Capitalizing on ‘stealth lodging’ niche Connecting homeowners with people seeking short-term rentals is a $2.5B industry

BY STEVE BERGSMAN, FRIDAY, FEBRUARY 8, 2013.

Inman News®

After Todd Hunter and his partner acquired a West Hollywood, Calif., property with a guest house in the back, they had to decide what to do with the extra living space.

The most obvious choice was to turn it into a rental, but a neighbor mentioned Corporate Housing by Owner, a website that connects private homeowners with people seeking short-term rentals such as traveling executives or actors.

“We priced it out both ways, as an unfurnished rental and as a fully furnished monthly with higher-end design and appliances,” Hunter said. “We live in a place people want to come to, so we decided to try to go the corporate housing route. If it didn’t work, we figured we could always take out the furniture and make it a full rental.”

The space was nicely decorated, professional photographs were taken, and the property was posted on Corporate Housing by Owner’s website on a Wednesday. That afternoon, Hunter got his first query. A second followed the next day.

Hunter decided to go with the first query from a mother and daughter who were coming to Los Angeles on a job hunt. They were moved in by the next Saturday. The rental’s listing price of $2,800 a month was much higher than what a standard rental at less than $2,000 a month would have brought in, Hunter said.

“We might have been a bit lucky, posted on Wednesday and a move-in by Saturday,” Hunter said, “but we were still very pleased.”

Kimberly Smith, co-founder and CEO of Corporate Housing by Owner (CHBO), calls corporate housing “stealth lodging” because few people are aware of it until they need the services, even though it produces $2.5 billion to $2.9 billion a year in gross rents.

While anyone, including a mother and daughter looking for employment in a new city, can use short-term residential housing, the business is called corporate housing because residences in the programs are most frequently used by executives and other businesspeople on temporary assignment in another city or going through a corporate relocation.

Some of the many users of corporate housing include visiting nurses, baseball players in spring training, Cirque du Soleil performers on an extended performance schedule in one city, and snowbirds.

From an ownership point of view, corporate housing was always a kind of corporate business in that it was generally dominated by big firms, many of which were major apartment owners and managers. For example, a company like Equity Residential, the largest apartment owner in the country, boasted a corporate housing division that owned 3,000 apartments. The division was eventually sold off.

If you, as an owner of a residence, either condo or single-family, were interested in using it as corporate housing, it was very difficult to get that message out to potential renters. That was until Smith and friends developed CHBO.

“CHBO is a platform where individual owners can connect directly with tenants,” Smith explained. “What makes us different from, say, a Craigslist, is that we have developed relations with the Employee Relations Council, with insurance companies, and with people who deal with housing needs on a regular basis. So, you are not just sticking a rental property out there in the universe by itself.”

CHBO allows a homeowner with a rental to have a repetitive, rental relationship with a New York businessman, even though the homeowner might live in a private home in suburban Atlanta or a high-rise in Los Angeles.

“The other thing about CHBO is that we took everything that we could think of that might be needed by renters or homeowners and added it to the website,” Smith said. “There is, for example, a 55-page booklet that tells you what you need: How many forks does a typical business traveler expect? What do I do with the mail, etc.? In addition, we run an annual survey that produces a report so those interested in the business can, for example, see how long tenants generally rent.”

Corporate housing today consists of about 80,000 residential properties across the country, and if you throw extended-stay hotels into the mix, that’s another 300,000 rental units.

Typical corporate housing is like a commodity product, Smith said. “One company goes and leases a bunch of apartments. The company either rents or buys furniture and then leases out the apartments to the consumer for shorter periods of time (than an apartment rental).”

That’s the known factor, as the 80,000 properties represent the established or company-serviced part of the industry, which is designed around apartments. There is no data on the private residences, but Smith, who knows the industry better than almost anyone, guesses there are another 50,000 private residences that produce about $1 billion in gross rent revenue.

