Thriving in Adversity - STR Case Studies Through COVID

“Is there anything else I can do to help you?” is one of the most cliché, throwaway lines in customer service. Consumers recognize this, and data show they much prefer contactless, people-free interactions for many actions, including booking lodging.

As long as the company has a free-and-easy way for consumers to engage in their business, your customers are probably thinking, “Yes, you can help me by not helping me. I can do it myself.”

Since the pandemic shook the country back in spring, contactless service is everywhere. It’s expected, and when done correctly, applauded. It’s likely it will be one business strategy that survives COVID-19.

So where does this approach play in the multifamily industry -- one that takes great pride in human interaction?

“We’re a people industry” many property management professionals say. Yes. But what if apartment operators could find high profit margins and a hedge against downside risk in 2021 and beyond by offering rental space in scenarios when they never even have to see or speak to their guests?

Two companies addressed this “inevitable” hospitality business shift during “Thriving in Adversity – Two STR Case Studies,” part of the Flexible Rentals Investment Conference.

The session featured panelists Roman Pedan, Founder and CEO, Kasa Living; and Will Lucas, Founder and CEO, Mint House; with moderator Steve Lefkovits, Joshua Tree Media.

Their companies are proving a new model that competes with traditional hoteling. And it’s one that also is well suited for apartment owners and managers.

Mint House has 22 properties in 11 cities, mostly the urban core. It operates digitally, like a hotel, inside an apartment building. The complete hotel amenity package is available on the guest’s phone.

“We have digital check-in, digital check-out, digital concierge service, you can order what you want in your refrigerator from your phone or online, and we have branded room service and smart TVs with streaming services,” Lucas says.

Does it work? His communities rank No. 1 in satisfaction on Trip Advisor in New York City, Nashville and Greenville. He’s No. 2 in Denver and No. 3 in Minneapolis. “We’ve been 80 percent occupied in our buildings across our portfolio over the past five months, which is significantly greater than the hotel industry during that time.”

Kasa Living has properties in 34 cities. Pedan says he’s getting between 85 percent and 130 percent of market rents per night, depending on the market and type of stay. He says he’s consistently earning 2x the revenue of hotels.

“Our profit margins are 60 to 70 percent; that’s something unheard of in the hotel industry,” he says. “We’re [performing like this] during the worst hospitality environment, perhaps, ever, so you know there’s plenty of upside for our business once the world recovers. We’ve increased our unit count by 60 percent since the pandemic. We’re a good hedge for the multifamily industry facing a lot of potential headwinds now and into 2021 with unemployment and supply demand and evictions.”

Additionally, there’s a culture change going on with work-from-home and business travel, and this can be beneficial if apartment operators want to capitalize, he says.

Kasa Living’s bookings also are done through a phone app. It has a simple, six-step contactless process of directions on how guests can get from their car or Uber to their door in 5 minutes without ever having to see or speak to a person.

His units have decibel sensors and marijuana sensors to make sure none of his guests are “bad actors.”

Kasa Living does not use master leases. It has a revenue sharing model that is flexible. “Our partners can adjust it up or down based on how they are doing in their market – good times or challenging times,” he says.

Pete Regules at CORT says, “Be flexible. Why invest in permanent solutions for ever-changing situations.”

Pedan says apartment communities will begin to adopt his model “in the near term.”

Technology and connectivity-wise, Mint House installs everything necessary to make its program work. The rooms are wired as they would for typical “hotel room Wi-Fi” on the buildings’ existing service (depending on what type of system is available).

Kasa Living uses a non-commercial router in the room, which enables them to track their guests and helps them detect if more people are living in the unit than what was listed on their booking.

Investors are taking notice, and these companies are attracting venture capital funding even during the pandemic. Soon, apartment operators will as well. Lefkovits mentions that apartment operators can benefit by partnering with companies like these, “and not simply meet with them to suspiciously find out what they are all about,” he says.

Pedan says, “This is not something that you can build in-house. Let us come in and install it and operate it. See what you like about it, offer it how you want, and then cleave us off.”

Please click below for replay.