IMAGINE you are in a foreign city, but instead of checking into a hotel, you stay in a stranger's home. For a growing number of people, this is slowly becoming a favourite option. While the short-term home rental market is still in its infancy, its potential for growth is strong.
At the forefront of this emerging business is husband-and-wife team Federico Folcia and Teo Jia En. They formed their peer-to-peer short-term home rental business Roomorama.com in January 2009.
Teo and Folcia were in their mid-twenties and working for Bloomberg in New York when the idea came to them. The couple, who confess they have wanderlust in their blood, understands all too well the weariness of staying in hostels and dingy budget hotels. It was their search for affordable and unique alternatives to such dwellings that led them to Roomorama.
"We formed Roomorama out of our own passion for travel and desire to make the marketplace more efficient for travellers looking to book value-for-money accommodation that is also unique and not cookie-cutter," Teo tells City & Country in an email interview. She is the chief operating officer of the company.
The couple started renting out their apartment in the Lower East Side of Manhattan to travellers via online classifieds whenever they travelled overseas. To their dismay, the process was cumbersome and unreliable, leaving them to deal with risks such as no-shows and non-secure methods of payment.
"We started Roomorama to solve all these problems and create a convenient and safe platform for travellers around the world to find and book a place to stay, and for homeowners to rent out to strangers simply and safely," says Teo.
The first apartment listed on Roomorama was their own apartment. The one-bedroom apartment was converted into two bedrooms and they rent out the extra room. They then convinced a few of their friends to list with Roomorama. It wasn't long before a few property managers came knocking on their door.
"They were very excited about Roomorama because they felt they didn't have a good platform to market their properties," says Teo.
Soon came more property managers and professional listings, leading the company to focus on getting professionally managed properties to be listed. This move helped increase the overall quality of listed properties and reliability of the user experience.
However, challenges remain. As with any new concept, getting the masses to buy into the concept is not easy.
"The biggest challenge was bringing this concept to the masses and helping people understand that there are many alternatives to hotels that can be simple and safe to book. Another challenge was convincing homeowners to open up their homes to strangers, and making the proposition of short-term rental (compared with long-term rental) appealing enough for them to consider it seriously," says Teo.
"As people started seeing the value and safety in renting apartments and homes as alternatives to hotels, the concept and brand gained traction quite organically."
Growing the business Within three years, Roomorama had secured an inventory of nearly 70,000 properties across 5,000 destinations globally. Growth in bookings and revenue tripled over the same period of time.
Still, Roomorama's success took Teo and Folcia by surprise. "We knew there would be demand for what we were doing, but the reception has been very good. Now we are no longer just a passing trend but a very legitimate business in an US$85 billion industry," says Teo.
Roomorama has over 500 properties in Malaysia, located in Kuala Lumpur, Langkawi, Penang, Ipoh, Melaka, Kuching and Kota Kinabalu. The most popular cities among Malaysians for short-term rental — Kuala Lumpur, Langkawi, Penang and Melaka — are also the ones with the most number of properties.
At the present time, Roomorama has over 1,000 registered users/number of customers in Malaysia and over 300 hosts. Listings range from single bedrooms to entire villas and prices can go from below RM100 to more than RM1,000 a night.
Roomorama has a dedicated team that searches for high-quality properties around the world.
"To ensure that the Roomorama standards are met by new hosts, they go through our customer service team which requests proof of identification and utility bills of the properties to ensure both are verified," says Teo.
As most of its customers are looking for quality value-for-money accommodation, the company focuses on mid to high-end properties that are professionally managed. Its customers/guests are mainly working professionals, families and small groups between 25 and 55 years of age.
"Most of our properties are completely private as well, so they are more suited to families and small groups than what our competition offers. We also offer extra services such as express booking, business concierge and a perks programme in which we offer discounts to brand partners around the world," says Teo.
Teo adds there are many second and investment homes listed on the portal. Owners have the option of listing on Roomorama on their own or hiring a professional manager if they don't have the time to manage the properties themselves. The company works with these professional managers, who use Roomorama to market the properties under their management.
According to Teo, many owners choose the first option and enjoy the process of responding to enquiries and hosting guests.
"Typically, hosts can charge a 50% to 100% premium for short-term rentals [with a trade-off for lower occupancy]. As our service is completely free for our hosts, the profit for them is 100%."Roomorama generates revenue from the booking fee from guests, which includes credit card processing fees.
"This is about 8% to 12% of the total room rate. This measure ensures better rates because our hosts don't need to increase their rates too much because they get the rent in full," explains Teo.
Opening your home to strangers"In the past, people only thought of long-term rental as a viable option to rent out their second or third homes, and no one even thought of opening up their primary residence," says Teo.
She believes Roomorama's easy and safe process has helped convince people to look at short-term rental as a way to increase rental yields. It also adds flexibility as homeowners can use their own properties whenever they want compared with having long-term tenants.
Simon Ng is one of those who listed his primary residence in Bangsar South on Roomorama. He travels a lot and used to rent out his apartment on a short-term basis through referrals and online advertisements. Roomorama approached Ng after coming across one of his web advertisements.
"I decided to give Roomorama a try as I find the team to be very responsive and friendly. What is extremely useful is that full payment is received upon confirmation of booking and I receive the payment once the guest has checked in. If it's a no-show, there will be cancellation charges," says Ng who joined Roomorama in February 2011.
His 1,130 sq ft apartment has two bedrooms and Ng offers a choice of renting one of the bedrooms or on occasions, when he is abroad, the entire apartment. Rental rates are from US$40 to US$131 per night. The apartment comes with standard facilities and while it does not offer cleaning services, it has amenities one would find in a home, such as a washing machine, wireless Internet and air-conditioning.
While there has been keen interest on his apartment, only one guest has stayed there thus far. Ng says the renting of a property depends on a lot of factors.
Another host, Ng Poh Chooi, has received five groups of guests since she listed her apartment on Roomorama in July 2011. Upon the completion of her unit in The [email protected]-Garden Hotel & Residences in Jalan Pudu, Poh Chooi turned to the internet to lease her apartment on a short-term basis and stumbled upon Roomorama.
"It has been quite an experience and we learn as we go along but the most important thing is that everything went smoothly. Guests liked the apartment and the facilities and the location is fantastic," says Poh Chooi.
Her 1,300 sq ft apartment comes with standard facilities and basic amenities. She offers an option of renting one, two or three bedrooms at US$148 to US$188 per night.
Poh Chooi opted for short-term rent instead of long-term because she sees increasing demand for short-term leasing among travellers as budget airlines allow more people to travel.
While Teo knows the market is still in its infancy, she believes there is room for growth as more people discover how easy it is to rent out their space on a short-term basis. The current global economic environment also plays a key role.
"I think it has impacted the business in a good way because people need to get more creative with the assets they are holding and try to maximise returns. Also, people are now looking for more value-for-money options when they travel and we certainly offer that," says Teo.
New York, London and Paris are the most lucrative markets, which is no surprise to Teo.
"These three cities are the most popular travel destinations for tourists and business people and as a result, hotel prices can get absurdly high. Renting an apartment or home is a much smarter and more affordable alternative," she reasons.
Roomorama has plans to widen the selection of properties available for booking and to make the process as quick, seamless and safe as possible with its upcoming instant booking service and mobile app over the next few years.
After all, as Teo points out, Roomorama's goal is to get travellers to realise that hotels are not the only travel accommodation available to them.
This story first appeared in The Edge weekly edition of Jan 21-27, 2013.