EDITORIAL – Getting government out of the ‘bedroom business’

New businesses are not unlike baby turtles journeying from the nest on the beach to the safety of the open sea: They are extremely vulnerable in their infancy.

In regard to turtle hatchlings, Cayman Islands environmental officials are continually pushing proactive protective measures to maximize the reptiles’ chance of reaching the ocean and, eventually, maturity. (For example, “turtle-friendly” lighting, mapping and monitoring of nesting sites, etc.)

But when it comes to nascent entrepreneurial efforts – and here we are speaking specifically about “peer-to-peer rental services” such as Airbnb properties – our government’s actions seem, not to nurture, but to impede.

Before hosting a single paid guest, property owners who wish to take in visitors must undergo a licensing process involving three separate inspections from three separate entities (Department of Environmental Health, Cayman Islands Fire Service and Department of Tourism) – that can take up to 90 days. They must repeat the process every year, paying government $250 for an experience that is anything but pleasurable. The penalty for noncompliance is a fine of $100 per guest, per day.

On top of that, licensed proprietors must pay 13 percent of their revenue to government each month! Ironically, while the “business” side of the business is almost wholly conducted online, that 13 percent tax must be remitted to government by mail or in person. (It’s like making a car payment by Pony Express.)

Similarly, officials recently handicapped an “Uber-like” ride-share service that would have introduced competition into the local taxi industry. This looks far more like protectionism than market-based capitalism.

Both of those lines of businesses are part of the so-called “sharing economy,” where online technology connects people who need something (e.g., a car ride, or a place to stay) with people who have something (e.g., a car or a house). Such ventures help satisfy demand in the marketplace, but, equally importantly, provide outlets for entrepreneurship and avenues to improve an individual’s earning potential.

Focusing on short-term rentals, allowing people in Cayman to use their homes as “bed-and-breakfasts” has the potential to boost immediately the number of units in our country’s “room inventory,” with a disproportionately positive impact in areas outside the main Seven Mile Beach corridor … for example, West Bay, Bodden Town, East End, North Side and, perhaps most of all, the Sister Islands.

The Airbnb concept appears tailor-made for Cayman Brac, which seems trapped in hospitality purgatory, with scant space at the island’s few resorts, but overall demand not large enough to support new large hotel projects. (Exhibit A: The now-vacant Alexander Hotel.) Adding “one room at a time” to the Brac seems a viable and sensible strategy.

In general, peer-to-peer rental services attract “mid-range” tourists to Cayman (as opposed to “high-end” guests at The Ritz-Carlton or Kimpton, or “day visitors” hopping on and off cruise ships). Additionally, Airbnb-type properties can potentially provide visitors with close (and desirable) encounters with “real Caymanians.”

Largely without government’s intervention or “assistance,” many local homeowners are already monetizing their largest assets. Last year, the owners of Cayman’s 470 Airbnb properties earned a combined $3.8 million. We applaud them.

Instead of encouraging this burgeoning industry in every way possible, government has imposed a heavy-handed regulatory burden, as well as helped itself to a confiscatory 13 percent of their relatively meager revenue.

If this government is, as it claims to be, “of and for the people,” it needs to re-examine what its regulatory policies are doing to the very people it purports to represent.

28 COMMENTS

  1. Getting the government out the bedroom business , you will have return Cayman Islands back to 1960’s But i hope that everyone see how much the government loves and cares about your future , and opportunities in the Islands today .
    Even to the very opportunity that you could make some extra income to help the people get ahead in life , and the government has to take 13% out of it .
    I agree with control of rental properties that standards of the property is very important , but do we see what government will be taking away from you with your little rental property ?
    I believe that it would be 13% of every dollar, and you will have to pay licensing fee , and associations fee , and inspection fee and at the end of the day you will be loosing about 25-30% of your net income, then if you only own one property you might end up with enough money to pay the electric bill .
    The government won’t care because they love you if you’re made of money .

