Will hosting the DNC pay off for these Milwaukee neighborhoods?

Few people are as excited for the July Democratic National Convention (DNC) as Milwaukee’s boosters and tourism bureau. The event this summer is “a once-in-a-lifetime opportunity to define ourselves globally,” says Kristin Settle, communications director for Visit Milwaukee.

Perhaps in anticipation of the three-day event, which begins July 13 and is expected to welcome more than 50,000 visitors, Milwaukee has become a darling of the travel press. Forbes, the Wall Street Journal, and Eater have all recently written about the city and its cultural treasures, while the New York Times gave Milwaukee its 36 hours treatment this past October.

This press attention, as well as other upcoming regional events such as the Ryder Cup golf tournament, taking place in September, has made Milwaukee a top destination on Airbnb. The short-term rental site ranked Milwaukee first in its list of top trending destinations for 2020. (Indianapolis held that designation last year.) The ranking is based on an increase in advanced bookings year-over-year; Milwaukee saw a 729 percent jump in reservations for 2020 (based on bookings made by September 2019).

David Wachsmuth, a professor at Montreal’s McGill University who studies Airbnb’s impact on cities, says that it’s natural for cities to see these kinds of events, and the crowds they bring, as a potential catalyst for growth, attention, and investment. It also makes sense to view Airbnb, and the ability to rent out rooms and homes, as a way to spread some of that benefit to residents and neighborhoods around the city and region. But, Wachsmuth says, the big local gains predicted for these events don’t often materialize.

Much like the Bilbao effect—the spike in tourism and visitors to the Spanish city due to the construction of the Frank Gehry-designed museum, which many cities have tried but failed to replicate—the Barcelona effect, named after the city’s experience hosting the 1992 Olympics, has tempted politicians and business leaders to try to leverage the role of host into a transformation of the local economy. Barcelona’s multibillion-dollar investment in promotion and infrastructure building, including turning former industrial sites into public beaches, successfully changed world opinion of the city.

“City officials view these events as the opportunity for economic impact and large-scale investment,” says Wachsmuth. “The evidence is clear that this doesn’t always pan out. These events can’t always be transformative. But that hope is more or less omnipresent.”

Showcasing a new side of Milwaukee

Milwaukee officials excitedly spoke of the progress and new development they hope to show off during the convention, which is taking place in the new Fiserv Forum. The surrounding West Town neighborhood, nicknamed Deer District after the town’s NBA franchise, the Bucks, has seen extensive investment in recent years. The Menomonee River Valley, a former industrial district, has seen extensive revitalization and redevelopment. Settle and others also spoke of recent community redevelopment efforts taking place in formerly disinvested neighborhoods of the city, especially black areas on the near-northwest side, as a sign of the city’s evolution.

While the city officials don’t have any guesses as to the total boost in tourism revenue coming to Milwaukee this year, Settle expects a significant increase.

The Milwaukee 2020 Host Committee expects the city will see a $200 million economic impact from the convention. (For comparison, tourism in the four-county Milwaukee area generated $5.7 billion in 2018, the latest year on record.) The city’s expenses include permitting, overseeing road and street closures, and security, the latter of which is both the largest portion of the budget and one expected to be covered by a $50 million federal grant.

While the greater Milwaukee area has roughly 18,000 hotel rooms, according to Settle, many of the event-related bookings will be made on Airbnb and other short-term rental platforms, city officials say, and they’ve been in conversation with Airbnb to figure out how to best partner for the convention. Many residents look forward to a substantial pay day from renting out a spare room, apartment, or entire home to visitors. One homeowner, Lori Warhol, who lives on the outskirts of the city, told the Milwaukee Journal-Sentinel she plans to raise the price of renting her home from $400 to $4,240 a night, while a condo downtown raised its typical July prices from $195 to $3,500 a night during the week of the DNC.

