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The Airbnb Revolution

The short-term stay market is finding its feet – and it’s changing the way we do business, writes Aaron Tunstall.

By: Aaron Tunstall

30 April 2018

Disruptive technology is hot right now, and almost nothing has been more disruptive than Airbnb. It’s changed the way we holiday, the way we use our holiday homes, and the whole hospitality and property management industries. As apartment specialists, we had no choice but to enter the short-term stay market more than two years ago – and it’s been fascinating to watch this phenomenon grow and mature.

When we started out, we had to ask the owners of a couple of smart, furnished apartments to be our guinea pigs. We guaranteed their rent, taking on the risk ourselves so they’d let us take a punt at “Airbnb-ing” their places. Fast forward six months and we realised we were making so much money we had to explain to the owners that we really needed to start paying them.

Our “executive rentals” and short stay properties have, overall, been going gangbusters. It’s not only apartments, we’ve also got houses, ranging from Cockle Bay to Dairy Flat and everything in between, and they too are often popular. Some properties that I thought really wouldn’t succeed, like apartments in one Queen Street building notorious for being a bit crowded, have in fact been highly sought after. I think tourists know the name “Queen Street” and like the location. Also always busy are the apartments in hotels like Waldorf or Metropolis. Travellers see the official room rate of maybe $300 a night and then realise they can get an almost identical apartment for $170 on Airbnb.

‘As the market floods with new listings and new management companies, we’re seeing the market mature and a more realistic return settle into place’

Managing a short-term renter yourself can be stressful – that’s one reason we get enquiries every day on new properties to manage. It’s like running a hotel, with all the frantic organisation that implies. The nightly rates are relatively low and they’re not going up, because more properties are arriving on the market all the time. But the quality must be high – they’ve got to look fabulous in the photos because this is a competitive market. We’ve had to explain to a few owners that pulling your furnished apartment out of the long-term rental market doesn’t mean you can start “Airbnb-ing” it with the same tired old furniture. You’ve got to give it some flair: a bit of colour, artwork, throws.

In Auckland, the money’s all in the summer, so you need to maximise your income during the warm months and stretch it out to cover the costs in winter. Those ups and downs, plus the uncertainty of the income, can make this tough for some owners. If you like certainty, stick to traditional tenancy agreements. Luckily our team is able to mix in some two and three-month tenancies over winter for our owners from our large tenant pool (at a weekly, not nightly rate), but the self-manager won’t be able to do that. And you’ve got to manage the cleaners, the linen, the hotel experience, and the consecutive one-night stays – we soon realised we needed in-house employees to keep up with the demand. As you can imagine, the management fees are much higher than usual, but some of our owners are finding it well worth their while to switch to short-term rentals.

For the earliest adopters, the returns were outstanding on Airbnb. As the market floods with new listings and new management companies, we’re seeing the market mature and a more realistic return settle into place. But I know that some people are buying properties specifically to Airbnb, and they’re confident in their numbers. Short-term and nightly rental isn’t an easy way to make money any longer, but it remains a superb option for any owner who is prepared to take a little extra risk with the potential of extra reward.

Aaron Tunstall is the general manager of award-winning Impression Real Estate, which specialises in property management and sales and manages over 1,750 Auckland apartments.

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