Stay Alfred's collapse opened up for Frontdesk an opportunity to rise in rental property management with a less-risky model. More interestingly, Frontdesk's new software offering for multifamily communities takes advantage of an opportunity left on the table by Expedia Group, which botched the execution of its Pillow and ApartmentJet acquisitions.
Frontdesk, a property management service and tech vendor, has become the new operator of 55 urban short-term rental units in New Orleans, Indianapolis, and Pittsburgh formerly managed by Stay Alfred, which ceased operations in May.
An asset-light strategy is working for Frontdesk, based in Milwaukee and founded in 2016. This year it saw record revenues and a 20 percent increase of units managed to 580, said Jesse DePinto, co-founder and chief product officer. It has hosted 80,000 stays since May.
Like some other troubled rental brands, Stay Alfred, based in Spokane, Washington, was blindsided by the pandemic, as shutdowns compelled the business to stop accepting guests at its apartments. At the same time, it was weighed down by master-leases that left it partly on the hook to continue paying property developers, such as for a decade-long lease on 140 units in one Nashville tower.
The company, which had raised $62 million in venture capital, was also tripped up by the pandemic’s timing, which came in the middle of it seeking a $30 million capital raise to fuel further growth, reported the Spokane Journal of Business. Stay Alfred had generated $100 million in revenue in 2019, but interest in its equity and assets evaporated during the pandemic’s first wave.
Frontdesk has stepped in to manage the 55 Stay Alfred properties, changing the locks, signs, operations such as housekeeping and marketing.
Stay Alfred, which in January ran more than 2,200 units and by May closed for good, joined other rental sector companies thrown off balance by the pandemic. Lyric essentially closed its property management service this month after rival Mint House took over its lease agreement at 70 Pine St. in New York City. Lyric had raised $179 million since its start in 2014. Mint House, which has raised $15 million according to Crunchbase, aims to close the year with 600 units under management in the U.S.
Domio, another player, told Skift it is re-engineering its finances through an Assignment for the Benefit of Creditors (ABC) process, which includes a realignment of its portfolio. The majority of properties will continue to serve its customers, but some properties may leave the brand. Domio has plans to open three new properties in Florida, Puerto Rico, and Mexico this month.
Frontdesk, which has raised $8 million in equity and $3 million in debt, said that it saw a 44 percent increase in average stay length year-over-year this year. Its niche is multifamily communities. An upstart player hoping to enter that market is Orion Haus, led by CEO Cindy Diffenderfer.
Frontdesk said its focus on urban settings with multifamily partners gives it double-pronged advantages. One is for the travelers, in that it unlocks more supply in the urban constrained areas, such as the downtown area of Columbus, Ohio, whose pre-crisis boom wasn’t matched by supply from national hotel brands.
“For the property manager and property owner, we allow them to increase their occupancy and boost their income by using short term rentals as a tool for optimizing vacancies,” DePinto said.
One of the startup’s multifamily partners is Core Living, using revenue-share full-service agreements in four states.
Software Sales Bet for Multifamily Rentals
Frontdesk launched in November a software product that aims to help landlords and tenants provide short-term rentals in multifamily developments.
This move takes advantage of a gap that opened up when Expedia Group shut down in May shut down Pillow and ApartmentJet, two rental management software companies Expedia Group had acquired in 2018 in an approximately $54 million deal. As Skift’s Dennis Schaal reported previously, the travel giant had tried to create a suite of software tools called Flex out of the acquisitions, but Airbnb, one of the largest contracts, cut the off soon after the acquisition. So Expedia Group Multifamily solutions lost steam.
The Frontdesk Flex software suite bets on having customizations specifically for multifamily property managers and owners and having an all-in-one system. Many multifamily operators would likely otherwise plug into a rental property management system made generically for short-term rentals, such as the popular Guesty and then add on a revenue management tool from a provider such as Beyond Pricing or Wheelhouse and add on either a housekeeping service or a housekeeping management tool like Properly and they add on a service like Operto to automate guest management and maybe a guest portal service such as Hostfully. Frontdesk’s Flex aims to unify those functions, including a remote call center. Frontdesk is already providing this virtual service in a fifth state to Core Living.
“We provide the technology platform, but we also provide the revenue managers, the trust and safety specialists, the guest experience specialists, the call center, and 80 percent of the work that goes on behind the scenes virtually that is needed to manage vacation rentals and short term rentals,” DePinto said. “The property managers only have to manage a small component, which is effectively cleaning and laundry.”
Frontdesk isn’t the only rental player to have benefited from a rise in remote work and some travelers’ preference for lodging outside of large hotels. The sector’s largest brand, Sonder, has grown to 5,000 listings and typically leases them and runs them as rentals or licensed hotels. Spending on Airbnb rentals roughly doubled during the U.S. summer, year-over-year, estimated Edison Trends. Airbnb is expected to have its initial public offering this week, bringing further attention to the sector.
“We’re aiming to makes short term rentals more accessible to a wider range of apartment types and to many communities outside of tier-one cities that aren’t well served today by the heavy hitters like Sonder, Kasa, Casai, etc.,” DePinto said. “We’re democratizing the concept for both travelers and owners.”
Photo credit: An image of a New Orleans short-term rental available via Frontdesk, a property management firm that has entered the New Orleans market by acquiring some short-term rentals formerly managed by Stay Alfred. Frontdesk