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The	
  Local	
  Economic	
  Impact	
  
of	
  Participating	
  Coachella	
  Valley	
  
Short	
  Term	
  Rentals	
  
TXP,	
  Inc.	
  
1310	
  South	
  1st	
  Street	
  -­‐	
  Suite	
  105	
  
Austin,	
  Texas	
  78704	
  
(512)	
  328-­‐8300	
  phone	
  
www.txp.com	
  
1Participating	
  Short	
  Term	
  Rental	
  Economic	
  Impact	
  –	
  Coachella	
  Valley	
  |	
  Spring	
  2014	
  
Overview	
  
The	
  Short	
  Term	
  Rental	
  Advocacy	
  Center	
  (STRAC)	
  was	
  formed	
  in	
  2013	
  by	
  a	
  coalition	
  of	
  
several	
  short	
  term	
  rental	
  marketplace	
  stakeholders	
  as	
  a	
  means	
  to	
  engage	
  travelers,	
  
property	
  owners,	
  and	
  local	
  residents	
  in	
  a	
  conversation	
  about	
  the	
  regulation	
  of	
  this	
  
growing	
  market	
  segment.	
  	
  STRAC	
  member	
  companies	
  have	
  more	
  than	
  1.1	
  million	
  
listings	
  worldwide.	
  	
  As	
  short	
  term	
  rentals	
  continue	
  to	
  grow	
  in	
  popularity	
  and	
  use,	
  it	
  is	
  
vital	
  that	
  all	
  stakeholders	
  have	
  a	
  clear	
  understanding	
  of	
  the	
  benefits	
  presented	
  by	
  this	
  
expanding	
  market	
  segment.	
  	
  To	
  this	
  end,	
  STRAC	
  contracted	
  TXP,	
  Inc.	
  to	
  assess	
  the	
  
economic	
  impacts	
  of	
  short	
  term	
  rentals	
  attributable	
  to	
  their	
  customers	
  (termed	
  
“participating	
  short	
  term	
  rentals”	
  in	
  this	
  report)	
  in	
  the	
  Coachella	
  Valley,	
  CA.	
  	
  	
  
	
  
This	
  report	
  details	
  the	
  economic	
  impact	
  of	
  participating	
  short	
  term	
  rentals	
  in	
  
California’s	
  Coachella	
  Valley.	
  	
  The	
  impact	
  is	
  significant,	
  as	
  participating	
  short	
  term	
  rental	
  
activity	
  in	
  2013	
  created	
  total	
  economic	
  output	
  of	
  $272.0	
  million	
  and	
  2,539	
  jobs	
  in	
  the	
  
local	
  Coachella	
  Valley	
  economy.	
  	
  The	
  report	
  provides	
  an	
  overview	
  of	
  trends	
  in	
  the	
  
overall	
  tourism	
  sector	
  in	
  the	
  Coachella	
  Valley	
  area,	
  followed	
  by	
  the	
  results	
  of	
  the	
  
analysis	
  and	
  conclusions.	
  The	
  input	
  data	
  on	
  direct	
  accommodations	
  spending	
  was	
  
provided	
  by	
  STRAC	
  member	
  companies	
  and	
  reflects	
  estimates	
  for	
  2013.	
  While	
  the	
  vast	
  
majority	
  of	
  the	
  properties	
  are	
  located	
  in	
  the	
  Coachella	
  Valley,	
  Riverside	
  County	
  was	
  
used	
  as	
  the	
  study	
  area	
  for	
  analytical	
  consistency,	
  and	
  all	
  impacts	
  are	
  estimated	
  at	
  the	
  
county	
  level.	
  	
  	
  
	
  
Tourism	
  and	
  the	
  Economy	
  of	
  the	
  Coachella	
  Valley	
  
Overall	
  Context	
  
Recognized	
  for	
  its	
  natural	
  beauty,	
  chic	
  boutiques,	
  luxury	
  spas,	
  and	
  rocking	
  music	
  
festivals,	
  tourism	
  is	
  a	
  key	
  component	
  of	
  the	
  Coachella	
  Valley’s	
  economy.	
  	
  Visitor	
  
spending	
  is	
  an	
  important	
  generator	
  of	
  local	
  employment	
  and	
  economic	
  activity	
  as	
  well	
  
as	
  state	
  and	
  local	
  tax	
  revenue.	
  The	
  Greater	
  Palm	
  Springs	
  Convention	
  and	
  Visitor’s	
  
Bureau	
  estimates	
  that	
  one	
  out	
  of	
  every	
  four	
  jobs	
  in	
  the	
  area	
  are	
  sustained	
  by	
  the	
  
tourism	
  industry.	
  	
  Employment	
  in	
  the	
  Accommodation	
  and	
  Food	
  Services	
  sector	
  and	
  the	
  
Arts,	
  Entertainment,	
  and	
  Recreation	
  sector	
  has	
  shown	
  strong	
  growth	
  over	
  the	
  past	
  few	
  
years.	
  	
  These	
  tourism-­‐related	
  industries	
  have	
  far	
  outpaced	
  the	
  rate	
  at	
  which	
  overall	
  
employment	
  has	
  grown	
  in	
  the	
  Coachella	
  Valley,	
  emphasizing	
  the	
  importance	
  of	
  tourism	
  
to	
  the	
  region’s	
  economy.	
  	
  	
  	
  
	
  
Tourism	
  in	
  the	
  Coachella	
  Valley	
  is	
  driven	
  by	
  the	
  sum	
  of	
  its	
  offerings,	
  but	
  over	
  the	
  past	
  
decade,	
  the	
  region	
  has	
  become	
  increasingly	
  well	
  known	
  for	
  its	
  annual	
  music	
  festival.	
  	
