The recent proposal to increase the short-term rental (Airbnb) tax rate in the U.S. Virgin Islands to 20% or more is a drastic and misguided policy that would have devastating effects on the tourism industry — particularly for St. Croix. Some argue that this proposed tax hike would address the housing crisis and boost hotel occupancy, in reality, it threatens to drive visitors away and harm the very businesses that rely on tourism to survive.
Virgin Islands Short-Term Rentals Are Already Paying More Than Most U.S. Destinations
Currently, short-term rental owners in the U.S. Virgin Islands pay a 12.5% tax, which is higher than many short-term rental markets in the United States. To put this into perspective:
Puerto Rico: 7% tax on short-term rentals
Denver, Colorado: 10.75% tax on short-term rentals
Austin, TX: 11% tax on short-term rentals
Raising the U.S. Virgin Islands’ tax rate to 20% or more would make it one of the highest in the country — if not the highest.
Why This Will Drive Away Tourists
Tourists are price-sensitive, and an increase in taxes directly affects their decision-making. A family planning a vacation to the Caribbean has many options, including Puerto Rico (7%) and the Bahamas (10%). Why would they choose the U.S. Virgin Islands when they’d have to pay 20% or more in lodging taxes alone?
A tax hike of this magnitude will cause travelers to choose more affordable destinations, leading to fewer bookings for short-term rentals. This, in turn, will result in lower occupancy rates, fewer tourism dollars being spent on local businesses, and ultimately, a decline in the overall economy.
The Trickle-Down Effect: How Local Businesses Will Suffer
Tourism is the lifeblood of the U.S. Virgin Islands. When visitors stay in short-term rentals, they spend money at:
Restaurants and bars
Local markets and grocery stores
Tourist shops and downtown retailers (especially jewelry stores, which depend heavily on visitor spending)
Taxi drivers and tour operators
Excursion companies and beach rentals
If fewer tourists visit the islands due to higher lodging costs, all of these businesses will suffer, leading to economic decline.
Short-Term Rentals Create Jobs in the Community
Beyond supporting local businesses, short-term rentals directly create jobs for many local residents of the Virgin Islands, including:
Housekeepers and cleaning staff who maintain rental properties between guest stays.
Electricians, plumbers, and handymen who perform regular maintenance and repairs.
Landscapers and pool service providers who keep rental properties looking pristine.
Property managers and co-hosts who assist with guest communications and on-site needs.
An increase in the short-term rental tax would lead to fewer bookings and revenue, ultimately reducing the demand for these jobs.
Hotels vs. Short-Term Rentals: A False Choice
The suggestion is that raising the tax will encourage visitors to stay in hotels instead of Airbnbs. But the reality is that hotels and short-term rentals serve different types of travelers.
Many visitors prefer short-term rentals because they offer kitchens, multiple bedrooms, and a more home-like experience—something hotels simply cannot provide.
Hotels often lack availability during peak travel seasons, meaning there aren’t enough rooms to accommodate all visitors.
Hotels in the U.S. Virgin Islands are also significantly more expensive than many short-term rentals, meaning some tourists who currently book Airbnbs wouldn’t just switch to a hotel—they would simply vacation elsewhere.
A Different Approach
If the goal is to address the local housing shortage, the solution is not to cripple tourism. Instead, policymakers should consider:
Incentives for long-term rental development, such as tax breaks for property owners who lease to residents.
Collaboration with short-term rental owners to find balanced policies that support both tourism and local housing needs.
Final Thoughts
A 20% or higher short-term rental tax will do more harm than good for the U.S. Virgin Islands. It will drive tourists away, hurt small businesses, and damage the islands’ reputation as a vacation destination. Instead, the government should focus on sustainable solutions that address housing issues without jeopardizing the tourism economy.
If you’re a short-term rental owner, host, or someone who benefits from tourism, now is the time to speak out against this proposal before it becomes a reality. Let’s protect the future of tourism in the U.S. Virgin Islands and ensure that St. Croix, St. Thomas, and St. John remain thriving, attractive destinations for visitors worldwide.
—Sharifa Garcia is the founder and CEO of Our Home Rentals.
Editor’s Note: Opinion articles do not represent the views of the Virgin Islands Source newsroom and are the sole expressed opinion of the writer. Submissions can be made to visource@gmail.com.
