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Airbnb has evolved into the perfect partner for Build to Rent

Lavanda discuss why Airbnb is a primary channel for acquiring long-term tenants, and why this is good news for Build to Rent players.

By Fred Lerche-Lerchenborg, CEO, Lavanda

After a sustained trend of guests seeking accommodation for longer periods, Airbnb recently launched ‘long-term reservations’ – stays of more than 28 days. Airbnb’s strategy to disrupt the long-term rental industry and evolve into the platform of choice for renters globally is now in full effect. 

Landlords and property managers need be in no doubt; Airbnb is now a primary channel for acquiring long-term tenants, competing directly with the likes of Rightmove and Zoopla in the UK for example. In this article we explore why the $30bn+ tech titan is well positioned to win, and importantly why this is only good news for Build to Rent players.

Fred Lerche-Lerchenborg, CEO, Lavanda
Fred Lerche-Lerchenborg, CEO, Lavanda

The shift to ‘omnichannel’ renting

As Build to Rent developers increasingly favour more diversified and defensible mixed-use assets, operators are seeking new tools to help them engage and operate ‘omnichannel’ rental demand (a more fluid mix of short, medium and long-term tenancies). Airbnb have very clearly identified this growing pain point in one of the fastest growing sectors of residential real estate, and their recent move into ‘longer-term reservations’ now positions the Airbnb platform as a comprehensive solution and perfect industry partner. 

So what’s driving this increase in mixed use schemes, and the growing appetite for ‘omnichannel’ renting? 

The truth is that an ‘omnichannel’ strategy is not defined by any one benefit in particular, but rather the total benefit of the resulting toolkit and its contribution to the overall optimisation of the asset. In short, the ability to engage short, medium and long-term rental demand more fluidly enables an asset manager to be more agile and proactive in capitalising on benefits that exist across the full spectrum of local rental demand, and consequently able to flex and pursue more aggressive or defensive strategies as local rental demand allows. A high-level summary of just some of the strengths and benefits offered by the different channels are as follows:

Long-term rentals (typically a 6 month+ tenancy)

  • Stabilises the asset with a steady and reliable income stream.

Mid-term rentals (broadly defined as a 3 – 6-month tenancy)

  • ~15%+ higher yielding than a traditional long-term rental due to the increased flexibility that it offers the tenant. 
  • Significantly less operational, so a lower cost-to-serve than a more hospitality-led short-term rental. 
  • Offers increased flexibility that’s increasingly prized by the modern renter; remote working ‘digital nomads’ who value experience, and whose lives typically stretch across multiple urban centres.

Short-term rentals (stays from 1 to 90 nights)

  • ~25%+ higher yielding than a traditional long-term rental.
  • Effortlessly tap into high yielding peak seasonal demand.
  • Efficiently monetise temporary void periods between longer-term tenancies.
  • Allows new schemes to significantly optimise the lease-up period by tapping into high-yielding short-term guests as long-term residents are phased in to the community.

Increased agility and flexibility at an asset level has never been more important than right now. In the likely event of a sharp economic downturn once government aid packages are withdrawn, Build to Rent operators are already thinking ahead to how their residents will be impacted by the consequences of reduced salaries and higher unemployment. 

Increased voids, tougher rent negotiations, and a rise in defaulting on rent payments are unfortunately all on the horizon. There’s a definite realisation that the thinking and tools that have enabled us to thrive over the last few years are not the ones that will support us in this next period as the world recovers from the pandemic.

Watch out Rightmove and Zoopla

In addition to providing Build to Rent operators with access to short, medium and long-term rental demand via a single platform, it’s important to note that Airbnb is also a major player in business travel and corporate relocation. Since its launch in 2014, Airbnb for Work has been widely adopted by more than 700,000 companies globally – and for good reason; it offers better value, better located accommodation options that are better suited to the individual needs of business travellers. By embracing Airbnb as an acquisition channel, Build to Rent operators are in fact better able to market their units to a rich and rapidly growing pool of premium business travellers – either on a short, medium or long-term basis. 

What makes Airbnb such a disruptive force, however, is that its technology facilitates a direct relationship between the landlord and the tenant. It essentially disintermediates traditional lettings or relocation agents, streamlining the existing value chain. I know what you’re thinking. That’s never going to happen. Others have previously tried and failed. Etc. But this time it really is very different… 

Here’s why. Airbnb has invested billions into crafting an industry-defining user experience, which it has successfully packaged up in a mission-driven global superbrand that consumers love; it’s innovative, engaging and unthreatening in equal measure. Over the last 12 years this killer combination has fuelled extraordinary global adoption, enabling it to enter new markets and steal significant market share fast – business travel, luxury vacation rentals and hotels to name just a few. Whereas Rightmove or Zoopla have crafted fantastic brands and user experiences, they typically end in an introduction to a letting’s agent. Airbnb, on the other hand, has honed a brand and experience that is increasingly synonymous with our deep human desire for travel, escapism and belonging.

Upon this winning foundation, Airbnb has gone on to develop a very sticky consumer app that genuinely ‘owns’ the relationship with its user. Guests and hosts store payment methods within the app, Airbnb takes receipt of all funds, the app facilitates all communications between parties, etc. 

It’s not too hard to see how Airbnb can trade on the convenience of already having everything in one place to grow its market share further and evolve into the default option for booking any type of accommodation; long-term, temporary business travel, holiday accommodation, etc. Ease and convenience has time and again proven to be a winning formula when it comes to challenging deeply entrenched consumer habits.

This is just the beginning…

As Airbnb matures as a business, it shows a far deeper understanding of its ecosystem and the stakeholders within it. Build to Rent is evolving into a major source of urban supply for Airbnb’s marketplace, so it logically follows that Airbnb’s platform should evolve to better service the needs of its Build to Rent audience. 

An example is Airbnb Experiences. Following the launch of Airbnb Experiences back in April, it’s now easy to see how this new feature of Airbnb’s platform could be extended to enable Airbnb guests to browse and book amenities within a building. Not only would this power additional revenue streams for Build to Rent operators, but it actually calls into question whether a custom app for residents is really needed at all? Airbnb offers operators (hosts) a pretty comprehensive set of tools out of the box, including resident communications, the ability to extend tenancies, book and pay for amenities, solicit feedback, etc.

In all of this, one thing is clear; this move by Airbnb is only the beginning of a tsunami of disruption for the Build to Rent sector. As the worlds of hospitality, travel and real estate continue to converge, and as Airbnb earns its rightful place in part of the Build to Rent/multifamily technology stack, it’s only a matter of time before Booking.com, Expedia and any number of the other online travel agents attack this space with clearer intent and focus. Where one goes, others will follow. 

A new age of ‘omnichannel’ renting is upon us, and it’s to be embraced by Build to Rent operators; a better toolkit to drive greater value from delivering better experiences. Of course change is hard, but the writing is on the wall for those who choose instead to bury their heads in the sand. 

Lavanda is a multi-award-winning property management system, made by property managers.

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