    • I forgot to mention that the property owner have to pay Airbnb out of the net income, and your labor that one would involve to be hospitable to your guest , so that won’t leave enough to pay your electric bill , meaning that you will have to go in your retirement funds to keep your lights on .
      So I have to say that you people who are renting your property to supplement your income , is going to have figure out how to handle the government to keep them out of the bedroom .
      Someone needs to get with Airbnb and get the list of all property owners in Cayman, and come together. If you don’t understand what I am saying , you will have to suffer with what government gives you .

        • Most excellent suggestions, Ms. Furniss.

          And for further information, here’s the actual 23-minute press conference that Hon. Moses Kirkconnell held on 21-Mar-2018 with the AirBnB Policy Associate explaining the background, the programme, the reasons for this partnership and the signing of the Memorandum of Understanding.

          It’s posted on CIGTV’s YouTube channel under the playlist “Press Conference”.
          https://youtu.be/yQFC0IeAZeQ

          • In the global business dictionary the definition of hotel is “A commercial establishment providing lodging, meals, and other guest services.
            In general, to be called a hotel, an establishment must have a minimum of six letting bedrooms, at least three of which must have attached (ensuite) private bathroom facilities. Although hotels are classified into ‘Star’ categories (1-Star to 5-Star), there is no standard method of assigning these ratings, and compliance with customary requirements is voluntary. A US hotel with a certain rating, for example, is may look very different from a European or Asian hotel with the same rating, and would provide a different level of amenities, range of facilities, and quality of service.”

            So therefore airbnb should not be governed by the hotel regulations in the Cayman Islands

  2. The problem is that Airbnb would then be treated differently then the many other sites that direct tourists to island rentals. It would also give them an advantage over hotels. Additionally, they would not be subject to the same standards as the others. I use Airbnb, Homeaway, VRBO and Flipkey to market my home. It is fully licensed and inspected every year. I recently had a last minute rental from someone that got to their Airbnb rental and found it “disgusting” in their words. While I was happy to have the rental I also was concerned that the guests would have a bad impression of Cayman. Fortunately they loved the place and have booked a return visit. If Airbnb would be given a tax free status I would direct all my rentals to book through them and totally avoid the 13% tax.

  3. This is going too far! Airbnb started as two young men needing extra cash offered an air mattress in their living area to tourists passing through in San Francisco. The basis of airbnb is genuine people opening their home and their life to travelers. But as usual, the Cayman Islands has to get onboard and suck out revenue which is not easily remitted upon Government’s demand and takes too much time!

    I can agree with the tourism tax of 13 percent for guest houses, owners who rent second properties, foreign investors and the hotels. This is their enterprise. But to impose a tax to a Caymanian who opens their only home – not a rental property – shares what they have, and shows the visitors a Caymankind vacation, it is despicable that Government would impose a tariff on what really is a true cottage industry.

    Does this also mean that if I am housing a family member such as a college age person and I ask them to contribute to room and board, that I must pay 13 percent of their cost of living to Government?

    I will not allow Government to regulate who comes into my home, and I will not pay one red cent of tax on visitors who I welcome and entertain in my home to supplement the government purse. As a matter of fact, I may submit and corporate expense sheet to government for rebate on tax for CUC and water fuel surcharges consumed by the visitors!

    Government should start collecting the stamp on residential and commercial leases to make up for large deficits in the budget and overspending before even considering taxing me!

      • Good point! I do know that there are several people who are of a like mind. On another note, tax concessions should not have been given for development of multimillion dollar condos and hotels.

        BTW as part of the tourism campaign, we should clean up the dump. Most of the rental accommodations along Seven Mile on the exterior stink from the dump this time of year! Every elected official campaigned on cleaning up the dump. The dump is operating the same as it has since it reached it capacitity in 2002. I was at the top of Mount Trashmore two weeks ago and it absolutely inhumare and disgusting! I propose that Government make a start by at least recycling and preparing a separate landfill specifically for vegetation.

    • Ms. Furniss , I very much agree with everything you have said . But like I said , if you want to be able to do anything with the issue and the government . You or someone have to bring all the Cayman members of Airbnb together and form an association . If not the government will walk all over everyone and charge you whatever.

      • Mr. Ebanks, I agree with your statement that there is power in the people, so I really don’t understand what all the commotion is about.

