A cursory glance at a new market whereby owners can supplement their income with one of the most popular short-term rental websites (Airbnb.com), is showing more than 300 places in the Cayman Islands that can be rented by a couple in December of this year, ranging in price from little more than $100 a night all the way up to thousands per night. Such properties are bunched in the Seven Mile Beach location as one might expect as it is the most popular location for visitors to our shores, but some are located in other areas around Grand Cayman, including South Sound, Bodden Town, and Cayman Kai.
Such rental sites are clearly becoming increasingly popular with homeowners in the Cayman Islands, with owners recognising that the Cayman market is highly desirable for people all over the world looking to rent a room, a cottage, condo or an entire house. This newly developing segment of the real estate market has been very good for Cayman, as well as property owners: it gives people different accommodation choices when visiting which means new visitors to our island; it increases revenues for Government as these visitors have to pay an occupancy tax; and it has benefitted those in the hospitality and retail industries, with the increasing numbers of visitors to our restaurants, bars, shops, and tourist attractions. Indeed, our August arrivals figures for stayover visitors are up almost ten percent in August last year. It seems that each month we break new records for stayover visitor arrivals.
The advent of Airbnb, etc. has been great for homeowners because the income derived from renting out their properties short term has assisted them in offsetting costs, helped pay for renovations and helped pay for bigger properties with separate annexes that can accommodate short term guests and services debt or getting a return, no one wants to say no to extra cash. Most owners are diligent in the upkeep of their short-term rental offering because of the rating systems that such websites offer which means checks and balances are in place and decent controls are there, which is very important because the customer has high expectations when it comes to this jurisdiction.
While all the above is all well and good, I would urge caution if someone is contemplating basing the rental returns investment purely on this, renting out their property in this way, especially if they believe that the growth in this field will continue indefinitely. I believe that room rates will begin to soften somewhat because of various factors, including as the number of rooms/accommodations of this type continue to increase, the possibility of a US recession and issues with global economies, in general, would have an impact as we move down the road within the next few years. Lastly, the other island within the Caribbean is also increasing their inventory which only creates more competition.
My cautioning concern is that property owners are banking on this ongoing revenue from the short-term rentals. Are they overstretching themselves by purchasing larger and more expensive properties based on this? If this line of income should drop-down or prices soften due to economic pressures as outlined, or as so many new properties are getting on the bandwagon. I would hate to see foreclosures happen as a result. I would urge caution when it comes to prospective revenues from such ventures and buyers should take a slightly conservative approach.
Owners should see this type of supplemental income from short term rental as the cherry on top of the cake rather than bread and water.
My suggestion would be to take a slightly more conservative approach and see this purely as supplemental income versus a return on investment.
Note: I would love to hear from you if there are any points of interest as they relate to Cayman’s real estate industry that you would like me to discuss in future articles, or if there are any questions you would like me to answer. Email: James.Bovell@bovell.ky