One was a four-story 84-room, $6.9-million hotel described by engineer Khattar Elmassalemah as a “pretty standard” Holiday Inn Express. It will be built in the near future near the southward exit of the New York State Thruway adjacent to the Winston Farm in Saugerties. The other was a year-round mountain resort in bucolic Big Indian specializing in destination weddings, music camps, workshops, conferences and retreats. The Full Moon Resort, whose principal owner is Henry Stout, plans to spend about $1.5 million ($1.2 million loaned to it by the Catskill Watershed Corporation) to add a wedding pavilion and ten small cottages to its existing stock of 22 units on a 100-acre parcel off the Oliverea Road in Shandaken.
Full Moon will create six new jobs over the next three years and over ten years save about $100,000 in property taxes on the improvements. The Holiday Inn Express will create 57 jobs during construction and eleven jobs thereafter and save the developer $1.9 million in taxes over a 15-year period.
What do these projects, so different in character, have in common? Both, one traditional and the other non-traditional, the one predictable and the other experiential, appeared before the Ulster County Industrial Development Agency Wednesday morning, April 12 seeking reduced property taxes. They are the latest entrants in the variegated expansion of the local accommodations industry, in recent years one of the few bright spots in the Ulster County economy.
The proliferation of non-traditional players has irretrievably disrupted the hotel industry. That’s part of the reason why about half the applicants to the Ulster County IDA in the last couple of years have been from the accommodations industry. Many additional players, from Mohonk Mountain House, the Hasbrouck House and the Emerson Resort and Spa to Airbnb and Tentrr, have been expanding without local tax breaks. Specialty resorts, lodges, event destinations and accommodations of all types, many serving urban millennials, are refocusing and renovating.
The multi-sided technology platforms of the sharing economy supply a selection of services from the palatial to the primitive. An expanding variety of establishments, from tents outside private homes to luxury destination hotels, provides an ever-widening array of short-term lodging options and complementary services to travelers, vacationers and others. Today’s marketplace provides space for all of them.
Lacking the track record of the standard hotel brands, Airbnb and its competitors have built successful signaling networks for both guests and hosts to increase the odds of successful matches. The model works.
Ulster County comptroller Elliott Auerbach recently said he had counted over a thousand short-term rental units around in Ulster County. That business appears to be expanding to the point where locals are worried that some owners don’t occupy their residences but rent them out short-term. Woodstock’s town board last week discussed owners who were operating their properties as full-time hotels.
Six months ago, a consultant study for the New York City hotel industry found that Airbnb accounted for nearly eight percent of all occupied room-nights at a daily rate of $157 as opposed to the hotel average room rate of $276. The Airbnb share is expected to increase to 15 percent in another two years. Airbnb is costing the New York City hotel industry more than two billion dollars a year in lost revenues, according to HVS Consulting and Valuation.
The numbers aren’t always treated logically in the various censuses.
According to federal government statistics, close to two million people in the nation work in the accommodations industry, about 35 percent of them either as maids or housekeepers or as desk clerks. Even if their complementary services, primarily food, generate more revenue than lodging does, such income is classified for census purposes as in the accommodations rather than the food-services subsector.
If I understand the classification system correctly, food jobs are classified according to who runs the food services. The restaurant in a separate building for the planned Saugerties Holiday Inn Express will be owned by its operator, not the hotel owner, the IDA was told by developer Bipin Patel. Full Moon Catering, on the other hand, offers its on-site customers extensive food options (“Of course, the heart of every home is the kitchen,” explains the Full Moon website. “The Café, located at the first floor of the inn, features tasty country buffet breakfasts and lunches for wedding guests…as well as superb dinners for retreats and conferences”), usually as part of the overall wedding-guest package.
Airbnb and its competitors pose more complex problems for the economic bean-counters. Dealing with the sharing economy strains the capacity not only of the traditional accommodations industry but also of governmental tax collection. While twelve New York State counties are already receiving income from voluntary collection agreements with Airbnb, Ulster County Legislature chairman Ken Ronk says he is waiting for state approval for such agreements, which he says is technically not bed-tax income.
Meanwhile, Tentrr, “the new Airbnb for campers,” has about 50 Catskills-region campsites and is expanding rapidly. How do you tax campsites?
What taxes should they pay and who should pay them?
At the present time, there’s space in the expanding marketplace for both traditional and non-traditional accommodations, both of which continue to invest in facilities locally. Revenueyourhotel.com pointed out in a recent analysis that at least three major features differentiate competition from peer-to-peer platforms from competition among traditional hotels. Non-traditionals can quickly scale supply to meet demand, which regular hotels cannot. Non-traditionals can offer a much wider variety of product than the traditionals can. And non-traditionals can expand supply anywhere there are houses rather than in particular zones.
What can the traditionals do? In some areas, they have lowered their prices. As the history of the Catskills mountain houses and the Borscht-Belt resorts have shown, however, that can be a risky strategy. Charging less than one needs to keep one’s stock in good repair is no recipe for continued survival.
On Monday April 17, The New York Times published an article by Katie Benner about plans to combat Airbnb, accusing it of “not playing by the same rules” as the hotel industry. By focusing on the people hurt by home-sharing, the hotel industry’s campaign hopes “to provide a counterweight to Airbnb’s strategy if presenting a unified, working-class face.”
Most customers for the traditional segment of the accommodations industry are looking for a product: a room, and perhaps a meal and a drink. Most clients in the non-traditional segment are looking for an experience, and perhaps a lower price.
“The people whom we are selling to now are experiential,” explained a real-estate manager with whom I attended a meeting this past weekend. “You have to sell them the experience.”
“They’re here already,” confirmed a colleague who’s been in the Greene County accommodations industry for 30 years.
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