        If the commotion is about having to pay 13% out of the earnings received from renting out your bedroom, then make a petition which tells the government to withdraw it AND BY CONSTITUTIONAL LAW, government is MANDATORILY OBLIGATED to obey whatever the People-Initiated Referendum tells them to do upon majority votes.

        It’s not that difficult.

        At the March, 2018 press conference, AirBnB stated that there were 470 properties listed in the Cayman Islands.
        https://www.youtube.com/watch?v=yQFC0IeAZeQ&index=5&list=PLw4BrYufwdD3cQo9rUZ09XKkb7prYCtRO

        Section 70 People-Initiated Referendum of our Constitution gives us the permission to direct government what to do provided that FIRST 25% of the current registered voters sign a petition telling government what to do AND THEY MUST DO IT if the majority of voters agree.
        http://www.legislation.gov.uk/uksi/2009/1379/pdfs/uksi_20091379_en.pdf

        As of today, there are 21,150 registered voters in Cayman and if all you need is 25%, then that’s only 5,288 petition signatures you need to collect.
        https://portal.elections.ky/index.php/home/official-register

        So, Mr. Ebanks, if there are 470 AirBnB properties in the Cayman Islands, if 200 of you got together who feel like you don’t want to pay the 13% extra because $20 MILLION PER YEAR OR WHATEVER IS NOT BEING COLLECTED BY RENTAL STAMP DUTY ENFORCEMENT or for whatever reason you just don’t feel like you want to pay the 13%, then that would mean each of the 200 AirBnB property owners would only have to GET ABOUT 26 VOTERS EACH TO SIGN THE PETITION.

        So like I said, it escapes me why this is such an issue when there are obviously simple solutions to reversing this 13% obligation if that’s what the collective agree to.

        So let’s move on. Otherwise, I hope it works out for whoever is passionate enough about doing something constructive in getting the job done.

    • Ms. Furniss, you have a sound argument when you state that “Government should start collecting the stamp on residential and commercial leases to make up for large deficits in the budget and overspending before even considering taxing me!”

      I agree with this part of your argument because it appears to me like government is now trying to BALANCE THE BUDGET ON THE BACKS OF THE PEOPLE while wholesale omitting their duty to enforce Section 3(1) Charge of Duty, which to me is procedurally unfair.

      On Page 6, the Stamp Duty Law (2013 Revision) states that “There shall be charged for the revenue of the Islands stamp duties upon the instruments specified in the Schedule at the rates therein prescribed.”

      Further, on Page 21(c)(i), the Schedule, Rates of Duty, Lease or Agreement for a Lease of Immovable Property or any Interest Therein states that “where the consideration or any part of the consideration is RENT and the term is thirty years or less if the term does not exceed five years, a duty equal to 5% of the average annual rent” is imposed on landlords renting out their property in the Cayman Islands.
      http://www.gov.ky/portal/pls/portal/docs/1/11525789.PDF

      So, let’s just do some calculations on this matter regarding this current revenue stream of possibly $20 MILLION PER YEAR that the CIG is now not even enforcing, AND it is already a law so they are STATUTORILY OBLIGATED TO COLLECT.

      The latest published figures from the Economics and Statistics Office (ESO) on page 102 put the number of individuals on work permits at 23,298, which are, for the most part, transient workers that are here to go since they are not in the category of Caymanians or permanent residents of the Cayman Islands.
      https://www.eso.ky/2016compendiumofstatistics.html#2

      Of those 23,298 individuals, let’s conservatively estimate that 17,000 are renting apartments and have not purchased a home here in Cayman while they are here on a work permit.

      Mind you, there are much more individuals since we haven’t even included the rest of the 6,000 professionals who have higher earning capacity, nor have we included the thousands of locals and residents who are currently renting as well.

      But we are going to be very conservative so we’re just going to estimate 17,000 rentals for this exercise.

