By Meghan Hall
The short-term rental market has revolutionized both the hospitality and multifamily industries as hoteliers, brokers and property owners are learning to navigate the impact created by the advent of companies such as Airbnb and VRBO. Short term rentals are ever becoming an increasing share of both the hotel and multifamily markets, a trend that is unlikely to slow anytime soon, according to Jordan Allen, chief executive officer and founder of Stay Alfred, a tech-enabled travel company. However, unlike Airbnb and VRBO, Stay Alfred goes further than its predecessors who act merely as a platform for individual property owners to rent units; it enters into long-term contracts with multifamily owners and developers for several floors of — or entire — buildings before renting them out short term to guests.
“The best way to explain Stay Alfred is comparing what Hilton and Marriott are to Hotels.com,” said Allen. “We’re bringing the four-legged stool of real estate, brand, hospitality and tech to a space that traditionally has only had one of those. Airbnb is a tech platform; apartment and multifamily are focused on real estate. We’re combining all four of those, and it’s really complex.”
Stay Alfred currently operates 2,500 properties in 32 cities across the United States, including Seattle, Chicago, Boston, Denver, New Orleans and San Diego. Allen was inspired to create the company while planning a trip with friends to Denver and found that renting a condominium downtown for his entire friend group was cheaper than a single night in one of the area’s centrally-located hotels.
Stay Alfred targets well-finished Class A multifamily properties in major downtown cores throughout the United States, properties that are close to restaurants, entertainment and local attractions. The units range in size from one to three bedrooms and, in most cities, the average nightly rate is around $181 per night. The buildings often feature a variety of amenities from water views to fitness centers.
According to Allen, many of Stay Alfred’s guests are older millennials tired of staying in cramped hotel rooms. Many of Stay Alfred’s guests are GenXers, with 76 percent of its guests over 35, while 67 percent of its guests have a household income of more than $100,000. Allen attributes this to Stay Alfred’s decision to operate high-end units in downtown, urban cores and their consistent guest experience, which can make the units more expensive than alternative short-term rentals.
“It’s not just kids with backpacks who are 18 years old,” stated Allen. “These are $200 to $500 a night type of accommodations.”
The platform, like its predecessors, has taken the multifamily and hotel markets by storm.
“This is absolutely the future of hospitality and travel,” said Allen.
It is also, however, the future of multifamily development. In five to ten years, Allen thinks, more multifamily developers and property owners will incorporate short-term rental components into their projects, and major brokerage firms will have departments that specialize in master-leasing apartment buildings.
“Multifamily real estate is one of the most conservative real estate sectors, so they’re really scratching their head with this,” explained Allen, who says that short-term rentals are quickly taking up a fast-growing share of the market. “They are wondering how it will affect the value of their buildings, whether or not it is legal, etc.”
However, in its negotiations with property owners, Stay Alfred has shown how it can be an amenity to building residents and a steady stream of cash flow for landlords.
“By taking over these blocks and understanding the operational component of it, I think [long-term tenants and owners] see us as a benefit,” said Allen. Stay Alfred offers travel discounts to long-term tenants living in its buildings to travel and stay in any one of its properties in other cities around the United States.
According to Allen, Stay Alfred has grown 150 percent annually since its founding seven years ago, and the company is targeting major markets such as Los Angeles, San Francisco and Europe over the course of the next year. Stay Alfred had not targeted these metros initially, explained Allen, due to legal red tape and cost.
“To be a global travel brand, you have to have a presence in New York, San Francisco, Los Angeles,” said Allen. “We’re working on it, but it is a little more capital-intensive.”
In San Francisco, Allen said, master leases in residential zones can pose legal problems, meaning that Stay Alfred will need to target new build or redevelopment zones as opposed to existing buildings. In Europe, the challenge will be different, as “built-to-let” developments are rare. However, Allen is optimistic that the future of renting and hospitality is here, now.
“This is new, it’s scary, but it is coming,” said Allen. “The multifamily developers, the loan officers, the brokers: whoever gets involved early and figures it out, the market is tremendously large. The genie is not going back into the bottle with alternative accommodations.”