When the Sundance Film Festival begins in Boulder, Colorado, on Jan. 21, 2027, tens of thousands of filmmakers and moviegoers will descend on the city. The influx of film aficionados will bring a problem familiar to cities that host large events: Those out-of-town visitors will all need lodging at the same time.

Boulder has traditionally had restrictive rules around short-term rentals. The city responded to the lodging pressure by creating a new rental license in April 2026 that temporarily expands who can offer short-term lodging during the event.

By allowing second homes and tenant-occupied properties to enter the lodging market, the policy could broaden who earns lodging income and spread visitor spending across more Boulder neighborhoods.

As an urban and regional economist in Colorado, I study housing policy and local public finance. I am particularly interested in how local governments serve as laboratories of democracy – and who benefits and bears the costs of their policy experiments.

Lodging policy for a predictable demand spike

Sundance is an 11-day annual festival that showcases independent storytelling by featuring dramatic and documentary films, shorts, premieres and filmmaker discussions. After more than four decades in Utah, Sundance is making Boulder its new home.

In Utah in 2025, Sundance reported 85,472 in-person attendees, including nearly 28,000 visitors from outside the state. Not all attendees require lodging or visit at the same time. Even so, that scale is large relative to Boulder’s existing lodging capacity.

According to Boulder City Council documents, there are roughly 2,900 hotel rooms and 685 standard short-term rental licenses in Boulder.

Hotels are generally built to accommodate demand that persists throughout the year or recurs predictably across seasons. Constructing enough hotel rooms to accommodate the Sundance peak would leave many rooms empty the rest of the year. However, homes and spare bedrooms can enter the lodging market temporarily, then return to residential use.

Boulder’s ordinary short-term rental rules require a dwelling to be the owner’s principal residence, meaning an owner must occupy the dwelling for more than half the year. Those restrictions are intended to prevent homes from being converted into full-time tourist accommodations.

The new Festival Lodging Rental License, designed specifically for Sundance, expands the preexisting rules. Any property ownership type may qualify, including nonprimary residences, such as second homes and long-term rentals. Hosts may rent an entire home, a single room or a smaller secondary living space on the property, such as a backyard cottage or an in-law suite.

Festival rentals are capped at 29 total days per year. They can operate only during a city-approved window covering the 10 days before and the nine days after the festival.

The new policy is intended to support Boulder’s economy and reduce traffic and emissions from people staying outside the city, all while preserving most homes primarily for residents.

City officials have estimated that the policy could add more than 1,000 festival rentals by 2027, on top of existing short-term rental licenses. Actual participation will depend on myriad factors like rental prices, owner consent, homeowners’ association rules and residents’ willingness to leave or share their homes.

Who benefits from the festival

Sundance’s move to Boulder was supported by substantial public incentives. For example, a recent Colorado law makes a qualifying global film festival eligible for up to US$34 million in refundable tax credits from 2027 to 2036. This tax credit reduces state revenue. Because the credits reduce state resources, the economic case depends partly on whether Sundance generates enough new wages, business income and tax revenue in Colorado to justify that public cost.

Sundance’s commissioned 2025 report estimated that out-of-state visitors spent over $160 million in Utah. As tourism economists have long warned, gross spending merely indicates the scale of economic activity – and not how much the host city benefits.

In this context, local benefits would include additional wages earned by local workers, profits retained by locally owned businesses, and tax revenue received by local governments. Not every visitor dollar produces such benefits. Some revenue ultimately flows to nonlocal suppliers. Festival-related sales can also be offset if visitors displace tourists who otherwise would have come, or if residents avoid crowded areas and shift their usual spending to another time or place.

Two studies show that short-term rentals can be especially valuable to consumers and hosts when major events strain hotel capacity. One found that Airbnb created its largest economic benefits to visitors and hosts when hotels were close to full, such as New York City on New Year’s Eve. Another documented a similar effect around Austin, Texas’ SXSW Film & TV Festival when additional home-sharing listings reduced hotels’ peak pricing power. By providing places to stay precisely when demand surges, short-term rentals cause hotel prices to rise less than they otherwise would.

The most direct beneficiaries of Boulder’s new short-term rental policy will be hosts. Hotels would ordinarily capture much of the income generated by scarce lodging. Boulder’s policy opens some of that opportunity to homeowners, second-home owners and, with the owner’s permission, tenants.

Festival benefits can extend beyond lodging to the local business community. A study in New York City found that greater Airbnb activity increased restaurant employment in surrounding neighborhoods, likely because guests spent money near where they stayed. That suggests festival rentals could spread festival attendees throughout the Boulder area and not just near existing hotels and festival screening venues.

Do policy guardrails matter?

The same short-term rentals that add lodging during a demand spike can create housing problems if homes remain in the tourist market afterward. National research suggests that Airbnb growth can move units from the long-term to the short-term market, contributing to higher rents and home prices.

There is also evidence from the 2017 solar eclipse that even temporary increases in demand for short-term rentals can result in a persistent increase in local Airbnb listings. However, the restrictions on Boulder’s new Festival Lodging Rental License limit this risk by restricting rentals to a city-approved event window.

After the 2027 festival, Boulder officials can begin evaluating the policy on three dimensions: Did it add meaningful lodging capacity? Were the economic benefits shared among tenants, workers, businesses and neighborhoods? And did it protect the long-term housing supply?

If Boulder were to publish comprehensive data, it could help other jurisdictions confronting similar short-term demand surges.

Read more of our stories about Colorado.

Tim Komarek has received funding from the Economic Development Administrations University Center Program.