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What is the competitive landscape for services like AirBNB targeted at the long-term residential rental market?
Hello! Thank you for your question on the competitive landscape for services like Airbnb in the long-term residential rental market. The short answer is that there is a great competitive landscape for the long-term residential market with companies like LiveOffer, Rentberry, and Rentwolf launching their services in the Australian market. You will find a deep dive of my research below together with an explanation of the methodology.
METHODOLOGY
I started by describing the long-term rental market in Australia to have an overview of what services like Airbnb are likely to be tapping into in the long-term. I then provided information on Airbnb and its plan on long-term rentals, and this was important to see if it fits into the rental market in Australia. Lastly, I searched for other similar competitors seeking to launch in Australia to provide long-term residential rental platforms.
THE RENTAL MARKET IN AUSTRALIA
The rental market in Australia has become tense and more tenants live in fear due to discrimination. Research by CHOICE revealed that 83% of tenants in Australia do not have a fixed-term lease or have a lease that lasts less than a year. It also revealed that 62% of the tenants cannot ask for long-term rental security. Most tenants have encountered discrimination, and most of them also fear being blacklisted as bad tenants as it would give them a bad reputation that interferes with their ability to find residential places. There are also problems with the residential areas in Australia. 20% of renters have also experienced flooding, leaking, and molds and 8% live in a property in dire need of repairs. The request for repair takes a while since the landlords and property owners are not very responsive. The research revealed that 21% of renters wait over a week to get a response on urgent repairs. Renting has become the most practical option for Australians since most cannot afford to purchase property. Australia also has poor rental rights as compared to most developed countries because they do not have strict limits on rent increases and do not clearly provide secure long-term arrangements. Leases in the country can even last just six months with the tenants subject to eviction after a short notice. The entrenched culture of fear prevents most renters from complaining even when they encounter problems. With such inadequacies, services like Airbnb can help to restore the faith of renters on property with better services and through caring for the concerns of the tenants.
SERVICES LIKE AIRBNB AND THE LONG-TERM RENTAL MARKET
The residential market is changing thanks to technology and innovation. Over 90% of people are looking to change their living situation and over 60% of them search through their mobile gadgets. It is becoming easier for renters to connect with good and compatible roommates and find different types of rental places from the ones that are fully furnished to those that require furnishing. Various services have been created to link tenants with property owners. Roomi and EasyRoommate, for example, connect potential roommates while HomeSuite helps people to find furnished housing. RentPayment also improves the collection and payment of rent.
Airbnb has become a favorite among many people traveling and looking for a place to stay on vacation, and it is interested in doing the same for those looking for a place to live. It is looking to expand into the long-term rental business, and the research plan involves carrying out a competitive examination of Craigslist. Craigslist dominates the rental markets in many cities, but Airbnb believes it can offer an identity-verified and safer alternative. Airbnb is likely to give Craigslist great competition because of the safety it seeks to offer its users. The posts on Craigslist only show the advertised rents and not the negotiated rent, and there are possibilities of scams. ComScore, an internet research firm, reveals that Craigslist gets approximately 60 million visitors every month in the United States. However, the people can post freely and anonymously on Craigslist since it does not police the listings. This has made it easier for scammers to post on it, and Airbnb may tap into the lack of security to offer great competition. In the year 2016, Craigslist failed to identify and remove over half of scam listings, and Airbnb is using this to its advantage. It already has a sublet page that provides monthly rentals in over 5,000 cities. It collects 9% to 12% fee from every booking.
Airbnb is looking to improve its services to fit the long-term rental plan. It is likely to build options where the renters can pay for utilities and recurring service fees.
LONG-TERM RESIDENTIAL RENTAL PLATFORM COMPETITORS
There is a lot of competition in the long-term residential rental services in Australia, and three main Airbnb competitors are also seeking to enter the market. They include Rentberry, LiveOffer, and Rentwolf.
Rentwolf is Australian-owned and allows tenants to provide a value proposition that includes the preferred rental price and more. It promises transparency by allowing participants to view the offers from potential tenants in real time. It has the lowest operational cost and can also handle financial products such as personal loans and insurance. The platform also removes the third parties involved in property management. Rentwolf calculates an offer to income ratio that prevents potential tenants from making bids they cannot afford safely. It launched on July 12, 2017, and had about 5,000 users after a week with 650 landlords included. Friends and family funded the start-up by contributing $600,000 and Technocrat founder, Anand Vasan, invested $650,000. As it continues to build up, it charges the landlords $14 as the monthly subscription fee. It hopes to generate revenue from aggregated rental bidding data in the long-term.
Rentberry is based in San Francisco and was launched in 2016 to position itself as a transparent home rental service that offers a negotiation platform that unites the landlords and tenants. It is set to launch in Australia in 2017 with the aim of encouraging transparency in the Australian rental market. The landlords list their property for free and can vet and screen tenants and collect rent too. The tenants can also adjust their application considering the number of people interested in the property and their willingness to pay. Presently, it has about 100,000 properties and over 50,000 users, and the number is still increasing. The planned launch in Australia is part of the global expansion, and it has already received $1.57 million dollars in funding from various venture capital investors. Inasmuch as some people see that it is likely to lead to an increase in rental prices in Australia, the start-up cites its success in the United States. It explains that it saves money for tenants in the United States by about 5.12 percent. The tenants can see the highest bids and the number of bidders on the property they are interested in. Currently, it charges the users $25, but it plans to as 25% of the difference between agreed upon rent and asking price in the future.
LiveOffer launched in Los Angeles in 2014 and was developed by a real estate technology company known as Property Connect. Its algorithm ranks applicants based on their duration of their lease, security deposit, credit history, and the prospective date of moving in. It raised $2 million for its launch in Australia in March 2017. The potential renters can adjust the date they are willing to move in, lease term, and amount of payment to attract the attention of the landlord. It targets the premium apartments with the best views, layout, higher floor and quiet location. Property Connect sought a listing on the Australian Securities Exchange with the expectation of issuing 50 million new shares at 5 cents per share to attain a market capitalization of approximately $12.3 million upon listing. By April 2017, it had completed the placement of 140.9 million shares at $0.011 each and was able to raise $1.55 million.
CONCLUSION
In conclusion, there is a high competitive landscape for services like Airbnb seeking to enter the long-term residential rental market. Airbnb is taking advantage of the shortcomings of Craigslist to launch its long-term rental project. On the other hand, start-ups such as LiveOffer, Rentwolf, and Rentberry are launching in the Australian market with the aim of restoring confidence and transparency in the rental market.
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