Airbnb is staying up to date with short term rental strategy

Airbnb is attempting to bring more apartments into their peer to peer rental service, including those currently leased by tenants. Many leases prevent subletting without landlord approval. Some condominiums also require home owner association approvals. Still Airbnb has launched the “Friendly Buildings Program”. They hope they can use economic incentives to get landlords on board by giving landlords a cut of the revenues generated by their tenants’ short term rentals. Under the program, “if landlords allow tenants to lease units on Airbnb, they have an opportunity to take a cut of the nightly revenue at a suggested rate of 5% to 15%.” As of late 2016 landlords and tenants are both resisting the idea.

There are numerous concerns from both landlords and renters. Margette Harper, Sr. V.P. for client services for Lincoln Property Co. explains that,there is just inherent risk in allowing unknown guests to come onto your property.” Building owners are concerned that working with Airbnb would open them up to lawsuits and would also upset other tenants who do not want transients in their buildings’. Airbnb has assured landlords that they will provide the necessary insurance to make the process easy and streamline, but landlords are not seeing the upside. AvalonBay Communities Inc., Essex Property Trust, and Camden Property Trust, three of the country’s largest landlords have all declined to participate in the program.

Appealing directly to apartment landlords is essential for Airbnb’s future growth. The vast majority of the housing stock in the most popular cities are apartments. Airbnb wants to have access to these highly demanded areas not just for the massive amount of tourists (100 million this past year). They accommodate, but also to prepare for the short term rental/ non ownership phase the millennial generation is ushering in.  Millennials want great flexibility with respect to their housing needs. Airbnb can provide this flexibility.

In August of 2016 U.S. homeownership rates hit a 48 year low. The vast majority of millennials are renting longer and buying later compared to the generation before them. This is mainly due to rising home prices and income levels remaining stagnant. In “Creating safe cities of the future” Norm Miller explains that future great cities will take full advantage of the sharing economy. Cities with residents that share tools, share cars, and share gardens are all better off. Living space is now part of the shared economy and the convenience of having a shared/rented space will trump ownership. Airbnb understands the potential of the sharing economy and is doing their best to stay ahead of the curve.

A competitor to Airbnb, the start-up company Roam, allows users to sign a lease and live in different places throughout the world for short periods of time. Roam’s website explains it, “is a network of global co-living spaces that provide everything you need to feel at home and be productive the moment you arrive.” Roam currently has locations in Bali, Miami, and Madrid with expansion plans in the works for Tokyo and San Francisco. An individual can sign a lease starting at as low as $500 a week. Roam is attempting to set a precedent for how the next generation of non-homeowners/renters can live. Millennials want the ability to travel and work remotely. Many do not want to bogged down with homeownership.

Airbnb and similar firms pose a huge threat to the status quo of the current rental market. Landlords should not be so quick to dismiss Airbnb’s incentives. Airbnb provides a tremendous amount of potential for capturing the short term rental market. Landlords can resist the trends or be part of them.

Top photo: © Getty Images / Nikada

References

“Coliving & Coworking | Roam.” Roam Co-Living. N.p., n.d. Web. 20 Oct. 2016. <https://www.roam.co/>.

Kusisto, Laura. “Airbnb Offers Landlords an Incentive.” WSJ. Wsj.com, 11 Oct. 2016. Web. 20 Oct. 2016. <http://www.wsj.com/articles/airbnb-offers-landlords-an-incentive-1476178200>.

Matthews, Chris. “Young People Can Afford Homes, They Just Don’t Want to Be Homeowners.” Fortune Young People Can Afford Homes They Just Dont Want to Be Homeowners Comments. Fortune, 17 Aug. 2015. Web. 20 Oct. 2016. <http://fortune.com/2015/08/18/young-people-can-afford-homes-they-just-dont-want-to-be-homeowners/>.

 

 

About Author

Judge Ryan

Judge Ryan is a graduate student in the MSRE program at the University of San Diego. He received his B.A. from Brown University in 2014 studying Business, Entrepreneurship, and Organizations. He is excited to attend his first MIPIM conference with Dr. Norm Miller and colleagues from the MSRE program.

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