
Airbnb Acquires Luxury Retreats, Beating Out Expedia, Accor - prostoalex
https://www.bloomberg.com/news/articles/2017-02-16/airbnb-buys-vacation-home-management-company-luxury-retreats
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t1o5
They are a menace to the common man who lives at rental apartments. The rental
prices of apartments have gone very high due to AirBnB. The entire building is
being rented out in AirBnB by the owner making it impossible to rent for the
common man.

Someone should keep a check on this service. For ex: Allow only single home
owners to rent, else this is going to be a huge problem.

The rental that I took was owned by a real estate agency even though the
profile showed the foto of a family. I didn't realize that until I thought I
will meet with the sweet family, so I called the phone number and it was
picked up by receptionist and said there is no family !

So I asked AirBnB about this rental portrayed as a family owned rental, but
was really a real estate agency, their reply was "Its legal" and I should have
read the fine print before renting.

~~~
calvinbhai
Or even better, zoning should factor in the average Airbnb rental rates. Allow
more rental units to be available in a zoned area where airbnb operates (it'll
bring down rent / airbnb prices)

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wavefunction
I disagree that your proposal is better.

For instance, "zoning should factor in the average Airbnb rental rates". I am
not sure what you mean by this, but presumably the average rates are
fluctuating all the time, which means "fluctuation" in the zoning as well.
Plus the properties would be properly treated as commercial sites and subject
to appropriate taxes.

~~~
calvinbhai
agree with you on taxing.

What I meant was, zoning should ensure that Airbnb will not be a sustainable
option for home owners. If there's 10x Airbnb listings for 1x Airbnb guests
visiting the area, how long can the remaining 9x sustain empty houses?

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cleansy
It's getting hot in the luxury rental market. But to be fair, $300M is quite a
sum for Luxury rentals. The high-end market is a tricky- and operationally
complex business. Suddenly instead of just putting up a website with some
stock images you need to have either some sort of warehouse and cleaning staff
or negotiate and train contractors in each city to provide the service that
your high paying guests expect.

Depending on how you structure the business you have to inspect each home
before you put it up for rent and normally you reject 4 out of 5, because of
location or other criteria. Then stuff happens like: heating or A/C doesn't
work and somebody has to be sent out to fix it in the middle of the night..

In a normal hotel you can do all of that with less then 10 minutes of work.
But in this scenario you need to drive somebody to these homes. Not a really
scalable business.

I would say good luck Airbnb :)

Edit: Disclaimer: I work in this industry

~~~
muse900
My family owns a few luxury apartments in Santorini. We always have them
overstaffed. The apartments are 80% full during all seasons and 100% March to
November.

The revenue is exceptional.

Our clients are quite happy I'd say, judging by reviews in tripadvisor,
booking etc (9.5 booking, 4.5 tripadvisor).

Even during times that electricity is cut off and there is no water due having
an electric pump to bring water up the cliff.

Its a win win scenario. We get a few customers that are on their honeymoon
etc, meaning they are paying way above their actual price range, and they are
always happy with the things provided.

Even on unfortunate moments like 2013 I think where half of the island was out
of power for 4 days so thats 4 days without water, electricity on a 2000+
euros a night trip, I'd say customers were pretty understanding of the
situation and also they were glad we did everything we could to accommodate
their needs such as giving them ton's of bottled water etc.

The point am trying to make here is that people that are willing to pay for a
luxury apartment are usually nice enough and understanding when there is an
issue, and the ones that can't really afford it but its their big moment in
their lifes, appreciate things like "bed/mattress" etc luxuries that they
never had before.

Btw people living on our apartments will pay 100euro taxis and 600 euro boat
trips... (way overpriced compared to general market prices) and generally they
will spend a lot more money than just accommodation

~~~
charlesdm
How does the math on this work out?

How much is one apartment worth, and how much yield are you getting from them
after deducting all the overhead? It's something that I've looked at though
obviously highly location dependent.

~~~
muse900
Well Santorini is a really expensive location. I'd say my parents bought those
apartments really early on 60 years ago, before Santorini became so popular.
(goldmine for my family)

We had an offer for 1 of the apartments for 6m euros. (Not selling it) The
lowest rent per day is at 2k euros. 2k euros is a high monthly salary for a
worker. So I'd say it makes quite some revenue.

(Note that my sister is running the business so I am not very familiar with
the details)

~~~
charlesdm
Cool! Well done (to your parents).

~~~
roymurdock
To add a bit of math into the equation:

Piketty estimates that the average return to real estate worldwide is a little
less than 5%.

In other words, the average property worth $6M would generate 6,000,000 x 0.05
/ 12 = $25,000 in rent per month.

If we use the same assumption to calculate the value of your property,
assuming an 80% utilization rate - $2000E/day x 365day/yr x 0.8 utilization /
0.05 = $12M.

So given these assumptions your sister was offered half of the value of the
property. Of course this simple valuation hasn't been adjusted for taxes,
depreciation, cost of maintenance, etc. but I doubt that would bring the value
of the property down by 50%, and I'm willing to bet that you generate much
higher than a 5% return on your properties if the rental mkt is as good as the
OP has described.