      This 17,000 figure represents the following work permits issued to individuals in the following industries:
      5,193 Activities of Households as Employers
      3,931 Accommodation and Food Service Activities
      3,041 Construction
      2,754 Wholesale and Retail Trade and Repair of Motor Vehicles and Motorcycles
      2,324 Administrative and Support Service Activities
      17,243 Individuals on Work Permits

      For the sake of this exercise, let’s go on to estimate that rent being paid is $800 per month, which is an annual rent of $9,600 making the 5% Stamp Duty owed to government $480 FOR THAT ONE WORK PERMIT HOLDER that is renting an apartment.

      Now remember, we are only conservatively including 17,000 individuals, which is $8.16 MILLION DOLLARS PER YEAR NOT BEING COLLECTED FOR THE GENERAL REVENUE TO RUN THIS COUNTRY.

      As a result of this lack of proper revenue collection, thousands of families in Cayman suffer on social services since social services does not have the budget to adequately assist those in need, and now the 470 property owners that rent out their bedrooms through AirBnB have to pay an extra 13% to make up the government’s budget deficit.

      As a matter of fact, I would even venture to think that the REAL figure of uncollected stamp duty is more than $20 MILLION DOLLARS PER YEAR.

      So, Ms. Furniss, THAT should have been your argument, not that you will not permit government to regulate to you which visitors you bring into your home and that you will not be paying government “one red cent”.

      Don’t waste your time griping to AirBnB or the Tourism Minister about how being charged this 13% is affecting you as a Caymanian.

      It surely doesn’t seem to matter to government, and there is absolutely nothing AirBnB can legally do to help you because in THIS jurisdiction, if you want to register and rent and be marketed through AirBnB, then AirBnB IS CONTRACTUALLY OBLIGATED TO NOTIFY TOURISM ever since they signed this Memorandum of Understanding a few months ago in March.

      And instead of complaining to AirBnB and the Tourism Minister, perhaps it would be more effective to contact the Finance Minister to confirm if the 2009 “loophole for tourists staying in non-hotel accommodations whereby the signing of a very short term lease avoids the payment of Tourism Tax” is still in effect, as the Lands & Survey Director previously noted he was aware of back then.

    • Everyone who pays taxes knows that revenues come with expenses and deductions to arrive to adjusted gross income. Further, many credits reduce tax due.

      Let $3.8 million figure not blind you. That is just one side of an equation.

      Don’t forget about business expenses of Airbnb(s) that include monetized personal time spent to run Airbnb, allocated house and vehicle depreciation, allocated interest on mortgage, home office, business use of personal computer, internet, mobile service, etc. and direct expenses from a laundry detergent to electricity, from water and advertisement to Airbnb franchise fees.

      So Airbnb owners DID NOT pocket $3.8 million as it might seem.

  4. Why should an American company get a free ride when Cayman Villas, a Caymanian owned company that rents out local properties has to comply with all taxes and regulations?

    The same applies to local condos that also comply with the same taxes and regulations.

    Certainly the requirements for 3 inspections every year is overkill. Put the power to inspect all privately rented homes in the hands of just one set of inspectors. And reduce the cost if it is just one room of a family home that is being rented rather than the whole property.

    You are right on the money with respect to competition for taxis. But a good start would be requiring meters in taxis that MUST be used. To avoid the occasional fare rip off.

    • Mr. Linton would you please explain “a free ride”?

      I agree with you the taxes, for accommodation and taxis, are excessive in comparison to the rest of the world.

      The financial industry in Cayman has failed. So the tourism industry is bearing the burden of the loss, unfairly.

      There is one piece of advice that I can offer to all Caymanians. Anyone will pay anything for excellent service, but no one wants to feel that they are paying excess. People recognize when they are being taken advantage of and being scammed. Everyone wants to feel good when they are spending money. But if they don’t feel good they will not return. I always offer quality and service to every visitor I meet anywhere I meet in Cayman, whether I pick him up a along the West Bay Road and give him a ride back to his condo from Fosters, or he asks me where to go for dinner. I do not look for anything in return from any visitor to the Cayman Islands.

  5. I just don’t understand why all of you are complaining about the new “home sharing” taxes and regulations.

    The reason those new taxes are now in place and all the regulations, government fees and government inspections of your properties have been enacted is totally YOUR OWN fault. You have no one other than yourselves to blame.

