Gigantic private equity firm TPG has been purchasing single-family houses in Florida tourist areas, which it is using as a nightly substitute for hotels and short-term rentals on platforms such as Airbnb.
For years, a number of institutional investors, publicly traded corporations such as Invitation Homes, and other private equity firms have been active buyers of single-family homes, leasing their properties for a minimum of one year.
TPG is one of the few major investment firms that purchases residences with the specific intent of renting them out every day. The Florida residences are managed by Kasa, a hospitality organization based in New York that oversees approximately 75 properties nationwide for daily accommodation, which was contracted by the firm.
According to a TPG official, the Florida house-buying initiative is merely a “pilot program” and may not expand to include more participants if the initial outcomes don’t meet the company’s goals. However, the company added that Florida served as a test market and that, should the initiative prove successful, it will try to extend to other travel-related markets.
The altering nature of travel during the pandemic is reflected in TPG’s new program. The lodging industry refers to this trend as “bleisure travel,” where business travelers prolong their stays by adding one or more days of vacation.
TPG executives are placing bets that more flexible remote and hybrid workers, bleisure travelers, and families will demand more space, privacy, and a kitchen when traveling, favoring a large home over a hotel suite.
Another possible threat to the hotel industry, which is already dealing with increased competition from short-term rental companies like Airbnb and Vrbo in many vacation spots, would be if other large investment firms adopted this strategy and started renting out homes on a nightly basis in popular tourist markets.
By increasing their investment in extended-stay brands—many of which have larger guest rooms with kitchens and dishwashers to support visits lasting a week or longer—hotel owners have acknowledged that a growing number of visitors prefer longer-stay options.
At a Fast Company event this month, Hilton Chief Executive Chris Nassetta stated, “People have more time to do bleisure.”
In the past few months, ideas for new extended-stay brands have been revealed by Marriott International and Hilton. Hyatt said that it has received first commitments from developers for over 100 properties under its new, higher-end extended-stay brand, Hyatt Studios.
At the same time, TPG thinks the private equity firm can charge a higher price than individual Airbnb hosts because it has renovated the Florida homes, furnished them with new pieces, and is professionally managing them through Kasa.
Carving out a new accommodation model can be difficult, and it’s unclear if the economics would work on a daily basis, according to Sean Hennessey, associate professor at New York University’s Tisch Center of Hospitality and head of a hotel consultancy.
However, he saw a chance among wealthier tourists who have discovered that renting from private homeowners can be uneventful.
Hennessey stated, “Some are dissatisfied and seeking a higher level of quality and service.”
Through one of its real estate funds, TPG claimed to have purchased over a dozen residences in Fort Lauderdale, Pompano Beach, and other popular Florida locations. The company has bought houses as recently as the first quarter, but it has stopped buying most of them along with other institutional investors due to low supply of available properties and rising mortgage rates.