Galveston's short-term rental operators reflect on turbulent year

Kimberly Danesi
ROBERT MIHOVIL

The Daily News
By B. SCOTT McLENDON, The Daily News

GALVESTON

After a turbulent year in the island’s short-term rental market, marked by a 400 percent registration fee hike, a new tracking software and complaint call center, rental operators are optimistic about a better 2024.

On Jan. 1 2023, Galveston short-term rental owners were due to begin paying an annual $250 registration fee, up from a one-time $50 fee. The increase was meant to help pay for a $1.3 million rental-tracking and data-collection software purchased by the Park Board of Trustees and rolled out on June 30.

The park board, which manages some aspects of island tourism, on July 12 rolled out a corresponding call center for neighbors to enter complaints about short-term rental guests, who some islanders say often throw loud gatherings and leave all manner of trash in the homes they rent.

“I’m happy to see new steps being taken toward enforcement and encouragement of responsible short-term rental ownership and operation,” said Ana Draa, president of the Short Term Rental Owners Association of Galveston. “I think it’s great that the park board can now identify those who previously were able to be off the radar and not pay registration or hotel occupancy tax.”

The island has experienced a notable growth in the short-term rental market over the past four years, park board CEO Kimberly Danesi said.

“They now make-up 53 percent of the hotel occupancy tax collection, compared to 29 percent in 2019,” she said. “Thanks to investments by city council and park board trustees, we have been able to identify unregistered properties and collect data to help inform the growth that we are seeing.”

FEES AND SOFTWARE

Some short-term rental owners initially questioned where all the money from the fee hike would go, and some say they still don’t have a clear answer.

The park board July 7 delivered to the city about $695,000 in collected fees, which represented $158 of the $250 from each rental owner. The park board keeps $92 from each fee to maintain and monitor the software, according to the park board. City officials have said that money will go toward code enforcement of short-term rentals.

The software, which cost $1.3 million, scrapes data from hundreds of different rental sites every day. It identifies short-term rental properties, registered and not registered, and totals up all advertising activity. The park board has a five-year agreement with Deckard Technologies. The agreement calls for $275,000 in the first year and $265,000 for the next four.

When the software — Deckart Technologies’ “Rentalscape” — went online in June, it noted as many as 800 short-term rentals on any given day operating without valid registration, according to the park board. About 4,400 rentals out of the 5,200 listings the software identified were registered in July.

On Friday, about 4,944 properties had been registered with the park board, said park board spokeswoman Caitlin Carnes.

The park board has sent out 567 notices this year to non-compliant rental owners, Carnes said.

Draa thinks Galvestonians and rental operators have to manage expectations regarding what the software can achieve, saying 100-percent compliance isn’t likely, she said.

What Draa and other rental operators are hoping the software can do is confirm whether there's any truth to the notion that short-term rentals burden law enforcement. 

“Until we start looking at the data, any discussion on whether we are a bigger drain is just hearsay,” Draa said.

MARKET SATURATION

Some short-term rental owners think the Galveston rental market also reached a point of saturation this year, amid all the regulation and oversight changes.

“You’ve got some people who came in during the last few years, when travel patterns were changing,” Draa said. “And we’re seeing people come into the market and wash out. I think there’s this misconception that a short-term rental is passive income. But I’d argue it’s not. You’re constantly working.”

Draa thinks there’s still room for improvement in 2024, she said.

“I hope in 2024, that we see the city follow through with the audits, assessing fines and enforcement,” Draa said. “And I really hope with this expensive software that we all paid for and support, that the city is up to the task of enforcement.”

Short-term rentals were an important part of Galveston’s ability to rebound during the COVID-19 pandemic and have added a mix of options to the island’s range of accommodations of hotels, Danesi said.

“We appreciate the work our STR partners are doing to help find ways to manage the growth of this industry,” Danesi said. “We will continue to do our part to keep residents front of mind through finding ways to improve and engage in responsible tourism practices.”

B. Scott McLendon: 409-683-5241; scott.mclendon@galvnews.com