    After all, it is only “real” Caymanians who voted this bunch of scallywags into office. Life is choices.

    • Mr. Barnett, during the last election, I was at the voting station at George Town Primary School in George Town. I came across a woman who could not speak English and did not understand where she was supposed to go to vote. She did not know where the Town Hall was located in George Town. The majority of “real” Caymanians do not vote. Back in the early 1990’s there was an article published in the paper showing the voters. Only one quarter of the population at that time was registered to vote and the majority of the registered voters did not have a high school education. In those days most “real” Caymanians abstained from voting which is why we are in the mess we are today.

      • Lorrie. I may have been born in the UK.

        But the Cayman Islands has been my home for almost 40 years. I consider myself every bit as much a “real” Caymanian as anyone else.

        The ultimate test is this: In a war would you fight to defend your home or would you take the first plane out of harms way?
        I might be too old to enlist but you can be sure that I would stay to defend my HOME.

  6. So the Compass is still banging on about the issues with the ‘Uber style’ “ride sharing” service. It was anything but.

    A car sharing service might be you or me letting it be known that I am driving from West Bay to Bodden Town and would anyone like to share the ride and the expenses.

    The ‘service’ suggested (see Compass 4th April) that non professional drivers would offer rides for a fee. That is called, in most places, a Taxi! The point about the ‘non professional’ is that the drivers of the ‘taxi’ might have another job.

    It is the same with the AirBnB – this is not a case of offering a friend to stay, it is a business model where you offer a service for a fee. It matters not HOW the service is arranged – all this rubbish about ‘peer-to-peer’ is just baloney techno hype where the owners of the app used cream off a percentage.

    So, I want to rent out a room in my house or my entire house, then why is this any different to becoming a hotel or a lodging house? There needs to be some surety that the guest will be properly looked after, that the electrics are not shoddy etc. This needs some regulation.

    Then there are the other issues – let’s take pensions as this is an issue covered a couple of times in the Compass this week.

    With the so called ‘gig’ economy, who employs the driver of the Uber style car sharing service? Are peer to peer service providers free to offer their services where they like or will they be tied to their particular App? Are they paid a minimum wage and given holidays like any other ‘worker’? What about health insurance? Does this work contribute towards a pension (as it should) and who pays? Who checks if they have the proper insurances – taxi car insurance or public liability insurance?

    These are regulatory matters and while the Compass would like the Government to relocate to Little Cayman and keep out of the way of anything remotely entrepreneurial if they do, who picks up the tab when it all goes wrong? AirBnB, etc.? Yeah, right! Or perhaps the generous Compass will ride to the rescue?

  7. Two links that might be of interest in this debate –
    https://www.miamiherald.com/news/business/article214833115.html
    https://www.theguardian.com/technology/2018/jul/14/airbnb-misuse-private-landlord-safety-risk-mps

    For years absentee condo owners (and in the main that’s what we are talking about here – it’s not like Cuba’s Casa Particulares with the properties being owned by locals) have unofficially done vacation lets over here with no problems. I’ve even been a key holder for one owner. But Airbnb seem to have thrown a spanner into the works here. So what if their lets have supposedly bought $3.8 million into the economy? Odds are the old system of letting to friends and friends of friends earned at least that much and probably more without the hassles Airbnb have now created.

  8. I am thankful to see all of these responses to the 13% monthly tax and the $250 yearly fee. I am a 75-year-old retired person trying to supplement my income with Airbnb which involves my changing and washing sheets and towels, sweeping, dusting and, excuse me, cleaning toilets, and the government wants to take 13% of what I earn and are doing nothing? Our reviews are stellar and we love hosting. However, is the government going to take into consideration the gas and electricity (AC)? We provide complimentary pick up and drop off at the airport. Our guests love being met outside of the customs hall and experiencing Caymankind their first minutes on island and for the rest of their stay. We give a tour on the way to our home in West Bay and on the way back to the airport. Read our reviews. The government should be paying us 13%. Sincerely, Expat’s wife.