  
The	
  Coachella	
  Valley	
  Music	
  and	
  Arts	
  Festival	
  hosted	
  nearly	
  300,000	
  attendees	
  in	
  2013,	
  
an	
  increase	
  of	
  more	
  than	
  ten	
  times	
  the	
  total	
  attendance	
  at	
  the	
  inaugural	
  festival	
  in	
  
2Participating	
  Short	
  Term	
  Rental	
  Economic	
  Impact	
  –	
  Coachella	
  Valley	
  |	
  Spring	
  2014	
  
1999.	
  	
  The	
  music	
  festival	
  expanded	
  to	
  two	
  weekends	
  of	
  three	
  days	
  each	
  in	
  2012	
  to	
  
accommodate	
  growing	
  demand.	
  	
  The	
  estimated	
  daily	
  attendance	
  figures	
  have	
  
continued	
  to	
  climb,	
  tending	
  to	
  track	
  patterns	
  in	
  the	
  overall	
  economy.	
  	
  
	
  
Table	
  1:	
  Employment	
  by	
  Selected	
  Sectors	
  in	
  Riverside	
  County,	
  CA	
  
	
  
Accommodation	
  and	
  
Food	
  Services	
  Sector	
  
Arts,	
  Entertainment,	
  
and	
  Recreation	
  Sector	
  
Total	
  Employment	
  
2007	
   63,309	
   26,048	
   861,029	
  
2008	
   66,073	
   28,264	
   887,214	
  
2009	
   63,306	
   29,004	
   868,285	
  
2010	
   64,685	
   27,302	
   865,369	
  
2011	
   64,944	
   27,616	
   859,040	
  
2012	
   67,194	
   30,256	
   866,110	
  
Change	
   6.1%	
   16.2%	
   0.6%	
  
	
   	
   	
   	
  
Source:	
  American	
  Community	
  Survey	
  5-­‐year	
  estimates,	
  US	
  Census	
  Bureau	
  
	
  
Figure	
  1:	
  Average	
  Daily	
  Attendance	
  at	
  the	
  Coachella	
  Music	
  Festival	
  (thousands	
  of	
  
attendees)	
  
	
  
Source:	
  Goldenvoice	
  and	
  the	
  Indio	
  Police	
  Department	
  
	
  
Similarly,	
  total	
  annual	
  hotel	
  revenue	
  is	
  dependent	
  on	
  a	
  range	
  of	
  factors.	
  	
  These	
  include	
  
overall	
  national	
  economic	
  climate,	
  which	
  impacts	
  demand,	
  as	
  well	
  as	
  industry-­‐specific	
  
factors	
  such	
  as	
  the	
  construction	
  of	
  new	
  hotel	
  properties.	
  	
  Annual	
  hotel	
  revenue	
  in	
  
3Participating	
  Short	
  Term	
  Rental	
  Economic	
  Impact	
  –	
  Coachella	
  Valley	
  |	
  Spring	
  2014	
  
Riverside	
  County	
  declined	
  sharply	
  between	
  2007	
  and	
  2009	
  but	
  has	
  since	
  rebounded	
  so	
  
that	
  the	
  total	
  revenue	
  in	
  2013,	
  $535.3	
  million,	
  has	
  surpassed	
  the	
  previous	
  high	
  in	
  2007.	
  	
  	
  
	
  
Figure	
  2:	
  Annual	
  Riverside	
  County	
  Hotel	
  Revenue	
  ($millions)	
  	
  
Source:	
  Smith	
  Travel	
  Research,	
  TXP	
  
	
  
Short	
  Term	
  Rentals	
  in	
  the	
  Coachella	
  Valley	
  
Short	
  term	
  rentals	
  are	
  an	
  important	
  part	
  of	
  the	
  accommodations	
  market	
  in	
  the	
  
Coachella	
  Valley.	
  In	
  2013,	
  the	
  participating	
  short	
  term	
  rentals	
  had	
  more	
  than	
  265,000	
  
nights	
  booked	
  in	
  the	
  7,754	
  properties	
  listed	
  in	
  the	
  area.	
  	
  	
  
	
  
The	
  weighted	
  average	
  daily	
  rate	
  for	
  participating	
  short	
  term	
  rental	
  listings	
  in	
  Riverside	
  
County,	
  CA	
  was	
  $272	
  in	
  2013.	
  	
  Smith	
  Travel	
  Research	
  found	
  that	
  hotels	
  in	
  the	
  same	
  area	
  
had	
  an	
  average	
  daily	
  rate	
  of	
  $113	
  in	
  2013.	
  	
  As	
  the	
  majority	
  of	
  short	
  term	
  rental	
  listings	
  
in	
  this	
  area	
  are	
  entire	
  homes	
  or	
  condos	
  (and	
  thus	
  have	
  more	
  than	
  one	
  bedroom),	
  this	
  
makes	
  short	
  term	
  rentals	
  a	
  budget-­‐friendly	
  option	
  for	
  families	
  and	
  groups.	
  	
  	
  
	
  
As	
  in	
  most	
  communities,	
  the	
  average	
  length	
  of	
  stay	
  for	
  short	
  term	
  rental	
  users	
  is	
  longer	
  
than	
  visitors	
  who	
  stay	
  in	
  hotels.	
  	
  The	
  average	
  number	
  of	
  people	
  in	
  the	
  party	
  also	
  tends	
  
to	
  be	
  higher.	
  	
