Puerto Rico gov’t loses millions due to lack of proper data on STRs

Flaws in the data collection and organization of thousands of short-term rentals undermine oversight, even as the Puerto Rico Tourism Company recognizes this sector as its most significant revenue source.

By Luis Joel Méndez-González | Centro de Periodismo Investigativo

The Puerto Rico Tourism Company (CTPR, in Spanish) lacks critical information such as the physical addresses, the number of properties, and the names of owners for all short-term accommodations in Puerto Rico, a deficiency that hampers municipal planning for accommodation needs while also limiting the effective collection and oversight of the Room Occupancy Tax, according to an investigation by the Centro de Periodismo Investigativo (CPI).

According to data provided by CTPR’s Chief Financial Officer, Gustavo González-Serrano, $35.2 million was collected in the 2023-2024 fiscal year from the Room Occupancy Tax levied on short-term accommodations. This collection did not capture the room taxes from all short-term rentals in Puerto Rico, partly because the Tourism Company does not even know the exact number of properties rented for less than three months, the public entity acknowledged to the CPI as part of a litigation for access to information.

The Room Occupancy Tax Act (Act 272-2003) requires hoteliers and lodging establishments to have a tax identification number to operate in Puerto Rico, and their information is grouped in a Registry of Hoteliers.

“When entering the Registry of Hoteliers, some hoteliers voluntarily submit both the physical addresses of the properties and the names of their owners, and they are included in some of these physical files,” according to stipulations accepted by the CTPR during the litigation initiated by the CPI a year ago.

Since 2022, the Tourism Company has required hoteliers to provide the lodging address on their forms, but listing the owners’ names remains optional. The CTPR does not update the digital Registry of Hoteliers with all the information in its physical files for short-term accommodations. The CPI verified this by reviewing a random sample of 19 physical files, which hold the documents submitted by hoteliers on paper, and found that some physical records included more detailed information about property owners and the locations of their accommodations than what was reflected in the digital registry provided by the Tourism Company.

For instance, the physical file for Marsters Real Estate Inc. included addresses for 19 short-term rentals, but none were included in the digital versions of the Registry of Hoteliers provided to the CPI. Similarly, Río Mar Real Estate Services & Management Corporation had 81 addresses in its physical file, but these were also missing from the digital registry shared with the CPI.

Initially, the CTPR did not provide the physical addresses or the names of the owners of the 35 accommodations operated by Wall Capital LLC, even though the information was available in the physical file where even the cadastral numbers of each rental property appeared. After the CPI confronted the CTPR with this finding, the information was included in the last information delivery in September.

Through the lawsuit for information requests and the review of physical files, the CPI found out where some of the short-term accommodations are located and who their owners are, information that Tourism initially said was confidential.

By the summer of this year, the Registry of Hoteliers of the Tourism Company had recorded 6,472 hoteliers dedicated to short-term accommodation and 11,398 rooms of this type. Of the 6,472 hoteliers, only 3,880 have a physical address and a cadastral number identifying where their businesses are located, according to an analysis by the CPI of the Registry of Hoteliers as of June 30.

The number of rooms that Tourism has in its Registry cannot be understood literally because, for hotel tax purposes, a “room” can be a whole house even if it has several rooms. It can also be rooms within a house or a building. So, according to the Registry of Hoteliers, 11,398 spaces are used as short-term accommodations in Puerto Rico, which could be whole houses or rooms.

But this data from the CTPR contrasts with those offered by the industry and could represent only about half of the housing units that independent studies estimate operate in Puerto Rico as short-term rentals, assured Raúl Santiago Bartolomei, a professor at the Graduate School of Planning at the Río Piedras Campus of the University of Puerto Rico.

Airbnb alone has 24,000 active properties in Puerto Rico, according to the Data Analysis Division of the firm Estudios Técnicos Inc., and there are other platforms, such as Join a Join and Vrbo. Companies Abexus Analytics and AirDNA estimate that there are between 20,000 and 30,000 properties that serve as short-term accommodations.

According to the Room Occupancy Tax Act, a hotelier is any natural person or corporation that operates lodging, including short-term accommodations. A hotelier can be the owner of the accommodation, but also an intermediary who manages the property and handles the rental. A short-term accommodation includes, according to this same law, houses, apartments, cabins, villas, motorhomes, floating homes, and boats, among other rental concepts, rented for a term of less than 90 days.

The Room Occupancy Tax is the largest source of revenue for the CTPR, said the chief financial officer of the CTPR in a separate conversation with the CPI during the NEXT: Puerto Rico Tourism Summit. Part of these collections go to the financing of the Convention Center District Authority and Discover Puerto Rico, both government entities.

The CPI found that at least four hoteliers registered in the Tourism Registry — where they appear registered with 521 rooms — no longer engage in that business. Some assured the CPI that they stopped managing that business at least since 2020, although they remain active in the Registry. As part of the litigation for access to information filed against the agency, the CPI received five versions of the Registry of Hoteliers that lacked information, were outdated, and had multiple flaws in the collection and organization of data on short-term rentals.

