How investors can win the homestay race

By JLL - Jun 18, 2019 | 02:09 PM GMT+7

TheLEADERWhen investing in homestay properties has emerged as a new trend, investors ought to take into account a number of factors to maximise their profit in the long term.

How investors can win the homestay race
If you are focusing on short-term rental services, pick a property near tourist attraction areas or the airports

When it comes to offering new alternatives to travelers, Airbnb and homestay models have proven their potential, with their market share has now been on the rise, taking the portion once belonged traditional hotels.

However, findings from JLL shows that hotels have been less affected by online home-sharing platforms than expected. Especially in Vietnam, where hotel supply is not yet sufficient to cater to the growing number of tourists at peak seasons.

Although these platforms are not posing a serious threat, traditional hotels should not underestimate Airbnb’s potential. Millennials are more comfortable with the sharing economy, evident in the incredible growth of Grab and Airbnb in Vietnam. 

The sharing economy trend has presented the market with new opportunities to invest in, no matter how much capital or asset investors possess.

According to te Grant Thornton’s Hotel Survey 2017 report, Airbnb has grown quite significantly over the past few years, now supplying over 16,000 accommodation units for the Vietnam market.

Homestay properties, meanwhile, are usually located in big cities with high tourism demand like Ho Chi Minh City, Hanoi, Dalat, Nha Trang, Sa Pa and others.

This model offers much larger spaces through a wide range of accommodations including entire villas, houses, apartments and bungalows, which can lodge a larger number of guests than hotel rooms.

Airbnb, in this case, is creating an additional hospitality market by offering new alternatives to travelers and attracting a new generation of guests, particularly the millennials, who represent an increasing portion of travelers constantly seeking for new experiences.

Airbnb has been expanding rapidly worldwide. The latest acquisition that Airbnb has made includes Hotel Tonight, a platform known for its last minute hotel booking experience. Prior to this, it has invested in OYO, a hotel startup based in India that allows Airbnb to enhance travel experiences and scale through technological applications. 

This demonstrates the company’s ambition to better its service and take market share from competitors, who refuse to adapt to the changing market. 

The growth of this alternative model has served as a catalyst for hotels to continue to innovate and improve their products and services to customers.

This type of short-term rental model starts out as a platform for people to rent out their unused space, anytime they want. Homeowners with spare rooms in their house can rack in considerable additional leisure income, even if they only rent out their property every weekend or so. 

The attractive income has inspired many investors in Vietnam to invest in buy-to-let, or take a long-term lease to rent the property back.

Many, nevertheless, has found that the returns they make a month were not able to cover their mortgage or interests.

So before deciding to invest your capital and become a host, there are a few things to get right.

Location is key. If you are focusing on short-term rental services, pick a property near tourist attraction areas or the airports. How the property connected to nearby traffic and facilities like convenience stores or food courts is also a major concern.

Management should not be overlooked, either. Managing several listings at a time can be tiring, especially if the investor is doing this apart from their day job. 

Oversight in management can lead to serious security problems, property and reputation damage. Hiring experienced staff is probably the best solutions for management issues, but quality human resource can fatten operation costs, which can easily eat up profits at the end of the day.

Experience is also another matter to take on. Before listing the properties, think about what your home can offer guests compared to traditional hotels at the same price. 

Many homestay investors considers ‘local touch plus competitive price’ the golden formula for success. 

The majority of guests who choose homestays over hotels tend to expect certain taste of the local area in their rented property, anything from ‘Ca phe sua da’ drip filter in the kitchen to ‘non la-shaped’ lamps can differentiate your property from competitors.

Finally, investors must be aware of the business registration procedures necessary for this model to ensure sustainable and smooth business operation.

When there is more and more residential supply, it is more difficult to rent out apartments with long-term contracts. Short-term rental model can be a solution for this problem.