By Al Williamson
Landlords have always had the ability to woo business travelers to their rentals.
But now that online travel agencies such as Airbnb, HomeAway, and TripAdvisor have gone mainstream, it’s easier than ever!
Let’s define a corporate rental as a dwelling that’s leased directly to a company or a business traveler who has a housing allowance. If a company is paying for the rental, and not the tenant, then it’s a corporate rental.
When a company pays its employees or contractors to work remotely, then that tenant:
- Will likely go out of their way to not embarrass their employer
- Will have a binary attitude toward your rates. Either your rates are within their allowance, or they aren’t.
These two characteristics make business travelers the most lucrative and ideal people for your rentals.
The Opportunity
Business travelers find that with mid-term corporate rentals, they are able to afford more home-like conveniences for less. They are able to cook healthier, have more privacy, and have a richer travel experience when they don’t stay at a hotel.
That’s why the trend in corporate housing is spiking. Especially when a traveler is on an assignment for 30 days or longer.
Extended-stay business travelers actively search for houses and apartments to live in. Many want to live in neighborhoods and not off freeway offramps.
Is it possible that you could furnish a rental to accommodate corporate travelers?
Could you earn hotel-size money instead of market rent?
Most certainly!
How Much Could You Make
The U.S. General Services Administration (gsa.gov) maintains a list of daily hotel rates for various cities throughout the United States. Their website presents per diem housing rates for each calendar month.
If you’re trying to decide if a corporate rental would be profitable, then look up the GSA per diem rate for your city and work with that number.
For example, the 2023 GSA per diem hotel/lodging rate for Phoenix/Scottsdale is $151 per night. Assuming a 30-night stay, that’s $4,530 per month.
Assuming an 80% occupancy, if you have a one-bedroom corporate rental in Phoenix, you could reasonably expect to earn $3,624 per month.
The next step is to calculate the difference between your expected corporate rental earnings and your local market rents.
For example, based on information from Rentometer.com, the median rent for an unfurnished one-bedroom apartment in Phoenix is $2,367 per month. This means that you could make $1,257 extra each month ($3,624 – $2,367) if you converted a traditional rental into a corporate rental. That’s a lot of money!
Of course, you’ll need to pay for the electricity and other monthly expenses associated with a corporate rental, but even after paying those expenses, the additional net income is fantastic!
Help Making a Decision
Extended-stay hotels have been around for decades. They are part of a mature industry. By focusing on extended stays, and not nightly stays, you can take month-to-month landlording to new heights.
Corporations behind Extended Stay America and Residence Inn by Marriott use a lot of sophisticated financial models and institutional knowledge to decide where to place their +$10M hotels. So, if there’s an extended-stay hotel near you, then you should accept that as proof that your corporate rental will be wildly successful.
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Al Williamson is the world’s first landlord scientist and an expert on extended stay Airbnb meaning he is a thought leader on furnished rentals that are available on a monthly basis. His passion is helping real estate investors and asset managers increase their net operating incomes to dramatically increase their property’s value. For more information, please email al@leadinglandlord.com.