Staying Local

Why distributed neighborhood hotels are the future


When you walk around Union Square in San Francisco you notice there are a lot of hotels. There are over 30,000 hotel rooms in this city of 800,000 people. There are also over 220,000 apartments. There are under 2,000 apartments available on Airbnb next month, and most of these won’t actually be booked. That is less than 1% of all apartments and 7% of all hotel rooms. There are more rooms in the Hilton Union Square than on all of Airbnb.

A movement is growing against the gentrification of San Francisco and the lack of affordable housing, as noted in several recent news stories. As incomes rise and more people move into San Francisco, demand for the limited supply of housing is rapidly increasing.

Gabriel Metcalf wrote a great piece for The Atlantic about possible solutions, most of which stem from a need for more supply.

So how do we get more supply?

Most solutions involve more subsidies for affordable housing, more public housing, approving more high-rise construction to take the pressure off of smaller buildings in the neighborhoods.

I have a another proposal.

Legalize short-term rentals of all kinds and let the neighborhoods absorb the 30,000 rooms devoted to transient visitors.

As guests begin to live in our neighborhoods, where Airbnb is strongest, they will reinvigorate the economy in these neighborhoods as they frequent our local restaurants, our local corner stores, our local bars and coffee shops.

We are in a new phase of hospitality. No longer do guests need to stay in huge 2,000 room buildings in order to have a concierge to call them a taxi, a bellhop to bring them room service, or a cleaning staff to turn over their bed.

We have Uber, we have GrubHub, and we have HomeJoy. We have great new services on top of Airbnb and other platforms that make staying local as comfortable and convenient as a hotel.

Staying in someone’s home or apartment is simply another accommodation choice, alongside staying at a traditional hotel, a boutique hotel, a hostel, or a resort. It happens to be an option that is rapidly gaining popularity in San Francisco and across the globe.

So why is a Distributed Neighborhood Hotel better for the city?

One word: flexibility. Apartments that are used for housing tourists are easily converted back into long-term rentals when demand spikes. This is not the case for hotels. As rental prices increase, apartments reach a tipping point where the revenue owners can expect from renting it out long-term is at parity or slightly higher than what they can expect from renting it out to tourists, after all the costs of cleaning, linens, amenities, hotel tax, and the time or cost of managing 6+ guests a month. We have seen this change in San Francisco already, as some of the hosts Beyond Stays works with have opted to switch to renting to long-term tenants, especially in areas with low tourist demand relative to resident demand (e.g. NoPa). This naturally brings supply back on the market when it is needed most. As prices and demand drop, these apartments can then be converted back to accommodations for tourists. Hotels, on the other hand, have thousands of unbooked rooms each night. They are unable to release any of this supply into the long-term market because they lack the amenities needed to house long term renters.

So what will the future of hotels look like?

Just as hotels began building boutique brands (see Starwood’s W Hotels and Marriott’s Edition) as they saw the success of Kimpton and Joie de Vivre, we will see the major brands start offering Airbnb-style accommodation, especially to millennials, families, couples, and groups traveling together who prefer the extra space, cooking facilities, safety and comfort of a neighborhood home.

Front desk staff from places like the Hilton will meet you at one of the homes they manage, a hotel concierge will always be available, cleaners will travel from the “base” hotel downtown and clean and outfit your home. You will have all of the services of a hotel, in a local, neighborhood home.

Cities that embrace this accommodation option will delight the growing number of tourists that prefer a local, neighborhood hotel, and benefit from having a more flexible housing supply.

For more information on the legislation under consideration in San Francisco and to let Supervisor Chiu know that you want San Francisco to support neighborhood hotels, contact him here.