Kass Management Services principal Mark Durakovic isn’t interested in using Airbnb at any of his apartment properties across Chicago, but some of his friends are.
“I’ve spoken with developers who are beginning to consider allocating certain units in their development to short-term rentals and who hope to reap the benefits of added income generated by those units,” he says. “But these are big, 230-unit mid-rises, and even high-rises, with daily management and institutional backing for risk management.”
On the flip side, Durakovic also sees how Airbnb could benefit the smallest of mom-and-pop players as a tool to enhance revenue, manage exposure to market, and better monetize unit-turn vacancy.
“It’s probably something that will be left to the landlord who is small enough and hands-on enough to deal with daily management and the very large developments with staff and structure,” Durakovic says.
Pricing out a community with both short-term rentals and longer-term traditional leases probably isn’t even a difficult process and could likely leverage existing revenue management technologies.
“It’s not a fundamental, unsolvable problem. But it’s important to note that we’re in the first minutes of the first quarter of this game,” says Eian Counts, vice president of product strategy for Rainmaker Group, which offers pricing software to the multifamily and hotel sectors. “We don’t believe it’s an insurmountable hurdle to combine the success of both industries and bring them together to make one cohesive solution that determines price for both short-term and long-term traditional leases.”
Like most things Airbnb and multifamily related, how the home sharing platform is ultimately integrated by owners and managers will be the guiding force in systems and solutions development to manage disparate renter demographics.
“Multifamily operators will ultimately have the choice of [whether to] directly expose certain units to Airbnb rentals themselves; allow residents to sublet their own units; use third-party managers to lease certain designated units; or even try some combination of all those,” says Counts. “The economics and monetization strategies surrounding each approach are different, which, of course, impacts how operators would implement revenue management solutions.”
While Counts says it’s too early to begin modeling, his company is nonetheless devoting time to Airbnb at its user conference, joining NMHC OPTECH and the 2016 AIM Conference in welcoming the home sharing giant to the dais in hopes of furthering conversations and negotiations about an industry-standard framework.
Matthew Hoffman, vice president of Kigo, a vacation rental software firm owned by RealPage, agrees there’s a lot of opportunity for apartment companies to come out on top if they can figure out a strategy. He says RealPage is already working to streamline the steps for multifamily firms to leverage Kigo's capabilities to manage short-term leases.
“We see this as more of an opportunity than a battle,” Hoffman says. “The average length of stay in the short-term rental market is seven nights, with an average annual occupancy of 35%. So an asset manager has the opportunity, by transitioning a unit to the short-term rental market, to monetize approximately 17 short-term leases (or bookings) of that unit per year.”
Companies will still have to face the complexities of local regulations and tax policies to make this business venture work, but if the demand keeps growing and software can make it easier to manage, Hoffman says handling those complexities will be worthwhile.