Disruption is the buzzword. Everyone remembers the Uber wave that threw the taxi business upside down.
Fewer are aware of online accommodation listings, the biggest being Airbnb, that are changing the way people look for accommodation as they travel the world.
A quick search on the Airbnb site for Kenya throws up hundreds of listings.
According to Knight Frank’s 2018 global city report, Airbnb is benefiting from the growing popularity among the young market segment who are becoming versatile online, even when looking for accommodation.
The Global City report has placed Airbnb as a top option for the increasing number of a new generation of younger employees who are said to be more flexible in business and leisure travel.
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This in return is also encouraging the companies to deploy them around the world through the Airbnb model for shorter periods.
“We are seeing a huge rise in businesses travel and employees who are technically asking for Airbnb to help them easily incorporate Airbnb into their travel policies all over the world,” Says James McClure, one of Airbnb’s Managers.
“For the serviced apartment market, it underlines the growing importance of branding and the uniform quality of services and booking systems. For example, the quality of serviced apartments in Kenya matches that of a hotel, but it’s been done relatively informally to date,” McClure says.
Going formal
McClure says that all along, the next level for the short term lease options has been going professional, which is like getting online platforms like Airbnb with better branding and offers.
Cytonn’s report on hotel and hospitality industry performance has, also for the last two years, indicated that serviced apartments especially in Nairobi have outperformed hotels.
They recorded an average occupancy of 90 per cent in the past with revenue per available room hitting Sh12,700.
The occupancy rates in 2016 declined by 2.7 per cent.
“The occupancy in serviced apartments is 29.6 per cent higher than that of hotels, and is 33.5 per cent cheaper on average than a hotel room,” the report noted.
But, are developers adopting these new trends in the market? Yes. A few developers are now fully focusing on short-term rentals in the market.
Kilifi based Sultan palace Beach Retreat development feature on Airbnb, allowing tenants owning holiday homes to rent them out to as many clients as possible when not around their homes.
Mr Liu Tiancai, the company’s managing director says comfort in receiving monthly stipends by landlords is what has been making the short term models unpopular in the past.
They help and introduce those who buy apartments from them especially for holiday purposes to rent them out to different clients on Airbnb to help them make money when they are not around.
Sultan palace also intends to apply the same concept in Nairobi’s Kilimani area where they are developing serviced apartments.
According to Tiancai, although it has previously been difficult for developers to venture into the short term rental stay investment, market trends are showing that it is among the best sure way of reaping big in real estate.
“For short term investments in the real estate, the investor is able to get increased income since a unit can host several short stay tenants who pay a premium when there is consistent occupancy ratios,” Tiancai says.
Tiancai says, for short term renting, the owner also gets a reduced damage risk compared to when homes are rented for longer than six months, where the threat of damage increases by every day for the property owner.
Nairobi, which Knight Frank has highlighted as a top global city, has been reported in the local housing market research that short term stay services have an average of 30 per cent share of searches by those looking for short stay accommodation services online annually.
This is in spite of the fact that Nairobi has not been doing well in the online platforms, like Airbnb, compared to other places in the Middle East where Sultan Palace Beach Retreat drew its inspiration for the model.
Collaboration
Tiancai says, in Kenya, their observation has been that property owners offering short stay accommodation services rarely collaborate with those who drive the travel industry.
“One of the ways into boosting short stay accommodation services is ensuring collaborations between for instance local conference organisers, travel agencies who handle thousands of tourists annually, both domestic and foreign on Airbnb,” Tiancai says.
If it picks up as it has in the rest of the world, short-term rentals like serviced apartments will be the next frontier of growth in Kenya’s real estate market.
According to market insiders, Airbnb is the reason short-term accommodation rentals are rising in demand.
Market trends have indicated that short-term rentals, like serviced and furnished apartments, are offering higher returns thus they are doing well in the market.
According to the Hass Index for the fourth quarter of 2017, which was released in January 2018, indications are that apartments, where short-term’s serviced apartments lie, had a rental yield of 6.01 per cent, a higher yield compared to other long-term rental investments in spite of a long electioneering period.
Hotel and Caterers Association CEO Mike Macharia says properties listed on Airbnb and offering short stay accommodation services are doing fairly well.
But, since people respond to market needs, the millennials — who are young and require efficient, inexpensive services — are changing the market curve in favor of short term rental services due to their fair price.
So, next time you want a place to stay for only a few days, you might want to go online and see what is on offer.
