The year is heading towards peak holiday season and around Australia will be thousands of people staying in Airbnb accommodation or letting out their homes or investment properties to paying short-term guests.
There’s been plenty of resistance to Airbnb from the hotel industry which is fending off a disruptive rival for business share and apartment owners troubled by the impact of their building being invaded by an ever-changing roll call of strangers.
Wherever you sit on the issue there can be no doubt that Airbnb isn’t going away and while the focus has been on the impact on the hotel and tourism industry the real estate industry needs to be alert to its impacts.
Whether Airbnb is a threat or an opportunity depends on many factors. The threat exists where a landlord opts out of traditional leasing in favour of short-let Airbnb, engaging one of the many short-let property management companies that have set up to service this new sector. The opportunity lies in leveraging the expertise and infrastructure inherent in the property management business to target and service Airbnb lets.
The law is still trying to catch up with the changes wrought by the sharing economy. In Queensland there is no requirement to obtain body corporate consent for short term lets however some councils have sought to keep a lid on things by requiring permits and compliance with various codes, stripping away the financial incentive to be an Airbnb host.
NSW is still grappling with the issue. An 18-month long parliamentary inquiry rejected calls from the hotel industry for heavy regulation and given that Sydney now rates among Airbnb’s top 10 destinations with 4500 hosts listed in the City of Sydney alone it’s clearly thriving despite being in a legal grey zone. Across metropolitan Sydney Airbnb lets have increased from around 5700 in September 2014 to around 10,500 in October 2015. About 60 per cent of these are entire homes or apartments – not so much sharing as leasing.
So why would a traditional estate agency take an interest in this market, valued in 2015 at more than $25 billion nationally. Well it’s a growing sector and for property owners who are doing more than inviting travellers into their spare bedroom it’s a potentially profitable little earner.
The average fees charged by Airbnb property managers are around 18-20 per cent, more than twice the traditional property management fee, though of course there’s a lot more involved in taking on the host and concierge role that an Airbnb requires. Nonetheless it presents an opportunity to grow the property management business in areas of high demand by Airbnb guests, such as the inner city and popular beachside locations.
In one inner-west Sydney suburb, R&W Marrickville manages a property for an investor 10 months of the year but in December and January he lets the home on Airbnb where he takes advantage of the high demand and higher rates for Sydney accommodation over the summer. There is some logic to this approach if you have tenants such as students who are happy to vacate for two months or you’re confident of finding new longer term tenants each year.
The R&W Noosa office sees no threat from Airbnb to its dominant position as a short-term letting specialist. There is certainly Airbnb accommodation available, however Principal Peter Butt says it tends to be in secondary locations, distant from the prime locations where most holiday-makers want to be.
And then there is the benefit of scale. With 250 holiday lettings on their books and a business that goes back to 1992, R&W Noosa is able to offer economies of scale and service efficiency that an Airbnb manager hoping to take a share of the market could not. The costs of running a holiday letting business are substantial and cleaners, plumbers and assorted other tradies cost more and are less likely to be there when you need them unless your business represents a substantial part of their business.
But not every business is so well-insulated against the threat from Airbnb and a prudent operator should at the least be aware that disruptors can be disruptive. And if you can’t beat them joining them is always an option.