  In	
  2013,	
  participating	
  short	
  term	
  rental	
  users	
  visited	
  the	
  Coachella	
  Valley	
  
for	
  an	
  average	
  of	
  9.1	
  nights	
  with	
  an	
  average	
  of	
  4.4	
  people	
  travelling	
  together.	
  	
  	
  	
  	
  
4Participating	
  Short	
  Term	
  Rental	
  Economic	
  Impact	
  –	
  Coachella	
  Valley	
  |	
  Spring	
  2014	
  
Economic	
  Impact	
  Calculations	
  
The	
  process	
  for	
  calculating	
  the	
  economic	
  impacts	
  associated	
  with	
  participating	
  short	
  
term	
  rentals	
  is	
  fairly	
  straightforward.	
  	
  First,	
  direct	
  spending	
  in	
  different	
  applicable	
  
tourism	
  categories	
  associated	
  with	
  the	
  short	
  term	
  rentals	
  is	
  estimated.	
  	
  Next,	
  specific	
  
multipliers	
  provided	
  by	
  the	
  Bureau	
  of	
  Economic	
  Analysis	
  RIMS	
  II	
  system	
  for	
  each	
  
industry	
  for	
  each	
  county	
  are	
  used	
  to	
  estimate	
  the	
  ripple	
  effects	
  that	
  are	
  attributable	
  to	
  
the	
  direct	
  spending;	
  the	
  combination	
  forms	
  the	
  total	
  economic	
  impact.	
  	
  
	
  
Direct	
  Spending	
  Estimates	
  
TXP	
  used	
  the	
  data	
  provided	
  by	
  STRAC	
  member	
  companies	
  (specifically	
  number	
  of	
  nights	
  
booked,	
  party	
  size,	
  length	
  of	
  stay,	
  and	
  daily	
  rate)	
  to	
  create	
  an	
  aggregated	
  estimate	
  of	
  
direct	
  lodging	
  spending	
  by	
  participating	
  short	
  term	
  renters	
  of	
  $72.2	
  million	
  during	
  2013.	
  	
  
This	
  data	
  was	
  then	
  combined	
  with	
  data	
  from	
  the	
  US	
  Bureau	
  of	
  Economic	
  Analysis’	
  
Travel	
  and	
  Tourism	
  Satellite	
  Accounts	
  to	
  further	
  estimate	
  the	
  additional	
  direct	
  spending	
  
patterns	
  of	
  visitors	
  to	
  the	
  Coachella	
  Valley.	
  	
  	
  	
  
	
  
For	
  example,	
  for	
  every	
  $100	
  a	
  traveler	
  spent	
  on	
  lodging,	
  they	
  spent	
  an	
  additional	
  $69	
  
on	
  food,	
  $24	
  on	
  local	
  transportation,	
  $48	
  on	
  arts,	
  entertainment,	
  and	
  recreation	
  
activities,	
  and	
  $59	
  on	
  retail	
  shopping.	
  	
  As	
  a	
  result,	
  the	
  total	
  direct	
  spending	
  by	
  short	
  
term	
  renters	
  in	
  the	
  Coachella	
  Valley	
  for	
  2013	
  is	
  estimated	
  at	
  $216.5	
  million.	
  The	
  
breakdown	
  of	
  this	
  total	
  direct	
  visitor	
  spending	
  by	
  category	
  is	
  shown	
  in	
  Figure	
  3	
  below.	
  
	
  
Figure	
  3:	
  	
  Visitor	
  Spending	
  ($millions)	
  
	
  
Source:	
  Travel	
  and	
  Tourism	
  Satellite	
  Accounts;	
  US	
  Bureau	
  of	
  Economic	
  Analysis	
  
	
  
5Participating	
  Short	
  Term	
  Rental	
  Economic	
  Impact	
  –	
  Coachella	
  Valley	
  |	
  Spring	
  2014	
  
Economic	
  Impact	
  Methodology	
  
The	
  economic	
  impacts	
  extend	
  beyond	
  the	
  direct	
  activity	
  outlined	
  above.	
  	
  In	
  an	
  input-­‐
output	
  analysis	
  of	
  new	
  economic	
  activity,	
  it	
  is	
  useful	
  to	
  distinguish	
  three	
  types	
  of	
  
expenditure	
  effects:	
  direct,	
  indirect,	
  and	
  induced.	
  	
  Direct	
  effects	
  are	
  production	
  changes	
  
associated	
  with	
  the	
  immediate	
  effects	
  or	
  final	
  demand	
  changes.	
  	
  The	
  payments	
  made	
  
by	
  a	
  visitor	
  to	
  a	
  hotel	
  operator	
  or	
  taxi	
  driver	
  are	
  examples	
  of	
  a	
  direct	
  effect.	
  
	
  
Indirect	
  effects	
  are	
  production	
  changes	
  in	
  backward-­‐linked	
  industries	
  caused	
  by	
  the	
  
changing	
  input	
  needs	
  of	
  directly	
  affected	
  industries	
  –	
  typically,	
  additional	
  purchases	
  to	
  
produce	
  additional	
  output.	
  	
  Satisfying	
  the	
  demand	
  for	
  an	
  overnight	
  stay	
  will	
  require	
  the	
  
hotel	
  operator	
  to	
  purchase	
  additional	
  cleaning	
  supplies	
  and	
  services,	
  for	
  example,	
  and	
  
the	
  taxi	
  driver	
  will	
  have	
  to	
  replace	
  the	
  gasoline	
  consumed	
  during	
  the	
  trip	
  from	
  the	
  
airport.	
  	
  These	
  downstream	
  purchases	
  affect	
  the	
  economic	
  status	
  of	
  other	
  local	
  
merchants	
  and	
  workers.	
  
