Debbie Sowell and Chris McHaney are no strangers to property ownership. They own their Cooper-Young home, have multiple rental properties in Midtown and Sowell is a real estate agent. But when half of a small duplex near Overton Square came on the market earlier this year, the two weren’t quite sure what to make of it.
The location dictated a higher rental price, but the layout of the apartment made Sowell think it might be hard to get that price. The solution: After months of research into “short-term rentals,” the couple decided to buy the unit, rehab it, furnish it and list it full time on Airbnb. Now they’re making a monthly average of 2.5 times what they would have had they turned it into a long-term rental.
“You really have to look at the property and the location; there are different purposes for different properties,” Sowell said. “Airbnb is a wonderful way for individuals to maximize their properties.”
Sowell and McHaney represent some of the 53 percent growth that Memphis has seen among Airbnb hosts, or property listers, over the past 12 months, bringing the current active base to 430, said a spokesperson for the company.
That kind of growth could spell big business in Memphis and more options for visitors.
The majority of Memphis Airbnb listings are in Cooper-Young, a walkable area of the city that contains no hotels. As the shared economy model continues to grow, more visitors are opting to use Airbnb for lodging.
In the past 12 months, the number of people who stayed in Airbnbs in Memphis grew by 80 percent, to 53,000, the company said.
“There are people who want hotels, and that’s fine, but more and more, people want to experience something local,” said Sowell, who has a degree in interior design and said she tried to make their Airbnb unit as Memphis focused as possible, incorporating local art and photography, locally roasted coffee and a quirky style.
Memphis has roughly 23,000 hotel rooms available citywide for the 10.5 million people who visit Memphis each year. Airbnb’s growth in Memphis hasn’t had much of an impact on the hotel industry, which is seeing growth of its own, said Kevin Kern, vice president of communications for the Memphis Convention & Visitors Bureau, noting that the number of rooms grew by about 400 just since last year, and there are plenty of projects in the works.
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The Captain Harris house sits directly across from the Young Avenue Deli, a popular bar and nightclub. "You've got to look at the location and the property," said Debbie Sowell, a real estate agent.
In 2016, the hotel occupancy rate increased 1 percent over 2015 to 65 percent, the average daily room rate increased 3.6 percent, and, at 2.2 percent, Memphis room demand grew faster than the 1.7 percent U.S. average. Revenue per available room also outpaced the national average with a 4.6 percent increase from 2015 to 2016 and has been on an upswing since 2013.
Kern said, “Business is good.”
“Airbnbs enhance the offerings available to visitors, and consumers drive that demand,” he added. “Our industry is just like all others, changes come and go, and this is a great option and there are a lot of great Airbnb properties in Memphis.
About 60 percent of Airbnb listings in Memphis are dedicated short-term rentals, like a backyard carriage house or an apartment, while the remainder are extra rooms in a host’s full-time residence, a spokesperson from Airbnb said, noting that the average Memphis host earns about $8,000 a year.
And now the city is cashing in on that as well.
Earlier this year, Memphis became one of about 300 cities across the country to enter into an agreement with Airbnb that allows the organization to collect and remit local taxes on behalf of hosts. In Memphis, that includes a short-term rental occupancy tax, 3.5 percent of bookings, and a tourism improvement district assessment, $2 per room per night. Since the agreement went into place on June 1, the city has collected $120,287 from Airbnb, according to the city’s media affairs office.
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Memphis isn’t the only local city looking into how short-term rentals are classified and taxed. Collierville recently updated ordinance language that effectively banned short-term rentals in city limits as of Sept. 1.
“Airbnbs across the country are things everyone is looking at and updating ordinances for. Communities across the state are going through the same thing, and everybody has a different set of challenges they’re faced with,” said Collierville Alderman John Stamps, adding that what might be allowed in a resort or lakeside community might be different in a small town.
Stamps said the Collierville board would be open to reviewing something like a tax levied on short-term rentals, should citizens ask for that. For the time being though, he said, “Airbnbs are unregulated, home-based businesses that aren’t allowed in residential areas, so that’s why [the ordinance] was updated.”
Neighbor opinions in Cooper-Young, which contains the largest concentration of Memphis Airbnbs, are mixed on the topic. A search of “Airbnb” on the neighborhood communication app Nextdoor returns an array of references, from “abhorrent” to “a huge boost to the local economy.”
From a real estate perspective, Sowell said short-term rental saturation is nowhere near being an area of concern here like it is in some larger cities like San Francisco, for example. Here, she said, it’s about maximizing properties: some are good for homeowners, some might make more sense as long-term rentals and some make sense as short-term rentals.
Sowell cited one example of a multi-family house across the street from bar and music venue Young Avenue Deli. It might not be an ideal long-term rental, she said, but for visitors looking to take advantage of the neighborhood’s nightlife, it’s a perfect location, adding, “The market dictates the need.”