Louisville, KY · Member since 2015 · 166 posts · 83 votes
Hello, I’ve been looking at starting an Airbnb type rental. I currently have long term rentals. The sites that I have been looking at is an area where tourism has been on the rise. They have limited hotels, however I know that there are two more hotels that will be building in the area. I have viewed this from two different angles. The first is that I’m sure the hotel chains have done studies and feel there is a need for short term rentals in the area. The second would be the opposite. That the hotels will hurt the Airbnb’s in the area. This is a small town. Most people are probably looking to spend a couple days here versus a whole week I would think. I’ve viewed other Airbnb’s schedules in the area and they seem to confirm that. Any input is greatly appreciated.
If the market you are looking at, that has the new hotels, is in a different market than yours; local people have already have the same plan as you. They would be better poised to run a STR if it's in their same town.
I have 23 STRs in this town, 83 beds, 37 bathrooms. One of my competitors was a mobile home park with about 30 mini-cabins. The owner lived 3 hours away, in a different market. He sold the park because he could not adapt to market conditions as fast as I could. I'm on the front line, the other guy was a distant spectator. Don't be the distant spectator (or speculator).
New hotels are a sign of rising demand, and so, a good thing for STRs. My STRs are in vacation destinations, not urban areas, but even so my typical guest stays 2-3 days, not a week.
And while I'm sure there's a point where there could be more supply than demand, those hotels about to be built are literally banking on there being enough to demand to supply their hundreds of rooms. That means there's probably plenty of room for some STR action. That said, look at the budget level of the hotels being built - if they're mid-range or higher, good deal. If they're Motel 6s, you may not want to bother.
Looking at the other area AirBNBs is probably your best market research, though. If the calendars of comparable properties to what you're envisioning look pretty full/are making good money, see where this road takes you. If it looks like they're mostly empty even though they seem to be doing all the right things, then you probably want to pass.
Hotels are major investments so I think it’s a good sign that they have run the numbers and see the potential. More hotels mean more volume means more opportunities to attract Airbnb guests.
I don’t really see myself competing with hotels anymore - more so differentiating my vacation rental against the competition. The beauty of Airbnb is providing an option for people or groups that prefer a furnished apartment or house over a hotel or multiple hotel rooms. This trend is exploding. I no longer stay in hotels when vacationing with my family - $10 bottles of water and a cramped room - no thank you. And my guests have realized that 5 couples paying $100 / each a night for a private villa makes much much more sense than 5 hotel rooms each one at $500 / night... not to mention private pool, bbq, and cooler full of beer. I do require a 3 night minimum and have plenty of 1 week stays so agree with other posters to do your research on competitor occupancy and rates.
The real question is can you provide a compelling alternative value proposition to these hotels... eg short walk to beach, beautiful view, tranquility, well equipped kitchen, more space, pet friendly, much cheaper, etc.
When hotels are being built in an area that isn't urban it is usually a very good sign for STR's.
If the hotels are extended stays then it may be a sign that there is a need more on the corporate/traveling worker side of things which is where I focus on.
Most people are probably looking to spend a couple days here versus a whole week...
That likely means people would be more inclined to book weekends over weekdays which will leave the the bulk of the month unrented. So it may be tough going trying to getting to were you could break even and then hopefully make some money.
What are other Vrbo / Airbnb properties doing as far as price and bookings? You can check their calendars to see.
@Kevin Allen Go for it. Sounds like it's basically in your back yard. I was initially concerned that you were going to venture into something that was more than a few hours away by car.
@Kevin Allen AirBNBs have nothing to do with hotels. It's a different market and you just need to make sure you target the renter that the hotels are not.