	
  
Induced	
  effects	
  are	
  the	
  changes	
  in	
  regional	
  household	
  spending	
  patterns	
  caused	
  by	
  
changes	
  in	
  household	
  income	
  generated	
  from	
  the	
  direct	
  and	
  indirect	
  effects.	
  	
  Both	
  the	
  
hotel	
  operator	
  and	
  taxi	
  driver	
  experience	
  increased	
  income	
  from	
  the	
  visitor’s	
  stay,	
  for	
  
example,	
  as	
  do	
  the	
  cleaning	
  supplies	
  outlet	
  and	
  the	
  gas	
  station	
  proprietor.	
  	
  Induced	
  
effects	
  capture	
  the	
  way	
  in	
  which	
  this	
  increased	
  income	
  is	
  spent	
  in	
  the	
  local	
  economy.	
  
Figure	
  4:	
  	
  The	
  Flow	
  of	
  Economic	
  Impacts	
  
Once	
  the	
  ripple	
  effects	
  have	
  been	
  calculated,	
  the	
  results	
  can	
  be	
  expressed	
  in	
  a	
  number	
  
of	
  ways.	
  	
  Four	
  of	
  the	
  most	
  common	
  are	
  “Output,”	
  equivalent	
  to	
  sales;	
  “Value-­‐added,”	
  
which	
  is	
  sales	
  minus	
  the	
  cost	
  of	
  goods	
  sold;	
  “Earnings,”	
  which	
  represents	
  the	
  
compensation	
  to	
  employees	
  and	
  proprietors;	
  and	
  “Employment,”	
  which	
  refers	
  to	
  
permanent,	
  full-­‐time	
  jobs	
  that	
  have	
  been	
  created	
  in	
  the	
  local	
  economy.	
  	
  	
  
	
  
The	
  interdependence	
  between	
  different	
  sectors	
  of	
  the	
  economy	
  is	
  reflected	
  in	
  the	
  
concept	
  of	
  a	
  “multiplier.”	
  	
  An	
  output	
  multiplier,	
  for	
  example,	
  divides	
  the	
  total	
  (direct,	
  
indirect	
  and	
  induced)	
  effects	
  of	
  an	
  initial	
  spending	
  injection	
  by	
  the	
  value	
  of	
  that	
  
injection	
  –	
  i.e.,	
  the	
  direct	
  effect.	
  	
  Larger	
  multipliers	
  mean	
  greater	
  interdependence	
  
among	
  different	
  sectors	
  of	
  the	
  economy.	
  	
  An	
  output	
  multiplier	
  of	
  1.4,	
  for	
  example,	
  
Indirect Induced Total ImpactDirect + + =
6Participating	
  Short	
  Term	
  Rental	
  Economic	
  Impact	
  –	
  Coachella	
  Valley	
  |	
  Spring	
  2014	
  
means	
  that	
  for	
  every	
  $1,000	
  injected	
  into	
  the	
  economy,	
  another	
  $400	
  in	
  output	
  is	
  
produced	
  in	
  all	
  sectors.	
  	
  	
  
	
  
Economic	
  Impact	
  Results	
  
Participating	
  short	
  term	
  rental	
  activity	
  in	
  2013	
  created	
  total	
  economic	
  output	
  of	
  $272.0	
  
million,	
  value-­‐added	
  of	
  $155.7	
  million,	
  earnings	
  of	
  $70.1	
  million,	
  and	
  2,539	
  jobs	
  to	
  the	
  
local	
  Coachella	
  Valley	
  economy.	
  	
  The	
  majority	
  of	
  this	
  activity	
  is	
  concentrated	
  in	
  the	
  
sectors	
  with	
  the	
  highest	
  direct	
  tourism	
  spending,	
  such	
  as	
  food	
  services;	
  arts,	
  
entertainment,	
  and	
  recreation;	
  and	
  retail	
  trade.	
  	
  	
  
	
  
Table	
  2:	
  Economic	
  Impact	
  of	
  Participating	
  Short	
  Term	
  Rentals	
  in	
  Riverside	
  County	
  
Industry	
   Output	
  	
   Value-­‐Added	
   Earnings	
  	
   Jobs	
  
Ag.,	
  forestry,	
  fishing,	
  &	
  hunting	
   $1,219,699	
   $410,860	
   $221,071	
   7	
  
Mining	
   $98,826	
   $53,025	
   $19,528	
   	
  -­‐	
  	
  
Utilities	
   $5,012,668	
   $2,995,602	
   $859,443	
   8	
  
Construction	
   $1,853,774	
   $928,188	
   $514,629	
   10	
  
Manufacturing	
   $17,477,975	
   $6,055,927	
   $2,322,748	
   48	
  
Wholesale	
  trade	
   $7,098,913	
   $4,793,501	
   $1,672,780	
   26	
  
Retail	
  trade	
   $36,321,158	
   $23,796,686	
   $10,672,578	
   381	
  
Transportation	
  &	
  warehousing	
   $24,116,019	
   $9,026,502	
   $6,218,930	
   180	
  
Information	
   $8,860,128	
   $4,773,210	
   $1,521,963	
   20	
  
Finance	
  &	
  insurance	
   $8,071,042	
   $5,042,678	
   $1,744,741	
   27	
  
Real	
  estate	
  and	
  rental	
  &	
  leasing	
   $29,930,915	
   $22,249,107	
   $1,837,614	
   119	
  
Prof.,	
  scientific,	
  &	
  tech.	
  services	
   $4,931,917	
   $3,293,533	
   $1,838,748	
   27	
  
