Artificial Intelligence Shapes the Future For the Vacation Rental Industry

September 30, 2020

The digital age is upon us and the artificial intelligence revolution is weaving its way into the vacation rental industry. It’s no surprise that cities across the US and Canada are turning from time-consuming manual processes to Artificial Intelligence (AI) in an attempt to keep their finger on the pulse of this fast-growing industry.

A recent essay written by a robot sets out to convince us that they come in peace. “I am here to convince you not to worry. Artificial intelligence will not destroy humans. Believe me”.

Is this the way of the future?

The vacation rental industry has boomed in the last five years and in spite of, or possibly thanks to Covid-19 there’s been a further spike in vacation rentals as traveler preferences have turned from hotels to vacation rental homes. Smart property managers are fast turning to technology to ensure guests a safe and hassle-free stay, with the implementation of custom voice assistants, home automation, virtual tour technology, self-check-in and digital guest apps on the rise.

But, how do cities and counties keep their finger on the pulse of this fast-growing industry?

Cities and counties are finding it increasingly difficult to regulate short-term vacation rentals and ensure compliance. Airbnb has over 5 million listings worldwide with guests increasing from 29 million in 2016 to a projected 45.6 million by 2020, according to Statista.

David Wachsmuth, a professor of urban planning at McGill University in Canada, told The Wall Street Journal: “Cities and other levels of government are dealing with what has been just an explosion of short-term rental activity over the last five or so years. And it’s a situation where regulation is impossible, basically, because of some of the data-access issues.”

With vacation rental home addresses hidden online until time of booking, and a lack of available data, many cities and counties are turning to AI software and technology to identify rentals, enforce local ordinances and short-term rental rules, collect taxes on bookings and receive alerts on new listings entering the market.

“They essentially go and do a drive-by, or they try to book the property so they can get the address, and then they catch them, and it’s like a sting operation. You can’t do that when you have thousands of these, right?” says Ulrik Binzer, a Silicon Valley Entrepreneur and founder of Host Compliance.

When a ban on short-term rentals affected him personally, Binzer’s interest sparked and, using his technology background, he began to review the cumbersome manual methods being used by cities and counties to manage the STR market. Binzer says “It was like bringing a knife to a gun-fight”.

Over 300 innovative cities and counties across the US and Canada are using Host Compliance’s AI software to find solutions. Using artificial intelligence technology, they crawl the internet using algorithmic methods to identify listings and collect data on short-term rentals and owners. Using machine learning, the software is also able to analyze calendars and detect owners underreporting taxes.

How effective is AI technology?

The City of Nashville, Tennessee signed up with Host Compliance in 2017 under a four year contract costing the city $250,000 annually. According to records shared by Jon Michael, Zoning Administrator for Nashville and Davidson County, the short-term rental tax revenue increased by $2.9 million in the first year, from $4.1 million to almost $7 million and the software identified 2,500 rental operators breaking the rules. In a statement to NPRSean Braisted from Nashville‘s code enforcement department said:

“We would have problems with essentially party houses that would try to pull as many beds into one house as possible and cram as many people in there. We’ve had complaints about people allegedly having sex parties to doing all sorts of things within short-term rental properties.”

The Covid-19 global pandemic has seen an increased strain on city budgets and with the assistance of natural language processing, computer vision, and artificial intelligence, there’s an opportunity for cities and counties to bridge the revenue gap, ensure the payment of taxes and increase revenue opportunities.

Nashville, Las Vegas, and Denver are among a few of the cities using AI software solutions such as Host Compliance, MUNIRevs, and Hamari STR to provide rental data for fair and effective enforcement.

Is this the way forward for STRs?

In a statement to NPR, Airbnb spokesperson, Christopher Nulty, said: “We just don’t think that the best approach here is for cities to turn that responsibility over to another company whose sole responsibility is to tattle on people.”

Binzer responds: “In the long run they all realize that if this is just the wild west, the pendulum is going to swing in the other direction and there are going to be so many restrictions that it will destroy their business”

We will continue to watch this space!