Luxury brokers insist they can take on Airbnb Luxe and win

After disrupting the short-term rental industry at large, Airbnb is coming for brokers of high-end vacation rentals.

On Tuesday, about two years after it acquired high-end vacation rental website Luxury Retreats, Airbnb announced it was rolling out Airbnb Luxe, a vertical featuring properties that rent for $1,000 or more per night. Sourced from listings on Luxury Retreats, Luxe features about 2,000 properties worldwide, which were selected due to stand-out features in their design, location and views, according to the company. Renters using the service can take advantage of the services of a trip designer — like a concierge or butler — to arrange tours, transportation, and more.

The short-term rental giant is hoping to make a big splash in the high-end sector of the market as luxury travel increases and competitors like Marriott launch their own travel concierge businesses. Airbnb said that it saw a 60 percent bump in Airbnb bookings worth at least $1,000 a night in 2018.

The heft of the company’s earning power is evidenced in places like British Columbia, where, since instituting a tax on Airbnb users as of October 1, 2018, the firm has generated $14 million in taxes — double the amount it had projected it would earn on the 31,000 listings it has in the province.

The launch of Airbnb Luxe is limited to listings in only six cities in the U.S. and a slew of countries in the Caribbean, Latin America, Asia, Australia, Europe and Africa — where there are likely fewer restrictions on short-term rentals. Listings in markets like New York and Florida — two states that have been host to various municipal fights over short-term rental regulations — are absent from the list.

In the U.S., Luxe has listings in Los Angeles, Palm City, Hawaii, Vail, Utah and Park City. When asked why listings from New York City were excluded, an Airbnb spokesperson said that only 2,000 properties met the criteria for the new vertical.

Where it works and where it doesn’t

The high-end vacation rental agent is something of a rare bird, but brokers within that specialty don’t believe Airbnb Luxe will impact their business — and that it wouldn’t, even if short-term rentals were generally less regulated.

Christopher Stewart, a Douglas Elliman agent in East Hampton, said that the restrictions for short-term rentals in the Hamptons likely kept Airbnb Luxe away from the area.

“I think the business platform of it is probably good. The road blocks are what’s allowable under town code,” he said.

In East Hampton, homeowners are only allowed to rent out their properties twice in a six-month for periods of less than 15 days. Luxury properties rent out for anywhere from $100,000 a month to $1 million a month in season, which is between Memorial Day and Labor Day.

Stewart said the personal touch of an agent will remain essential to Hamptons vacation renters, considering the nature of the housing stock in his market.

“Out here, given the fact there are so many different styles, ages, locations of luxury homes, people will always want to look at them. So we’ll survive,” he said. “If you’re not uber familiar with where you’re renting, that’s where the agents come into play.”

Alla Furman, a longtime luxury rental agent at Hilton & Hyland in Beverly Hills, said that, while Luxury Retreats listings are often “immaculate properties,” there are benefits to using a traditional broker as opposed to an online listings platform like Airbnb.

“It’s sometimes cheaper to go through a broker because a broker can negotiate,” she said.

On-the-ground brokers are also “more exposed” to a market, meaning they are able to differentiate between homes to find the suitable rental property for a family, Furman added. And in markets like Los Angeles, where privacy is paramount, agents like Furman often have access to “off-market” properties that wealthy homeowners might not want to be advertised online for the masses. “We have more inventory,” she said.

Airbnb Luxe has 63 listings in Los Angeles, located in Hollywood Hills, Malibu, Beverly Hills and Los Feliz, among others.

Serving the guests

For its concierge services, Airbnb is partnering with local firms that can provide that support. In L.A., the firm has tapped Elite Luxury Homes, a full-service luxury rental platform run by CEO Martin Beaurivage.

Beaurivage said his firm has been collaborating with Luxury Retreats and Airbnb for the last seven years by helping identify and provide high-end homes for their platforms. With Airbnb Luxe, their role now expands to “making sure client has the best experience” — whether that be by making reservations at the best restaurant, or curating a horse-riding adventure for the guests.

Elite Luxury also offers its own homes on its platform, however. Beaurivage said the listings on his platform are exclusive, so he doesn’t see Airbnb as a direct competitor.

“We don’t have any issue with Airbnb Luxe expanding and coming into this market,” he said. “At the end of the day, the owner relationships, the management and exclusivity will remain to us because we are the boots on the ground.”

Beverly Hills-based Villaway is another luxury rental company that has been supplying inventory to Airbnb for years. Its founder and CEO, Joe Liebke, said Airbnb’s “marketing power” will bring “added value” to the luxury rental market.

“Right now it is estimated that less than 10 percent of luxury travelers use vacation rentals so building what we call ‘the trust bridge’ from luxury hotels to luxury rentals is going to be very good for the segment,” Liebke wrote in an emailed statement. “Airbnb is helping to let the world know that there are benefits for both luxury home owners and luxury travelers.”

Know your market

Airbnb appears to be steering clear from markets like Florida, where regulations of such rentals vary among municipalities, and from New York City, where short-term rentals are illegal. Additionally, the standards of service will be tricky to uphold in markets that have voracious demand.

A spokesperson for Airbnb said the properties on the Luxe website must pass a 300+ [point] inspection, including a strict set of standards, from chef-grade appliances to high end finishes; and from desirable location to the proper amount of bathrooms corresponding to each bedroom.

It will be difficult to offer enough options of that kind to meet the level of demand you find in a place like New York City, brokers said.

“Most of our properties are co-ops and condos. I don’t really see how they’re going to be able to roll this out in New York City with much success,” said Sean Murphy Turner, a broker at Stribling & Associates who handles long-term leases of high-end units. “If someone needs a really glamorous rental, they’re going to have a hard time if it’s for a short period of time.”

And in some markets, a patchwork of varying local restrictions will limit the number of listings. In Los Angeles, for example City Council passed a law that legalizes short-term rentals as long as hosts only rent out their primary residences. But next door, Santa Monica has some of the strictest short-term rentals regulations in the nation. Airbnb and other home-sharing companies have been involved in an ongoing legal fight with the city.

Restrictions also vary throughout Florida. In Miami Beach, for example, the city commission has cracked down on illegal short-term rentals, enacting fines that in some cases start at $20,000 per violation and can jump to $100,000 a pop.

Sam Gaita, a director of investment sales at Elliman and vice-chair of the Florida Vacation Rental Managers Associations, previously owned his own luxury rental and property management firm in South Florida. His company employed travel butlers who would arrange specialty treatments like yoga instructors, personal trainers, chefs and even anti-aging doctors.

Now he sells properties that can legally be rented on home-sharing websites like Airbnb.

Gaita said Airbnb’s biggest challenge will be changing people’s perception of the company.

“It’s going to be a mindset change for people because they think of Airbnb as affordable and not as bespoke,” he said. “Airbnb doesn’t have the prestige and it’s going to have to build that. Luxury Retreats had that prestige.”