STR also reports that one-half of the rooms listed on Airbnb
are sold for seven days or more. This challenges the conventional wisdom that Airbnb typically competes for the short-term
or daily traveler. Based on this analysis, it may compete more
directly with extended-stay properties, according to Kroll Bond
At the recent Americas Lodging Investment Summit conference, hotel operators didn’t express too much concern over competition from Airbnb, reflecting the industry’s all-time high occupancy rates and RevPAR growth. However, although the industry
has achieved strong growth, performance has varied by market.
“San Francisco/Oakland/Hayward was the third largest market for Airbnb listings with the highest average daily rate for both
hotels and Airbnb,” says KBRA senior director Larry Kay. “The
ADR premium was 12.1% for hotels compared to Airbnb. Late
last year, San Francisco limited Airbnb rentals to 60 days per year.
Short-term rentals also have been impacted in certain markets
such as Miami and New York City.”
ALIS conference attendees didn’t see Airbnb as providing
new supply, but rather as a new platform for existing rental
units. Yet for existing supply, Airbnb’s ADR appears to be very
competitive—especially on weekends, when there is stronger
competition for leisure travelers. According to the STR, US
hotel ADR on weekends has a negligible 2% to 8% price pre-
mium over Airbnb. On weekdays, however, the premium rises
to 14% to 23%, reflecting more demand, higher occupancies
and less price sensitivity from corporate travelers.
Although Airbnb currently has a small market share, its continued growth, particularly among millennials, has been met with a
full frontal attack by the lodging industry. Hotel companies are
attempting to appeal to millennials with technology, high-end
amenities and local designs/neighborhood themes.—Lisa Brown ◆
It’s an age-old maxim: Brokers who represent both tenants and
landlords are not totally objective. Why? Because in dual-agency
arrangements, common with today’s giant traditional full-service
real estate firms, the broker has an obligation to bring tenants to
their own listings or the other listing brokers’ buildings—and that
may not be in the tenants’ best interests. Indeed, this may compromise the interests of space users and create a recipe for conflicts.
In 2015, a Watkins Research Group study revealed that most
corporate tenants polled were very concerned about the potential of conflicts, and they said they’d
prefer to work with a tenants-only
service provider. In December 2016,
the California Supreme Court, in
what is viewed as a landmark decision, ruled that in dual agency
arrangements, the broker “owes the same fiduciary responsibilities to each party” and must be transparent in disclosing germane
information. While this California legislation focuses on residential real estate, it has “far-reaching implications” for commercial
brokerages as well as corporate tenants and occupiers.
In the legal industry, it’s called common sense when one law
firm represents the plaintiff, and another represents the defendant. To ensure objectivity and accountability, each side hires its
own advocate. Otherwise, it would be called a conflict of interest.
As mentioned earlier, the potential for this same inherent conflict also exists in the real estate industry.
While the practice of brokers serving both landlords and tenants
may be widely accepted, it can be tenuous. The fact is, when the
tenants’ needs and the brokers’ incentives are incompatible, a conflict is inevitable. And today, companies are more sensitive to even
the perception of impropriety. More CFOs are now scrutinizing
their companies’ real estate decisions, and they are conducting
greater due diligence in examining their outsourcing relationships.
Tenant advisory firms differ from traditional commercial firms in
two major ways: they solely represent the interests of their clients,
and they provide long-term corporate services that are not just deal-
oriented. As the market continues to consolidate, more space users
are recognizing the value of having an exclusive advocate with the
expertise and value-added services to meet their requirements.
Why has it taken this long for tenant representation firms to gain
a foothold? Landlord clients tend to provide greater revenue to
listing brokers than tenants do,
and many brokers prefer to work
with traditional brokerages,
motivated to make fast commis-
sions for transactions and
enhance their future listing
Another deterrent to would-be tenant-only firms is tied to
Brokers that represent landlords
get valuable visibility since they
can install their signs on their
clients’ buildings to advertise the
availability of space. Tenant representatives typically don’t enjoy
this spotlight and resulting
So, what is our recommendation to tenants? They should
raise the issue of conflicts from
the get-go, and they should be
more diligent in selecting service
providers that put their interests
first. Ask for references as well as a complimentary audit of your
real estate needs. Shop around.
No one expects tenant advisory firms to replace traditional listing
firms. However, the advocacy approach will continue to be adopted
as tenants increasingly discover the benefits of this alternative.
Scott R. Wingrat is a principal and founding member of Cresa Baltimore.
Gene Sachs is a managing principal and founding member of Cresa
Washington, DC. They may be contacted at firstname.lastname@example.org and gsachs@
cresa.com, respectively. The views expressed here are the authors’ own.
By Scott Wingrat and
New Concerns About Conflicts of Interest in CRE
More CFOs are