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Short-term Vacation Rental Hosts: Lodging Tax Expert Oliver Hoare Has Something to Say [INTERVIEW]

Short-term Vacation Rental Hosts: Lodging Tax Expert Oliver Hoare Has Something to Say [INTERVIEW]

If you have ever booked a stay with Airbnb, Vrbo or a luxury rental platform like The Nightfall Group, as guest, you book, pay and stay. Your rental includes a lodging tax as part of your booking and you probably don’t give a second thought to where those taxes end up. Short-term rental (STR) hosts are required to pay lodging fees, just like hotels, however with the explosion in growth of STR’s, many hosts are unaware of exactly what they owe and to whom. To learn more about how this all works, I reached out to hospitality industry and lodging expert, Oliver Hoare, with Avalara, Inc. to get some answers. He accepted my invitation for an interview and really took the time to explain the tax implications for hosts and property managers. Most importantly, he was able to offer a simple solution for hosts that keeps them in compliance, no matter what market they are in, or if they have multiple properties in different locations. Brilliant!

In May 2022 Avalara, Inc., a leading provider of cloud-based tax compliance automation for businesses of all sizes, announced the launch of Avalara MyLodgeTax Pro, a SaaS solution that helps managers of multiple short-term rental properties increase efficiency and ensure compliance through automation.

Who is Oliver Hoare?

Oliver Hoare Headshot

Oliver Hoare, Avalara 

With over twenty years of experience in the hospitality industry, lodging expert Oliver Hoare joined Avalara in 2021, as General Manager of Lodging, after previously serving as a senior executive at Expedia for the last decade. At Expedia, Oliver and his team grew bookings to over $1billion a year, and his experience in the Expedia Partner Solutions division working with air and travel sites that supply power to other travel sites via APIs gives him a unique, holistic understanding of the travel industry. Oliver has a wide range of expertise in the hospitality and lodging space, including stints at one of the largest global hotel chains, Accor, followed by British Airways.

What is a lodging tax? 

Lodging tax, also known as occupancy tax is the core tax specific to hotel and vacation rentals that are typically 30 days or less.   

What are the tax implications for a host, renting out their property if they do not utilize a service, like Avalara MyLodgeTax?  

The 900lb gorilla in the room for hotels or short-term rentals (STRs) is tax compliance. It’s complex but vital to be compliant. STRs are a popular and exciting business, but tax-wise it’s onerous to understand how much, how often and how to pay state and local tax authorities. If a host chooses to not utilize a service such as Avalara MyLodgeTax, that means they are fully responsible for submitting their license and permit renewals on time, as well as calculating, reporting and remitting their lodging taxes to the appropriate jurisdictions. 

In many cities, significant fines are levied if a host does not properly comply with short term rental regulations, including tax, licenses, and permits. Aside from fines, non-compliance is also punished by the withdrawal of the lodging license and registration by the jurisdiction. Also, lodging tax can be complicated and tedious to handle manually; therefore, using software such as MyLodgeTax reduces the risk of error in compliance. 

Donella Mansion

Donella Mansion courtesy of The Nightfall Group

 

How does MyLodgeTax work? 

MyLodgeTax is a software that provides a range of automation tools for hosts, including:  

  • Automates lodging tax returns based on your monthly transaction data and prepares, files, and remits lodging tax based on jurisdiction deadlines — for one location or thousands.
  • Identifies multiple state and local tax agencies where hosts need to register their property.
  • Applies, maintains, and annually renews each lodging tax license and permit on the host’s behalf for the life of the account. 
  • Allows for quick and simple input of revenue and consolidates all revenue information in one place.
  • Improve accuracy and reduce the risk of overpaying or underpaying by monitoring new tax rules and rates for the city, county, and state jurisdictions. As well as determining the portion of lodging tax responsibility between host and vacation rental marketplaces. 

When should a host consider using MyLodgeTax? What if they are only renting one property a few times a year? 

Avalara has many single-property hosts using MyLodgeTax, primarily because tax compliance is time-intensive and complex, and takes time away from business-building activities, or in some cases, focusing on other business or personal pursuits. There are numerous steps involved in lodging tax compliance. Hosts or property managers that decide to handle tax compliance manually must: 

1. Understand what lodging tax is. 

 2. Identify which lodging jurisdictions apply to their rental. 

 3. Determine which lodging taxes they’re required to collect. 

 4. Register with applicable tax jurisdictions. 

 5. Distinguish which charges are taxable. 

 6. Know which taxes online rental platforms are collecting for you. 

 7. Collect lodging tax from guests. 

 8. Make sure the right tax rates are being charged. 

 9. File lodging tax returns on time.   

Don’t the short term rental marketplaces and platforms take care of lodging tax? What do they typically cover and what is host responsible for? 