Management	
  of	
  companies	
  	
   $1,251,079	
   $776,119	
   $427,969	
   5	
  
Admin.	
  &	
  waste	
  services	
   $5,731,528	
   $3,767,198	
   $2,024,304	
   71	
  
Educational	
  services	
   $1,758,103	
   $1,004,960	
   $643,888	
   20	
  
Health	
  care	
  &	
  social	
  assistance	
   $15,435,823	
   $9,519,090	
   $6,165,114	
   125	
  
Arts,	
  entertainment,	
  &	
  recreation	
   $35,990,810	
   $22,713,770	
   $12,206,880	
   562	
  
Accommodation	
   $2,210,639	
   $1,421,517	
   $629,537	
   20	
  
Food	
  services	
  &	
  drinking	
  places	
   $56,131,884	
   $29,209,630	
   $16,703,640	
   841	
  
Other	
  services	
   $8,466,187	
   $4,313,768	
   $2,091,194	
   49	
  
Total	
  	
   $271,969,086	
   $155,734,011	
   $70,116,228	
   2,539	
  
Source:	
  TXP	
  
Note:	
  	
  since	
  lodging	
  activity	
  takes	
  place	
  in	
  private	
  homes,	
  the	
  spending	
  for	
  this	
  segment	
  of	
  the	
  impact	
  analysis	
  is	
  run	
  
through	
  the	
  Household	
  sector	
  of	
  the	
  economy,	
  rather	
  than	
  the	
  Accommodations	
  sector.	
  
	
  
Tax	
  revenue	
  further	
  amplifies	
  the	
  impact	
  of	
  tourism	
  and	
  tourist	
  spending	
  in	
  the	
  
Coachella	
  Valley’s	
  economy.	
  	
  Both	
  local	
  jurisdictions	
  and	
  the	
  State	
  of	
  California	
  benefit	
  
from	
  direct	
  spending	
  by	
  visitors,	
  as	
  well	
  as	
  realizing	
  revenue	
  associated	
  with	
  the	
  ripple	
  
7Participating	
  Short	
  Term	
  Rental	
  Economic	
  Impact	
  –	
  Coachella	
  Valley	
  |	
  Spring	
  2014	
  
effects	
  of	
  that	
  spending.	
  	
  In	
  general,	
  tourism	
  is	
  an	
  attractive	
  revenue	
  source	
  for	
  local	
  
governments,	
  especially	
  since	
  these	
  taxes	
  are	
  not	
  imposed	
  on	
  local	
  residents.	
  	
  
	
  
Conclusions	
  
Participating	
  short	
  term	
  rental	
  related	
  spending	
  is	
  an	
  important	
  part	
  of	
  the	
  tourism	
  
sector	
  in	
  the	
  Coachella	
  Valley,	
  ultimately	
  creating	
  thousands	
  of	
  jobs	
  and	
  millions	
  of	
  
dollars	
  of	
  earnings	
  and	
  tax	
  revenue	
  for	
  the	
  community	
  each	
  year.	
  	
  This	
  appears	
  to	
  be	
  
largely	
  net	
  new	
  activity;	
  different	
  types	
  of	
  lodging	
  serve	
  discrete	
  segments	
  of	
  the	
  
market,	
  and	
  the	
  overall	
  economy	
  appears	
  to	
  be	
  the	
  largest	
  determining	
  factor	
  in	
  
tourism	
  performance	
  (see	
  Figure	
  2).	
  As	
  with	
  most	
  sectors	
  of	
  the	
  economy,	
  the	
  battle	
  for	
  
tourism	
  dollars	
  is	
  intense,	
  meaning	
  that	
  diversity	
  within	
  the	
  accommodations	
  market	
  is	
  
essential	
  to	
  meeting	
  customer	
  demand	
  and	
  remaining	
  competitive	
  with	
  other	
  cities	
  and	
  
regions	
  throughout	
  the	
  nation	
  and	
  world.	
  Seen	
  in	
  this	
  light,	
  short	
  term	
  rentals	
  are	
  a	
  
highly	
  valuable	
  asset	
  in	
  the	
  Coachella	
  Valley’s	
  tourism	
  portfolio.	
  
	
  
	
  
Legal	
  Disclaimer	
  
TXP	
  reserves	
  the	
  right	
  to	
  make	
  changes,	
  corrections	
  and/or	
  improvements	
  at	
  any	
  time	
  
and	
  without	
  notice.	
  	
  In	
  addition,	
  TXP	
  disclaims	
  any	
  and	
  all	
  liability	
  for	
  damages	
  incurred	
  
directly	
  or	
  indirectly	
  as	
  a	
  result	
  of	
  errors,	
  omissions,	
  or	
  discrepancies.	
  TXP	
  disclaims	
  any	
  
liability	
  due	
  to	
  errors,	
  omissions	
  or	
  discrepancies	
  made	
  by	
  third	
  parties	
  whose	
  material	
  
TXP	
  relied	
  on	
  in	
  good	
  faith	
  to	
  produce	
  the	
  report.	
  
	
  
Any	
  statements	
  involving	
  matters	
  of	
  opinion	
  or	
  estimates,	
  whether	
  or	
  not	
  so	
  expressly	
  
stated,	
  are	
  set	
  forth	
  as	
  such	
  and	
  not	
  as	
  representations	
  of	
  fact,	
  and	
  no	
  representation	
  is	
  
made	
  that	
  such	
  opinions	
  or	
  estimates	
  will	
  be	
  realized.	
  The	
  information	
  and	
  expressions	
  
of	
  opinion	
  contained	
  herein	
  are	
  subject	
  to	
  change	
  without	
  notice,	
  and	
  shall	
  not,	
  under	
  
any	
  circumstances,	
  create	
  any	
  implications	
  that	
  there	
  has	
  been	
  no	
  change	
  or	
  updates.	
  
