The "Contractor" Model - Serviced Accommodation

The Economy or Budget model would be a better title but Contractor Airbnb's or SA are what most people understand so although this model is not our personal chosen one there is no doubt that In some locations, in certain situations or circumstances a budget model is simply the smart solution.

It may be the market you feel most comfortable with - you may have acquired a property that was simply a great deal - or you may have inherited the property. Which ever route the objective is to buy well (you make money when you buy - not when you sell) and then implement the best strategy (use of the property) to generate the best return on your investment over time which suits your personal goals and situation.

The question is then what solution should you lay over your property deal to deliver the best return with the most confidence given the capital, time and experience at your disposal - be it Social Housing - Serviced Accommodation - Buy to Let - HMO etc?

Serviced Accommodation should in almost every case generate better profit than Buy to Let A debate could be had between HMO and SA depending on the location and capital flexibility but both generally generate better returns than BTL.

The SA market ranges from luxury quality, higher price and higher touch to low cost low touch and everything in between.

The profitability stems from the blend you achieve of nightly rate (ADR) and occupancy.

Example

In Liverpool Budget properties achieve 64% occupancy with a nightly rate (ADR) of £81.80 generating revenue £19,108 pa

A Luxury property in Liverpool typically gets 37% occupancy with an ADR of £227 thats revenue of £30,656 pa

The perfect world is to achieve budget or economy occupancy at luxury or upscale nightly rates and in some locations this is perfectly possible and is the most profitable generating revenue of £53,027.

Each of these examples is vastly superior to other property solutions and its this blend of ADR, Occupancy, Capital, Location and Guest Experience that is critical in correctly deciding which model of SA you will adopt.

Assuming the correct solution is a Contractor or budget model SA then don't simply furnish it like all the others you see and stick it on Airbnb.

Contractor Model - Things to Consider

"Contractor led" SA properties can be very profitable and also bring the benefit of longer stays, they require fewer interactions, changeovers and demands and here are a selection of thoughts we would focus on:

• The nightly rate will be low and so the fewer bookings with external marketing costs the better - the right solution is to make your marketing focus not Airbnb!

  Airbnb and booking.com (BDC) should not be your primary marketing channel. Some do primarily use Airbnb and then try and get enquiries or bookings away from the platform and to book direct without the costs. This has risks - Airbnb will throw you off the platform without warning if you are caught doing this or for poor guest experience - as 100,000 properties found in March 2024.

  
  

• Direct to companies is the most profitable route and where your energy should be directed in building relationships, awareness and future bookings. I would still use the OTA's like Airbnb to fill near time occupancy gaps.

  
  

• If you are outsourcing your hosting - an Airbnb Superhost is not the right solution - I would never employ someone like me to host this type of operation - not because I will not do an amazing job of maximising guest experience, pricing strategy or marketing your property on traditional OTA platforms - but simply because we do not operate a service that has a focus on building B2B relationships for direct bookings or an established network of relationships. Those hosts who specialise in this market are where you need to look. You should interview them and explore their methods even if you are considering hosting it yourself - you will glean a lot from the conversations.

  
  

• You need a direct booking website and payment system that makes it easy for your prospective business clients.

  
  

• I would definitely still have a channel manager system for a number of reasons - to manage channel platform availability and pricing, to save time, to ensure no double bookings, to simplify and automate guest communication and because they can include a simple to set up direct booking website with integrated payment systems and invoicing for businesses.

  
  

• You will need to decide if you are going to pack in beds and expect contractors to share or provide the ability to do so - most don't want to - or allow contractors the sanctity of a room to themselves as standard. Remember in this model price is the central issue for the business so understanding typical nightly budgets is key.

  FYI - one contractor booking source is "Comfy Workers" who typically markets opportunities for £100 per night and these almost always require "no room sharing"

  
  

• You will be surprised at the number of reasons or use cases that people will use an "Airbnb" but assuming you have the property and your focus is longer contractor stays do not simply discount short term leisure stays.

  
  

• Our focus is upscale or luxury properties and we still welcome contractors - they tend to be last minute when our prices drop to be appealing to that market. Now flip this on its head - your focus would be building longer term contractor stays using B2B marketing and networking and you could close off further out using your channel manager while also opening it for bookings on OTA's for the coming week or month for leisure stays using Airbnb or BDC and charging a premium.

  
  

• Allow instant booking - this is best and removes barriers to bookings. People want to book when they want to book and don't in general want to wait to be assessed. The fewer barriers and rules the more bookings - use price and minimum stay length as well as deposits or Air Cover to provide you with security you need.

• In this model remember you are probably not even dealing with the actual guest in most cases with the booking being made and paid for centrally by someone working in an office - 9am - 5pm so be prompt with responses and always professional.

Whichever model you operate SA is at heart a hospitality business and never forget that the experience of guests can be the primary marketing fuel for future bookings - build relationships - bend over backwards to get great reviews and don't stress the different expectations of different guests.