Skip links

Main navigation

Menu
Podcast Episode #313
Real Estate Investing News

Multi-Families Turn Into “Pop-Up Hotels”

Listen to the full episode OR Scroll to read the related article.

Learn > [REN #313] Multi-Families Turn Into “Pop-Up Hotels”

Published: July 26th, 2017

Is it a another controversial use of housing that’s advertised on Airbnb or a great idea for apartment buildings with vacancies? Several new startups are betting on the “great idea” half of that question by turning vacant units into hotel rooms until they can be rented out.

WhyHotel started experimenting with the idea near Washington, D.C. during the Trump inauguration. The company anticipated a lodging shortage and provided 50-furnished units in a 22-story apartment building called “The Bartlett” in Arlington’s Pentagon City. They were ready by January 13th, in time for the big event.

WhyHotel is a pilot project put together by Vornado Realty Trust, the developer that owns the apartment building. It’s a huge building with 699 units, so the short-term rentals did not consume the entire property. The idea was to generate revenue from spaces that were not yet rented.

Vornado also owns “WeLive” micro-apartments in the nearby Crystal City, and work-live “e-lofts” in Alexandria so this isn’t it’s first venture into new rental scenarios. The Washington Post wrote in an article that some call the idea a “paradigm shift” that Vornado has cultivated from the sharing economy.
 

Pop-Up Hotels Gaining Ground

Vornado isn’t the only one doing it either. The idea seems to be picking up steam, despite all the controversy over short-term rentals. The Wall Street Journal writes that Miami’s YouRent.com is leasing sections of apartment buildings, and sometimes whole buildings, and transforming the units into hotel rooms.

The Journal writes that another soon-to-be-launched startup called “Parallel” is also planning to provide a similar business model by renting blocks of empty apartments, furnishing them, and then renting them as overnight accommodations. It will also provide a hotel-like team of hosts to take care of those guests.

The paper says these startups are negotiating with city planners and agreeing on a set length of time to operate. Most of the time, it’s about 8 to 16 months, while developers are trying to fill the buildings. Developers often have a large cash outlay to get a project up and running, and this is a way they can raise revenue to help bridge a cash-flow delay. It could also help make the building appear more “occupied”, instead of empty.

According to the Wall Street Journal, the WhyHotel units in Pentagon City operated from January through May for $179 to $329 a night. By converting them temporarily, they avoided the controversy over the creation of short-term rentals that eliminate long-term housing.

YouRent.com’s CEO, Brian Ferdinand, told the Journal that he hopes to take advantage of luxury-apartment vacancies and the high demand for lodging in trendy urban metros. YouRent is operating and expanding in Miami; Austin, Texas; and Nashville, Tennessee. It also plans to expand to San Diego, Denver, and Boston.
 

Pillow Provides Transparency for Landlords

Pillow is another short-term rental tool and just launched a new arm of its business called “Pillow Residential”. It’s designed to help landlords who want to know what’s going on in larger apartment buildings, and gives them a cut of any revenue generated by the rentals. It’s specifically designed for multi-family rentals.

While the original Pillow service helps hosts set prices, manage bookings, and deal with the key exchange for cleaning, Pillow Residential offers a way for landlords to enter into the mix. The product helps identify which units are being rented out, provides profiles on guests who are staying there, and makes sure the cleaning crews come up “clean” on background checks. For tenants, they no longer have to worry if they will be kicked out for Airbnb’ing their apartments.

Investors are apparently very enthused about Pillow Residential. The company just raised $13.5 million dollars to help make it a success. TechCrunch says that Pillow Residential has already enrolled more than 5,000 units. Cities include San Francisco, Oakland, Denver, Eugene, Salt Lake City, Louisville, and Albuquerque.
 

The New Short-Term Rental Paradigm

Services that expand upon the functionality of Airbnb, HomeAway and VRBO are helping the short-term rental industry adapt to a broader business model where hosts don’t have just a spare bedroom to rent out. BuzzFeed says these tools are being used by hotel companies, property managers, and a “new breed of entrepreneur” that you might call a “mega host”.

The blog writes about a tool that analyzes the Airbnb website, called “Inside Airbnb”. It has identified more than 100 Airbnb hosts that have more than a hundred listings each. 39 of them have more than 200. Airbnb has also changed to help accommodate mega hosts like the company TurnKey Vacation Rentals.

Until last year, TurnKey had to list properties under the names of actual people. It used the names “Julie” and “Erica” according to BuzzFeed. Then Airbnb launched its tools for professionals including a company team that could deal with property managers. This allowed TurnKey to rebrand itself as a company. TurnKey is also interesting to investors. BuzzFeed says it has raised $41 million dollars since 2013, a year after it was founded.

Author

Kathy Fettke

Kathy Fettke

Kathy Fettke is the Co-Founder and Co-CEO of Real Wealth Network. She is passionate about researching and then sharing the most important information about real estate, market cycles and the economy. Author of the #1 best-seller, Retire Rich with Rentals, Kathy is a frequent guest expert on such media as CNN, CNBC, Fox News, NPR and CBS MarketWatch.

Full Bio