I once asked a very successful local real estate agent, "how many of our buyers originally came here on vacation?" He reflected for a while, looked at me and said, "all of them."
It is understood that tourism is a major component of the local economy, but sometimes the direct connection between strong tourism and higher property values is overlooked. According to a Hilton Head Island second homeowner study conducted in 2011 by the University of South Carolina Beaufort, 88 percent of property purchasers vacationed in the area before buying real estate. The more visitors that come to the Lowcountry on a year-round basis, the more real estate buyers there are.
One of the fundamental laws in economics is that if demand increases without a corresponding increase in supply, it leads to higher prices and more transactions. Simply put, visitors to the area increase the demand for real estate. More visitors equals increased demand for real estate which equals higher property values.
The other important point here is that visitors pay accommodation tax on overnight lodging. This tax is used for marketing the destination to attract more visitors. Accommodation tax is used to maintain public services and preserve the beaches, which is important for property values. Nonprofit organizations submit grant applications for accommodation tax money to improve the experience of visitors through funding of their events and arts and cultural offerings. The beauty of it is these nonprofit organizations also improve the experience of local property owners. They have a positive effect on property values because they are wonderful agencies to have in the community.
Visitors help keep restaurants open and leave their money here before they go home. The visitors provide the cornerstone of the economy and support the exceptional quality of life Lowcountry residents enjoy.
On Hilton Head Island, where the majority of Lowcountry accommodation tax is generated, there is only a 10 percent tax on overnight lodging. According to the National Hotel & Lodging Association, the national average for tax on overnight stays is 13 percent. Many tourism destinations often charge more than average; Charleston for example charges 14 percent.
By only charging 10 percent accommodations tax on Hilton Head, the area is foregoing significant dollars of positive economic impact and compromising property values. By charging more in accommodations tax, the community could help fuel the most important economic engine there is, tourism. Maximizing accommodations tax revenues will stimulate tourism demand, help fund destination events and local arts and culture. It will bring more buyers of Lowcountry real estate and positively affect property values.
This article is the second in a five-part series that addresses actions to stimulate Lowcountry real estate demand and positively affect property values. Robert Stenhammer has been a resort executive for more than 15 years. He is the president of Hilton Head Accommodations.