Hotel rooms

“Why not” turn unrented units into hotel rooms?

Lew Sichelman

With rental periods ranging from one year to two or more, some apartment developers have found a way to monetize their empty units that have yet to be rented out by turning them into short-term hotel rooms.

One of the latest to embrace the pop-up hotel concept is the Kiley, a new 315-unit building that just began leasing in Washington DC’s Capital Riverfront neighborhood, where UIP Cos. transferred 125 units to a local company to operate as short-term rentals.

“We are here to fill the void,” said Bao Vuong, co-founder of WhyHotel, a full-staff hotel operator.

Twin Benefits

For UIP, the benefits are twofold, said director Peter Bonnell. It creates energy when the building is in its infancy.

“With more people, it brings the building to life. Otherwise, it will still be vacant,” Bonnell said.

But at the same time, it generates income during the rental period. Bonnell expects to rent about four units per week at the Kiley, which features a host of eco-friendly amenities that, taken together, have earned it LEED Silver certification from the US Green Building Council. It will therefore take more than a year to complete it.

As part of the agreement between UIP and WhyHotel, the two companies will share start-up expenses and the revenue generated by the hotel units will be used to reimburse these costs. Any profit after that will be split between them. Due to a confidentiality agreement, Bonnell said he could not reveal the percentage of profits each company will receive.

WhyHotel will be relinquishing its apartments in the Kiley as they are rented out. The units will be returned to the developer ready to rent. When all of its units are rented out, the business will close and move on.

Why not

Created in 2017 by former apartment developers, WhyHotel might as well be called WhyNot, because it offers one of those rare win-win situations for developers and consumers alike. Developers use it to generate revenue and business, while occupants get the value and space of colocation similar to what Marriott and Airbnb offer in the short-term home rental industry. as well as the consistency and service of a hotel.

The Kiley, for example, includes a wide range of apartments, ranging from studios to three-bedroom, two-story lofts. And the list of equipment is just as wide. Among other things, there is a rooftop swimming pool and a recreation area the size of two football fields, a 24-hour concierge, a garage with electric vehicle charging stations and contactless elevators. A separate fitness center with a yoga studio, sports simulators, and a playground is on the lobby level.

The hotel’s potential clients are not limited to tourists wishing to stay for a week or a weekend. An ideal prospect would be someone who is thinking of settling in a building full time but who wants to test the place or the neighborhood before signing a long lease.

Another candidate might be someone who is already committed to home ownership and needs a place to stay while their apartment is being occupied. And a third might be a road warrior who comes to town during the week and returns home on the weekend, repeating the script over and over.

Branching out

Under an agreement with AMLI Residential’s 700-unit, three-building ownership in Midtown Miami, WhyHotel, which has a number of locations in the DC area and describes itself as a turnkey hotel operator , now extends beyond its roots in Washington. And similar businesses are popping up all over the country – Stay Alfred in Spokane, Washington; Stay Tony in Los Angeles; London-based Yotel and more outdoor group retreats in Denver and PopUp Hotel and Flash Camps in Australia.

Rendering of Kiley. Image courtesy of WhyHotel

The concept works for apartments, especially luxury properties with lots of hotel-like amenities, but not for condominiums and co-ops, according to Vuong. Condo buyers want new, never-before-lived in units, the WhyNot executive explained, while renters don’t care as long as the place is clean. Additionally, condominiums can sell out in advance, while apartments typically only begin the rental process shortly before the building is ready for occupancy.

WhyHotel units are priced the same as any other hotel, Vuong said. But the rooms are bigger and better equipped. Kitchens at the Kiley, for example, feature subway tile backsplashes, stainless steel appliances, and under-cabinet lighting. Each residence is also equipped with a full size washer and dryer.

Other notions

WhyHotel’s rivals have a similar but different modus operandi. Stay Tony, for example, offers rental financing for qualified residents, interest-free for six months or with interest for a year. Launched by realtor-turned-developer Tony Diamond in Los Angeles in 2012, it would be the first short-term furnished social housing company offering financing rather than demanding cash on the head of the barrel.

The Stay Tony concept works for people who are moving for any reason, but it is especially suitable for those accepting a temporary assignment, leaving homes while they are being renovated, or coming to town for medical purposes. Another possible candidate would be a recent college graduate moving to the area to start a new career.

Diamond believes his MO is a “game changer” because it allows residents to preserve their money.

“One of the biggest payoffs of moving to a new city is the huge upfront cost,” he said.

Diamond’s partner in this venture is Uplift, a travel financier that offers monthly payment options to vacationers.

“People are already funding one-time life events like weddings, medical procedures and vacations,” he said. “We thought, why not fund the life event of a move.”