The CTPR took almost a year from the original request to comply, for which the Court of First Instance imposed a fine of $62,400 for contempt. The Court of Appeals confirmed the decision that validated the claim for access to public information presented by the CPI. The Supreme Court decided not to review the decision of the Court of Appeals, at the request of the CTPR.

Hoteliers are required to list a contact address in the Hoteliers Registry, but many resort to listing their corporations’ physical or mailing addresses. As a result, the Tourism Company has no clear knowledge of where the commercial operations they tax are located, nor does it have full visibility of all properties marketed as short-term accommodations.

“Tourism does not maintain a registry of owners and does not maintain a registry of properties,” said CTPR attorney Raúl Márquez-Hernández during a contempt hearing in July in the Court of First Instance of San Juan. “Could it seem unreasonable to anyone? Could it seem complicated to oversee tax collection that way? Yes, but it is the public policy of the Government of Puerto Rico, and it is what the Tourism Company has to implement,” he added.

Insufficient data collected for planning purposes
In the last 10 years, Puerto Rico experienced an impressive rise in short-term rental units. According to press reports, from 1,000 housing units destined for this commercial activity in 2014, according to the firm Abexus, it increased to more than 25,000 units in 2023.

The CTPR did not respond to the CPI’s question about the discrepancy between the figure of 11,398 rooms and independent studies estimating between 20,000 to 30,000 properties used as short-term accommodations. The data has been published in multiple forums, even in some sponsored by the CTPR.

The difference between the 6,472 hoteliers and the more than 25,000 housing units available in 2023 for short-term rental can be partly because a single hotelier can manage several rental properties, according to previous explanations from the CTPR. Since the public entity does not register all existing short-term rental properties, it cannot confirm that those managing more than 25,000 units are all registered as hoteliers and pay room tax.

“We maintain a Registry of Hoteliers for which for each registered hotelier number there may be one or several properties in their name,” wrote González Serrano in a communication to the CPI.

Rentals off the radar
The co-president of the organization Viva Puerto Rico Short-Term Rental Alliance, René Acosta, agreed that the difference in figures is influenced by the number of units each hotelier markets, but also acknowledged that there are people who engage in this business who have never registered as hoteliers.

“Many people are not registered [with Tourism] because they are only with Airbnb and if you are with Airbnb, at this moment, it does not require that [hotelier] number,” explained the also member of the Board of Directors of the CTPR, who thinks that the public entity needs more “teeth” to strengthen oversight.

The Room Occupancy Tax Act establishes that “intermediaries will be required to ask providers, owners, or operators of properties used as Short-Term Supplemental Accommodations (short-term rentals) to register with the Tourism Office and obtain a Tax Identification Number before doing business with them.”

The president of the Association of Paradores and Puerto Rican Small Inns, Xavier Ramírez-Rodríguez, estimated that the Tourism Company loses over $29 million in collecting the Room Occupancy Tax for not having a real number of short-term accommodations in operation. The businessman explained that this estimate comes from AirDNA data.

In total, the Registry of Hoteliers contains information on 6,978 hoteliers, including hotels, inns, and motels. This Registry notes the number of rooms these businesses have available.

The same Registry is used to document short-term accommodations. In Puerto Rico, renting entire residences or apartments is the most frequent modality, and renting individual rooms is less common. For the Room Occupancy Tax, a house rented entirely will pay taxes as if it were a room, regardless of the number of rooms it has, according to the CTPR.

“As part of the requirements of Act 272, as amended, anyone who owns and rents a property for a period of less than 90 consecutive days must charge a room occupancy tax equivalent to 7% of the room rate and present it to the CTPR. This tax applies to studios, apartments, houses, villas, or any other property rented for less than 90 consecutive days,” it explains on its website.

It is the hotelier who requests the identification number necessary to remit the Room Occupancy Tax, as required by Act 272-2003. So, it is responsible for collecting, retaining, and remitting the tax billed to the guest.

For example, if a hotelier rented their property in Cabo Rojo, on the West Coast, for 20 nights in November and their property in San Juan for 20 nights, they only must indicate that they rented 40 nights during that month and pay the corresponding taxes without detailing where these rentals occurred.

By registering only the number of rooms for rent, the CTPR’s Registry of Hoteliers primarily serves a tax collection purpose but limits the information available for effective oversight of collections and tourism planning, several experts interviewed by the CPI agreed. The CTPR’s duty is not only to collect taxes but also to “create and facilitate the implementation of public policies to make Puerto Rico a primary and unique destination within the global tourism market,” according to its website.

“There is no legal authority to create a registry of owners or a registry of properties. Much less does the Tourism Company have the authority to require anyone who wants to rent a property short-term to reveal or register the physical address of the properties or the names of the owners,” argued attorney Márquez-Hernández during the contempt hearing for the Tourism Company’s non-compliance with the CPI.