	
  

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The Local Economic Impact of Participating Coachella Valley Short Term Rentals

  • 1.     The  Local  Economic  Impact   of  Participating  Coachella  Valley   Short  Term  Rentals   TXP,  Inc.   1310  South  1st  Street  -­‐  Suite  105   Austin,  Texas  78704   (512)  328-­‐8300  phone   www.txp.com  
  • 2. 1Participating  Short  Term  Rental  Economic  Impact  –  Coachella  Valley  |  Spring  2014   Overview   The  Short  Term  Rental  Advocacy  Center  (STRAC)  was  formed  in  2013  by  a  coalition  of   several  short  term  rental  marketplace  stakeholders  as  a  means  to  engage  travelers,   property  owners,  and  local  residents  in  a  conversation  about  the  regulation  of  this   growing  market  segment.    STRAC  member  companies  have  more  than  1.1  million   listings  worldwide.    As  short  term  rentals  continue  to  grow  in  popularity  and  use,  it  is   vital  that  all  stakeholders  have  a  clear  understanding  of  the  benefits  presented  by  this   expanding  market  segment.    To  this  end,  STRAC  contracted  TXP,  Inc.  to  assess  the   economic  impacts  of  short  term  rentals  attributable  to  their  customers  (termed   “participating  short  term  rentals”  in  this  report)  in  the  Coachella  Valley,  CA.         This  report  details  the  economic  impact  of  participating  short  term  rentals  in   California’s  Coachella  Valley.    The  impact  is  significant,  as  participating  short  term  rental   activity  in  2013  created  total  economic  output  of  $272.0  million  and  2,539  jobs  in  the   local  Coachella  Valley  economy.    The  report  provides  an  overview  of  trends  in  the   overall  tourism  sector  in  the  Coachella  Valley  area,  followed  by  the  results  of  the   analysis  and  conclusions.  The  input  data  on  direct  accommodations  spending  was   provided  by  STRAC  member  companies  and  reflects  estimates  for  2013.  While  the  vast   majority  of  the  properties  are  located  in  the  Coachella  Valley,  Riverside  County  was   used  as  the  study  area  for  analytical  consistency,  and  all  impacts  are  estimated  at  the   county  level.         Tourism  and  the  Economy  of  the  Coachella  Valley   Overall  Context   Recognized  for  its  natural  beauty,  chic  boutiques,  luxury  spas,  and  rocking  music   festivals,  tourism  is  a  key  component  of  the  Coachella  Valley’s  economy.    Visitor   spending  is  an  important  generator  of  local  employment  and  economic  activity  as  well   as  state  and  local  tax  revenue.  The  Greater  Palm  Springs  Convention  and  Visitor’s   Bureau  estimates  that  one  out  of  every  four  jobs  in  the  area  are  sustained  by  the   tourism  industry.    Employment  in  the  Accommodation  and  Food  Services  sector  and  the   Arts,  Entertainment,  and  Recreation  sector  has  shown  strong  growth  over  the  past  few   years.    These  tourism-­‐related  industries  have  far  outpaced  the  rate  at  which  overall   employment  has  grown  in  the  Coachella  Valley,  emphasizing  the  importance  of  tourism   to  the  region’s  economy.           Tourism  in  the  Coachella  Valley  is  driven  by  the  sum  of  its  offerings,  but  over  the  past   decade,  the  region  has  become  increasingly  well  known  for  its  annual  music  festival.     The  Coachella  Valley  Music  and  Arts  Festival  hosted  nearly  300,000  attendees  in  2013,   an  increase  of  more  than  ten  times  the  total  attendance  at  the  inaugural  festival  in  
  • 3. 2Participating  Short  Term  Rental  Economic  Impact  –  Coachella  Valley  |  Spring  2014   1999.    The  music  festival  expanded  to  two  weekends  of  three  days  each  in  2012  to   accommodate  growing  demand.    The  estimated  daily  attendance  figures  have   continued  to  climb,  tending  to  track  patterns  in  the  overall  economy.       Table  1:  Employment  by  Selected  Sectors  in  Riverside  County,  CA     Accommodation  and   Food  Services  Sector   Arts,  Entertainment,   and  Recreation  Sector   Total  Employment   2007   63,309   26,048   861,029   2008   66,073   28,264   887,214   2009   63,306   29,004   868,285   2010   64,685   27,302   865,369   2011   64,944   27,616   859,040   2012   67,194   30,256   866,110   Change   6.1%   16.2%   0.6%           Source:  American  Community  Survey  5-­‐year  estimates,  US  Census  Bureau     Figure  1:  Average  Daily  Attendance  at  the  Coachella  Music  Festival  (thousands  of   attendees)     Source:  Goldenvoice  and  the  Indio  Police  Department     Similarly,  total  annual  hotel  revenue  is  dependent  on  a  range  of  factors.    These  include   overall  national  economic  climate,  which  impacts  demand,  as  well  as  industry-­‐specific   factors  such  as  the  construction  of  new  hotel  properties.    Annual  hotel  revenue  in  
