Some of the biggest players in the short-term rental (STR) industry – including Airbnb – are identifying new ways to define their industry beyond the standard one-night-stay sublet.
What the STR market looks like a year from now – once the world hopefully has solved the COVID-19 pandemic – is an exciting one filled with growth opportunities for all players. Flexibility means any length of stay, they say.
That philosophy led the discussion in the session, “Flexible Rentals: All-Star Reunion,” part of the Flexible Rentals Investment Conference. Panelists included Eric Eccless, Director, Airbnb; Jason Fundin, Co-Founder & CEO, WhyHotel; and Jon Slavet, CEO, Daydream Apartments; along with moderator Steve Lefkovits, Joshua Tree Media.
Eccless says short-term rentals should be defined by more than just those bookings from transient overnight travelers. His data back that up: Searches on Airbnb for “longer” stays are up 50 percent year-over-year.
“If you are multifamily, and you are looking to make short-term rentals part of your revenue management plan, you don’t want to be locked-in to fixed tranches,” he says.
Fundin has been growing his pop-up hotel brand. For developers who build a new, 300-unit property, the concept works well because they will benefit from its revenue-share model, not leases.
“We take 100 of the units from it and run a hotel while the staff leases up the rest,” Fundin says. “We’re like the carnival that comes to town: we set up, we fill up, we wind down, and then we move on.”
Though it’s called WhyHotel, Fundin says the company’s been able to divorce itself of being looked at as a hotel. Thus, the name.
“Given that these are brand-new properties, there’s a more marketable attraction to the ‘newness’ of them,” he says. “People want to stay there. We provide the full gamut of furnished units. We’re like a nirvana in the middle of hotels and corporate housing.”
Coming out of the pandemic next year, there will be an overreaction from pent-up demand, Fundin says. (It’s been a long time since people have been able to visit grandma, he adds). “Then, demand will start to taper off a bit. Come 2022, we’ll have set a new normal. I’m optimistic.”
More Demand Than Supply
The Daydream community product allows people to move in, register with the city and set up everything they need to become a host. “Actually, we’ve found that we have more of a supply issue than a demand issue,” Slovet says. “That’s been very positive, and in some ways, surprising.”
He looks at every piece of inventory in the property as something that can be offered, turned and repurposed. “It can work for co-working as well, and for those who are looking for flexible, furnished, multi-month move-ins or overnight stays.”
He says that whether they are called residents or guests, they are paying customers, and “we’ll see a graying of that continuum.”
Slovet says he’s looking to attract the semi-permanent traveler on their own terms. “Corporate offices have thrown away the rules about where their employees can live while on the road,” he says.
Gateway cities are seeing higher vacancy rates right now, so those operators are more willing to explore new options, Eccless says. “We bring housing ‘affordability’ to the renter,” he adds. “We’re creating a wider funnel for the residents (to earn income and better afford their rent) and that’s our path for them. Living in the city is expensive, especially for Millennials. We see that if our active hosts are out of town seven to 10 days a month and sublet through Airbnb, they can pay one-fourth to one-third of their rent.”
The panel joked that potential STR branding could be for renters/hosts to wear a hat that reads, “I’m getting a 25 percent discount off my rent.”
Eccless says Airbnb also is driving the point that communities that allow short-term rentals benefit the communities’ renter base as a whole.
“We’re not a disruption,” he says. “All who live there can benefit [financially]. The NOI helps the building’s owners and allowing short-term rentals creates the bigger funnel for the operator. The renters can make paying their rent more manageable and will stay longer.”
Fundin says his business model supports many.
“The pop-up hotel model really spreads the love,” he says. “The guests get a great place to live with all of the services that can come with hotel living like bathroom cleanings, the operators earn ‘free’ money through the revenue-sharing and we create jobs for that local market.”
For these companies and others looking to enter the space, they can help redefine real estate, which Fundin says is such a calcified industry.
“There are so many required financial signoffs, building codes (that take five years to gain approval, anyway), local zoning ordinances and other [red tape],” he says. “The industry too often responds with, ‘Why would we change? Let’s give those who operate in the industry some more rules. What we say is that if you aren’t allowing pop-up hotels, you are capping your financial upside.”
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