~~~
muse900
The offer was at least 10 years ago, we weren't renting most of them back
then. I gave it as an example because I don't know what the actual evaluation
of each apartment is.

Santorini boomed the past 5 years I'd say to the point that this year the
Government had to cut down Ships from mainland to Santorini because the Island
couldn't afford having that many tourists on it.

Using your calculations yes it would go for more than 6m euros although you
have to calculate the fact that Greece is currently in a very unstable
economic state, with heavy property taxes etc, and of course being close to
the Middle east tourism can be affected heavily by wars etc. Although again I
have no idea what the actual price of any of the apartments would be nowadays.

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gigatexal
So now they'll compete with their operators?

~~~
yesiamyourdad
Not exactly. AirBnb's core business is urban partial rentals (where they
started as a direct competitor to Couchsurfing). They've been expanding into
the VRBO space in the last few years, but that's a closely related segment.

AirBnb has very few properties in the high end price range and people who are
willing and able to drop that kind of money on a rental are looking for a very
different experience, from booking to the stay. I doubt very much that any
AirBnb or VRBO owner is very concerned about either company making a move into
luxury rentals.

~~~
gigatexal
Unless you're on of the few patrons of the service with a nice summer rental
or something. Now you're competing with this acquisition instead of other
customers with nicer rentals in exotic places etc.

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zitterbewegung
So airbnb will try to be a hotel in the future ?

~~~
inopinatus
Much like eBay is now basically a channel for retail. The alternative becomes
the incumbent.

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codingdave
Of course, buying up properties doesn't mean nearly as much as successfully,
and profitably, operating them.

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jgalt212
I thought a large part of the value prop of Airbnb was that they had no
expensive capital outlays.

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bradgessler
AirBNB will be a hotel at scale. Just like Uber will become a taxi company.

~~~
dajohnson89
And the prices will go up.

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kchoudhu
For a given level of service, AirBNB is usually already more expensive than
mainline hotels.

They have a fine line to tread as far as pricing is concerned.

~~~
aianus
There are entire classes of accommodations that airbnb enables that were not
previously available.

There's no way to share a hotel room with a random and save $100 a night, for
example. Or to stay at a hotel room in a pure residentially zoned area and
experience life as a local. Etc.

~~~
alpha_ori
This is absolutely correct. Hotels are optimized for a very particular pattern
of travel: individuals or couples who use the accommodation solely to sleep.
Many, many other use cases are actually more economically serviced by vacation
rentals, mainly due to the availability of a full kitchen and comfortable,
aesthetic, and private common spaces such as living rooms, pools, decks, and
hot tubs as part of the offering, and greater flexibility with location.

Consider, for instance, the following:

* 3 or more couples wish to travel together. They'll be doing some touristy things during the day, perhaps, but half of the fun of the vacation will be hanging out and bonding in the evenings, having wine in the hot tub, deep personal conversations in the living room, whatever it is they do. A 3+ bedroom vacation rental will accommodate this more economically than any similar hotel situation, even when they do exist.

* A family wishes to travel together. They have an infant, a small child who is a picky eater, a ten year-old boy and a thirteen year-old girl who refuse to share a room, and one of the parent's mother who will take care of the infant at "home" while the rest of the family does some of the more challenging activities. This group probably doesn't want to eat out for every meal and needs a comfortable and pleasing space for the grandmother to stay in for long periods of time during the day.

* Three or four bikers have found a beautiful route in a less-travelled semi-rural area. The nearest hotel is 15 miles away with no bikeable route, but there is a vacation rental just one mile away on rural roads. No need to bring the bikes into the hotel room, no need to rack the bikes on the car to get to the trailhead. Get the bikes from the garage and go.

* A small startup team is attending a conference. They'll be having business meetings all day, so it is important for them to be together to prepare their pitches in the morning and be together in the evening to review the results and strategize. Local hotels and restaurants are full of their competitors, and a private space will help them to focus.

* A couple has always wanted to visit an amazing locale. One of them has a significant food allergy to an ingredient commonly used in local cuisine, and the area is not known for being accommodating in this way. Because of the allergy, they are used to cooking for themselves, and would prefer to do that rather than, say, eat hamburgers every day at the hotel restaurant. Having a well-equipped kitchen is important to them.

I could keep going. The vast majority of my travel is in situations like the
above that are more possible, economical, and/or pleasant in vacation rentals
than in hotels. I've been using them 3-6 times a year for the past 15 years.
(I used VRBO before AirBnB.) I can't imagine going back to staying in hotels
for most of my travel.

