Landlords and developers are starting to view Airbnb in a new light as some of their peers continue to fight the company. Apartment Investment & Management Co. is in the middle of suing Airbnb to prevent its tenants from illegally renting out their rooms on the app.
That fact hasn’t stopped Brookfield, a major player in global real estate, with an estimated $68 billion in total assets, from investing $200 million in Niido, an Airbnb partner, demonstrating a willingness to embrace home sharing instead of fighting it.
But what benefits do landlords see in partnering with Airbnb? The short answer is revenue. The app launched its Friendly Buildings Program in 2016, with the aim of offering a profitable value proposition to providers of multifamily housing. The idea was to let landlords get a cut of the profits made from renting.
65% of of the nights booked on Airbnb in 2016 were for apartments or condominium buildings
Airbnb has gathered over 10,000 listings since the global launch of the program in August, 2017. A survey by Pillow, a home sharing platform, discovered that 65% of of the nights booked on Airbnb in 2016 were for apartments or condominium buildings. Another survey by the National Multifamily Housing Council and Kingsley Associates showed that 49% of renters under age 25 were curious about using home sharing as an extra stream of income.
Sean Conway, CEO of Pillow, was reported as saying all indications point to the fact that “Airbnb is here to stay,” and that being allowed to rent out one’s apartment will be an “amenity that will be on every renter’s checklist, just like high-speed Internet. I think it’s just proof in the pudding.”
Chris Lehane, head of policy at Airbnb, described how surprising it was that over the course of the last couple of years, big players in the housing market went from keeping their distance to “knocking on the door” to partner with them.
Lehane continued that this was due to developers recognizing the needs of their consumer base from an economic standpoint, giving tenants options to leverage their property in this way can help them afford housing.
A Quick Primer on Niido and How it Works
The concept at work here is that ‘Niido Powered by Airbnb’ apartments are to be leased out yearly. They are intended to be primary residencies, but tenants may rent out their units for 180 days out of the year.
The program offers a Niido app that interfaces with Airbnb to makes it easy to post listings, manage calendars, amenities, and keyless entry.
Niido keeps 25% of profits from renting while the program’s tenants keep 75%. Airbnb and Niido maintain that what they have produced is not a hotel, though their platform does borrow many strategies and techniques from the hospitality industry. All sites have a “Master Host” who serves in a concierge-like capacity for travelers. Like many co-living residencies emerging lately, Niido powered by Airbnb features communal spaces, as a traditional hotel would.
Niido acts as the constructor and remodeling party for buildings in the partnership. Airbnb brings technology and name brand recognition to the table. This relationship could be compared to that of hotel owners and their management and brand companies.
With the cash infusion of $200 million, Niido Powered by Airbnb wants to introduce four communities in the U.S. in 2018, with the first one slated to open in early 2018 in Kissimmee, near Orlando, Florida. No confirmation was provided as to the location of the other three locations, but it was suggested that the company is interested in the Southeast region. A report by Bloomberg indicated the company wanted to develop Niido communities in Miami, Fort Lauderdale and Tampa. The first property was freshly built, but Niido leadership said existing complexes would be developed for future projects.
Implications for the Future of the Apartment Industry
Rick Haughey, vice president of industry technology initiatives for the National Multifamily Housing Council, said in Skift that the corporate housing unit reserves have the potential to change the apartment business model, including how typical leases are structured.
Airbnb, Haughey observed, is not alone in trying to disrupt the apartment industry, but is joined by a multitude of companies, including Pillow. The ball is still in play when it comes to innovation in this space, he implied, describing the industry as “all over the place” when it comes to handling this trend, with solutions that are amenable to all parties still in the works.
Though Airbnb was meant for homes, it is now making it easier for bed and breakfasts and boutique hotels to promote their rooms on its system, further driving its interest in getting Airbnb hotels of its own. However, these Niido-powered communities are more similar to the platform’s coliving model than traditional hotel services.
Moreover, growth will be crucial as the company pursues its IPO, though today the company has 4 million listings worldwide. Airbnb leadership reported achieving profitability this year, which is a key piece of making an IPO happen, while a source told CNBC that the platform saw a 50% increase in bookings over the prior year in 2017. What remains unclear going forward is if Airbnb will hold true to its original vision of itself as different from mass produced hospitality companies as it moves towards having its own buildings and going public.