Stay Alfred, the Spokane, Wash. startup that rents out downtown apartments and turns them into short-term rentals, has completed its biggest deal yet.
Stay Alfred said it has master-leased 10 floors of a new 45-story apartment high-rise apartment tower in Nashville. In the 10-year partnership with developer Tony Giarratana, Stay Alfred will take 140 of 350 units in the 505 tower, the tallest building in Tennessee, and turn them into furnished short-term rentals.
Stay Alfred’s model consists of leasing swaths of units in new downtown apartment buildings before they open and turning them into something like boutique hotels with access to amenities. Stay Alfred says it plays a role similar to a property management company, and it is legally licensed by cities it operates in, pays taxes and runs background checks on guests.
“Travelers want a local, immersive experience with a neighborhood feel,” Stay Alfred Founder and CEO Jordan Allen said in a statement. “We’ve pioneered an ecosystem that gives guests the experience they want, while providing developers and owners a proven, turnkey way to eliminate lease-up risk.”
Founded in 2011, Stay Alfred says it hit $25 million in revenue before raising a $15 million funding round earlier this year. Allen told GeekWire in an interview that the company is on track for $100 million in revenue by the end of next year.
Stay Alfred has nearly doubled its headcount this year to roughly 140. At the end of the year, Stay Alfred should have units in 1,000 buildings around the country, with a goal of 2,000 to 4,000 properties by the end of next year.
Stay Alfred shares an increasingly crowded market with a number of tech-powered short-term rental companies, like Airbnb, VRBO, HomeAway and more. These companies have flourished by offering an alternative to pricey downtown hotels and giving guests access to units in neighborhoods all over cities.
But these companies have also sparked backlash in cities where housing costs are rising sharply, with critics saying they contribute to affordability issues by taking units off the market. Stay Alfred on its website advertises downtown units numerous cities dealing with skyrocketing housing costs such as Seattle, Portland and San Francisco.
Allen says Stay Alfred is different from Airbnb because it is not taking mid-level units in neighborhoods around town out of the housing stock.
“We get lumped into (a reputation for) taking homes in affordable neighborhoods and affordable housing off the market,” Allen said. “We only do downtown core, where all the hotels are.”
Allen claimed that Stay Alfred could even boost housing stock. The company gives developers a consistent source of long-term income that could encourage them to take on riskier housing projects they might not otherwise pursue.
Stay Alfred today sits in a gray area between vacation rental company and hotel operator, or as Allen describes the business: “Marriott meets Airbnb.” But Allen sees hotels as more of a competitor than Airbnb. Stay Alfred’s catalog of apartments units, with kitchens and laundry machines, appeal to travelers who want to stay more than a night or two as well as larger groups.
Going forward, expect to see more deals like the Nashville tower, where Stay Alfred sets up a big presence in just a couple buildings, rather than snapping up isolated units all over the place.
“Instead of having two or three units in 10 buildings scattered around the town, we are really trying to centralize our operations and experience where we’re taking over much larger portions of a building,” Allen said. “It allows us to control the guest experience; the maintenance and operations are much better than just staying in some random apartment in town. It’s much more of a branded, curated guest experience.”
Earlier this month, the Seattle City Council approved a new tax on short-term rental operators who rent out entire units. The tax is part of a set of regulations designed to prevent property owners from operating Airbnbs and other short-term rentals as if they were hotels — part of a broader effort to ensure an adequate supply of long-term rental stock for the city’s permanent residents.
The new short-term rental tax in Seattle may actually end up penciling out as a win for Stay Alfred. Allen explained that the Airbnb tax would constitute about 3 to 7 percent the cost of a room for Stay Alfred. Today, Allen said, the company is paying hotel taxes at a higher rate.