Tourism officials say a certain TV show has helped the short-term rental industry in Waco double over the last year.
The city of Waco is on track to collect more than $110,000 in lodging taxes this calendar year from 44 vacation rentals, compared to $55,000 from 22 rental spots last year. That would represent about $1.6 million in 2017 sales.
“I hate to say it’s the Magnolia effect, because everyone’s tired of hearing about that, but it’s true,” said Carla Pendergraft, marketing director for Waco and the Heart of Texas. “I think most of them have been created pretty recently, in the last year.”
Pendergraft said the Waco lodging market is already one of the hottest in Texas, but the vacation rental boom has helped absorb the additional tourist traffic the “Fixer Upper” reality show has brought to Waco. Stars Chip and Joanna Gaines announced last week that the fifth season of the hit show, which starts next month, will be their last.
“What the fans are saying is, ‘Now that the show is ending, we really have to go to Waco to get our fix,’ ” Pendergraft said. “In the short term, it may increase, not decrease.”
Short-term rentals still count for only about 3 percent of Waco’s total hotel occupancy tax revenue, but the rentals drove a significant part of the growth in that revenue, Pendergraft said. Overall occupancy tax revenue is on track to increase by $590,000 this year, from $3.3 million last year to $3.9 million this year, she said.
Those funds benefit the Waco Convention Center and other tourism efforts, including billboards, print and online ads and some 280,000 Waco maps printed for distribution this year. A fraction also helps local arts organizations.
Waco’s Magnolia-related tourist boom has coincided with the rise of Airbnb, VRBO and other vacation rental platforms.
In Dave Morrow’s experience, the source of the demand is impossible to miss. He has made a side business renting out the “Mailander House” at 1403 N. Fifth St., which was renovated on Season 1 of “Fixer Upper.” With rates starting at $250 for the one-story house, he has seen an occupancy rate between 70 and 90 percent.
“I’d say ‘Fixer Upper’ is close to 95 percent of my business,” Morrow said. “We had one small group that came that didn’t even know about ‘Fixer Upper,’ and they were kind of freaked out because people drive by the house and look at it all the time.”
As it happened, as the Tribune-Herald caught up with Morrow on Friday afternoon for a photo shoot, he was giving an impromptu tour to three women who had traveled from as far away as Virginia to visit the Magnolia Silos.
Morrow said millions of people have seen his house on TV thanks to reruns.
“I had one gal who told me that at her hairdresser, ‘Fixer Upper’ is on a continuous loop,” he said. “There’s people who have seen my episode three, four or five times. I think because of Hulu and Netflix, the show is immensely popular.”
Waco city planners are scrambling to catch up with Waco’s hottest cottage industry: online vacation rentals.
Beyond the star power of the Mailander House, he said Magnolia tourists tend to gravitate in general to vacation rentals rather than hotels.
“Honestly, it’s a different experience, staying in a hotel compared to a home that’s set up as a guest facility,” Morrow said. “Most of the folks I know take a lot of pride in giving personal service. I meet all my guests and give them a five-page listing of all the things to see and do.”
He also has four town bikes ready for his guests to use to tour downtown and nearby Cameron Park.
Morrow said he bought the house in 2014 for $30,000, plus $5,000 in back taxes, then paid the Gaineses about $65,000 to renovate it.
“We asked the banker to come by and look for a remodel loan,” he said. “The banker looked and said, ‘This is on the tax rolls for $58,000, and you want to put in $100,000? You’re going to be underwater.’ ”
Morrow said the business model of renting homes to Magnolia tourists has developed since then, and he has benefited from it. But he said it’s a lot of work maintaining the house and paying all the fees and taxes on it.
The city of Waco planning department in summer 2016 notified property owners who advertised on short-term rental platforms that they had to get special permits from the city and pay their hotel occupancy taxes. Since then, the city has approved dozens of permits and has adopted a new ordinance that puts some new limits on homes rented when the owner is not present.
Pendergraft said owners need to educate themselves on the tax rules before renting out their homes.
“I feel like Airbnb and some other services don’t make those obligations clear,” she said.
Pendergraft said the vacation rental industry doesn’t seem to have hurt conventional hotels. Information from the firm Source Strategies shows the Waco Hilton had 88 percent occupancy in the second quarter of this year, up from 75.7 percent the previous year.
Overall, Waco hotels had a second-quarter occupancy rate of 75.5 percent this year, beating all Texas markets except Austin-Round Rock, which had 76.6 percent, according to Source Strategies. Statewide, occupancy rates were less than 65 percent, according to the firm.
Pendergraft said Waco’s high occupancy rate is good news for hotels but poses challenges when it comes to booking conventions. She said the large blocks of rooms she needs to book are harder and harder to find.
Three new business-class hotels are under construction on the Interstate 35 side of downtown, promising a total of about 400 rooms. Two full-service hotels, a 160-room Drury Plaza Hotel and a yet-to-be-named 110-room hotel, are planned for developments along the Brazos River in downtown.
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