The short-term rental industry has come a long way. Once mainly for vacation rental property owners with a few properties, business leaders in multifamily have started to add short-term rental units to their portfolios. Kigo Senior Vice President Matthew Hoffman says the industry has a lot to offer multifamily owners and managers if they keep their eye on the ball. And now is a good time to either dip a toe deeper into the market or expand portfolios.
On Brad Larsen’s national podcast, Property Management Mastermind, Hoffman said the foundation of the short-term rental industry is getting sturdier with institution of policies and procedures that have driven its multifamily counterpart. And regardless of the size of the property management company, there’s money to be made in short-term rentals.
“This has been an evolving, up and coming industry,” Hoffman said.
Building success in short-term rentals and staying protected
In the podcast, Hoffman shared best practices and advice, touching on the benefits of good reviews and how owners and property managers can cover their assets to generate good revenue in NOI for the long term.
“It’s been very exciting as we see short-term rentals burgeoning year over year,” he said. “The growth over the next two years, going from global industry from $120 billion to $190 billion by end of 2020, is significant as we see short-term rental supply really converge with hotel supply and sit alongside the same accommodations as guests are looking for all the amenities of a home.”
Apartment operators can get started by opting by creating short-term rental units from those that have previously been slow to rent long-term. This is a great way to boost occupancy.
But, he adds, expansion or extending a brand into a new market comes at a price, and owners and management companies should take steps to protect themselves against risks inherent to the industry as well as evolving rules and regulations.
Multiple-night bookings and insurance protect against damage
Property managers are often concerned about damage by unruly guests, something that has unnecessarily shed negative light on the short-term rental industry. Truth is, Hoffman says, guests are generally responsible, just as they are when staying in hotels.
However, there are always exceptions. And property managers need to arm themselves by requiring guests to have a stake in the game through multiple-night bookings and putting up some type of security.
Longer stays typically generate the types of guests who treat the home or unit as if it were theirs and are less likely to destroy furniture and amenities. The bad players are typically one-night bookings for a big gathering, when damage is more likely to occur.
Some short-term rental companies require a deposit, but even $500 or $1,000 up front isn’t always sufficient. A trashed unit can cost far more to get back into the marketplace.
Hoffman says the industry is shifting toward requiring guests to purchase an insurance policy that fully protects the unit. The policy can be baked into the cost of the rental nights.
“There needs to be a non-refundable fee built into bookings that covers the damage,” he said. “This fee is paid by the guest and provides insurance for damage in the unit while a guest is staying there.”
Managing the nuances of changing regulations and short-term rentals
Hoffman believes the industry will adapt and endure but advises that owners and management companies don’t go it alone when negotiating the sometimes rocky road of city, state and national regulations and taxes.
“The property management company is constantly in the know and can operate this model and work with a partner who can handle this side of the business,” Hoffman said. “That’s what I recommend for any multifamily or single-family owner or management company getting into this space. Work with a third-party company.”
Meeting travelers with right accommodation, location and price
For companies considering to opt into short- term rentals, there is no better time, Hoffman says. U.S. travelers are demanding a five-star experience outside of the hotel arena and there is plenty of room for growth.
Short-term rentals are seeing the confluence of homes and hotels similar to what Europe has seen over the years, he said, as well as the maturation of the traveler. The industry also is seeing some hotspots in Nashville, Denver, Dallas and Clearwater Beach, which are prime growth opportunities along with urban markets in Dallas and Chicago.
“In Europe, we saw the evolution of the traveler,” Hoffman said. “It was about renting an accommodation for the right price and location. What you will see with the U.S. traveler is that it’s no longer going to be the type of accommodation, it will be the right accommodation, right location for the right price whether it be hotel, multifamily unit or single-family unit. That is what’s going to be happening.”
RealWorld 2019 will offer educational sessions about how multifamily professionals can get started in short-term rental management. Register today!