Anyone who has rented a room on Airbnb knows the process is simple—you can get a great deal on a cool rental in a city you’re visiting with just a few clicks. Users may think the process on the other end is just as straightforward: someone has an empty apartment or room, they list it on a website, and a person who wants to stay there gets in touch and pays them for it. While there are many individuals who work small-scale to make a few extra dollars, the increased popularity of online travel agents (OTAs)—like Airbnb, as well as Booking.com, Expedia.com, etc.—has also allowed a new business to emerge: property management for short-term and vacation rentals. Though the market is growing, it’s a tricky business riddled with organizational and mathematical challenges. For these budding companies and unofficial groups, renting out properties is a full-time job.
How it works
Many Lebanese own multiple homes that spend long stretches unoccupied—perhaps the owners reside outside of Lebanon but want to keep a piece of home, visiting only a few weeks a year, or they travel frequently for work, leaving the apartment empty on weekdays. Whatever the situation, homeowners may want to make money from an unused property, renting it out on various OTA platforms. Many don’t have the time, patience, or knowhow to do it themselves, and instead choose property managers to run the business for them, for a fee.
This business is still quite new in Lebanon, but a handful of property managers already exist. One of the largest, Propke (the company behind the website Byout Beirut), launched in July 2017 with just seven properties and today has almost 50. Co-founders Hady Abdelnour and Rouf Dawalibi say they’ve expanded solely via word of mouth. “We provide A-Z services for homeowners that don’t have the time to host themselves,” explains Dawalibi, adding, “We give the owners an opportunity to make a yield.” Another group Executive spoke to is still in the process of becoming an official company and prefered to speak anonymously. Trust and transparency between owners and managers are important. Propke sends owners monthly statements. In their experience, homeowners usually choose to be hands-off, but can see communications with clients on the OTA platforms, if they wish.
Another way the business can work is if property managers themselves start to acquire apartments. Since buying many properties at once would require a lot of capital upfront (while buying and managing too few properties would not make business sense), a more feasible option is long-term leases of properties that are then sublet as shortterm rentals. Logistically, it is also sound to acquire properties in one area or even one building, as this minimizes travel times for the maintenance crew and also makes it easier to keep track of upkeep issues.
Who’s staying where
Lebanon is seeing more and more listings on OTAs every year, according to those in the business. Looking at Airbnb this month, there are hundreds of rentals to choose from, ranging from a $9600 per night nine-bedroom “palace” in Faqra, to a $10 per night Hermel apartment advertised using a photo of dead birds (the city is a popular hunting destination). Cool-looking, luxurious, or unusual spaces can usually get a higher asking price, which is why many of the properties managed by professionals are decorated in creative ways.
Location is also vital, as these services can ensure that guests stay in coveted areas for cheaper than it would cost them at a hotel. One of Propke’s most popular homes is a tiny but highly functional seven square meter capsule apartment in central Ashrafieh that goes for $40 per night. Most of the properties are clustered in Beirut, especially in the Mar Mikhael and Hamra areas. By all accounts, properties for rent outside of popular areas tend to generate less revenue, and homeowners are better off renting to long-term tenants. In fact, Dawalibi reveals that renting on Airbnb doesn’t necessarily bring in a significantly higher profit than renting long term, but it gives owners flexibility, which means that if they want to use their homes once in a while, they can.
Though there are various types of clients, OTAs mostly target budget travelers. “Our [most common] segment is 25 to 35 year old budget travelers usually traveling as couples,” Dawalbi says. They spend an average of four nights and spend an average of about $100 a night. Eighty percent of them are not Lebanese.” Repeat clients, especially Lebanese, are valuable too, as they often fill up nights that would otherwise be empty, like weekdays during low seasons. They often come back directly to the managers, bypassing the OTAs. Some even attempt to use wasta. “The Lebanese have an overwhelming need to undercut the middleman,” Dawalibi says. “Sometimes they try to undercut us and talk to the owner, but it’s us who get the emails. They think they can get a better deal.”
