European startups fight Airbnb for the digital nomad market

Last week Flatio and NomadX, two of Europe’s largest rental platforms focused on the mid-term rental market, announced their merger, as the companies sought to better position themselves to push back Airbnb and others. in the battle for the expanding market.

Medium-term rentals – which typically range from one month to one year – have long been viewed as a prime area of ​​growth. Even before the pandemic, people were moving further and further away from the office, with more than 30% of employed people working from home at least part of the time in Sweden, Finland and the Netherlands, according to Eurostat. Meanwhile, rSearch for MBO partners law firm suggests that the number of digital nomads in the United States alone could increase from 7.3 million in 2019 to 10.9 million this year.

And the pandemic has done little to stop the rise of the rental industry in the medium term. Flatio saw a 20% year-over-year growth in bookings in the first nine months of 2020 and a 100% increase in revenue in key cities.

Now, with working from home becoming the norm for many of us for the foreseeable future, it is likely that many more people will choose to move their “office”, at least for a while.

Take Airbnb

Flatio, a Czech startup founded in 2015, has grown rapidly in recent years and has 9,000 registrations in 60 cities in 17 countries. NomadX, which was founded in 2017, has so far focused on the Portuguese market and has 1,700 listed properties. Both companies focus on rentals from one month to one year, although some are slightly shorter or longer.

Radim Rezek, co-founder and CEO of Flatio

According to Radim Rezek, co-founder and CEO of Flatio, mid-term rentals don’t really exist in an easily accessible way online. “People who are looking for places for a few months have no websites to find [them on]. These people don’t want to pay the prices in hotels or on Airbnb, but [hosts] on long-term websites don’t want to talk to these tenants because they only want to live there for a few months, ”he told Sifted.

Flatio does not charge a deposit, has a unified lease agreement between tenants and landlords, and sets up recurring payments, with payments handled through the Flatio app.

Rezek says Airbnb tried and failed to enter the mid-term rental market four years ago, but has struggled in the space and about 5% of its revenue comes only from medium term rents.

“Airbnb makes it a cutting edge company,” he adds. “They educate their owners to maximize their profits. Their owners try to optimize each day according to the season and we don’t. We favor individual owners who have one or two apartments at most. They have it as a side activity and don’t want to have a lot of hassle. (85% of owners using Flatio only rent one property.)

“Of course Airbnb has a lot of money and they are much better funded than us, but our passion and our products, we believe we are able to compete with them,” he says, adding that Flatio helps owners with transfer protocols. and physical contracts, which are necessary for medium-term rentals.

Airbnb, however, is not ignoring the move to longer stays. Since the start of the pandemic, the company has signaled its intention to move towards longer stays in introduction of new tools to help hosts prepare their properties for long term rental.

Digital nomads

Portuguese startup NomadX, meanwhile, has focused on short- and medium-term rental for digital nomads, slow travelers and remote workers. The company estimates that its monthly prices are on average 50% cheaper than Airbnb listings, with people typically staying for around three months. “It’s a super exciting space,” NomadX founder Dave Williams told Sifted.

Dave Williams, Founder and CEO of NomadX

Williams highlights the rise of nomadic workers around the world.

“We are seeing a huge trend, especially in the tech sector, spilling over into other sectors, where companies are looking to migrate to a more remote work environment, offering a lot of flexibility, even with adjusting salaries for employees. workers depending on where they are going to reside.

“As soon as people start to feel comfortable on the plane again, we expect a huge boom in nomadic professionals,” he adds, pointing to culturally rich destinations like Prague, Budapest, Lisbon. and Porto where to live is (relatively) cheap.

“The technology has been around for six to eight years, and now companies are finally catching up on the ability to work remotely, and so are people. “

Healthy competition

The deal between Flatio and NomadX, worth more than £ 3.6million, is a positive sign of consolidation in the mid-term rental space, said Alejandro Artacho, managing director of the platform of medium term rental based in Madrid SpotAHome.

“The merger between NomadX and Flatio is good news, it’s good news for the market,” he says. “These other players are competitors, but in the end we all know each other.”

Alejandro Artacho SpotAHome
Alejandro Artacho, Managing Director of SpotAHome

While Flatio and NomadX together have more than 10,000 real estate listings, SpotAHome, founded in 2014, has more than 200,000 properties available for mid-term rental on its platform.

Taken as a whole, Artacho says the sector is emerging as a major component of the European rental market.