It’s complicated. While an increasing number of states now require lodging marketplaces to collect and remit state tax, in many jurisdictions hosts are still responsible for collecting and remitting local lodging taxes. This is another reason that hosts choose to use an automated solution like MyLodgeTax. 

How is the end user (guest) impacted by short term lodging tax? 

Guests simply pay the lodging tax as part of the charges related to their overall stay. It’s the host or property manager that need to ensure compliance after that.  

How has the short-term rental market disrupted hotel bookings? 

The STR market used to be referred to as “alternative accommodation.” Over the course of the pandemic, STRs have been core to people getting away from home and feeling safe. While hotels have done an enormous amount to make people feel comfortable, the STR marketplaces like Airbnb, Vrbo, and others have taken around 5% of the market share. While this might sound small it represents billions of dollars shifting away from hotels to STRs. You only have to see the revenue growth of Airbnb since it went public to understand the growth in this channel. Additionally, because much of the workforce is now allowed to be more transient, the STR space is seeing a large chunk of its bookings for longer lengths of stay. Around 25% of STR bookings are for 25+ days, which would have historically been unheard of.   

What do you see as the next big thing in the short-term vacation rental space? 

There are several big things happening in the STR space. A few of the most notable are:  

1. Mass adoption 

Over the course of the pandemic it’s been interesting to see STRs unlock large chunks of the market. This can be geographical (rural and beach locations are in highest demand over city centers). This can be demographic (The 50+ generation are one of the fastest growing set of new customers of STR marketplaces). STRs are growing and becoming mainstream across all demographics and geographical locations, but it’s been interesting to see how the STR space has proliferated.   

2. Consistent professionalism.

Gone are the days of Bob and Margaret leaving the key under the mat. STR hosts and property managers can offer contactless check-in, in a clean and safe property that’s more professional than what many would have expected 3-5 years ago. And one of the reasons I point out above that the 50+ demographic is now one of the fastest growing channels for new customers is reliable comfort at a consistent and professional level of service.     

The Alpine Villa

The Alpine Villa courtesy of The Nightfall Group

What enticed you to move to Avalara after years working with vacation booking giant Expedia and your time spent with Accor? 

Several reasons. First, I cannot advocate enough the value of working for brands like Expedia and Accor. I had a hugely rewarding time at both companies and learned a lot from many amazing people. Second, working for a large travel powerhouse through a pandemic took its toll. Stress, workload and seeing so many people ceasing to work causes you to be more reflective. So, it was actually a fairly obvious move. At Expedia I enjoyed working for a tech company that grew from a big player to a global powerhouse. It was this growth in the space that I most enjoyed,  and it’s where I see Avalara now. It’s a pretty large publicly traded company, but Avalara’s opportunity to be part of every transaction in the world underscores the potential. Last, I’ve gone from working for a large online travel agency to most of them being Avalara customers, so I’m still very much in the lodging sphere.    

Are you a short term vacation rental host? A guest?

To be 100% honest I was historically always a hotel guest. However, I have stayed in more STRs over the pandemic than the 10 years before  When we talk about the changes in the market and how STRs are becoming the norm, alongside hotels, I’m probably a typical example of the shift we’ve seen. For a short business trip alone, I would still lean heavily towards a hotel but for a 3+ night stay with family or friends, I would spend as much time looking at a home as I would for a hotel.  

Oliver, thank you so much for this making the time for this interview and for being so candid. It was a pleasure!

To learn more visit avalara.com/mylodgetax

MyLodgeTax Pro is designed specifically for professional property managers with 5–40,000 properties, who must navigate complex regulations to help mitigate compliance risk for their clients. As online marketplaces assume more responsibility for the remittance of certain taxes, MyLodgeTax Pro helps account for these agreements, reducing the risk of overpayment (or underpayment) of lodging taxes.

The Alpine Villa

The Alpine Villa courtesy of The Nightfall Group

Feature photo Donella Mansion courtesy of The Nightfall Group


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About The Author

Sherrie Wilkolaski

Sherrie Wilkolaski is the Editor-in-Chief of Luxe Beat Magazine and CEO of Luxe Beat Media. She's a luxury lifestyle journalist, bestselling author, speaker, radio talk show host, content strategist and Publishing Architect™. France is her favorite country to visit, her most memorable travel experience was walking the Great Wall of China and she is looking forward to making her inaugural visit to Ireland soon! Her column Cookies & Cocktails is Luxe Beat's most popular. She’s a former International Food Wine and Travel Writers Association board member and treasurer. Her most recent book, Publishing Architect’s Blueprint: Self-Publishing Fundamentals is a 2017 Indie Book Awards Finalist. She's currently studying for her first Sommelier exam. She is a member of the Society of Professional Journalists.

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