Private rentals rile hotels

Auckland apartment owners are cashing in on short-term rentals, undercutting hotel prices but earning hundreds of dollars a week, say hoteliers.

The booming number of investment apartments in the city has seen a growth in overnight rentals, with hotels and motels in the city crying foul as private owners offer their rooms in internet deals that are difficult to monitor.

Hotel and motel owners spoken to by the Herald on Sunday say property owners are duping the council by claiming their apartments are for private use, thereby dodging costly business rates.

This means they are only paying annual residential rates of around $800, rather than the steeper business levy of more than $2000. It also allows the apartment owners to avoid expensive set-up costs such as wheelchair access or fire prevention, which is required of hotels and motels who offer public accommodation. Residential rates should only apply to properties where the owner lives full-time or where it is let to a long-term tenant.

Greg Remmington, general manager of Auckland's Spencer on Byron Hotel, says the private overnight stays are a huge issue for the local hotel industry as the apartment owners have an unfair advantage in the fight for the tourist dollar.

"If another hotel comes on the market then that's well and good. They've had to comply with all the same regulations as us, so it's a level playing field. But when someone tags a load of residential apartments together as rental accommodation on a website, and can undercut hotel room rates because they have a third of our set up costs, well that's most definitely not."

Remmington says this practice is affecting the hotel and motel business throughout Auckland and councils need to introduce tougher regulations to bring offending apartment owners into line.

"Go to some of these websites and click on accommodation and you're swamped by these places."

The overnight apartment rentals are only likely to increase too, in the build-up to the IRB Rugby World Cup in New Zealand in 2011.

Already plans are being made to house tourists on cruise ships and in provincial centres, as it is predicted that hotels in Auckland will struggle to cope with the influx of visitors. But apartment owners who opt to rent their rooms out for a premium could make a tidy profit over the course of the two month event.

Overnight stays in city apartments currently start at around $180 for a one bedroom, comfortably furnished flat. There are discounts for longer stays. But in peak season these rates can double or even triple.

Hyatt Regency Hotel's management in the central city is also aware of the residential apartments being offered on the short-term rental market.

Communications manager Sarah Kellow says this is not only unfair to those in the industry, it's also potentially bad for Auckland, which needs quality service and facilities from all operators as a growing tourism destination.

"Yet these apartments are not being checked or held to the same rigorous standards that the rest of the industry must comply with," explains Kellow.

Boutique operator, Mollies Hotel in Herne Bay, says council needs to have better processes to identify offending apartment owners who avoid the high compliance costs it had to pay to start in business.

Manager Joanna Bourke says it is too easy for residential apartment owners to offer overnight stays.

"They can advertise on the internet, get their bookings that way and be paid that way. Council should not take people's word that these apartments are residential, they should check up on it."

The hoteliers' concerns are backed by the NZ Hotel Council. Spokesman Paul Archer says it is a growing issue for Auckland, which will probably worsen following the apartment building boom.

"For us it would be nice if council could identify the people who are doing this, and ping them accordingly."

Archer says the hotel council does not want to stop fair competition and believes apartments can be used as a nightly rental if owners are paying their way like any other legitimate business.

"But it's too easy to set these places up for rent right now using internet ads. And their advantage is huge when they don't have to pay higher rates or comply with legislation. We need this area tightened up."

Howard Morley, Real Estate Institute of New Zealand president, believes it will be too difficult for Auckland councils to effectively police all apartments to try and catch the offenders.

But Morley hopes local authorities do not try to copy a controversial and unsuccessful attempt in Queenstown to crack down on holiday home owners by using the Resource Management Act against those wanting to informally rent their holiday homes out.

"All of a sudden they might need smoke alarms or wheelchair access on their residential properties. I would be very concerned if that type of regulation was investigated here."

Auckland City Council says it is aware that this is a growing problem for the tourist accommodation industry. A spokesman says it does monitor residential apartment sites it suspects should be paying business rates.

The spokesman says there is a big difference between the two rates, with one residential apartment in the central city paying $840 annually, while another similarly sized and in the same building pays the business rate of $2127 because it is available for nightly rental.

Auckland City checks annually with building managers for units being let as short-term rentals, and any found are then rated as non-residential.

"From time to time, more sites come to our attention and these are then added to our list of sites to be monitored," the spokesman says.

Legislation prevents council from backcharging rates for those who flout the rules, but it may bill for the existing year if it discovers discrepancies.