In a typical corporate housing lease, clients stay 80 days. Established companies report that clients stay, on average, 100 days. “About 14 percent of the people who are booking their property through CHBO are doing so for a year or longer,” Smith said.

Smith, a political science major with a specialty in Asian studies, through an internship ended up at a corporate housing company in San Francisco. She stayed for four years and then went to AvenueWest Corporate Housing in Denver.

In 2006, Smith and partners launched CHBO.

AvenueWest wasn’t truly an expandable concept, she said. “It was impossible to have a property management company in every state, especially when it was targeting high-end executives in high-end real estate.”

Smith sensed there was a need for individual homeowners in the market, or, as she said, the “by-owner segment,” and there was a need for other tenants not being served by companies targeting the high-end corporate market.

“I knew there were tenants out there not being serviced,” she said. “If your house burns down (or is washed away in a Hurricane called Sandy!), you don’t have the resources to find a home to rent. Well, there may be someone out there who has an empty house because he had to relocate. There just needed to be a platform to facilitate the two getting together.”

Steve Bergsman is a freelance writer in Arizona and author of several books. His latest book, “The Death of Johnny Ace,” is now available for sale on Amazon.

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2012 by Owner Corporate Housing Report

2012 by Owner Corporate Housing Report

Welcome to 2013! In the last year, a lot has changed in the corporate housing and residential rental world. We’ve experienced:

  • Corporate housing mergers and acquisitions.
  • New laws regulating and prohibiting vacation rentals.
  • Identity challenges in the corporate housing industry.
  • A still uncertain economic climate.

I believe we will continue to see more of these changes in the months to come.

To help you navigate these changes with confidence, we’re excited to share our 2012 Annual Report―a summary of the results from our annual “By Owner” Corporate Housing Survey. This is the fourth year of our survey and annual report. In the pages to follow, you’ll be able to draw upon the latest data, as well as comparisons and trends from recent years.

Executive Summary

Survey Respondents

Responses were received from property owners across the United States (36 states and the District of Columbia), Canada, and Panama. The highest response rate came from property owners in California, followed by Colorado.

The top reason for being a corporate housing landlord continues to be the long-term investment (50%). That’s up from 47% in 2011, but it’s still below the peak of 55% in 2009.

Outlook for 2013

On a positive note, 36% of respondents predict that 2013 will be better and more profitable than 2012—a similar percentage to 2011. However, 10% of respondents believe that 2013 will be less profitable, which is a notable increase from the 5.2% who had this outlook in 2011. In addition, those who are “not sure” about the future rose from 14.7% in 2011 to 18.4% in 2012.

Profitability

Despite the cautious outlook described above, 92% of respondents report that their properties were profitable or breakeven in 2012. Overall, the responses were nearly same from 2011 to 2012, with property owners noting a slight increase in profitability in 2012.

Rental Rates and Discounts

60.4% of respondents say they offered the same rental rates in 2012 as they did in 2011. The great news is that 33.1% reported that they did raise their rates in 2012, and only 6.4% of respondents lowered their rates in 2012. These results are significant jumps from 2011 when 16.1% people reported lowering their rates.

Compared to our 2011 survey results, the largest increases in rental rates were for 1 bedroom, 2 bedroom, and 4 bedroom properties. The rates included later in this report are at their highest numbers since we first started collecting this data. 66% of respondents say they offer discounts for longer-term leases. Nearly half of the respondents say they offer rental rate discounts of 10% to 14% for longer-term stays.

Corporate Housing Terminology

72% of respondents list their rentals as “corporate housing,” followed by 51% who list their properties as a “furnished rental.”  The most interesting trend that has emerged in the last two years is a 13% drop in those who refer to their properties as “vacation rentals.” This is most likely due to the increase in regulation and taxation of the less than 30-day rental segment, and it’s a trend we will continue to monitor.

