After Todd Hunter and his partner acquired a West Hollywood, Calif., property with a guest house in the back, they had to decide what to do with the extra living space.
The most obvious choice was to turn it into a rental, but a neighbor mentioned Corporate Housing by Owner, a website that connects private homeowners with people seeking short-term rentals such as traveling executives or actors.
"We priced it out both ways, as an unfurnished rental and as a fully furnished monthly with higher-end design and appliances," Hunter said. "We live in a place people want to come to, so we decided to try to go the corporate housing route. If it didn’t work, we figured we could always take out the furniture and make it a full rental."
The space was nicely decorated, professional photographs were taken, and the property was posted on Corporate Housing by Owner’s website on a Wednesday. That afternoon, Hunter got his first query. A second followed the next day.
Hunter decided to go with the first query from a mother and daughter who were coming to Los Angeles on a job hunt. They were moved in by the next Saturday. The rental’s listing price of $2,800 a month was much higher than what a standard rental at less than $2,000 a month would have brought in, Hunter said.
"We might have been a bit lucky, posted on Wednesday and a move-in by Saturday," Hunter said, "but we were still very pleased."
Kimberly Smith, co-founder and CEO of Corporate Housing by Owner (CHBO), calls corporate housing "stealth lodging" because few people are aware of it until they need the services, even though it produces $2.5 billion to $2.9 billion a year in gross rents.
While anyone, including a mother and daughter looking for employment in a new city, can use short-term residential housing, the business is called corporate housing because residences in the programs are most frequently used by executives and other businesspeople on temporary assignment in another city or going through a corporate relocation.
Some of the many users of corporate housing include visiting nurses, baseball players in spring training, Cirque du Soleil performers on an extended performance schedule in one city, and snowbirds.
From an ownership point of view, corporate housing was always a kind of corporate business in that it was generally dominated by big firms, many of which were major apartment owners and managers. For example, a company like Equity Residential, the largest apartment owner in the country, boasted a corporate housing division that owned 3,000 apartments. The division was eventually sold off.
If you, as an owner of a residence, either condo or single-family, were interested in using it as corporate housing, it was very difficult to get that message out to potential renters. That was until Smith and friends developed CHBO.
"CHBO is a platform where individual owners can connect directly with tenants," Smith explained. "What makes us different from, say, a Craigslist, is that we have developed relations with the Employee Relations Council, with insurance companies, and with people who deal with housing needs on a regular basis. So, you are not just sticking a rental property out there in the universe by itself."
CHBO allows a homeowner with a rental to have a repetitive, rental relationship with a New York businessman, even though the homeowner might live in a private home in suburban Atlanta or a high-rise in Los Angeles.
"The other thing about CHBO is that we took everything that we could think of that might be needed by renters or homeowners and added it to the website," Smith said. "There is, for example, a 55-page booklet that tells you what you need: How many forks does a typical business traveler expect? What do I do with the mail, etc.? In addition, we run an annual survey that produces a report so those interested in the business can, for example, see how long tenants generally rent."
Corporate housing today consists of about 80,000 residential properties across the country, and if you throw extended-stay hotels into the mix, that’s another 300,000 rental units.
Typical corporate housing is like a commodity product, Smith said. "One company goes and leases a bunch of apartments. The company either rents or buys furniture and then leases out the apartments to the consumer for shorter periods of time (than an apartment rental)."
That’s the known factor, as the 80,000 properties represent the established or company-serviced part of the industry, which is designed around apartments. There is no data on the private residences, but Smith, who knows the industry better than almost anyone, guesses there are another 50,000 private residences that produce about $1 billion in gross rent revenue.
In a typical corporate housing lease, clients stay 80 days. Established companies report that clients stay, on average, 100 days. "About 14 percent of the people who are booking their property through CHBO are doing so for a year or longer," Smith said.
Smith, a political science major with a specialty in Asian studies, through an internship ended up at a corporate housing company in San Francisco. She stayed for four years and then went to AvenueWest Corporate Housing in Denver.
In 2006, Smith and partners launched CHBO.
AvenueWest wasn’t truly an expandable concept, she said. "It was impossible to have a property management company in every state, especially when it was targeting high-end executives in high-end real estate."
Smith sensed there was a need for individual homeowners in the market, or, as she said, the "by-owner segment," and there was a need for other tenants not being served by companies targeting the high-end corporate market.
"I knew there were tenants out there not being serviced," she said. "If your house burns down (or is washed away in a Hurricane called Sandy!), you don’t have the resources to find a home to rent. Well, there may be someone out there who has an empty house because he had to relocate. There just needed to be a platform to facilitate the two getting together."