Multifamily and Hospitality: More Than Friends?

Multifamily and hospitality are getting closer. Are the sectors on a path to come together, or will structural challenges stand in the way?

Today’s Thesis Driven is a guest letter from Daniel Cohen, CEO of NextStory Capital. Cohen previously founded and was the CEO of Sentral, a residential and hospitality operator.

The Catbird, a hybrid hotel-apartment concept in Denver, CO

From a customer’s perspective, hospitality and multifamily can look like two different points on a single “shelter continuum,” the first point being short-term accommodation, the second being long-term housing. Some practitioners imagine the two businesses evolving and overlapping, with hospitality offering longer-duration stays and multifamily able to offer shorter-duration stays. But are these businesses actually merging?

There’s clearly upside for those that can pull it off. Hotel people want multifamily’s abundant financing options and dream about getting multifamily valuations - how do they deserve half the cap rate I get? Multifamily pros covet hotels’ sky-high revenues, and they admire the brand standards that seamlessly thread through the marketing materials, the furnishings and even the scent machines. Each group stands to benefit from what it doesn’t have. 

This article explores the challenges and opportunities that multifamily and hospitality operators see as they innovate around hybrid business models to capture that upside. Specifically, we’ll cover:

• The structural hurdles to running a “hybrid” model;

• Opportunities and attempts to overcome those hurdles;

• Companies combining elements of multifamily and hospitality today;  

• What each industry–multifamily and hospitality–could learn from the other.