  • 4. 3Participating  Short  Term  Rental  Economic  Impact  –  Coachella  Valley  |  Spring  2014   Riverside  County  declined  sharply  between  2007  and  2009  but  has  since  rebounded  so   that  the  total  revenue  in  2013,  $535.3  million,  has  surpassed  the  previous  high  in  2007.         Figure  2:  Annual  Riverside  County  Hotel  Revenue  ($millions)     Source:  Smith  Travel  Research,  TXP     Short  Term  Rentals  in  the  Coachella  Valley   Short  term  rentals  are  an  important  part  of  the  accommodations  market  in  the   Coachella  Valley.  In  2013,  the  participating  short  term  rentals  had  more  than  265,000   nights  booked  in  the  7,754  properties  listed  in  the  area.         The  weighted  average  daily  rate  for  participating  short  term  rental  listings  in  Riverside   County,  CA  was  $272  in  2013.    Smith  Travel  Research  found  that  hotels  in  the  same  area   had  an  average  daily  rate  of  $113  in  2013.    As  the  majority  of  short  term  rental  listings   in  this  area  are  entire  homes  or  condos  (and  thus  have  more  than  one  bedroom),  this   makes  short  term  rentals  a  budget-­‐friendly  option  for  families  and  groups.         As  in  most  communities,  the  average  length  of  stay  for  short  term  rental  users  is  longer   than  visitors  who  stay  in  hotels.    The  average  number  of  people  in  the  party  also  tends   to  be  higher.    In  2013,  participating  short  term  rental  users  visited  the  Coachella  Valley   for  an  average  of  9.1  nights  with  an  average  of  4.4  people  travelling  together.          
  • 5. 4Participating  Short  Term  Rental  Economic  Impact  –  Coachella  Valley  |  Spring  2014   Economic  Impact  Calculations   The  process  for  calculating  the  economic  impacts  associated  with  participating  short   term  rentals  is  fairly  straightforward.    First,  direct  spending  in  different  applicable   tourism  categories  associated  with  the  short  term  rentals  is  estimated.    Next,  specific   multipliers  provided  by  the  Bureau  of  Economic  Analysis  RIMS  II  system  for  each   industry  for  each  county  are  used  to  estimate  the  ripple  effects  that  are  attributable  to   the  direct  spending;  the  combination  forms  the  total  economic  impact.       Direct  Spending  Estimates   TXP  used  the  data  provided  by  STRAC  member  companies  (specifically  number  of  nights   booked,  party  size,  length  of  stay,  and  daily  rate)  to  create  an  aggregated  estimate  of   direct  lodging  spending  by  participating  short  term  renters  of  $72.2  million  during  2013.     This  data  was  then  combined  with  data  from  the  US  Bureau  of  Economic  Analysis’   Travel  and  Tourism  Satellite  Accounts  to  further  estimate  the  additional  direct  spending   patterns  of  visitors  to  the  Coachella  Valley.           For  example,  for  every  $100  a  traveler  spent  on  lodging,  they  spent  an  additional  $69   on  food,  $24  on  local  transportation,  $48  on  arts,  entertainment,  and  recreation   activities,  and  $59  on  retail  shopping.    As  a  result,  the  total  direct  spending  by  short   term  renters  in  the  Coachella  Valley  for  2013  is  estimated  at  $216.5  million.  The   breakdown  of  this  total  direct  visitor  spending  by  category  is  shown  in  Figure  3  below.     Figure  3:    Visitor  Spending  ($millions)     Source:  Travel  and  Tourism  Satellite  Accounts;  US  Bureau  of  Economic  Analysis    
  • 6. 5Participating  Short  Term  Rental  Economic  Impact  –  Coachella  Valley  |  Spring  2014   Economic  Impact  Methodology   The  economic  impacts  extend  beyond  the  direct  activity  outlined  above.    In  an  input-­‐ output  analysis  of  new  economic  activity,  it  is  useful  to  distinguish  three  types  of   expenditure  effects:  direct,  indirect,  and  induced.    Direct  effects  are  production  changes   associated  with  the  immediate  effects  or  final  demand  changes.    The  payments  made   by  a  visitor  to  a  hotel  operator  or  taxi  driver  are  examples  of  a  direct  effect.     Indirect  effects  are  production  changes  in  backward-­‐linked  industries  caused  by  the   changing  input  needs  of  directly  affected  industries  –  typically,  additional  purchases  to   produce  additional  output.    Satisfying  the  demand  for  an  overnight  stay  will  require  the   hotel  operator  to  purchase  additional  cleaning  supplies  and  services,  for  example,  and   the  taxi  driver  will  have  to  replace  the  gasoline  consumed  during  the  trip  from  the   airport.    These  downstream  purchases  affect  the  economic  status  of  other  local   merchants  and  workers.     Induced  effects  are  the  changes  in  regional  household  spending  patterns  caused  by   changes  in  household  income  generated  from  the  direct  and  indirect  effects.    Both  the   hotel  operator  and  taxi  driver  experience  increased  income  from  the  visitor’s  stay,  for   example,  as  do  the  cleaning  supplies  outlet  and  the  gas  station  proprietor.    Induced   effects  capture  the  way  in  which  this  increased  income  is  spent  in  the  local  economy.   Figure  4:    The  Flow  of  Economic  Impacts   Once  the  ripple  effects  have  been  calculated,  the  results  can  be  expressed  in  a  number   of  ways.    Four  of  the  most  common  are  “Output,”  equivalent  to  sales;  “Value-­‐added,”   which  is  sales  minus  the  cost  of  goods  sold;  “Earnings,”  which  represents  the   compensation  to  employees  and  proprietors;  and  “Employment,”  which  refers  to   permanent,  full-­‐time  jobs  that  have  been  created  in  the  local  economy.         The  interdependence  between  different  sectors  of  the  economy  is  reflected  in  the   concept  of  a  “multiplier.”    An  output  multiplier,  for  example,  divides  the  total  (direct,   indirect  and  induced)  effects  of  an  initial  spending  injection  by  the  value  of  that   injection  –  i.e.,  the  direct  effect.    Larger  multipliers  mean  greater  interdependence   among  different  sectors  of  the  economy.    An  output  multiplier  of  1.4,  for  example,   Indirect Induced Total ImpactDirect + + =
