Vacation rentals in Hawaii appear to have displaced timeshares as the third most sought-after lodging choice behind hotels and condominiums in 2018.

Historically, hotels, condominium rentals and timeshares have been at the top of Hawaii’s institutional lodging choices. Hawaii Tourism Authority data from 2003 to 2017 showed timeshares as the third most-popular lodging choice.

But vacation rentals pushed ahead of timeshares in January 2018 and continued to be the more popular choice throughout the first 11 months of 2018.

While HTA doesn’t have 2018’s final tourism numbers, arrivals are expected to skirt close to a benchmark 10 million — largely because of added flights and the added capacity that vacation rentals bring to the state’s lodging inventory.

Whether the popularity of vacation rentals is good or bad for Hawaii depends on whom you ask. A study commissioned by the Travel Technology Association and released in July found that if alternative accommodations were severely restricted, on Oahu alone the local economy could lose $1.2 billion, 7,000 jobs, and $336 million in household income.

“Alternative accommodations are playing an increasingly vital role in Oahu’s visitor industry as more guests travel to the island and hotel occupancy rates are near max capacity,” Erik Kloninger, principal at Kloninger & Sims LLC and lead researcher of the study, said in a statement. “Efforts by lawmakers to significantly reduce the number of accommodations will have a significant effect on the island’s economy and hurt hundreds of local businesses that benefit from the revenue these visitors bring in.”

Along with the increased popularity of vacation rentals has come community backlash around the country, largely over increased traffic and disruption in residential neighborhoods where units are located — often illegally in Hawaii.

“Obviously there’s a market for vacation rentals, but the proliferation is out of control. We are over the tipping point,” North Shore resident Kathleen Pahinui said.

HOTELS STILL FIRST CHOICE

According to HTA data, the majority of Hawaii’s tourists still chose to stay at hotels or condos, but traditional accommodations have been significantly outpaced by the number of visitors choosing rental houses, bed-and-breakfasts, and private or shared rooms in private houses.

During the first 11 months of 2018, HTA reported that some 5.4 million visitors stayed in a hotel, which was up nearly 4 percent from the same period in 2017. Transient vacation rental unit stays at vacation and bed-and-breakfast homes, and private and shared rooms came to just over 1.1 million, a nearly 24 percent increase from the first 11 months of 2017.

One of the fastest growing accommodations categories through November was rental homes, where reported stays rose nearly 25 percent to 856,390. In comparison, the number of visitors who planned to stay in a timeshare through November was flat at 770,606.

Pahinui said she’s not surprised by the HTA data since timeshares are basically “legal transient vacation rental units” that “lock people into paying long-term maintenance fees.”

“Now you can go and stay wherever and not be locked into a long-term deal where you have to pay maintenance fees,” she said.

Joseph Toy, president and CEO of Hospitality Advisors LLC, said he believes vacation rentals are here to stay, but that there are limits to how far their popularity may take them.

“Vacation rentals offer more freedom of choice and give visitors the chance to embed in a community. They are similar to timeshares, but they don’t offer the prepaid vacation feature or the ability to transfer to other properties in the brand system. Some consumers still will chose timeshare,” Toy said. “Ultimately, I think most Hawaii customers will stay in hotels, which have always dominated our market.”

Toy said traditional lodging will continue to have the largest footprint since “new construction is increasingly regulating vacation rentals and the counties and state have discussed setting regulations that could limit their growth.”

But the trajectory of Hawaii’s vacation rental market is hard to predict.

In the beginning, vacation rentals were often touted as a less expensive alternative that probably wouldn’t displace traditional visitor lodging. Hawaii still has many economical vacation rental offerings. However, increased demand and wider acceptance from consumers has prompted the release of higher-end inventory that is marketed on digital platforms and competes more directly with the state’s institutional visitor lodging.

Former U.S. President Barack Obama and his family were spotted during the holidays at the $6,250-a-night Paul Mitchell estate in Kailua, where they have stayed on past vacations.

LUXURY RENTALS

Hawaii now has some of the most expensive Airbnb listings in the nation, according a study released Thursday by Upgraded Points. The study, which searched for the most expensive Airbnb rentals available in each state for a weekend stay in June, found a villa in Kailua that rented for $9,998 per night.

Airbnb said in a statement Thursday, “This listing is just one of the thousands of homes available on the Airbnb platform across Hawaii and while truly beautiful and spacious, is not representative of the incredible diversity of homes that can be found on Airbnb. The vast majority of Airbnb’s listings in Hawaii are providing affordable options for travelers and creating important supplemental income for locals.”

David Cusick, an analyst who works with Upgraded Points, said for the dates used in the study there were 305 available Airbnbs in Hawaii.

“I’m not sure if there is a universal standard for what makes a luxury rental, but there were 64 rentals with a price of $850-plus a night — that’s 20.9 percent. I don’t have the data for how that compares to other states but that 1 out of 5 is priced that high is pretty eye-opening,” Cusick said.

The Kailua villa wasn’t the nation’s most expensive Airbnb during that time period. In Farmington, Mo., a unit was renting for $12,000 a night. However, the study estimated that the cost of a two-night stay at the Kailua villa would be the equivalent of 17.8 months rent in the regular Hawaii market.

Windward activist KC Connors says the potential for owners, especially off-shore investors, to fetch high vacation rental rates has made it difficult for local renters to find affordable housing in her community.

“I just want to cry sometimes. We had an elderly couple, he was Hawaiian, who were homeless in Hauula and it took us nearly a year to find them housing,” Connors said.

Pahinui said the spread of vacation rentals into Hawaii’s neighborhoods is also eroding Hawaii’s resort districts and institutional lodging.

“Suddenly you don’t know your neighbors anymore. There’s more parking, more noise. Fewer affordable rentals, higher property taxes. More people falling into homelessness and more people moving to the mainland,” Pahinui said.

“It’s a new year; I hope state and local lawmakers will work together to find solutions,” she said. “The situation is dire.”