The Evolution of the Vacation Rentals Market

AUTHOR: Nick Halverson

I have been renting my home out in San Buenaventura de Osa for over 11 years. The vacation rental market has undergone several radical changes during the past decade-plus. Now another round of changes is on its way. 

Initially, there was no regulation for vacation rentals, and most of the marketing was via word-of-mouth or a couple of small online rental platforms.   

Then came Vrbo, which was the first well-funded online vacation rental platform. Then Vrbo went through several significant changes with their platform, their payment processes and lost many customers.  

Next came Airbnb, and their marketing and aggressiveness propelled them to be the largest booking platform globally. They went public in 2020 and had a market capitalization of $90 billion (more than Hilton and Marriott International combined). Airbnb also owns several hotel booking platforms, such as Hotel Tonight.  

Marriott International has also entered the vacation rental business with their Homes and Villas by Marriott International program, targeting 150 million+ Bonvoy members. They work exclusively with property management companies, and individuals cannot list their properties. 

 What is interesting is that the vacation rental platforms have business in the hotel industry, and the titans of the hotel industry are now in the vacation rental platforms. In other words, no one is sure where the lodging industry will go, but the established companies are hedging their positions.  

My predictions: 

1. With the entry of Marriott into the vacation rental business and AirBnB’s $90 billion war chest, there will be increased competition, increased regulation, and increased complexities in managing properties. 
2. The large platforms (Airbnb, Vrbo, etc.) will increasingly share more homeowner data with Hacienda (tax authorities) to ensure they (Homeowners and the platform) are compliant with the tax authorities. 
3. Travel in the area will continue to increase for the foreseeable future. 

 There are already some regulations in place in Costa Rica, including: 

• All property management companies must have SUGEF verification, often overlooked by homeowners when choosing a property management company. It is a big mistake. It means that not only is the homeowner knowingly hiring an illegally operating company, but it also means that the federal government has not vetted the company to ensure proper banking and accounting processes are in place. 
• All vacation rentals must pay the 13% IVA tax.
• All vacation rentals must pay 12.75% lodging tax. 
• Monthly reporting to Hacienda must occur if a homeowner even has one rental per year.

At Osa Property Management, we are excited to be a part of an ever-changing industry. We are prepared for the future, given our existing infrastructure (offices, a trained team, SUGEF), local knowledge (staff born and raised here), and over a decade of experience.   Contact us to learn more.