Short Term Rental Performance
In Florida, there is a county-level tax option called Tourism Development Tax, or "Bed Tax". This money is remitted from all short-term rental properties (6 months lease or less), including hotels. This data is a direct line to how well the short-term rental market in the area is performing, however the data is noisy. Local governments and institutions seem to look at this data with the perception that higher highs means steady growth, which is not true, but in the case of Okaloosa County, there is steady underlying growth beneath inflation-driven revenue and seasonal volatility.
Okaloosa clearly has a strong enough underlying economy to steadily grow through such extreme seasonality.
Extreme seasonality has implications for business-owners which affect the short-term rentals in the area over the long-term. Huge influxes of tourists in the Summer months followed by a near ghost town in the Winter months means business owners that serve the tourists have to take strict budgeting measures to survive. They lay off employees to cut costs, buy cheaper products or food to sell, etc. This creates a demoralized culture where only a few are benefiting from the community they help run and is now selling cheap goods to luxury buyers. This hurts tourism revenue over time.
Okaloosa seems to be maintaining well. There is certainly a higher barrier for entry than some neighboring areas, but the performance is clear. The clean (blue line) revenue gives a moderate positive outlook on how business is going over time given the clear inflation problem.
Testing for this inflation can be done by knowing the business owners. If the tourists are using less cash and debit and more credit cards and other means of financing their vacations, you can expect to see this kind of extreme seasonality and to have issues with inflation skewing numbers. Investors in the Destin area should be careful of giant leaps in revenue during the Summer as volume is not equal to growth. Analyzing financials is the best way to maintain the health of an investment in the Okaloosa (Destin) area.
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Christopher Woodward
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