  • 7. 6Participating  Short  Term  Rental  Economic  Impact  –  Coachella  Valley  |  Spring  2014   means  that  for  every  $1,000  injected  into  the  economy,  another  $400  in  output  is   produced  in  all  sectors.         Economic  Impact  Results   Participating  short  term  rental  activity  in  2013  created  total  economic  output  of  $272.0   million,  value-­‐added  of  $155.7  million,  earnings  of  $70.1  million,  and  2,539  jobs  to  the   local  Coachella  Valley  economy.    The  majority  of  this  activity  is  concentrated  in  the   sectors  with  the  highest  direct  tourism  spending,  such  as  food  services;  arts,   entertainment,  and  recreation;  and  retail  trade.         Table  2:  Economic  Impact  of  Participating  Short  Term  Rentals  in  Riverside  County   Industry   Output     Value-­‐Added   Earnings     Jobs   Ag.,  forestry,  fishing,  &  hunting   $1,219,699   $410,860   $221,071   7   Mining   $98,826   $53,025   $19,528    -­‐     Utilities   $5,012,668   $2,995,602   $859,443   8   Construction   $1,853,774   $928,188   $514,629   10   Manufacturing   $17,477,975   $6,055,927   $2,322,748   48   Wholesale  trade   $7,098,913   $4,793,501   $1,672,780   26   Retail  trade   $36,321,158   $23,796,686   $10,672,578   381   Transportation  &  warehousing   $24,116,019   $9,026,502   $6,218,930   180   Information   $8,860,128   $4,773,210   $1,521,963   20   Finance  &  insurance   $8,071,042   $5,042,678   $1,744,741   27   Real  estate  and  rental  &  leasing   $29,930,915   $22,249,107   $1,837,614   119   Prof.,  scientific,  &  tech.  services   $4,931,917   $3,293,533   $1,838,748   27   Management  of  companies     $1,251,079   $776,119   $427,969   5   Admin.  &  waste  services   $5,731,528   $3,767,198   $2,024,304   71   Educational  services   $1,758,103   $1,004,960   $643,888   20   Health  care  &  social  assistance   $15,435,823   $9,519,090   $6,165,114   125   Arts,  entertainment,  &  recreation   $35,990,810   $22,713,770   $12,206,880   562   Accommodation   $2,210,639   $1,421,517   $629,537   20   Food  services  &  drinking  places   $56,131,884   $29,209,630   $16,703,640   841   Other  services   $8,466,187   $4,313,768   $2,091,194   49   Total     $271,969,086   $155,734,011   $70,116,228   2,539   Source:  TXP   Note:    since  lodging  activity  takes  place  in  private  homes,  the  spending  for  this  segment  of  the  impact  analysis  is  run   through  the  Household  sector  of  the  economy,  rather  than  the  Accommodations  sector.     Tax  revenue  further  amplifies  the  impact  of  tourism  and  tourist  spending  in  the   Coachella  Valley’s  economy.    Both  local  jurisdictions  and  the  State  of  California  benefit   from  direct  spending  by  visitors,  as  well  as  realizing  revenue  associated  with  the  ripple  
  • 8. 7Participating  Short  Term  Rental  Economic  Impact  –  Coachella  Valley  |  Spring  2014   effects  of  that  spending.    In  general,  tourism  is  an  attractive  revenue  source  for  local   governments,  especially  since  these  taxes  are  not  imposed  on  local  residents.       Conclusions   Participating  short  term  rental  related  spending  is  an  important  part  of  the  tourism   sector  in  the  Coachella  Valley,  ultimately  creating  thousands  of  jobs  and  millions  of   dollars  of  earnings  and  tax  revenue  for  the  community  each  year.    This  appears  to  be   largely  net  new  activity;  different  types  of  lodging  serve  discrete  segments  of  the   market,  and  the  overall  economy  appears  to  be  the  largest  determining  factor  in   tourism  performance  (see  Figure  2).  As  with  most  sectors  of  the  economy,  the  battle  for   tourism  dollars  is  intense,  meaning  that  diversity  within  the  accommodations  market  is   essential  to  meeting  customer  demand  and  remaining  competitive  with  other  cities  and   regions  throughout  the  nation  and  world.  Seen  in  this  light,  short  term  rentals  are  a   highly  valuable  asset  in  the  Coachella  Valley’s  tourism  portfolio.       Legal  Disclaimer   TXP  reserves  the  right  to  make  changes,  corrections  and/or  improvements  at  any  time   and  without  notice.    In  addition,  TXP  disclaims  any  and  all  liability  for  damages  incurred   directly  or  indirectly  as  a  result  of  errors,  omissions,  or  discrepancies.  TXP  disclaims  any   liability  due  to  errors,  omissions  or  discrepancies  made  by  third  parties  whose  material   TXP  relied  on  in  good  faith  to  produce  the  report.     Any  statements  involving  matters  of  opinion  or  estimates,  whether  or  not  so  expressly   stated,  are  set  forth  as  such  and  not  as  representations  of  fact,  and  no  representation  is   made  that  such  opinions  or  estimates  will  be  realized.  The  information  and  expressions   of  opinion  contained  herein  are  subject  to  change  without  notice,  and  shall  not,  under   any  circumstances,  create  any  implications  that  there  has  been  no  change  or  updates.