have only been applied to commercial providers such as hotels, motels and other serviced apartments. These latest changes work to include all short-term accommodation providers that meet the criteria as laid out by the council. This rate is referred to as the Accommodation Provider Targeted Rate (APTR).

What is the Accommodation Provider Targeted Rate?

The Accommodation Provider Targeted Rate was introduced to hotels and motels back in 2017 as a response to increasing tourism and need for accommodation. These rates were set in place so that commercial accommodation providers contribute to the Auckland Tourism, Events and Economic Development (ATEED) organisation. Because the commercial accommodation industry benefits from the work done by this group, Auckland Council believes they should contribute to the costs of operating their work.Auckland Council considers the changes an equity issue. This is because they believe that although hotels and Airbnb properties are offering the same service (short-term accommodation), only one of them is being charged under the current rates. The move to charge all accommodation providers is an attempt to level the playing field.

The Proposed Changes to the Accommodation Provider Targeted Rate

The proposed changes are set to include short-term rentals under the APTR. With Airbnb rentals representing over 10% of the market share in 2017, the council has realised that online platforms are now one of the most popular mediums of finding accommodation in Auckland.Properties will only be included in the APTR if online platforms are being used to rent out an apartment, an entire dwelling or a self-contained unit. People that are only renting out a single room in their household will not be affected.

Different Areas of Auckland Have Different Rates

Auckland Council has also stated that different areas within the Auckland region will be charged different rates. As expected, central suburbs are impacted the most, while outer districts won’t be charged. They have divided these areas into Zones A, B and C.Zone AZone BZone CHigher APTRLower APTRNo APTRAlbert-Eden, Devonport-Takapuna, Mangere-Otahuhu, Maungakiekie-Tamaki, Orakei and WaitemataHenderson-Massey, Hibiscus and Bays, Howick, Kaipatiki, Manurewa, Otara- Papatoetoe, Puketapapa, Upper Harbour, Waiheke and WhauFranklin, Great Barrier, Papakura, Rodney and Waitakere Ranges

Properties are Charged Based on How Regularly They’re Rented

Rates are also planned to be determined by occupancy and property value. This measure of contribution will be ranked by three categories: Residential, Mixed and Commercial, depending on the number of nights a property is rented out in a year. These factors will work together with the zoning to determine how much each accommodation provider will be charged under the new APTR.The APTR changes are set to come into effect from the 1st of July 2018. While there has been significant protest to the proposal, Auckland Council has remained steady on their approach to this issue.Residential(up to 28 nts)Mixed(29 - 135 nts)Business(more than 135 nts)ZoneAvg. Rates%Incr.Avg. Rates%Incr.Avg. Rates%Incr.A$3,5550%$6,03469%$13,563277%B$2,5350%$3,76748%$7,524195%C$1,8550%$2,40929%4,115119%Table Courtesy of Bookabach.co.nz

Why Are the Changes Happening?

As mentioned, Auckland Council is making these changes to the Accommodation Provider Targeted Rate due to the rise in property owners renting their dwellings out online. The plan states that because these platforms are benefiting from the work done by the council to promote Auckland as a tourism destination, they should be contributing to the costs - as other commercial short-term accommodation providers have been.The traditional accommodation industry has also played a role in introducing this change by Auckland Council. As online short-term rental providers have become more and more competitive with the hotel industry, traditional accommodation businesses have called for these rates to reflect it. As the APTR comes into effect, the rates will be shared across traditional accommodation providers and these online mediums.

Are the New Charges Fair?

With short-term rental becoming a preferred mode of accommodation for many tourists in New Zealand, there’s no doubt that it’s moving into the commercial sphere. Airbnb and similar platforms are now competing with large businesses, like hotels, for guests in Auckland. It makes sense to place these categories together when talking about tourism.However, Auckland Council has emphasised that these changes are being put in place in an attempt to achieve more fairness across their rates system. With a major reason for the update being due to industries benefiting from work done by the council to increase tourism, it doesn’t make sense to ignore other sectors that are also thriving. Commercial accommodation providers only receive approximately 10% of visitor spending. Other industries like retail, hospitality and transport are also benefiting from tourism. The ATPR disproportionately targets commercial accommodation providers.

