When Airbnb announced its plans to dominate a hotel market full of multibillion-dollar giants without a single hotel room, the industry laughed. Now, however, Airbnb is bigger than the top five largest hotel brands put together. No one saw it coming, and that’s a trademark of truly transformative change in any industry.
Proptech is about to have its Airbnb moment, and true to the trademark of transformation, it’s in a completely different way than you would expect. I believe the biggest proptech giants will be those that allow property managers to expand beyond property and become online marketplaces. As the founder of a proptech company based in New York, I've seen the transformative power of proptech solutions that bundle services and have had my fair share of conversations with property managers about the challenges they face on a daily basis.
Airbnb Experiences bookings increased 7x over the course of 2018, and from 2015-2018 the number of experiences available grew from 500 to over 30,000. The eye-popping growth coincides with a meteoric rise of the “experience economy” which is expected to reach $8 trillion by 2030. But that rise isn’t just about the rise in travel experiences; it’s the fact that platforms such as Airbnb and Viator are conveniently bundled with accommodation. In proptech, that “experiences” opportunity comes not from a pottery class, but rather from providing easy, efficient access to additional services, from cleaning and home repair to bookable laundry and insurance.
The direct benefits start with landlords leveraging a large constituency of tenants to negotiate reasonable savings that can be passed on to the consumer, along with generating profits from a percentage of each service’s execution. But perhaps more importantly, it allows property managers to take an Amazon “bundling” approach in which loyalty is cultivated and property managers, if they can execute, will be able to recapture more and more revenue that was being spent on unrelated services outside of the building (i.e., pet grooming, bike repair, even personal training sessions). Those property managers that adopt the technology first will enjoy an advantage as tenants become accustomed to the ease of services and potential savings.
According to a daVinci Payments (formerly Swift Prepaid Solutions) survey, renters ages 18-29 outnumber every other rental group combined, and those renters are looking at the quality of their experience. This means that by offering services such as the ability to pay rent over a mobile device, which 71% are accustomed to, and giving discounts for booking services on a rental platform will make turnover far less likely. Those types of savings that come with reduced turnover and increased engagement aren’t just a direct benefit; they also increase the ability of property managers to save on realtor costs and manage more with less personnel. Even the simple reporting of maintenance issues can be a laborious process that is painful for tenants and can be simplified quickly via a mobile app.
When money is saved by better utilizing current staff and cutting out costly intermediaries, property managers can take that savings to the bank, literally. By increasing efficiency and boosting their savings, property managers can then turn around and buy back equity from the banks, enabling them to expand the amount of property they hold. With lower amounts owed to the banks and more positive cash flow, property managers will be able to take out loans at advantageous rates and expand their portfolios faster.
In spite of the laundry list of potential benefits, challenges still abound when it comes to convincing property managers to transform into a marketplace. First and foremost, with many experiencing boom times and lacking a tech background, they won't be quick to embrace technology platforms. Secondly, their time is extremely limited, and they may see add-on offerings as too much of a time commitment with an unclear return because they’re not related to their main offering. And lastly, they're overpitched by proptech "gurus," and not every product is created equally, so it's quite possible they've experienced empty promises in the past.
To be sure, property management still has a long way to go when it comes to tech, but it’s precisely that underdeveloped state of the industry in the age of Amazon and Airbnb that makes it so exciting. Marketplaces are what tech giants are using to fuel their rise as they become “everything” stores, building loyalty and revenues that would have seemed fictitious only a decade ago when Amazon was simply a book store.
As the real estate market faces how to build on its growth with proptech, I believe that it is this marketplace approach that will provide the answers. For customers, a new level of convenience is on the horizon, while for property managers, the opportunities are no longer confined to the properties themselves. #proptech #realestate #propertymangment #innovation #startup #rentalproperty #commercial