    • I was watching 7 Años (2016) on Netflix, and “Vero”, played by Colombian actress Juana Acosta had said:
      “We earn more, so we pay more (tax). Fine. But the time we put in, so as to earn more? Where does it appear? Where it is written off?”.
      So true.
      George Tustin in his comment has provided another example of what is really behind “earning more” and why Airbnb owners should be paying NO tax. If one to monetize their personal time spent on running their property as Airbnb ( an equivalent of a salary) and deduct all expenses, they might not even turn a profit.

  9. I ABSOLUTELY disagree with the Editorial Board’s assessment that government should get out of the “bedroom business”.

    Tourism Department has one job to do, and that’s to protect our enviable position as a first class tropical destination.

    They accomplish this by ensuring that operators adhere to minimum standards, health, safety and fire codes every year.

    But instead, the Editorial Board complains that prior to a property owner offering up their bedroom, the property is required pass various inspections to confirm that it remains suitable and fit for inclusion in Cayman’s accommodation inventory?

    I never thought the day would come in Cayman when objections are made for MAINTAINING A SAFE, CLEAN STANDARD, especially since tourism is the essence of one of Cayman’s top revenue streams that GOVERNMENT MUST VIGOROUSLY GUARD.

    The flip side of no property owner 13% contribution to offset the expenses for government oversight is rampant abuse, just like with other trades with insufficient regulations in place which are rife with unlawful abuses to tourists and the public in general, similar to what Mr. Geesey spoke of when his stayover tourists were thoroughly disgusted with the Cayman Airbnb accommodations they booked before coming to his place.

    Needless to say, I’m quite sure that incident will be followed up on by Tourism so that it is not repeated by the other property owner.

    I’d hate to imagine the free-for-all if any property owner was able to do whatever they wanted WITHOUT ADEQUATE TOURISM OVERSIGHT, similar to what we already experience when hearing daily complaints about incompetent Cayman drivers and rogue public bus drivers who KNOW that right now there aren’t enough enforcement officers to enforce the law, which then makes people more inclined to do whatever they want.

    Another case in point a few weeks ago is when local media published a story with pictures showing a public bus drver flagrantly ignoring safety and regulatory standards by doubly exceeding the maximum allowable passengers in a MAD DASH FOR CASH, when nearly each cruise ship passenger had another passenger sitting on their lap in order to get back to the cruise ship when they were all picked up from the Public Beach.

    Not only that, but it is normal practice when dealing with real estate that the property is signed off by the government department that regulates that trade. For instance, prior to getting your Certificate of Occupancy to certify that your property meets minimum safety standards and codes, government sends an electrical inspector to sign off that the correct wiring was installed correctly to code in order to minimise the likelihood that the property might burn down from faulty wiring.

    Government’s plumbing inspector won’t know the latest electrical codes or safety relating to proper wiring.

    And none of us don’t know what other corners were cut by some operators who are just into it for the money, so I’d rather know that EVERY property offered up in this programme is up to code, and that costs money to send these inspectors out and also to run regulate this programme.

    So I totally welcome the Department of Tourism’s responsibility in this matter as government strives to offer alternatives through private home rentals compared to top dollar tourism rentals as they maintain Cayman’s ranking a first class tropical diving destination.

    If 13% is what government is charging today, then that’s what will be paid until government removes that charge because that will only trigger the property owner becoming criminally afoul Penal Code (2018 Revision) Section 247A Intent to Defraud Government of its general revenue.

    And remember that government only has until next year November 2019 to pay off our $312 MILLION BULLET BOND.

    And the name that is bantered about as government’s serious go-to contender to pay off Cayman’s government bond appears more than happy to set the terms of what that government loan will be, just like what the vulture capitalist did when Argentina’s and Greece’s government officials failed to honour the terms of their government loan buyout, which crippled those respective governments when they didn’t pay up as contracted.

    Having said that, I also welcome the day where ALL OF OUR ELECTED GOVERNMENT OFFICIALS put their ego and pettiness aside to move forward with ALL IDEAS to do what is in the best interest of the country, instead of trying to balance the budget on the backs of the people.