Created by Robert Jordan for Host2Host 

Executive Summary 

Analysis of hotel and short-term rental lodging tax receipts for the eleven fiscal quarters spanning the beginning of the pandemic (October 2018 through July 2021) reveal that short term rentals, though initially harder hit than hotels, were better able to recover and by the summer of 2020 had increased their relative contribution to the city from about 16% to 28% of total lodging tax receipts. These taxes are used in part to support Travel Portland, the city’s Destination Marketing and Management Organization, but short-term rental taxes are in  addition uniquely directed, in part, to support efforts to alleviate the city’s housing crisis. The pandemic has revealed the relative robustness of the short-term rental portion of the tax base both in support of tourism and in addressing the lack of affordable housing. 

Introduction 

Both short-term rentals (STRs) and traditional hotels contribute to city and county finances through taxes placed on their lodging revenue. In Portland for the period covered, these taxes were in the form of a Transient Lodging Tax (TLT), amounting to 11.5% of gross receipts, and an additional 2% Tourism Improvement District (TID) tax, totaling 13.5% (an additional 1.5% state tourism tax is also assessed, but as it is not deductible from the gross receipts prior to  calculating the other taxes, it will be ignored in this analysis). Of the TLT, 5.5% goes to Multnomah County, and 6% to the City of Portland (which collects the tax on behalf of both city and county). For the purposes of this analysis, any business reporting on the city’s form TLMR  STR is a short-term rental, and any business reporting on form TLMR or TLQR is a hotel (or  motel). City officials have provided us with tax receipt data for both types of lodging starting in  September 2018 (when an additional $4 per night flat fee per booking was assessed against  short-term rentals only¹) through July 2021, as shown in Appendix A. Unless otherwise stated,  all analyses in this study stem from these figures.  

¹ City Council justified the $4 nightly fee per booking levied against short-term rentals but not hotels as it was felt that this type of use had a negative impact on the availability of long-term housing in the city. The entirety of the  receipts from this fee was therefore dedicated to the city Housing Investment Fund for use in combating the lack of affordable housing.

Taxes paid by hotels and by short-term rentals 

Because hotels have the option of reporting quarterly, both hotel and STR tax receipts have been converted to quarterly figures for analysis. The resulting numbers for the eleven fiscal  quarters covered appear in Table 1. STR tax here includes the $4 per night fee which hotels do not pay. 

There are two items of note in this table, the first of which is the extreme drop in tax revenue  from STRs in Q2 of 2020. Not only did many STR hosts shut down operations as the lockdowns  began, but there was an avalanche of guest cancellations (the booking platforms forgave most  cancellation penalties). Notwithstanding the initial collapse of STR revenues, the second item of note is the remarkable increase in the percentage of their contribution to total tax revenue  starting in Q3 of 2020 when compared to pre-pandemic levels (climbing from approximately  16% to 28% of total revenue). The conclusion that can be drawn from these figures is that as the industry adjusted to the pandemic, after only a short adjustment period STRs were better able to adapt than were the hotels, and their relative contribution to (the diminished) tax receipts rose accordingly. It is too soon to predict whether or not this changed ratio will revert  to pre-pandemic levels at some point, but it is worth noting that in the most recent quarter the STR contribution has already nearly recovered to pre-pandemic levels even as the hotels are  still struggling.

STR contribution to the Housing Investment Fund 

Of the TLT paid by both hotels and STRs during this time period, 6% of gross revenues goes into  the City’s coffers. In both cases 1% is dedicated to fund Travel Portland, but only in the case of  the STRs is the other 5% earmarked: all of it is paid into the city’s Housing Investment Fund.  Table 2 provides the quarterly figures for the STR contribution to this fund both from the $4 fee  and the earmarked portion of the tax paid to the city. 

Justly or unjustly, STRs have been blamed for contributing to the housing crisis in Portland and  across the country by encouraging the conversion of long-term rental properties to short-term uses. Although the requirement in Portland that all hosts live on premises is probably the greatest mitigating factor in dealing with this issue, the nearly $5 million provided annually by these taxes is also very significant in that it supports the creation of affordable housing in the city. Housing Investment Fund officials have pointed out that unlike much of the housing funding, these funds are unrestricted, further enhancing their usefulness.

STR contribution to Travel Portland 

Travel Portland is funded in part by its 1% portion of the TLT paid to the city, and in part by a special 2% TID (Tourism Improvement District) tax (increased to 3% in July 2021, after the period covered by this analysis). Both hotels and STRs pay this tax. Table 3 shows both the TID and the Travel Portland share of TLT tax paid, by quarter, to the city and county. The column for  STRs does NOT include the $4 fee, which goes entirely to address housing issues. For both  hotels and STRs, the gross receipts figures have been back-calculated from the tax receipts.

This table tells the same story as Table 1, muted by the fact that none of the $4 nightly fee goes to Travel Portland. After the lockdown figure for Q2 of 2020, STRs’ relative contribution to Travel Portland increases once the pandemic begins in earnest. Travel Portland’s website states that 63% of its operating budget comes from these city taxes (this figure based on pre pandemic conditions). As is also evident on the previous two tables, by the second quarter of  2021 STR income has recovered from the effects of the pandemic.

Conclusions 

It is important to remember that all the figures for STRs in this analysis are derived from data on Form TLMR STR, and that there are businesses that report on this form that fall outside the common conception of an “Airbnb”. Nonetheless, it is clear from the tax data that Portland’s  STR community, though originally suffering a more severe decline in revenue than did hotels,  was able to more quickly recover and by the time of this writing (October 2021) had essentially made up all the ground lost to the pandemic, whereas hotel revenues remained at barely half their pre-pandemic level. Because of normal seasonal swings in tourism from a high in the summer to a low level in the winter, it is important to compare like quarters when examining these data, but we might speculate that STRs as a group are less reliant on tourists than are  hotels, with more of their guests traveling to Portland for family visits, to explore relocation, or for business. Hotels have suffered especially from the extreme loss in convention business, a segment of the market generally less interested in STR type accommodations. Individual STR hosts are nimbler than hotel management can be, able to both cease and restart operations quickly. For the recipients of lodging taxes, specifically Travel Portland and the Housing  Investment Fund, the presence of a healthy short-term rental segment has provided a valuable cushion against the shock of revenue lost to the pandemic.