Flexible travel trends and the ongoing diversification of property uses are driving a convergence of hospitality and property management technologies.
It represents the latest chapter in the blend between hotel and short-term rental technology services, but also represents a “battleground,” according to one investor, as property managers take a leaf out of the travel industry’s book to identify new revenue streams.
On one side, the growing number of mixed-use properties creates gaps for a new breed of tech-enabled hospitality companies, in particular non-hotel brands, to enter new markets. They’re able to expand almost effortlessly into multifamily buildings, apartment blocks or even converted offices.
On the other side, property owners eye lucrative synergies with the travel industry and opportunities to maximize value from tenants and residents.
In the current commercial market, landlords are under pressure to deliver.
“The value of real estate is the value of its cash flows, and those cash flows are driven by the utilization of the asset and the quality of experiences within the market,” said Jason Fudin, CEO and co-founder of flexible real estate platform Placemakr.
“When you have a building that meets either multiple needs for a single customer, if a customer wants to co-work and stay, or live, or whatever else, that drives more revenue for you as the owner.”
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The trend is also fueled by a ”proliferation of this gray area of living,” according to Niko Karstikko, co-founder and CEO of Bob W, referring to increasingly different lengths of stay and reasons for travel.
Overall, more than 20% of offices remains vacant, and the Finland-based hospitality provider is capitalizing on this by expanding into office conversions, as well as mixed-use buildings. Last month it partnered with Osborne+Co Investment Management to launch an equity raise of £120 million to accelerate its expansion into under-utilized spaces.
“Underlying consumer behavior is changing,” said Roman Pedan, CEO and founder of hospitality operator Kasa.
“People are living more flexibly because their work is more flexible. And with a more flexible arrangement with work, they're able to extend travel to other places for longer, spend a few weeks in a city or a few extra days in a given city. There really is a huge shift in demand.”
Technology is adapting
That shift in demand and the resulting requirement for buildings to cater to a wider variety of purposes isn’t going unnoticed by property management system (PMS) providers. Startups such as Mews are helping buildings better manage and sell “spaces” rather than rooms.
Australia’s RMS Cloud, meanwhile, offers an example of how the technology has already reached a level of sophistication. It focuses on “booking time and space” as a solution, according to Zen Valli, managing director, EMEA, who cites one client, Oslofjord, as an example of where platforms are heading.
Oslofjord is a “village” located in Norway that has a 6,800-seat congress hall, 500 cabins and cottages, 10 separate hotel buildings, five arenas, plus several restaurants and co-working spaces.
“You name it, they've got it,” said Valli. “It’s unlike anything I've seen ever, with the amount of mixed accommodation.” But he said serviced apartments are now one of RMS Cloud’s fastest growing verticals and in the United Kingdom it works with Native Group.
In the United States, Pedan pointed to STILE Downtown Los Angeles by Kasa, which includes a 1,600-person theater, and 5,000 square feet of event space.
“Part of why the owner wanted us to be the manager is we were able to drive more efficiency of the property by utilizing the on-site team more effectively, delivering a better guest experience, and a more integrated experience to the property,” he said.
“So when there's someone who's booking the theater, it's easy for them to book the hotel and rooftop pool, and it creates a more cohesive and integrated experience.”
Residential play
The potential for upselling and cross-selling is evident. Now real estate operators want to offer more to residents and non-residential guests and ideally all under one platform. Kasa already works with real estate companies, such as Greystar and Starwood Capital, to manage buildings and gives friends and family a means to book apartments within the building.
The concept extends to “try before you buy” so they can test a particular city before committing. Pedan said in some buildings this drives up to 10% of the leases. “In most leasing scenarios, an owner pays to get leads,” he added.
One new platform called 1Living, forged from a partnership between Hospiria and Alliants, wants to further demonstrate the benefits to landlords.
“Generally, the multifamily sector and this whole industry is looking at ways they can better monetize the assets that they have,” said Merilee Karr, CEO of Hospiria, which is part of UnderTheDoormat Group.
“That's where solutions like 1Living can provide two things. We can do the resident hosting piece, so the residents can host. But then it goes out to multiple platforms.” Its launch was also in response to platforms such as Airbnb that are developing their own resident hosting programs, referring to the home-sharing giant’s tie-up with Greystar.
“If you're the real estate owner, whether you're an individual owner of a property in a development or whether you're the asset owner of the development, why would you want your destiny tied to one single online travel agency?” she said.
Airbnb also recently announced a partnership with private rental marketplace Zumper.
Two-way street
“It is a two-way street,” said Mike Scott, managing partner of Derive Ventures. “It's not just hospitality tech going into multifamily buildings. There could be multifamily buildings, or their technology, coming into hospitality.”
He believes “big multifamily PMS systems” like RealPage, Entrata and Yardi are already making inroads, while Lavanda has “found this niche hybrid of short-term stays.”
“It will be interesting to see if it is the likes of Entrata and Yardi that end up picking up those (multifamily buildings) and integrating them, or the likes of Mews and Oracle. It will be interesting to see which side adopts that hybrid-first (technology) as their own, because that could be the battleground.”
Further ahead, he believes platforms like Bilt Rewards, operated by residential owners and operators and covering 4.5 million homes across the United States, are ones to watch as they “bleed” into the world of hospitality. These landlords are increasingly looking to create loyalty with their tenants through the world of travel, and the Bilt Rewards loyalty platform already partners with hotel brands including Hilton and IHG.
“They’re a case study of multifamily, your residence, bleeding into travel distribution,” Scott said.
“Will these multifamily landlords actually become brands that tenants seek out and associate with?”
In the more immediate future, this convergence will likely only accelerate industry consolidation, with Mews looking to snap up more companies after bringing in an extra $100 million in financing at the end of September to further target mergers and acquisitions — just months after raising $110 million.
As one industry source noted: “There's no need for 10 groups to do the same thing. You won't see a single winner in any space, you're more likely to see an oligarchy of two or three winners.”