Property Management

80% of respondents say they do all their property management themselves. This is a decrease from the last two years. In the last year, we have seen an increase in the number of respondents seeking support from friends and family, as well as from real estate agents.

New! Property Management Software

The majority of respondents (55%) say they do not use any form of property management software to manage their rental property. 26% use basic spreadsheets, followed by 18% who use accounting software, such as QuickBooks™. 

New! Rental Documents

We asked respondents, where did you get your rental documents (such as leases)? The most (38%) say they found their documents on the Internet, followed by 34% who say they wrote their own documents. Only 16% say they paid an attorney to have their documents drafted.

New! Leasing Trends

Based on our experience full-service, corporate housing companies, renters tour properties in advance only 30% of the time. In contrast, in the “by owner” corporate housing segment, property owners say they provide tours to renters 44% of the time. 71% of respondents say email is the primary way they communicate with their potential renters. 46% of property owners say they meet all potential renters face-to-face.

Investment Real Estate Trends

We asked respondents, do you plan on buying more investment real estate? For the third year in a row, there are more “Yes” responses (40%) than “No” responses (17%). Over the last three years, we’ve seen a steady decrease in the “No, I’m done with real estate” response.

Property Size / Number of Bedrooms

The highest percentage of “by owner” rentals continue to be two-bedrooms (36%); though, this is a 5% decrease from 2011. 33% of respondents say their rental properties have three bedrooms or more. In contrast, in the full-service, corporate housing industry, the majority of rentals are one-bedrooms (51%). The availability of additional bedrooms makes the “by owner” corporate housing segment an attractive option to renters.

Property Type

Whereas the majority of corporate rentals in the full-service corporate housing industry are apartments, only 12% of “by owner” rental properties are apartments, according to survey results. Single-family homes are the largest percentage of “by owner” properties (25%) accounted for in this survey, followed closely by low-rise condominiums (23%).

Property Locations

The highest numbers of private corporate rentals are in suburban areas on residential streets (35%), followed by outer urban areas (27%) and central urban areas (23%).

Inclusions in a Furnished Rental

While the majority of private owners offer tenants a fully stocked kitchen (87.3%―up almost 10% over 2011), TV (85.1%), bed linens (84.5%) and towels (82.3%), there is much greater variation―and opportunity for competitive advantage – in the technology, maid services and perks that are available in each rental property. For the first time, we asked owners whether they offer a “Community Activity Pass” to renters, and 16.1% say they did.

Corporate Housing Tenants

Corporate housing tenants continue to be relatively “painless” tenants. In 2012, more than 90% of respondents say they had a positive experience with their corporate housing tenants. This percentage is consistent with the results from 2011.

Types of Renters

In 2012, the top three reasons for rentals were: business assignments (67%), relocations (43%), and family (33%). In general, the corporate housing renter pool remains consistent. There was a decrease in the number of people renting due to relocations, snow birds, and vacations. This year we added a new renter category: “temporary lodging due to a home remodel.” 23% of respondents say they had that type of renter during the year.

Length of Stay

63% of respondents say their tenants stayed an average or three months or more.

26% of respondents say they are willing to rent their properties for time periods of less than one month—down from 30% in 2011. This year, as the result of city legislation against less than 30 day stays (such as in New York City and Chicago), we added a question about who is setting limits on the minimum length of stay allowed. Only 8% of respondents say their city regulates their minimum length of stay. 22% say they are regulated by the rules of the community or the building in which the property is located.

Security Deposits and Insurance

82% of “by owner” landlords say they require some form of a refundable security deposit in 2012—down from 89% in 2011. In a growing trend, 8% of respondents say they require Accidental Rental Damage Insurance (ARDI) as an alternative to a security deposit.

Credit and Background Checks

In 2012, 28% of respondents say “yes,” they always run credit checks on potential tenants—a number that appears to be holding steady with previous years’ results. A larger amount, 30%, say ”no,” they never run reports, which also is consistent with previous years.

