The Business of Property Rentals
By: Jotham Lim & Hafidz Baharom
Homes for Rent on an International Scale
While Malaysian developers are still trying to find a niche in terms of developing apps for renting out properties, global players are currently in the midst of continued growth and consolidation as larger companies continue to buy out their competition in a very cutthroat market, especially for the holiday property rental side.
For those not in the know, there are actually three main companies in the holiday property rental app market who are globally competing to come out on top. They are travel community website TripAdvisor, Airbnb being the most recognised brand worldwide, and finally travel technology company Expedia.
On top of all these, you have aggregator websites and apps. These take all the properties and prices listed by the above companies and compare them for the cheapest price - akin to a Trivago for Airbnb.
Each of these companies actually owns a bunch of others which they have acquired throughout the years, in order to gain market share and reap the benefits from multiple income streams. For vacation property rentals or short lease rentals, here is a list of those apps and websites that might entice you.
01. Airbnb
Perhaps the most famous of the bunch, Airbnb is famous for the story of starting up in 2007 by Brian Chesky and Joe Gebbia developing the app in order to take advantage of a conference in San Francisco by offering “airbeds and breakfast”.
The company then relaunched itself in 2008, right before the Democratic National Convention based in Denver. The timing was ripe for the app to put on a show in the city by having 600 Obama supporters use it due to overcrowded hotels.
Its meteoric rise from such beginnings is what makes it a unicorn in the entrepreneurship and startup world, particularly since it has now challenged the hotel industry and has led to governments reconsidering regulation of short-term leasing of property.
Airbnb also challenged the mindset for multiple website companies which initially offered hotel rooms at discount rates such as Agoda, Trivago and Expedia, to rethink their models.
02. Expedia
The Expedia Group is well known as the largest travel technology company, owning aggregator websites such as Trivago, Travelocity and even Hotels.com. However, the rising tide of Airbnb which allowed independent homeowners to lease out their homes made the company rethink their business model.
It was with this in mind, the company decided to buy HomeAway, which operates on the same model as Airbnb, for US$3.9 billion in November 2015. To bolster their ability to challenge their rival, Expedia also bought Pillow, a company which manages properties for rent.
03. HomeToGo
HomeToGo GmbH is a Berlin-based company that acts as a vacation property search engine and aggregator - akin to what you find with Trivago and Kayak for hotel rooms or even Skyscanner for airline tickets.
Founded in 2014 by trio Wolfgang Heigl, Dr. Patrick Andrae, and Nils Regge, it currently employs 150 people and operates multiple websites based in European nations, the United States, Australia, Brazil, Mexico, Russia, Japan and Hong Kong.
Similar to Tripping.com, what the website does is list out properties available from other apps and web portals, allowing users to then be transferred to whichever portal offers them the cheapest price to complete the transaction.
In December 2018, the company managed to raise $150 million and bought out its main competition, San Francisco-based Tripping.com, making it the world’s largest vacation rental search engine and aggregator.
04. Flipkey
Initially launched in Boston in March 2008, Flipkey is currently controlled by travel community website TripAdvisor which bought a controlling stake in the company in August of the same year.
Flipkey’s advantage is that it straight out lists properties by districts which makes it easier for those looking at specific areas to stay in without having to suddenly find an interesting vacation pad for rent only to find that it is 6 kilometres away from where you want to be without a single public transport link.
That is personal experience speaking. A browse of listed homes available on Flipkey around London allows us to literally see the nearest station to the property most probably due to how the Tube is mapped out in line with the map of London itself.
05. HouseTrip
HouseTrip was founded in 2009 by Arnaud Bertrand and Junjun Chen who met at the École Hôtelière de Lausanne or the Hotelier School of Lausanne. Both moved to London to start up HouseTrip and managed to catch the market boom by becoming the largest holiday rental website in the world in 2015.
At its peak, the company managed 7 million overnight stays, 20,000 destinations with a total of 3000 properties listed on its site. However, the company was soon overtaken by a behemoth in the form of Airbnb and lost their ability to compete.
A restructuring exercise in 2014 saw both Bertrand and Chen leave the company. Two years later HouseTrip was bought over by vacation community website TripAdvisor and added to their TripAdvisor Rental brand. The amount spent for the acquisition was not disclosed.
