Professional Hosts on AirBnb

I was reading this analysis on AirBnb and this part about professional hosts looks pretty interesting:

Sylvia got started hosting when she noticed a potential arbitrage. There was a great deal of apartment stock available on the Peninsula south of San Francisco but few hotels. The available hotel units were low-quality but highly-priced, charging $500 a night or more, even mid-week. Sylvia recognized the imbalance between apartment and hotel supply as an opportunity and turned to Airbnb to capitalize.

First, Sylvia compiled data on apartment vacancies and rental prices, using information available on the Multiple Listing Service (MLS). Sylvia then used AirDNA, a short-term rental intelligence platform, to gather Airbnb nightly rate and demand data. Comparing the datasets, Sylvia identified geographic pockets where the arbitrage was most pronounced, warranting the establishment of a property management business.

Once recognized, Sylvia set about amassing available units. She did this by approaching building managers on the Peninsula and offering to lease all vacant units at a discount. This was a no-brainer for many managers and capital partners, allowing them to hit occupancy rates defined in loan covenants. Setting up a standard two-bedroom unit took approximately two days and an $8K investment. While units typically rented for $3-4K a month, Sylvia could earn $200 - $400 a night, maintaining an 80% occupancy rate. That means Sylvia brought in as much as $9.6K per unit with a gross profit of $6.6K, even if you assume she received no discount on the unit cost.

At its peak, Sylvia’s company employed three full-time staff members and managed 20 units on the Peninsula. If we imagine our back-of-the-envelope math to be reasonable, Sylvia’s company was brought in close to $200K a month with a gross profit of $132K. It’s worth noting that some hosts manage 100, 500, or over 1K units. Sonder, a venture-backed “competitor,” which focuses on higher-end properties, is the largest host on Airbnb, managing 3.5K listings as of 2019. Before shutting down, Lyric, a similar business that raised money from Airbnb, also used the platform to expand its footprint.

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