The deep freeze weighing down the hospitality industry is wreaking havoc on a local Airbnb market that’s grown to more than $10 million a month.
Seattle-based Loftium, which said one-third of its 600 properties are in Denver, is negotiating to reduce lease payments to landlords. The company, which raised $15 million last year, leases homes with two units and then has one long-term tenant help manage the Airbnb unit like an innkeeper. Loftium typically pays property owners more than market rent for a long-term rental.
But now that business model is broken.
Loftium CEO Yifan Zhang, 31, said her startup is not making any money right now.
“Travel is gone. … Whatever a (long-term) rental is able to pay is the income that’s available,” Zhang said. “We’re trying to just make something work.”
Zhang said the company is calling all property owners to renegotiate leases.
“Everyone’s taking a hit,” she said. “And our hope is to get through to the other side with everything intact. … It’s just a matter of how long this will last.”
Colin Sullivan, 28, rents a home in Washington Park from Loftium for $1,249 per month. He has access to one bedroom, one bathroom, a kitchen and a backyard. The Airbnb portion of the home, which he said used to be rented about 80 percent of the time, has two bedrooms, one bathroom and a small kitchenette. The Airbnb rented for $50 to $100 per night, Sullivan said.
Sullivan, who has rented from Loftium since July, said he’s had no short-term tenants for two weeks and has no future stays booked.
The owner of the home is in lease negotiations with Loftium, which is offering $1,000 less per month than what the owner is receiving now, according to Sullivan.
According to recent data provided by Denver-based AirDNA, revenue generated by short-term rentals in Denver is plummeting; they raked in $2.44 million in revenue in the final week of February. That figure dropped to 2.29 million for the week of March 2-8, and fell further to $1.68 million last week, according to the company’s figures.
Some Denver landlords are pivoting away from the short-term rental business altogether.
A Denver landlord who asked that his name not be used because he is still working on permitting with the city, is bailing on running a five-unit Airbnb hotel after one year in business.
He’s turning the units back into long-term rentals. Two-bedroom units were bringing in around $3,800 a month in revenue before expenses, such as cleaning. Now those same units might fetch $2,000 a month, he said, or even less if demand is weak.
“We were booked out for many months and a majority of those canceled, understandably so,” he said. “So the business plan is just not viable in the immediate future. While I think it will bounce back at some point in time I don’t when that will be, so we have to pivot.”
The pain is particularly hammering hospitality startups.
San Francisco-based Sonder laid off or furloughed approximately 400 employees, according to tech news site The Information. Locally, the company operates four Denver hotels in Uptown, LoHi and University Park. And it has signed leases for at least four more, some of which are ground-up developments being built to suit.
Developer Mike Mathieson of Forbes Partnership, who developed a 20-unit project for the company at 3022 Zuni St. and is planning another nearby, said the company told him it’s not signing any new leases at the moment.
Austin, Texas-based The Guild also laid off 20 percent of its workforce this week, according to The Information. The hospitality startup, which operates hotels within large apartment complexes, is leasing space at 1750 Little Raven St. in the Riverfront Park neighborhood.