Pub. 4 2019 Issue 4

12 www.ctaahq.org “Sometimes, there are modi cations we need to do on the oors on which we operate so that we can get a hotel certi cate of use,” he says. Many pop-up hotel providers have developed relationships at the municipal level and handle getting the proper permits for their units themselves. “It’s critical for us to be regulatory com- pliant,” says Locale’s Gandhi, echoing the sentiment of many of his competitors. “We collect and remit our hotel occupancy taxes just like a hotel would, on a monthly and quarterly basis.” If a city has a positive experience with a pop-up hotel oper- ator, Sonder’s Harrison thinks it will be more likely to work with that company through approvals. “Because we’ve worked with developers to restore blighted neighborhoods and give cities more occupancy during high seasons when they’d have otherwise left revenue on the table, we’ve gained their con - dence,” he says. Lyric has worked with local governments in Austin, Texas; Nashville; and Chicago to gain space permits. “We talk to city councils, and we hire local lawyers and real es- tate experts to make sure we’re legally compliant,” Kitchell says. The Future While concerns remain about regulatory issues, rowdy neighbors and inadequate background checks, the pop-up hotel asset class seems to be here to stay. e list of short- term-rental management providers continues to grow, and many multifamily housing executives are curious about how the niche sector will evolve. “ e model hasn’t been tested to a point where you can actually say it’s a great idea or it’s not,” says Diane Batayeh, CEO of Village Green. “We’re engaged with these companies [though] and are interested in how this model plays out.” Others see a lot of potential in the arrangement. “ ese types of companies are popping up everywhere, and it’s de nitely something that everybody needs to research and embrace, because it’s the wave of the future,” FPI’s Siebern says. “I’m very optimistic and open to using them.” As some apartment executives weigh the pros and cons of working with short-term providers, others wonder what’s next for the business. “We’re not seeing anything that suggests there’s a problem with demand for short-term rental apartments,” Kuntz says. But what if new supply tapers o and there aren’t as many lease-ups to occupy? Fudin says he’s not concerned about a tail-o in starts. “We don’t need that much inventory,” he says. “On average, 200,000 apartments deliver per year. Even if the number of units being delivered is less than average, there still will be hundreds and thousands of new available units.” Having a thousand units in every urban market that could support them isn’t Vacasa’s goal, Viner says. “We’re trying to o er hotel-type amenities in urban cores,” he says. “We’d be happy to operate 50, 60 or maybe 70 units in a city.” Allen, who wants to take Stay Alfred to 25,000 units and a couple billion dollars a year in revenue, sees a downturn as an opportunity. “As the real estate cycle starts to soften, we can o er a unique way to get a community leased up 10 times faster than [traditional methods would allow],” he says. Herndon agrees. “I think real estate is becoming more fungi- ble,” he says. “When market conditions are more favorable to have a hospitality versus a multifamily use at a particular piece of property, the real estate owner will be able to switch gears.” With many short-term providers getting venture capital funding, there’s also the question of who survives and who gets bought (or goes out of business). Entrepreneurs are putting a new spin on the short-term-stay model: They want to rent your apartments and boost your lease-up.