“You can add up to half a million ads across Europe if you put them together,” he explains. “Between all of us, we have raised a compound amount of over 150 to 200 million euros, so there is obviously a market for that, it is a profitable market, and it will grow.”

This is still much smaller than the size of the short-term rental market, even though the demand for medium-term rentals is growing. In Spain, Italy, France and the UK alone, over a million properties are listed on Airbnb.

Better than Airbnb

Breaking the news of the merger, Flatio’s Rezek said his company offered a better alternative to Airbnb’s “ridiculous prices”. The American giant, he said, “is pushing up rental prices in destinations, hurting local economies and forcing locals to leave.”

Airbnb’s impact on local populations has been well documented, but are mid-term rental platforms really a solution to the problem of price inflation?

Not necessarily, says Hans Koster, professor of urban economics and real estate at Vrije University in Amsterdam.

“Medium-term rentals are not fundamentally different from short-term rentals in that increased demand for housing will inevitably lead to higher house prices,” he says.

Professor Hans Koster
Hans Koster, professor of urban economics and real estate at Vrije University in Amsterdam

Koster says the noticeable effects will likely be limited to a small number of cities, but in these cases, medium-term rentals could exacerbate existing tensions around dwindling local populations.

“In Amsterdam, you see that the number of expatriates has been increasing for some time now. Of course, there are locals who don’t like it, ”he says. “If you’re talking about community development, it takes longer and requires investment from everyone in the neighborhood. You could say that the people who are there for a few months do not contribute much to this.

This is an opinion shared by some residents who have been protesting for many years against the arrival of Airbnb in their neighborhoods. Martí Cusó is a housing activist living in Barcelona‘s central Gothic Quarter. He said an increase in mid-term rentals could be just as damaging as Airbnb’s influence in the city.

“The effects are very similar between medium and short-term rentals, because what you generate is a population that does not contribute to the circular economy of a neighborhood. Spend only two months a year [in a place] is not taking root and generating community, ”he says.

Barcelona Airbnb
Short-term tourist rentals blamed for exodus of locals from central Barcelona

“It’s very dangerous for the price of housing. Normally, digital nomads come from countries with better wages than here. They have the ability to increase the price of housing through their ability to pay higher rents, so it is a force for gentrification, ”he adds.

But concerns like this, about a possible massive invasion of digital nomads in central Barcelona, ​​could be misplaced according to SpotAHome’s Artacho.

“I think what was going on with Airbnb was that they naturally focused on large urban areas,” he explains. “Being a digital nomad is more prevalent across the world. You would probably prefer to go somewhere on the coast which will be cheaper. Because it’s spread out, it’s better for local communities.

“The cities, now stranded, are not going to give you all the entertainment and all the work environment that they used to offer you, so the city’s value is lower. What we have seen from Covid is the rise of secondary cities, ”he adds.

Expanding market

Flatio and NomadX are not geared towards tourists, like Airbnb; Rezek says her clients include students, those who need a place to stay during home renovations, or people traveling for medical treatment. These demographics currently represent nearly a quarter of the company’s bookings.

“We have 20 to 25% of people who are really locals,” he explains. “People who renovate their apartment don’t want to go to a hotel, but have to spend a month or two somewhere because the renovation takes time. These inhabitants also form a huge group.

At the same time, Williams says that even before the pandemic, he was seeing a lot of complaints that Airbnb had become too corporate. “It’s almost like you are working with booking.com. They have lost that advantage of really looking after the hosts. I think that’s one of the things we’re trying to focus on, really focusing on those sole proprietors where there’s a real connection between host and guest, kind of like you had to originally when you sign up on Airbnb, which you lost in the process.

The merger of Flatio and NomadX is presented as a sign that European startups are taking Airbnb’s challenge in the mid-term rental market seriously. And with the Covid-19 pandemic plunging tech workers into the world of remote work, Rezek, Williams and Artacho could soon serve a whole new generation of digital nomads. The question for these startups, as for many growth sectors of the coronavirus, is whether the shift to flexible cross-border employment will be temporary or structural.

The players in the sector are showing external confidence.

“I told people to expect 10x the growth in the segment,” says Williams. “It’s a bit like mobile, every year was the year of mobile and it finally happened in 2010, 2011. It’s the same with nomads, everyone has been talking about it for a while, but now it’s about to begin. It will explode, I think, in the coming year.


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