While travelers across the globe have warmly embraced Airbnb and other home-sharing sites like VRBO, the services have been met with a decidedly frostier reception from the multifamily industry. Fueled by concerns about security, liability and risk management, the sector, on the whole, remains extremely leery of allowing residents to rent their units to travelers via Airbnb and other sites.
While such hesitancy and anxiety are understandable during the initial emergence of a disruptive technology, the multifamily industry might be better served to embrace the reality of Airbnb and the sharing economy. The potential economic benefits for both owners and residents are just too powerful, and the risk of not embracing it is high.
Yet, a new article in Multifamily Executive (MFE) details both the apartment industry’s longstanding concerns about home-sharing services and its wrestling with the economic opportunities they present. Mark Durakovic, principal officer and vice president of management services at Kass Management Services, told MFE that Airbnb represents many things to the apartment sector. “Opportunity? Competitive challenge? Thorn in our side? Future possibility? Can I say ‘all of the above’?” he said.
According to a spate of news reports at the end of 2015, three of the nation’s largest multifamily REITs —AvalonBay Communities Inc., Camden Property Trust and Equity Residential — are doing more than just pondering the possibilities presented by Airbnb and have begun discussions with the company about programs that would permit their residents to rent apartments in exchange for a portion of the resulting revenue.
However, Chris Nulty, a spokesperson for Airbnb, cautioned MFE that these talks are the most incremental of steps. No pilot programs are up and running yet, he said, and he characterized the talks with the three REITs as a “listening tour” in which Airbnb is simply learning about the owners’ concerns and thoughts on opportunities.
While the concerns are real and certainly understandable, a look at some hypothetical numbers demonstrates how powerful the revenue-sharing lure of Airbnb should be to apartment owners. Consider the example of a 200-unit property, which has 6,000 room nights available in a 30-day month (200 units x 30 days). Assume the following:
- 1 percent of those room nights (60) are re-rented by residents during those 30 days.
- the average short-stay revenue is $100 per night.
- the apartment owners receive 20 percent of the short-stay revenue.
In this scenario, each of the 60 room nights generates $20 per owner. That translates to $1,200 per month and $14,400 per year for the landlord. At a 6 percent cap rate, that’s $240,000 of increased asset value. Those are astounding numbers, ones that should compel multifamily owners and operators to work with Airbnb.
Not taking advantage of this opportunity means your residents will earn that extra 20 percent without your knowledge, because it’s cost prohibitive and too challenging to police a no Airbnb policy. A no-Airbnb policy is also too risky to your business if you note the impact of disruptive technology on other industries. The Internet has all but driven newspapers out of business. Uber is slowly eroding away the revenue of cab companies. Airbnb could take a bite out of apartment community business by making living in a condo, where residents could list their place on Airbnb regularly, much more attractive financially.
Additionally, a revenue-sharing model with Airbnb could lead to an improved user experience, as residents would be able to make extra money that they could use to defray the cost of rent or car payments, or spend at nearby restaurants and entertainment spots.
The wide range of issues presented by Airbnb and its potential impact on the resident user experience will be the subject of a thought-provoking session at AIM 2016. “The Sharing Economy and the Airbnb Challenge” will feature Jaja Jackson, head of multifamily housing partnerships at Airbnb. Other panelists will discuss similar emerging players and concepts in the sharing economy. Come armed with your thoughts and questions, and be ready to contribute to what is sure to be a lively discussion. To be part of the conversation, register for AIM 2016. Also, check out the recently released full conference agenda to learn about other sessions you’ll want to attend.
In the meantime, tell us your thoughts in the comments thread below. Do you feel the multifamily industry embrace Airbnb, or are the possible pitfalls simply too much?