Credit Cards

Approximately three out of five of respondents say they accept some form of credit card payment from their renters. 2012 is the first year that Visa/MasterCard is more popular as a credit card option (at 34%) than PayPal (at 33%).

Pets and Pet Security Deposits

Many long-term business travelers are arriving with pets. 48% of survey respondents say they accept some type of pet. Of those who accept pets, 62% say they take pets because it gets their properties rented. The most common rental period for renters with pets is one to three months.

In 2012, the average, non-refundable, one-time pet fee property owners charged was $253. The average pet refundable deposit is $344.

Marketing Trends, Resources and Results

In 2012, 44% of respondents say they spent $500 or more on their annual marketing efforts—up from 37% in 2011. 40% of “by owner” landlords say their property was always rented, while the remaining 60% say they needed more tenants.

63% say they had professional photos taken of their properties. In addition, 21% say they had used a professional decorator to furnish their properties. We believe these numbers will go up as the “by owner” industry matures. More individual owners are seeing property management as a viable income opportunity that requires polished marketing.

The majority of “by owner” landlords say they use the Internet to promote their properties. 64% of respondents say they use CHBO’s basic listing service, followed by Craigslist (44%). Craigslist has been steadily trending down in popularity since 2009; though, it is still a prominent marketing vehicle for many property owners. Respondents find they receive the most qualified leads and the most renters from Internet marketing, followed by real estate agents.

Internet Reservations

In 2012, we again asked how the “by owner” segment feels about real-time booking reservations, in which the property is leased through a computer website and the property owner has no interaction with the tenant.  16% of respondents say they have used one of these programs (down from 20% in 2011). However, the majority, 53%, say “no,” they would never rent their property without talking to the tenant first.

CHBO Services

Of the respondents using CHBO, they tell us they use the following CHBO tools the most:
(1) The property listings (2) The MyCHBO documents page (3) The Property Owner Handbook.

My conversation with “Work Reimagined” by AARP

Make Your House Work For You

During career shifts, your house doesn’t have to be a ball and chain. In fact, it can crank out extra cash.

By Sarah Mahoney  |  October 23, 2012

When Jule Zacher, a 48-year-old software consultant, decided to take a new job in Silicon Valley last September, she was both elated and torn. The new position was terrific, but it meant leaving behind “a quintessential Toronto home, a beautiful house and yard that I had redone from top to bottom.”

At first, she thought about selling, but quickly realized she could make more money by renting it. “I can save that as a retirement investment, and defer any tax implication,” she says. She found CHBO, or Corporate Housing By Owner, a website that charges property owners a $279 fee to advertise to corporate relocaters. Within two weeks, she had a six-month lease with a tenant paying $5,000 per month, covering her expenses while she builds her new life in California.

Add Zacher to the growing list of accidental landlords. Some rent their homes outright, or just their basement; others are taking in boarders. What they have in common is that they’re suddenly sizing up their abodes as a source of cash, not just a place to put their feet up and watchDancing with the Stars.

Renting Your House

For many, offering a home as a furnished corporate rental is ideal, says Kimberly Smith, founder of CHBO:

There are plenty of takers.  “People don’t understand how big a need there is for this kind of housing,” she says. “There are 100,000 travelling nurses at any given time, for example, while the Department of Defense moves 600,000 people around per year. There are divorces. Lots of people need short-term rentals.”

You don’t have to get rid of your stuff. Since these rentals are furnished, you eliminate the hassle of storage. (Many owners lock their valuables and knickknacks up in an owner’s room or closet.)

You get good tenants. Renters in this category are typically low maintenance. A traveling executive in town for a two-month project isn’t likely to care what color your dining room is, or throw noisy parties.

You get your house back whenever you want. While these short leases mean more work (since you’ll be screening new tenants frequently), they also add flexibility. “If you land a job and get back on your feet, there’s no need to wait months or years to get your property back from renters,” Smith says. The average length of stay is about 100 days.

