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Harnessing the Economic Power of Short-Term Rentals for Growth in 2021

Sponsored Content from Granicus


Adaptation, change, and flexibility. Any good planner knows the value of being nimble and ready to adjust, but during 2020 the ability to shift, and shift quickly, was put to the test. Despite efforts encouraging less travel during the COVID-19 pandemic, and in many ways because of them, there have been significant changes to the travel and lodging industries impacting the short-term rental market that require attention from city planners. These changes may have come as a result of sudden change, but planners should expect these changes to remain for the foreseeable future.

Travel distances are shrinking but, despite restrictions, travel is still occurring as cooped-up adventure seekers engage in tourism closer to home and driving to places that aren’t traditional tourist destinations. To meet the demands on these non-traditional locations, short-term rentals (STRs) have shown to be a more resilient option than hotels or other traditional lodgings. 

STRs Growth During COVID

STRs were hardly impacted by COVID, with both the CDC and the general public viewing them as a safer alternative to hotels. And with many metropolitan areas dealing with closures of many otherwise attractive tourist destinations, vacationers have opted to stay closer to home opting for the more-intimate setting of an STR.

The economic impact of the pandemic also created a situation that sparked an increase in STRs where people needing affordable rentals (either for housing or tourism) found homeowners seeking additional income streams.

All this has occurred despite emergency bans placed by cities and counties that have ultimately proven unsuccessful in reducing STR activity.

Whether because of COVID concerns or in spite of them, the growth of the short-term rental market was rapid in 2020 and it looks like that trend will continue in 2021. Airbnb’s IPO is proof that this is not a fad, as their valuation came in higher than the current valuations of Hilton, Marriott, and Hyatt combined. 

How Communities Can Benefit … Safely

The evolution of the STR landscape is continuing and planners need to prepare a plan that allows their communities to safely accommodate visitors and reap the rewards of this growth. 

One early, or even immediate, step planners can take to start addressing their community’s STR market is understanding the level of current STR activity in their community, particularly if there are restrictions or ordinances in place, and consider any adaptation that might be needed. For example, when the City of Henderson, Nev., discovered there were still hundreds of STRs active in their community despite local bans, they decided to progress their STR program, changing from banning STRs to working with the market through communication and effective ordinance and compliance measures.

Once planners have a better understanding of their STR climate, these are the next steps to take for achieving a similar positive growth in conjunction with regulation compliance:

  • Where are short-term rentals being housed? 
  • If a new or updated ordinance is put in place, how will compliance be checked and maintained? 
  • Will neighbors be willing to report unsafe rentals? How will they do so without burdening code enforcement?
  • What are the consequences of non-compliance? Will STR hosts have an opportunity to make corrections? Are these consequences a real deterrent?

Any new bans or regulation changes will only have their desired impact with an effective way to monitor and quickly act on STR violations in your community.

As vaccines are distributed and the COVID pandemic wanes, communities that have benefited from the previous tourism shifts can still capitalize on these new changed behaviors. Even if a community is not a traditional vacation spot, many may find that the “close-by” tourism phenomenon that developed during the pandemic remains. And while the country may eventually put the pandemic behind it, the economic recovery and need for more income will continue to drive the popularity of STRs.

Without proactive enforcement of local regulations, however, this growth will continue to be both difficult to properly monitor and become more difficult to bring into compliance further down the road.

City or county officials may feel that because they have a large number of STRs registered with the local jurisdiction, that they have a full understanding, and effective enforcement of the market. But officials may be missing STR owners who are unaware that they are subject to local or state regulations, if not actively looking to avoid it.

Unfortunately, compliance with short-term rental regulations without the benefit of direct education as the responsibility for compliance is still extremely low in many communities, often as low as 10%. Identifying those STRs that are out of compliance, either willfully or out of ignorance, can be a daunting, time-consuming task for any department.

What’s at Stake for Communities

Because STRs help meet a need for diverse income streams both now and in the future, communities have a tremendous amount of tax, permit, and license revenue at stake through proper compliance programs. As more people rent and the STR market continues to grow in communities, it is crucial to have a framework in place to capture that revenue.

In doing so, communities can have positive impacts that extend beyond tourism. STR revenue can enable financially-strained homeowners to generate income in a safe and productive way that can, in the long run, prevent affordable housing impacts. Communities such as Nashville and Denver have already seen millions of dollars from STR programs provide realistic offsets to budget shortfalls.

With a successful compliance program in place, STR revenue can be allocated for affordable housing, community improvement, pandemic aid, tourism initiatives, or other related programs, creating significant, long-term change.

Taking Action in 2021 

If you’ve not yet investigated your local STR market, now is the time to do so.

If your community doesn’t have an STR-related ordinance in place, create one. And if one is currently being enforced, the evolving market demands constant examination to make sure that any ordinance is relevant to the changes in the community and market.

In the end, however, ordinances aren’t enough. No matter where your community is in its relationship to STR compliance, there is no time like the present to adopt the tools, policies, and mindset that will allow you to enforce your ordinance in the current climate. The more steps communities take today to maintain strong, fair, and equitable STR policies, the better, and more lucrative, the market will prove for both local residents and community revenue.

If you’re ready to take the next steps with your short-term rental program, contact Granicus’ Host Compliance today for a complimentary assessment of the short-term rental market of your community. Learn more here.


About the Content Author and Sponsor: Granicus

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Granicus provides citizen engagement technologies and services for the public sector, bringing governments closer to the people they serve. Over 350 agencies trust our Host Compliance software to identify short-term vacation rentals across 60+ rental platforms, educate hosts, enforce regulations, recover much-needed revenue, and preserve community character.


January 29, 2021