Bringing In Future Residents With Pop-Up Hotels

Developers face a challenge when they open the doors to a new high-rise luxury apartment building: How do they fill all of the units that have suddenly come onto the market? It’s no easy task. But does that have to be the case?

By renting out some of those units as hotel suites, however, developers can have a two-fold benefit: They can take in an interim source of cash flow, while helping their marketing efforts to drive residential leasing. “A lot of those guests can end up becoming tenants of the building,” WhyHotel CEO Jason Fudin told PYMNTS.com in an interview.

Even if the hotel guests don’t end up becoming tenants, they can still help developers by becoming ambassadors to promote the building. And pop-up hotels in apartment buildings have other benefits for developers: The hotel itself can become an amenity to tenants who have already moved into a property. These tenants can use the onsite hotel for their guests at a discounted rate. That was the case with WhyHotel’s building in the Pentagon City neighborhood of Arlington, VA, just outside of Washington, D.C. There, 20 percent of the building’s residents used the hotel as an amenity, according to Fudin.

Even with these advantages, not every apartment building makes a fit for a pop-up hotel. WhyHotel, for example, needs to take a minimum of 100 or so units. That size building provides the company with the scale it needs to have 24/7 on-site hospitality staff. But buildings that are good candidates can gain new guests fasts — WhyHotel’s Pentagon City pop-up hit an occupancy rate of 85 percent in 60 days.

A ‘Hosted Hotel’ Experience

For travelers, WhyHotel works much like a traditional hotel experience. Travelers can pay by credit card and receive an email confirmation when they make a reservation, for example. However, the experience differs slightly when it comes to check-in. Instead of walking into a ground-floor lobby, customers receive a code for the front door through the email. That code allows them to enter the building and head up to a sky lobby on the third floor.

Once travelers arrive there, they head to a host two-bedroom unit that serves as check-in — and a place to refresh with drinks and snacks. Once they complete that task, they have onsite 24/7 hosts that can be called with Alexa from the building’s units (guests can use the voice assistant to ask for towels, for instance). The idea, in all, is to give customers the space of home sharing with the service level of a hotel — in new construction, too.

“These are all brand new units,” Fudin said. “Our brand is brand new. Everything is fresh.”

To promote its pop-up hotels, WhyHotel lists on sites where consumers traditionally find travel listings — homeshares and online travel agencies (OTAs) — as well as its own website. The company has digital marketing campaign, too, but it also takes a local, offline approach by meeting with nearby businesses and highlighting the work of local artists in its properties. In essence, WhyHotel seeks to add a local flavor to a property.

Beyond creating a local experience for travelers, the buildings come with the amenities that one might expect in a new luxury apartment building. Its new hotel in Baltimore, for example, includes a rooftop pool area. The rooms also come with features not often found in extended stay hotels, such as full kitchens in place of kitchenettes. In addition, rooms come with washers, dryers and a living room — features that could be helpful for families who are traveling with children.

The Road Ahead

Going forward, WhyHotel aims to have properties in every major U.S. metropolitan market. But Fudin wants to take that a step forward and “become part of the natural lifecycle of multifamily development.” And, though the company might be thought of as a novelty today, Fudin thinks it could be part of a new property’s strategy to drive leasing in the future. The company said that, this month, it has already raised $3.9 million in seed funding to grow its footprint and platform. That round was led by Camber Creek, with participation from Revolution’s Rise of the Rest Seed Fund, Mendacre, MetaProp, Vornado/Charles E. Smith (predecessor to JBG SMITH Properties), Working Lab Capital, Mitchell Schear and others.

To that end, pop-up hotels — such as those by WhyHotel — can help make new apartment developments less of a risky bet for developers. As a result, Fudin thinks WhyHotel can have a broader impact on the apartment market than serving a building when it just opens. By reducing the risk of opening a large apartment building, Fudin thinks WhyHotel might be able to produce a ripple effect and “could help bring more multifamily units to market.”