06. Vrbo.com
The grandfather of all property rental apps on your phone, Vacation Rentals By Owner (Vrbo) has been around since 1992 and listed 65,000 properties in 2006. This was the same year it was bought over by Homeaway Inc. for US$160 million.
Unlike Airbnb where everyone can list rooms as well as entire apartments, Vrbo only allows renting entire units. Also unlike Airbnb which now has companies listing properties for rental, Vrbo truly sticks to the concept of renting out properties strictly by their owners. Although awkwardly, “owners” might also mean you will find hotels listed as well.
From studios to penthouses, Vrbo lists them all. Yes, listings are available in our Malaysian Ringgit currency to avoid troubling ourselves being disappointed when rates don’t match our conversions on Google or XE Currency. A word of warning though, the price listed is not the final price you pay. There is an added deposit payment due that will be reimbursed once your stay is over.
07. Luxury Retreats
Here is an amazing story for you - Joe Poulin becomes a website designing whiz kid then starts up a website listing luxury properties to let, acquires three competitors, and raises US$16 million from venture capitalists. Before there was Airbnb Plus which lists luxury properties on their app, there was Luxury Retreats. This website lists properties on the cheaper side in terms of vacation postings, listing over requirements.
While others list by location, Luxury Retreats instead choose to list properties by villas rather than rooms, Hotels, Beachfront, Honeymoon, Ski Cabins, and Large. Another fully differentiated feature is Luxury Retreats’ blog which reviews single villas recently put up on their website to entice their members.
Sadly there are no Malaysian properties listed to match the villas on Luxury Retreats from Barbados, Hawaii, even apartments in Kensington, London. Or even Richard Branson’s island resort, Necker Island, which is listed at US$75 a night.
Luxury Retreats was bought over by Airbnb for an undisclosed price in February with Poulin joining Airbnb and currently leading the luxury homes division.
Other Rental Apps
Whilst all the above shows consolidation and competition among one another, there are those who are not in the same category. Case in point, there are apps and websites for the international marketplace specific towards long-term leases of months.
One shining example of this is Homelike, a monthly rental website launched an IPO just recently in June. Founded by Dustin Figge, he believes Homelike does not compete directly with Airbnb. In fact, Figge is quoted as saying, “Homelike begins where Airbnb ends”.
Another point of differentiation between this website and Airbnb is that Homelike does not allow companies to rent from single owners. Instead, Homelike acts as a B2B model allowing companies to rent serviced apartments and business apartments. It currently lists furnished apartments and works with more than 15,000 corporate clients across cities in Germany, Austria and Switzerland.
A similar corporate housing website is the Finnish company Forenom, launched by entrepreneurs Markus Oksa and Mikko Leppänen. The company continued having a presence in Finland and Sweden before expanding into both Norway and Denmark as well, completing coverage of the Nordic states.
Opening their website, it is clear they created a branch of hotels and aparthotels (as they call them) rather than having rustic homes rented by homeowners to tourists. This is mainly due to the investment capital from investor Capman in January last year. Forenom managed to grow even further by purchasing HotelHomes SATO.
Comparing all the above, the Malaysian market for apps and short to medium lease rental home websites, we come to a few conclusions. Firstly, Malaysian app and website developers in this sector need to consolidate or move towards global competition or be eaten by the Big Three - Airbnb, TripAdvisor, and Expedia. Or, if your app or website is agile enough with the resources, bucking the trend and setting a regional niche (see Grab). This is, of course, a war of attrition with later rewards.
Secondly, there is a need to look at creating a niche that would be beneficial. Luxury Homes could work in the Malaysian setting, particularly resort bungalows and high-end properties in city centres such as Kuala Lumpur, or even beachside properties. Or better yet, perhaps listing Malaysian home stays supported by the Tourism Ministry on an app similar to Airbnb is yet another niche market to consider.
And finally, perhaps it is time to think beyond the market. Managing entire property blocks rented to multinational companies bringing in international staff, similar to the target market of Forenom, would work in Kuala Lumpur City Centre, or even Mont Kiara high-end residential zones close to industrial areas. Checking these foreign examples and localising them here in Malaysia, subsequently expanding regionally, the ASEAN market still remains a blue ocean for anyone to test.