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A few years ago, with the rise of the sharing economy, a new economic model emerged: the management of tourist apartments. Although this type of rental has always existed, the appearance of portals such as Airbnb or Booking.com has made this activity more popular than ever.

At first these were individual managers renting out their own homes, but little by little this emerging niche grew, and companies began to appear, taking care of the professional management of several properties.

Being such a controversial topic, critical voices soon arose, calling for a new regulatory framework. Among other things, it is argued that this type of rental does not pay taxes, and that behind this model of a false “sharing economy” there are large business groups engaging in unfair competition against the hotel sector. In short: that this activity had little of a “sharing economy” about it.

But is that really the case? 

1. Only large companies profit:

In the following chart (chart 1) we can see, with data as of December 2017, that in the city of Valencia, 70.98% of apartment managers manage a single property and only 5% manage 5 or more properties.

If we consider a “professional” manager to be one who manages 4 or more properties, we can say that fewer than 8% of managers could be considered professional managers. (Managing fewer properties does not, in general, guarantee enough income to cover the costs of maintaining a business structure.)

We can therefore conclude that, although there are large business groups dedicated to managing tourist apartments, it is the small individual managers who manage one or two homes who manage the larger number of tourist apartments. 

Chart 1: Brickstarter

Therefore, we see that, in the case of Airbnb, we can indeed speak of a “real” sharing economy, since the vast majority of managers are individuals who manage a single property, thereby obtaining supplementary income. As for the effect on hotel occupancy rates, we can also see that hotel occupancy rates are likewise between 90 and 100% in the main tourist cities, so it does not seem that, in that sense, tourist apartments are engaging in unfair competition against hotels.

2. Who are the main management companies operating in Valencia?

While it is true that, as we saw earlier, the vast majority of managers are individuals who manage one or two listings, it is also true that there are companies that manage a large number of listings. Let’s see who they are.

In the following chart (chart 2) we can see the main managers in Valencia and the number of properties they manage. The ranking is led by several management companies with more than 100 homes each.  

Next, we find other managers with a large number of properties (which leads us to think that there are companies behind these profiles, since a single person cannot manage that many properties on an individual level.)

Chart 2: Brickstarter

 3. They do not pay the relevant taxes:

In order to ensure that income from vacation accommodation rentals is declared, the Spanish tax authority (Hacienda Pública) has introduced Form 179 this year, under which the portals that advertise vacation properties are required to report the income they pay out to the various owners.

In this way, if the data reported by the platforms do not match those submitted in each customer’s individual tax return, managers may be subject to inspection by the tax authorities.

Although this measure has been slow in coming, it seems unlikely that, from now on, income from rentals through these platforms can go undeclared.

Who benefits from Valencia’s new regulatory framework?

Under the new regulatory framework, and broadly speaking, only apartments located on the first floors, or apartments in buildings that are entirely vacation-oriented, may be used for vacation rental.

In this way, through these measures, the small individual managers end up being the most harmed, while large companies, with the capacity to develop buildings, and the hotel chains are the main beneficiaries of this regulatory change.

The new rules thus harm the interests of individual managers who only seek to obtain additional income through their own legal work.

Managing tourist rentals on your own is becoming increasingly complicated, due to legal and market uncertainty and all the work involved in managing well.

By investing with Brickstarter, you do not have to deal with those procedures, which we handle.

Past or estimated returns do not guarantee future returns. Investing involves a risk of total or partial loss of the invested capital.