However, that argument is not only a limited view of the CTPR’s duty regarding tax collection but is also contradictory to the modifications that the Tourism Company itself has made to its Hoteliers Registry form and with some information requests it has required from certain hoteliers, as the CPI observed during the review of 19 physical files.

For example, in the form revised in 2022, the CTPR included the optional question for the hotelier of whether they were the property owner and, if not, requested a letter from the owner authorizing them to manage it. The physical addresses of each accommodation and their respective cadastral numbers were also requested. In 2024, it became mandatory to indicate in the application whether the hotelier owns the unit, but attaching the authorization letter is optional, so there is no uniformity in the available data.

Upon reviewing 19 physical files, the CPI found that the CTPR’s Hospitality Tax Division requested by letter from 13 hoteliers the physical address of their rental properties. The files do not show follow-ups to these requests or repercussions for not providing them.

Unequal competition for guests
The president of the Association of Paradores and Puerto Rican Small Inns highlighted that the Room Occupancy Tax Regulation lacks penalties, such as fines or retroactive payments, when short-term rental managers do not request a hotelier number from the CTPR to evade taxes or out of ignorance. Ramírez-Rodríguez stated that platforms like Airbnb do not require the owner or manager of the property to enter their hotelier number.

The Tourism Company has a particular classification for online accommodation rental platforms. In the Registry, platforms like Join a Join appear with 1,500 rooms, Posadas Puerto Rico LLC with 11 rooms, Airbnb with only one, and HomeAway (now Vrbo) with zero.

When asked why the platforms registered so few or no rooms, when hundreds to thousands of active properties can be seen on their pages, the CTPR provided a vague written response: “At the time of their registration, the platforms provided an estimated number of properties to market. To date, the platforms do not provide a detail of the physical information or the names of the owners in the marketed units.”

The limited staff at the CTPR and its lack of commitment to oversight have contributed to the inconsistencies in the data on the total number of short-term accommodations in Puerto Rico, according to Ramírez Rodríguez.

For economist and international business specialist Gerardo González-Núñez, the lack of regulation of short-term accommodations harms Puerto Rico’s tourism industry to the extent that it does not level its competition with hotels and inns.

“There is an asymmetry between the treatments to inns versus private properties or short-term accommodations,” he said. “The government has not been able to weave an analysis or policy for this type of business.”

The economist added that there could be hoteliers who, despite having structures with several rooms equal to inns, register them as short-term rentals to evade the costs and requirements they would have to meet if classified as inns in the Tourism Company. For example, Bahía Beach Resort, of the 18 properties it managed as of April, 11 were located in the Las Veranda condominium in Río Grande.

An inn is considered a parador when it has at least seven rooms and is located outside the San Juan metropolitan area.

On the other hand, for the same month, of the 180 properties managed by West Indies Vacation Rentals as short-term accommodations, 44 apartments were in Condado Lagoon Villas, in San Juan, which is an aparthotel. The minimum inventory to be considered a hotel is 15 rooms.

According to the president of the Association of Paradores and Puerto Rican Small Inns, hotels and inns must invest in certifications that short-term accommodations are not required. They also must pay municipal licenses, as well as their electricity bill and their tax deductions at the end of the year as a business.

Additionally, he calculated that, aside from the $29 million left uncollected in taxes by the government, another $100 million is lost annually in licenses, merchant registrations, and health and fire certificates, among other requirements, because these hoteliers do not have to meet the same requirements demanded of hotels and inns.

“There are a series of permitting requirements that we need to have as inns that are not [required of] short-term rentals that are direct competition, sometimes even whole buildings that they recovered and that are practically hotels,” he said.

To be properly regulated, it is important to count how many such accommodations operate in Puerto Rico, said González-Núñez.

CTPR’s press officer, Leslie Díaz, informed the CPI that the Tourism Company only has two auditors to oversee this tax.

“If you do not collect precise information, you cannot oversee it,” said former Treasury Secretary and CPA Teresita Fuentes-Marimón, referring to the CPI’s findings on the Room Occupancy Tax. “The government entity that receives money has to request that information because it is not only for oversight, but it goes to the government’s accounting and is important for its financial statements.”

The former official warned that the lack of precise information about short-term rental owners could lead to underestimating the tax collections.

“A tax administrator, which is what the government is when it administers a collection, has to corroborate as part of its duties that it’s paid what it’s owed,” said Fuentes-Marimón.

For Fuentes Marimón, information such as the physical addresses of rental units is also vital in terms of planning and marketing Puerto Rico as a tourist destination and investment for developers of large tourist facilities, such as hotels and inns.

Fuentes-Marimón described as “unhealthy” the practice of accepting the information submitted by Airbnb to the CTPR as accurate, as it is not sufficiently precise.

According to special assistant Marisol Luna, the Planning Board is also unaware of how many homes are used as short-term rentals in Puerto Rico. The Board’s mission is “Puerto Rico’s integral development by establishing a rational, balanced, and sensitive plan” and “to promote a process of sustainable economic and social development.”

Vanessa Colón Almenas contributed to this story.