Attempts to boost U.S. cities’ economies by hosting political conventions have had mixed results. A study by Cleveland State University’s College of Urban Affairs found that the 2016 Republican National Convention didn’t live up to expectations for its host city, generating a financial impact of $142 million, about 30 percent below estimates. The number of visitors to Cleveland for the convention also fell short of projections by 11 percent.

How will short-term rentals for the convention impact Milwaukee?

As of last week, Airbnb spokesman Sam Randall says the site already has 1,000 guest arrivals booked during DNC week and projects local hosts will earn around $653,000 total from the existing reservations; those numbers are expected to rise closer to the time of the convention. The platform has set a goal of hosting at least 20,020 total guests between Milwaukee, home of the DNC, and Charlotte, North Carolina, which will play host to the Republican National Convention, this year.

In addition, in the next month, Airbnb will begin hosting seminars for hosts on safety and advice for those new to the platform. Randall says “there are many initiatives in motion,” including preliminary discussions with local government and businesses on how they can work with Airbnb.

The company’s own internal data suggests that 97 percent of earnings from renting a room goes directly to the hosts, while visitors using Airbnb spend on average of $170 per day on local restaurants and merchants, according to a company-sponsored survey. Independent studies have cast doubt on the impact Airbnb has on cities. A 2019 report by the Economic Policy Institute argues that the benefits are vastly overstated; the money travelers who use Airbnb spend at local businesses would have likely been spent anyways, since “only 2 to 4 percent of those using Airbnb say that they would not have taken the trip were Airbnb rentals unavailable.” And while the site does create lower lodging costs for travelers, that’s not a concern, according to the researchers: There is “little evidence the high price of travel accommodations is a pressing economic problem,” especially since accommodation costs (unlike housing costs) haven’t risen particularly quickly in recent years.

Still, Airbnb’s network could be a boon to host cities, which otherwise invest in massive hotel projects in the lead-up to major events. The DNC in Milwaukee offers a smaller-scale preview of how Airbnb might be able to benefit cities in these situations in the future. In November, Airbnb announced a partnership with the International Olympic Committee, where it will serve as a global partner through 2028, a period covering five separate games, all massive events that bring large numbers of tourists.

“It’s not like you can just build 10 new hotels for the next convention coming to town,” Wachsmuth says. “Accommodating spikes in tourist demand is about as good a justification as anything for having Airbnb. This is the time, as a city hosting one of these events, when you should welcome Airbnb. But in practice, it’s become harder to work out this way. Regulators and housing advocates don’t trust Airbnb, which makes it harder to have an amicable arrangement.”

Activists and housing advocates have pushed back against Airbnb hosting during the Olympics, on the grounds that it can lead to speculation and gentrification, pointing to studies that show renting units on the site has contributed to rising rent and displacement in many cities. NOlympicsLA, an activist group opposed to the city of Los Angeles hosting the 2028 summer games, has said the deal is a “match made in synergy hell,” which will lead to speculation and displacement.

This tension is already on display in Paris, host of the 2024 Olympics, which Wachsmuth says is “in open warfare” with Airbnb. A local hotel association has threatened to suspend its participation in the games if Airbnb is allowed to rent out lodgings, and Paris Mayor Anne Hidalgo plans to hold a referendum on the site’s presence in the city if she wins re-election this year.

Wachsmuth says that the fears of anti-Airbnb politicians and advocates, who argue that landlords will chase after the oversized profits that can come with special events, are justified. An apartment owner may see the DNC or Olympics on the horizon, for example, and not rush to fill a unit, instead holding out to make money when a crush of visitors come to town.

“If you don’t have regulations in place to preserve housing, you may have created a bunch of commercial airbnb operators,” he says. “It’s a possibility.”

Wachsmuth believes simple restrictions can be applied to limit the potential for Airbnb abuse, especially for one-off events. He says limiting the ability to rent out principal residences is the easiest thing to do. Like the larger event itself, this type of policy makes sure the benefits for hosting—and its negative neighborhood impacts—are temporary.