Online vacation rentals spark crackdown on amenity use in Myrtle Beach area

dwren@thesunnews.comMay 18, 2014 

As more vacation home owners turn to online rental assistance programs such as HomeAway.com to market their properties and save money, traditional on-site rental management businesses along the Grand Strand are fighting back by limiting those owners’ use of amenities such as swimming pools, restaurants and parking.

Some resorts have always offered special benefits for those who use their in-house rental agencies. But the practice is getting more cutthroat this spring, with at least one local property owner suing a rental firm over his loss of parking and restroom privileges and another rental firm threatening to sue an owner for advertising the availability of amenities in an online advertisement.

“We can’t give away our business and expect to stay in business,” said Lee Rawcliffe, who owns the rental management group for the Sands Resorts condominium towers in Myrtle Beach. “If an owner doesn’t want to participate in paying for the amenities, I can’t let their guests use them.”

Rawcliffe’s business, like most traditional rental management companies here, makes its money by taking a cut of the daily rate vacationers pay to stay at a condominium in the resort’s rental pool. That cut typically is between 40 percent and 50 percent of the cost of the reservation. In return, Rawcliffe’s company provides a full-service rental program for Sands Resorts owners -- from taking the reservations to checking in the guests and then cleaning the rooms once they leave.

The rental management company uses that money to pay salaries, insurance, taxes, marketing and for construction and upkeep of expensive amenities such as lazy rivers and water parks designed to lure vacationers to the property. If a condo owner decides to drop out of the resort’s rental pool and advertise his own property online, Rawcliffe’s company loses that revenue.

Trouble is, many of the guests who rent that condo from an online service still want to use the amenities that are no longer being paid for by the condo owner.

“It’s becoming a big problem,” said Rawcliffe, who said he handles rental management for about 80 percent of Sands Resorts’ 1,200 units -- down from 95 percent just three years ago. Rawcliffe said the trend started with the growth of the Internet but accelerated “when the market crashed and people started looking for a way to save money.”

There are about 3,000 listings for Myrtle Beach area properties on HomeAway.com, the nation’s largest online marketplace for vacation rentals. The number of area listings has grown by 53 percent since 2010, according to Jon Gray, the company’s senior vice president.

Nationwide, HomeAway.com reported a 28.3 percent growth in listings over the past year, with nearly 1 million vacation rentals now online. Instead of the 40 percent to 50 percent fee charged by traditional rental management firms here, HomeAway.com charges a flat rate of between $349 and $999 for a one-year listing or a 10 percent commission model.

Property owners upload their own photos and information to the HomeAway.com site and the online company provides a reservation calendar and online payment options. Along with the growth in listings, the online company’s revenue has grown by nearly 66 percent over the past year, according to its filings with the U.S. Securities and Exchange Commission.

“People used to have to buy an ad in the Atlanta newspaper if they wanted to market their place to stay in Myrtle Beach,” Gray said. “Now, it’s all online.”

Gray said cost is one of the main reasons people choose to list their properties on HomeAway.com instead of through a traditional rental agency. But control -- “They want to know who’s staying in their home and speak to everyone that stays in their home,” Gray said -- also is a big factor.

The national demographics of vacation home buyers is skewing younger -- to an average age of 43 -- and those younger buyers are more tech-savvy and comfortable with listing their homes on the Internet than those second-home buyers of the past, Gray said.

That is upsetting the traditional rental agency business model, leading some in the industry to enforce deed restrictions that give a property’s professional management company rights to the public areas.

“A lot of people have a problem digesting the fact that they bought a condo, not the amenities,” Rawcliffe said.

Coral Beach Resort in Myrtle Beach sent a cease-and-desist letter this month to Daniel Friedman, a condo owner who was advertising his unit on a local web site instead of using that resort’s rental agency.

The letter accused Friedman of falsely telling his renters that they could use “amenities and guest services that are reserved for the exclusive use and enjoyment of the owners and guests of Coral Beach Resort Management LLC.” Use of such amenities, the letter stated, “can only be enjoyed by the issuance of a keycard exclusive to [the Coral Beach] rental management program.”

Ross Martin, manager of the Coral Beach Resort, did not respond to requests for comments.

Friedman, who lives in Fort Mill, told The Sun News that he’s had run-ins with Coral Beach management in the past for what he termed nickle-and-diming him over rental fees. So Friedman decided to drop out of the resort’s rental pool and market his own property. A few weeks later, he received the cease-and-desist letter.

“Now they’re telling me my guests can’t use any of the amenities,” he said. “I’ve since put the condo on the market. They have literally forced me to sell my place.”

Bradley Bennett, a local real estate broker who owns and markets his units at Sands Resorts, filed a lawsuit against Rawcliffe last year when he and his guests were denied the use of that resort’s amenities. According to court documents, Rawcliffe told Bennett that his guests could not use the resort’s main lobby or restrooms and must pay a $20 fee for parking. Rawcliffe has denied any wrongdoing in the lawsuit, which is pending.

Bennett could not be reached for comment. He is seeking a declaratory judgment stating that he and his guests have the right to use the amenities.

Gray, the HomeAway.com vice president, steered clear of the controversy during an interview last week.

“We’re an advertising venue for property owners,” he said. “We don’t get into the actual management of the properties.”

Last month, Rawcliffe sent a letter to all Sands Resorts owners informing those who aren’t on the rental program that their guests no longer will have access to the main lobby, its restaurants, convention facilities and water park. The policy takes effect on Memorial Day weekend.

“We wanted to give everyone plenty of notice so they can inform their guests,” he said. “We don’t want to see any family’s expectations ruined.”

Rawcliffe said he tried to limit access to the water park facilities last year by issuing wristbands to his rental agency’s guests. He later found several people who weren’t supposed to use the amenities had gained access by using counterfeit wristbands. Rawcliffe wound up suing an outside rental agency that was supplying guests with fake wristbands and parking passes and that company’s owners promised to stop the practice. When they continued, Rawcliffe took them back to court and this month a judge found the owners to be in contempt of court.

This year, Rawcliffe has purchased equipment to make photo I.D.’s for all guests authorized to use Sands Resorts’ amenities.

Some Sands Resorts guests last year weren’t happy when Rawcliffe denied their access to the resort’s pools.

“Some people understand the policy, and then some people get angry -- mostly at the owners who told them incorrectly that they could use the amenities,” he said, comparing the unauthorized use of resort amenities to theft. “There is no way all this stuff can exist for free.”

Contact David Wren at 626-0281 or via twitter at @David_Wren_

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