Airbnb and other online short-term rental platforms’ disruptive business models have drawn much controversy. The start-up industry is rapidly expanding, not only in the U.S. but globally. In fact, Airbnb has already eclipsed other major hoteliers in terms of valuation and the company offers more rooms to rent than most major hotel brands. However, the adolescent industry’s quick adoption and rapid growth is outpacing legislation and regulation, creating concern from a wide variety of stakeholders.
For many in the apartment industry, the short-term rental industry represents a number of threats. First and foremost, apartment owners and managers have legal concerns, as most leases have been written such that short-term rentals are prohibited. They also have security concerns because they often lack information about which residents are renting out their units and to whom. There is fear over the extra wear and tear on the facilities, as well as potential damages to units and common areas. Liability is also an issue, as apartment firms do not want to be responsible for anything from the banal like a guest slipping and falling to the extreme like a guest assaulting another resident.
During a session at the 2015 NMHC OPTECH Conference & Exposition, Jaja Jackson, Airbnb’s head of landlord partnerships, announced for the first time that the company would soon launch a national multifamily-specific program and was currently testing a pilot program in California. Jackson then opened up dialogue about the relationship between the two industries while addressing multifamily’s chief concerns.
Because “we respect ownership,” Jackson said Airbnb was in the process of developing tools that can help the apartment industry manage what he called “home sharing activity” by providing more transparency and control, as well as a share of the revenue generated by the units in their buildings. The multifamily-specific program is set to roll out in 2016.
So, here’s how Jackson responded to industry concerns:
Concern 1: Our leases prohibit subletting
Jackson was quick to make a distinction between subletting and home sharing, which is the service he said Airbnb provides. Subletting is a much heavier agreement, he said, where rights are actually conveyed to person subletting; in contrast, home sharing could be dealt with through a licensing structure, where rights could be temporarily issued to guests. “The key distinction can be made by you and your legal team,” he said, noting that leases are not necessarily permanently static documents. They can be amended to accommodate home sharing activities and set parameters for those activities. “It’s only a lease violation if you say it is,” he said.
Concern 2: I don’t know who is coming in/out of my building
While Jackson acknowledged that having a background check on every Airbnb traveler would be great, he said it just isn’t possible given the company’s global platform. Every country has different rules governing those activities, as well as privacy and notification standards. That said, the company’s travelers are still vetted and the company retains a significant amount of data about each traveler, including date of birth, photograph, validated contact information and two additional pieces of identification. “No guests are anonymous,” Jackson said.
In addition, the company has been piloting a notification program in San Francisco. The company emails the owner or management company with upcoming trip activity and a summary of year-to-date activity at the property, so they have a record of which units will be accepting visitors. In 2016, apartment companies will be able to log into Airbnb’s site and see that information on a real-time basis. At the same time, the portal will allow owners and managers to upload house rules, as they’ve devised them, and require that the traveler acknowledge them. “There’s no limit to what you can express to guests,” he added.
Concern 3: I’m worried guests will cause damage or be disruptive
Jackson said this fear was largely overblown. Half of the company’s bookings are private room shares, where the host is at the residence during the duration of the trip. Analysis of the company’s data also shows that for every 60,000 nights, there is approximately one incident whose value is $1,000 or less. However, he noted that the company offers a host guarantee program, where the company will reimburse for up to $1 million in damage to the property. He said the agreement is activated the minute the reservation is confirmed. In addition, the company has a dedicated service team to help resolve any issues between host and traveler.
Concern 4: It’s my asset, but I’m getting little to no benefit for the risk
Jackson said that with the launch of the multifamily product next year, apartment owners/managers will be able to receive a share of profit anytime a resident shares his or her home. The company suggests apartment firms charge 5 percent to 15 percent as a commission or fee for the privilege, although he said it will be up to the firms to determine the exact percentage. Those funds are then directly deposited into the apartment firm’s desired bank account.
But beyond providing a revenue stream, Jackson said the partnership could be a powerful branding tool with guests becoming brand ambassadors. “Allow them to experience your amenities, your brand, the hospitality you provide,” he said. Plus, he noted that the referral rate on home shares is “phenomenal”-30 to 40 percent higher than traditional hotels. “There’s a lot of good mojo flowing around, and if you can do this right, you can associate your brand with that,” he said.
Concern 5: I’m not sure what the neighbors will think
Jackson said it’s up to each firm to determine what information it communicates to the rest of its residents. They can decide to share upcoming trip information or not. However, he said the key is positioning the extra revenue as something that benefits the whole community. For example, if the revenue will support a holiday party or new electric car charging station, it’s important to tell them that. Moreover, the company has a 24/7 neighbor hotline that can help them identify if an Airbnb trip is happening and help resolve any problems. “We’re trying to make this a very neighbor- and neighborhood-friendly amenity,” he said.