Once you’ve begun screening tenants, “do background checks, and go through a very formal application process,” she says. “Google them. Ask for their driver’s license. Run credit and background checks. And do walkthroughs, including video inspections.”

(CHBO doesn’t do any screening, but it provides DIY guidelines on such details as insurance, accepting credit cards and researching tenants.)

Another option, if you’re willing to invest in renovations, is renting out part of your home. When Peggy Northrop, editor-in-chief of Work Reimagined, left a high-profile job at Reader’s Digest, she and her husband found themselves struggling with too much real estate. “For years, we had lived in the top three floors of a house in Brooklyn, and rented out the basement apartment. We had also bought, fixed up and furnished a home in Connecticut. Plus, we are helping my husband’s son with his apartment, as well as our daughter, who is in college now.”

At first, she says, “I kept thinking, `I can’t afford all these houses. I have to find a job that pays exactly as much as my last one.’” But what she really wanted, she decided, was more freedom—to consult, to travel, to start her own business. “And with my daughter gone, I realized we didn’t need to live in our house the way we had been.” The result? She and her husband are renovating the basement and moving downstairs, and leasing out the triplex. “By renting out just part of one house, I’ve found a way to afford them all.”

 

Corporate Housing in San Diego?

Corporate Housing in San Diego

CHPA Network Connection – Open to ALLConnect with CHPA in your market to discuss local trends and issues while networking with other corporate housing professionals in the area.  Join us for industry insights, partnership opportunities and more.brought to you by CHPA.
Date: Tuesday, November 13, 2012
Topic: Wow! What a summer!?Discuss the current business environment and industry trends you are seeing with your colleagues in the San Diego area.
Location: Domain San Diego
8798 Spectrum Center Boulevard
San Diego, CA 92123
Host: CHPA
Facilitator: Madison Hospitality
Sponsor: Signature Furniture Rental
Food: Food and beverages will be provided
Cost: Free to both members and guests
RSVP: Click here!

SBA offers great business tools

SBA offers great business tools

If you are a small business owner, you need to know how your business stacks up with the competition in order to succeed. SizeUp will help you manage and grow your business by benchmarking it against competitors, mapping your customers, competitors and suppliers, and locating the best places to advertise.

Get to know the Corporate Housing Industry – CHPA Regional Conferences

Now is the time to start learning about the Corporate Housing industry – only $225 for non-CHPA members

Washington, DC Regional Conference  October 18, 2012 » 11:30 a.m. – 5:15 p.m.

Chicago, IL Regional Conference  November 6, 2012 » 11:30 a.m. – 5:00 p.m.

 

DC Event 

Prospecting for Success, Kevin Toomer, Premier Furnished Solutions
Gain confidence and the ability to secure appointments with qualified prospects for the corporate housing industry. Learn the principles of successful prospecting and directly apply the program to your current efforts in today’s challenging competitive environment.

Outsell, Outmarket, Outpromote, But Never Outspend! Bill Todd, Immediate Impact Marketing
Gain an arsenal of cutting edge ideas, strategies and tactics to increase sales, decrease marketing costs and improve your bottom line. Learn how to be more successful and spend less than your competitors. Implement these solutions immediately and start seeing results!

State of the Union: Government Spending
Kathy Lane (moderator), National Corporate Housing; David Chertcoff, DMC Management Services, LLC; Bill Foos, Basic Overnight Quarters; Chris Scott, Office of Asset and Travel Management, Office of Government-wide Policy
What’s really going on with government spending in the GSA and DOD sectors? What determines government standards, policies and per diems rates? Are your standard ‘perks’ potentially fraudulent per government regulations? Get an insider’s view on these issues and the impact on your business’s success. Corporate housing professionals also share their experiences and perspectives on how to successfully navigate this important sector.