Objections to the Accommodation Provider Targeted Rate

Many organisations operating in the commercial accommodation sector have claimed that these rates are extremely disappointing. Accommodation NZ insists that these charges are in fact legally questionable under the Fair Trading Act. Similarly, Bookabach.co.nz has stated in a press release, via Scoop, that: “The mum and dad investors who own, run and manage short-term rental accommodation properties across Auckland are the ones who will be impacted”.To summarise, if you’re currently operating in the short-term rental sector, this is what you need to know:

  • Auckland Council is proposing new rates for short-term rentals
  • These rates will depend on which part of Auckland your property is in
  • The rates will also depend on your property’s occupancy and value
  • These changes will be applied from July 2018 onwards

What the Accommodation Provider Targeted Rate Means for Airbnb Rentals

While the new rates are an added cost to Airbnb rentals and other short-term rental services, they’re still unlikely to have a detrimental impact. Due to the nature of Airbnb, the low-overheads will allow accommodation providers to keep their overall costs low and absorb this additional tax.The costs of running a hotel are very high in comparison to an Airbnb property. Factors such as free listing platforms, low maintenance concerns and high return-on-investment allow short-term rental owners to reduce their costs. This lets property owners continue to keep their rates lower than traditional accommodation providers.

Hotel Rates vs. Airbnb Rates in Auckland

Airbnb has become an extremely popular way of finding accommodation in Auckland for a number of reasons. Primarily, users are able to find cheaper, better-quality accommodation in ideal locations. At times, Airbnb listings are in the exact same building as hotel rooms. These listings offer access to the same amenities, extra features and more flexible dates, all at a cheaper rate.Citylife Hotel is one of the prominent hotels in Auckland that demonstrates these factors. Currently, in off-peak season, the Deluxe Suite in this hotel would cost you at least $254 per night. In contrast, listings on Airbnb for similar rooms are around $150 in the same building. As Airbnb properties are usually owned by individuals, the rooms are generally better-maintained, with much more appealing decor and finishings. With a price difference as stark as this, it’s obvious why guests are opting for the Airbnb over traditional approaches.

The Impact of the ATPR on Investment Revenue

Understandably, as the council moves to charge short-term rental providers for leasing out their properties, there is concern that it will negatively impact the revenue from operating a property. However, due to the massive price-gap between Airbnb listings and hotel rooms, this is unlikely to be the case.Hotels have a lot of expenses that impact their bottom-line - how much they charge for their rooms. In order to make a profit, traditional accommodation providers have relatively high nightly rates in comparison to short-term rentals. Even with the APTR, Airbnb hosts will be able to continue charging far less than hotels for their listings and remain competitive in the short-term accommodation industry.Short-term rentals are entering into the commercial property industry in 2018. The new changes to rates represent a switch in attitude towards these types of accommodation providers and how they are considered in the scheme of New Zealand’s economy. While the APTR will have an impact on Airbnb properties, the market is still strong and growing.As the Accommodation Provider Targeted Rate is mainly focused on central Auckland (this is where short-term rentals face the greatest cost), it’s important to consider how your property will be impacted. Just like hotels, the majority of Airbnb listings are based in the city centre. This means that they will be subjected to the maximum charge as set by the APTR. Many of those objecting to the rates change have advised owners of short-term rentals to contact the council directly. This will help make sure that you’re paying the correct amount and that there are no slip-ups as the change comes into effect.

Professional Airbnb Management Helps You Make the Most Out of Your Investment

Those wishing to make the most from their short-term rental should consider how they can best operate their listing to maximise their profits. All investors want to maximise their revenue from their investment and in the short-term rental industry, this means providing a great service with your Airbnb property.Reaching out to a professional Airbnb management company is a sure way to enable you to get the best from your investment. Property management, like ours, on a short-term rental can help you get the best price per night, with the greatest possible guest rating, to get the strongest return on your investment.Our team can help you with everything to do with short-term rentals. From establishing your listing to the day-to-day running of your property, our extensive services are the perfect option for those looking to explore what investing in Airbnb can offer them.Get in touch with Zodiak Management today to talk about what we can do for you.

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