FinTech, HealthTech, Insurtech, AgTech, AdTech, FoodTech…the list goes on. Technology is transforming every industry, without exception and these are not so much buzzwords, but the way we can expect to conduct our business moving forward. Research from Saȉd Business School at the University of Oxford claims that PropTech emerged out of the FinTech movement. Yet, while FinTech dominates the technology ecosystem, especially in the UK where the likes of Starling Bank rank among the country’s tech unicorns, PropTech appears to still be in a relatively nascent stage but growing significantly.
However, since 2017 (which Oxford’s Saȉd school claims was the turning point for the “PropTech revolution”) things are starting to change. High profile investors like SoftBank have been pouring money into the PropTech space, with total global investment last year being $14.85bn from 898 individual funding events and PropTech brands like WeWork becoming household names.
Yet, like consumer banking once did (and the capital markets industry arguably still does) real-estate relies on legacy, offline ways of working, still utilising very few digital tools. This is because, like banking, real-estate is a conservative industry which has been successfully generating vast sums of money using the same processes for many years: why change?
The answer is simple. There is so much more capital available which can predominantly be unlocked through digital transformation. There are two main reasons for this. Firstly, consumers (which all buyers are, even if they are operating in the B2B space) are now expecting a digital experience whenever they purchase anything, including renting and buying real estate. Secondly, real estate is at the edge of many other industries (such as travel and banking) which have already undergone digital transformation at a massive scale. To be able to continue successfully integrating with these other industries, real estate must and will evolve.
My expertise is in the long-term (30+ nights) business travel accommodation market. This industry is worth $160bn globally and growing. However, 90% of long stay accommodation providers still market their units offline, or are not using digital technology such as PMS (Property Management Systems), making it pretty much impossible for travelers to find and book these units. Imagine how much efficiency, convenience and ultimately revenue could be unlocked if these properties were available online and easy to book.
The demand for a “home away from home” is growing
You may be surprised to hear that 25% of business trips last longer than 30 days. This is a massive market and this was recognized by real estate suppliers many years ago fueling the market with more long-term housing supply. However, as they predominantly operate using offline processes, this doesn’t match up with the digital experience expected by their customers.
Many long term travellers end up staying in hotels for the duration of their trip because there simply is no other option. Yet, anyone who has stayed in a hotel for over a week will know that it can quickly transform from a novel and exciting experience to extremely detrimental to both mental and physical health.
At Homelike, we recently conducted research into what UK long-term business travellers are looking for when booking accommodation for a long business trip of over thirty days and a third of people would now rather stay in a furnished apartment than a hotel. This is a large percentage, but arguably the only reason that two-thirds would still choose a hotel is that they don’t think there is any other option. This is backed up by the fact that the majority of people we surveyed seem to find long-term business travel a very unpleasant experience.
The most disliked part of long-term business travel is homesickness. In particular, people really miss their family and friends when travelling (32%). This is followed by feeling unhealthy, namely eating out and drinking every day, plus not having access to a gym (17%). General stress (15%) is also cited as the main factor why people don’t like travelling long-term for business. All of these factors point towards the argument that long-term business travel is contributing to the fact that mental health cost UK businesses £35bn in 2018.
When then assessing what people are looking for in accommodation it’s clear that they are yearning for a “home away from home” when they travel for business. A central city location is the most important factor influencing the choice of accommodation (43%), closely followed by the quality of the property (42%). The property must be well kept, modern and have high quality furnishing. Property size (24%) and proximity to green spaces (21%) are also important. Millennials (people aged 25 to 35) are the most invested in creating a “home away from home” when traveling: 29% want to be located near a green space; 23% want to be able to host their family and significant other; and 21% want to take their pets with them.
The demand for easy-to-book long-term accommodation for business trips is clearly there, so why does the booking process still look the same as it did in the ‘90s?
No Diggity: It’s time for long-term business travel accommodation to leave the ‘90s
It’s easy to see why many business travelers end up settling for a hotel for their long-stays. Booking a furnished apartment for a long business trip is a process that in many cases hasn’t changed for decades. In some cities, apartments are still only advertised via offline brokers, classified ads in local papers or on local websites, making it impossible for travelers to even know they exist (also taking language barriers into account). Often there is also no way of seeing what an apartment will look like before you move in, or photos are of sub-par quality, meaning people are taking a big risk if they have to sign a contract remotely tying them to a location for several months. The paperwork involved when renting an apartment from overseas can also prove incredibly stressful for business travelers; normally a very large deposit is required and the person needs to provide a reference from their bank which isn’t straightforward to source. On the side of the supplier renting the unit, not being able to meet the tenant before they move in also means there is very little trust involved in the transaction.
Corporates have to go through up to sixteen manual touch points to process a 3 month booking. For busy people, this simply isn’t an option. On the flip side of the coin, hotels have already embraced digital transformation meaning the long-term booking process is seamless and most of the time instant. This is a massive opportunity for suppliers and fulfills a growing demand from business travellers—so what does real-estate have to do to take advantage?
Why tech must marry real estate and business travel
The opportunity for landlords to rent more property for medium-term rentals is massive and guarantees less churn than short-term or long-term renting. They urgently need technology in place which connects them directly with business travelers and internal travel managers at organisations to make the process as simple as booking a hotel.
Real-estate must embrace modern technology such as PMS which are currently only used by 6% of longstay providers. Bringing this technology on can seem arduous at first, like many kinds of digital transformation, but looking at how it has vastly enhanced other industries like consumer banking shows this is a no brainer. This must integrate with booking systems used by corporates to provide end-users with an end-to-end booking engines.
An end-to-end solution will not only boost B2B sales for suppliers because it will mean more people can see their units, it will also mean they are able to work more efficiently to process bookings and get people sorted with accommodation as efficiently as possible. Suppliers will be able to track bookings, invoices, rental agreements and unit performance in real-time meaning that they can maximize both the value and occupancy rate of their units. The fact that PropTech is enabling this transformation isn’t disruptive in the traditional sense of the word – it’s not putting existing players in real-estate out of business, rather it’s improving their ways of working so that their businesses can generate much more revenue in a much more efficient way than before, at a higher level of quality.
Business travellers are consumers and expect the same high-quality digital service when booking long-term accommodation that they experience with all other aspects of business travel, like booking flights, arranging Ubers to meetings and ordering food. The real-estate industry must accommodate the requirements of this audience – and other audiences in the space demanding more modern solutions – or it could risk fast becoming obsolete.
The PropTech revolution is going to impact us all. Andrew Baum, Visiting Professor of Management Practice at Oxford Saïd who wrote the report that I referenced at the start of this article said, “It might be that in five to ten years’ time we will be using crypto-currencies such as Bitcoin or Blockchain to buy and sell our houses… PropTech has been building such mass and momentum that it will change the world.”
This may still sound visionary in 2019, but PropTech is already improving people’s lives in ways you may not even realize. One of these being that it is revamping the long-term business travel accommodation market so that the process for both business travelers and real-estate professionals is vastly improved, making the experience more pleasant for travelers from start to finish and generating more revenue for suppliers.