Why choose a rental over a hotel room? “An Airbnb has a different value proposition than a hotel. You’re effectively paying less,” says Dawalibi. There’s disagreement on whether such rentals have affected the hotel business in Lebanon. One argument suggests that tourists in rentals would have stayed at a hotel, had they not had another option. But Abdelnour and Dawalibi say their clientele are different, and many of them wouldn’t have come to Lebanon at all if affordable accommodation wasn’t available. Moreover, they’re not interested in what hotels have to offer. “The advent of Airbnb … has attracted budget travelers that weren’t coming to Lebanon before,” Dawalibi says, explaining that the Lebanese hospitality industry began its growth in the 90s, catering mostly to Gulf tourists who wanted to stay in five-star hotels. “That product was built for a certain segment and today that segment doesn’t come to Lebanon anymore,” he says. Another push has come from the increase in direct flights to and from European destinations, which makes Lebanon more accessible for a long weekend. “Those types of Europeans stay in Airbnbs, not traditional [hotels],” he says.
The market is growing as people increasingly know and trust OTAs. Worldwide, governments are cracking down on the industry and imposing regulations, mostly for safety reasons, but this hasn’t happened yet in Lebanon. The players are all wary that regulations will come sooner or later. “It’s inevitable,” Dawalibi says. “It has happened everywhere, but the government is slow to act in Lebanon. We’re expecting [regulations].”
Back-end of the business
Budget travelers are sensitive to the loss of even a few dollars, but while dropping prices may secure more rentals, it may not end up being worthwhile, so property managers need to calculate carefully. The OTAs themselves take commissions from property managers and sometimes clients (from 3-20 percent of a booking’s value, depending on the platform and their system).
This is why many property managers are using a range of tools, some of which help with the mathematics of how to price rooms. Since properties are also usually listed on multiple platforms, other tools are used to avoid double booking. These calculations can be done manually, but softwares offering yield and channel management are vital once the business scales up.
Lebanese startup Outswitch, which has been operating since 2016, already offers channel and yield management services to companies outside Lebanon, and is currently in talks with local property managers. CEO John Boukaram explains that managing the pricing and booking of tens or even hundreds of properties across multiple websites for the next two years is a logistical nightmare. The wasted time and effort spent on such work can instead go into on-the-ground execution, where humans are really needed, leaving the maths to algorithms, which are more reliable anyway. “It’s about automating what you can to make sure you as a manager aren’t wasting your time,” he says. “There are things you can’t see that software can see. It’s a lot of math, and you can never expand as a business if you’re not using tools to save yourself time to focus on [other] things that matter—the daily operations.”
Outswitch adjusts prices according to demand, so if there are no bookings, it automatically lowers prices, Boukaram says, although managers can set a minimum threshold. He explains that there can be a loss of revenue due to manual work. “Sometimes you see two different rates on two websites [for the same property], and the guest will go with cheaper one. The property competed with itself—you lost yourself money.” This problem often occurs when managers make updates manually and don’t use proper tools to make sure prices are synced.
Problems and Lebanon problems
The logistics behind the business is even more complex than the math. Additional features on Outswitch let managers streamline teams and keep track of check-ins and check-outs. “Just because someone booked doesn’t mean they checked in and just because the check out time is now doesn’t mean they actually checked out. When you have 200 flats it makes a difference,” Boukaram says.
As with any service industry, the ultimate duty of the managers is to provide a happy experience for guests. Today, clients using OTAs are likely to leave reviews, which puts the companies’ reputations on the line. Since property rentals are aiming to reduce costs as much as possible, OTAs’ services need to mimic that of hotels, but at the lowest cost possible.
Any industry, in any country, has challenges, but in Lebanon many industries have additional challenges. In a service industry, people expect quality. In Lebanon, certain things—like power cuts, water shortages, and slow internet—are out of the hands of property managers and owners. Those in the industry tell stories of power cuts that leave Europeans baffled (why can they use certain appliances and not others?) and Netflix binges that result in internet consumption that will cost the managers a fortune. Explaining the country’s specific situation in advance helps, but sometimes guests coming from a different kind of life just don’t get it—and sometimes these uncontrollable elements make it into online reviews.
Despite the challenges, demand and supply seem to be growing for vacation rentals. With a stimulating lack of regulations, homeowners and managers are jumping at the opportunity and riding the wave for as long as they can, helping attract a new breed of tourist to Lebanon in the process.