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Hospitality Living: Welcome To The Next Generation Of Commercial Real Estate

A bedroom at a Placemakr property.

J.F. Finn, a global leader in the mixed-use building and retail centers practice at Gensler, was quoted saying, “You’re doomed if you’re doing single-purpose, single-use spaces, and even single-use buildings, because you don’t get as much value out of the real estate.”

Finn’s comments on the rise of mixed-use developments ring even truer today across a wide variety of asset classes. It’s not just about placing offices on top of retail anymore but creating spaces that are truly flexible to be used for an array of customer types — commingled spaces. One of the most natural places for commingled use is blending multifamily and hotel where the biggest difference between customers is just how long they call the space home. 

“Single-use properties in urban locations are an inefficient use of real estate investment capital,” said Jason Fudin, CEO of Placemakr, formerly known as WhyHotel. “They also do a poor job of serving customers across cycles and seasons, which means there is a tremendous whitespace opportunity to create value for both investors and customers."

Fudin said that in his view, buildings that blend home, hotel, retail and work into single, flexible and sustainable properties are the future of real estate. Placemakr has started making strides toward this future by blending home and hospitality — a concept it calls Hospitality Living. Not only does this hospitality living platform create a better experience for the customer, he said, but it's also through this model that Placemakr is able to produce outsized cash flow for owners.

"Our model allows us to generate hospitality revenue, reduce operational expenses through technology and leverage multifamily debt," Fudin said. "It's this mix that turns assets into cash-flowing machines." 

Through this approach, he said, Placemakr can increase a building's free cash flow by 1.5 times to 3 times. 

He added that this approach might sound like an impossible feat for the traditional world of real estate today, but this shift has already begun and will continue to happen in steps. 

"This revolution will likely be led by a number of up-and-coming companies with diverse perspectives on how the world is evolving," Fudin said. "That is in stark contrast to the traditional real estate world where capital is primarily controlled by a homogeneous group of men that live and operate very differently than the generation of people who will be using urban spaces over the next 30 years.”

He added that this impending sea change is as obvious to Placemakr and many others as the shift to online shopping was with the advent of the internet.

"Just give it time and those that don’t meet the customer where they are and create solid real estate returns will find themselves on the wrong side of history," he said. 

It was that disruptive spirit that led to the company’s evolution into a hospitality living provider. Placemakr’s tech-enabled, hospitality living platform allows the company to flex apartment-style inventory between furnished and unfurnished and short-term and long-term stays. The customer base includes a mix of guests and residents that could stay for a night or up to two years. In this model, guests and residents experience the best of both the hospitality and multifamily worlds, where the comforts of home — units with kitchens and laundry — meet the services of a hotel, including housekeeping.

A laundry room in a Placemakr property.

Consumer demand is supporting this revolution with a serious shift toward longer stays. In the evolving remote and hybrid work environment, “bleisure” travel combining business and pleasure continues to grow. As an indication of the short-term stay momentum, Fudin cited Airbnb's announcement during its quarterly earnings that 50% of all room nights on its platform were for stays that were seven or more days. 

“There's this huge tailwind for home-style stays as the world moves to a ‘work from anywhere’ model,” Fudin said. “This will be one of the largest seismic shifts in real estate since the suburbanization of America. We are seeing a new generation of people who are choosing to rent because they are prioritizing experience over ownership. The newest generation of consumers wants the flexibility to support their lifestyles.” 

Placemakr anticipated this industry evolution and originally began as an operator of temporary “pop-up hotels” that blended hospitality and multifamily during an apartment building’s lease-up. It offered fully furnished units in apartment buildings by leveraging yet-to-be-leased apartment units and turning them into hotel-like suites. The pop-up model generated additional revenue for properties during lease-up for some of the largest publicly traded REITs including Avalon Bay, Equity Residential and Brookfield. 

A terrace at a Placemakr property.

“Customers are looking for more flexibility and convenience in every part of their lives, and that includes in their apartments and their hotels,” Fudin said. “With us, they have both."

While Placemakr retains staff on property, it also offers contactless check-in and room keys, all on a guest’s smartphone. A guest can show up at any time, check-in by scanning their ID on their phone, and access their room. Or they can check-in with a Placemakr staff member. The same convenience exists for residents who have building requests that can be made remotely or in-person. 

“Our entire business model is centered around shared upside,” Fudin said. “The more successful we are for the property, the more value we share with our partners. It’s a win-win.” 

He said that when building owners enter into a partnership with Placemakr, the company handles everything. 

“We offer our partners a comprehensive solution from tech and software engineering to sales and marketing,” Fudin said. “Our team assumes the yield optimization capabilities as well as full property management.” 

The company has purchased close to $250M in properties to date, and last year alone it added $400M of its real estate partners’ properties onto the platform. 

He compared Placemakr to coworking companies like Industrious that have embraced this type of revenue-share model and are experiencing a lot of success as a result. This is in comparison to companies that have struggled by choosing a highly leveraged lease-based model. 

“Our expectation is that in the next five or so years, the majority of buildings under construction that would have been a traditional apartment building or hotel will be this type of apartment-style flexible asset instead,” Fudin said. “And the reason is that it's a higher and better use, which the efficient engineer in me can’t help but love.” 

This article was produced in collaboration between Studio B and Placemakr. Bisnow news staff was not involved in the production of this content.

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