Chicago Event

Lunch continues with presentation: Rental Trends in Chicago, Ron DeVries, Appraisal Research Center
Get an insider look at trends impacting the local market from an industry expert. Experienced with Chicagoland Apartment Association, Ron DeVries gives a uniquely qualified perspective on rent trends for conventional apartments in the Chicago area.

Prospecting for Success, Kevin Toomer, Premier Furnished Solutions
Gain confidence and the ability to secure appointments with qualified prospects for the corporate housing industry. Learn the principles of successful prospecting and directly apply the program to your current efforts in today’s challenging competitive environment.

Outsell, Outmarket, Outpromote, But Never Outspend! Bill Todd, Immediate Impact Marketing
Gain an arsenal of cutting edge ideas, strategies and tactics to increase sales, decrease marketing costs and improve your bottom line. Learn how to be more successful and spend less than your competitors. Implement these solutions immediately and start seeing results!

Expert Insights into Today’s Relocation Trends
Larry Gersch (moderator), Kraft Foods; Deborah Benavides, Shorewest Realtors; Karen Danner, Koenig & Strey; Tiffany Johnston, Weichert Relocation
Learn first-hand from relocation professionals what’s new in the industry and how that impacts what you need to be doing right now! Now more than ever, it is critical for companies to stay informed of the ever changing mobility landscape. Explore major trends emerging in relocation programs and potential implications for the corporate housing industry.

 

Starting a Corporate Housing Business

An AvenueWest Managed Corporate Housing Franchise is best suited for something with real estate or corporate housing experience and for someone with general business knowledge.  Lets face it, there are a lot of moving parts with running a multi million dollar business.  AvenueWest is, at its core, a provider of class “A” corporate housing properties designed to meet the housing needs of the business traveler.

So what can you do if you are interested in getting started but might not yet be qualified to be an AvenueWest Franchisee or have a different product model in mind?  Actually we get calls like this every week and would be happy to answer your general questions but to get you started here are a list of resources that you might find helpful.

SBDC – Small Business Development Centers

Starting a business can be a challenge, but there is help for you in your area. Small Business Development Centers (SBDCs) are partnerships primarily between the government and colleges/universities administered by the Small Business Administration and aims at giving educational services for small business owners and aspiring entrepreneurs.

CHBO – Corporate Housing by Owner

Corporate Housing by Owner (CHBO) is an online marketplace that connects private homeowners with individuals and companies in need of short-term furnished rentals. At corporate housing by owner, private owners and companies list and advertise their rentals while companies and individuals in need of corporate housing search from the thousands of listings on our site throughout the world.

CHBO – Handbook

CHBO – Annual Report

CHPA – Corporate Housing Providers Association

The Corporate Housing Providers Association (CHPA) is a professional trade association exclusively dedicated to supporting corporate housing providers around the world.

More than 220 companies worldwide currently belong to CHPA.   Additionally, there are more than 50 member companies around the globe that offer goods or services to the industry as invaluable partners to the industry’s success.

Power Hour – for Corporate Housing Companies

PowerHour® is a thought-leader in executive recruiting servicesinvestment banking servicescorporate housing training,corporate housing webinarssearch engine optimization {SEO}search engine marketing {SEM} and group co-op buying services for our corporate housing clients around the world. Since 1995 PowerHour has been the industry leader, the author of the SmartMatch Alliances book and research analyst of Internet Marketing PowerHour White Papers.

Skill Path Seminars

Our unique brand of training enhances skills, saves time and money and contributes to career and organizational success. Along with our technical training division, CompuMaster, we accomplish all this through:

Seminars, workshops and conferences. From teambuilding and business writing to Microsoft® Office suite applications we bring hundreds of one- and two-day sessions right to your community.

On-site training. We build customized training programs and deliver more than 3,500 courses to 80,000 employees each year–at Fortune 500 corporations, small businesses, government agencies and not-for-profit organizations.

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