A Blog by Jonathan Low

 

May 12, 2018

Surprise! You Live In a Giant Airbnb

Airbnb is expanding into co-owned and branded rental properties. It might be a good idea in terms of marketing and public relations since it forces Airbnb to pay taxes and otherwise compete fairly.

The big problem is the one that has plagued tech companies, especially in the on-demand and social media categories: an aversion to being open and honest - even, in this case, with renters in the acquired complex who were not notified of the strategy before they signed leases. Until tech companies stop skulking around rules, regs and transparency in order to make a few extra bucks, they will continue to incite enmity which could end up causing serious financially painful regulation. JL


Olivia Zaleski reports in Bloomberg:

Airbnb has an eye on expansion, announcing plans to team up with more real estate developers and facility managers. That should appease landlords, who have argued that Airbnb helps renters illegally sublet their apartments. But if the Florida project is any indication, Airbnb will face more complaints that it’s ruining the neighborhood feel by letting hordes of tourists run rampant on renters’ home turf. Blurring the lines between home and hotel poses the biggest problem.
In December, Sheila Schuler and her husband, David, were ecstatic to rent an apartment at the Domain, a cluster of well-kept pastel apartments in Kissimmee, Fla. The gated community’s palm trees and crystalline, cabana-lined pool felt like an oasis next to the nearby chaos of Walt Disney World, where Sheila works. Three months after signing a yearlong lease, the Schulers discovered Airbnb Inc. had co-opted their slice of paradise and that they would have to share their refuge with a potentially huge rotating cast of new faces. This summer the Domain will become the online booking giant’s first branded apartment complex, renting to tourists for short stays much the same way a hotel does. “We’ve been blindsided,” says David, who found out about the change from the building’s unofficial Facebook page. “We didn’t agree to live in a hotel.”
It’s easy to see why vacationers headed for Kissimmee, which welcomes about 10 million visitors a year, would book the Domain. Along with Disney, the building is moments away from Universal Studios and Jimmy Buffett’s developing Margaritaville resort project, making it ideal for Airbnb’s grand hybrid experiment. But when that influx of tourists is happening next door, ­people tend to balk. The Schulers are among a dozen residents frustrated with the 324-unit complex, some of whom spoke to Bloomberg on condition of anonymity for fear building management would retaliate.
Those who live at the Domain full time will be encouraged to sublet their spaces online when they’re gone for extended periods, and Airbnb’s guests will have access to amenities commonly found in hotels, including maid service, luggage storage, and digital keypads. Miami-based Newgard Development Group is overseeing the project through its Niido Powered by Airbnb brand. They, alongside the condo’s managers, are pressuring residents into an “Airbnb time-share operation,” says Domain renter Amanda Crane, who also works in the tourism industry. “I did not agree to this setup when I signed a lease.” Airbnb declined to comment. The Domain complex is designed to be a primary residence, says Cindy Diffenderfer, co-founder and chief marketing officer for Niido Powered by Airbnb. “We’re not trying to be sneaky,” she says. “We’re embracing a travel trend that we’re seeing in our properties.”
The backlash from tenants doesn’t bode well for Airbnb; at least two of Domain’s residents say they’ve consulted with lawyers about their options. In December, Niido said it plans to open as many as six Airbnb-branded
complexes in Florida like the one in Kissimmee. Airbnb, now valued at $31 billion, has an eye on expansion, announcing plans in October to team up with more real estate developers and facility managers. That should appease landlords, who have argued that Airbnb helps renters illegally sublet their apartments. But if the Florida project is any indication, Airbnb will face more complaints that it’s ruining the neighborhood feel by letting hordes of tourists run rampant on renters’ home turf.
Expanding to branded apartment buildings is critical for Airbnb to win over luxury-craving customers, which would help justify its
valuation, says Ivan Feinseth, chief investment officer and director of research for Tigress Financial Partners LLC, an investment banking firm. “Partnering with large landlords is the best way to get more consistency and control to offer a hotel-like experience but at a lower price,” Feinseth says. To broaden its appeal, Airbnb is adding listings for hotels as well as fancier digs under the label Airbnb Plus. Those sites get regular visits from an inspector to confirm that the towels are fresh and the appliances are working.
Airbnb’s branded buildings promise management companies 5 percent to 15 percent of the profit hosts generate. At Domain, residents who rent through Airbnb would pay Niido 25 percent of their home-sharing income. In exchange, Diffenderfer says, residents will have access to the same hotel-style amenities visitors will receive.
Niido didn’t tell residents about the Airbnb arrangement until April 19, after a Bloomberg reporter began asking questions about the venture. Some Domain residents say they suspected Airbnb was setting up a home-sharing operation after the complex manager, Dan Maggard, informed them their apartment locks would be changed to a digital system—but not why. He declined to comment. “I’m outraged. I’m beyond upset,” says Wilma Colon, who moved into the Domain complex about eight months ago. “My son uses the business center to study—now they’re making it into a lounge space for transient people who have no investment in our community.”
Diffenderfer confirmed the Domain’s common spaces are undergoing renovations, which include the creation of a room designed for cooking classes and wine tastings sponsored by local restaurants. The business center will morph into a more collaborative space with co-working tables, she says.
Improving the building’s facilities and making its aesthetic more chic is good for everyone, not just Airbnb users, and the cost of the remodeling and upkeep is already built into long-term residents’ fees, Diffenderfer says. “With a better understanding of Niido, I think residents will be really happy with what we’ve come up
with,” she says. According to Niido, tenants don’t have a choice; objection to Airbnb’s presence isn’t valid grounds for them to break their leases.
At least a few are happy to welcome more visitors into the neighborhood, if not their own homes. “I am a traveler at heart, so the idea of having other travelers around is exciting to me,” says Christian Matarazzo, who works for a nearby hotel company. “I think people will come around to the Airbnb partnership because it’s a great opportunity.” But for others, blurring the lines between home and hotel poses the biggest problem. “I work all day in the tourism industry,” Crane says. “I don’t want to come home to the tourism industry.”
BOTTOM LINE - Airbnb is expanding in Florida with its first branded apartment complex, but some of its full-time residents are pushing back.

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