The idea behind today’s episode came to me from one of our listeners. Hayden in Atlanta share some details on the topic of today’s show. So thank you to Hayden for keeping your eyes open to what’s happening in the marketplace.

The latest of these is a new company called Why Hotel. Apartment developers often have a number of vacant units upon completion of the building. The developer ultimately wants to sell these as soon as possible. But these vacant units are costing them money each and every day. The developers are not in the nightly property management business. They don’t want to put tenants into vacant units they intend to sell. They certainly don’t want to be in the hotel business. It is far too labor-intensive.

The folks at Why Hotel will partner with a developer to take a percentage of their vacant units and make them available in the short term rental market. Why hotel manages the furnishing of the units. They handle the nightly rentals, and they handle the day to day cleaning and management of the customer experience.

The value proposition to the end customer is it that they get to stay in a brand-new luxury building with modern amenities. By establishing a brand and setting a high standard for quality of finishes, they address the very common customer objection over the wide variation of accommodation quality that you find on platforms like AirBnB and VRBO.

Why Hotel solves a problem for the developer, by giving them a stream of income during a period where they have vacancy and holding costs. They solve a problem for the end customer by delivering a high quality finished product.

So far the company has locations in Seattle Washington and Arlington Virginia. They have a third location schedule to open shortly in Virginia as well.

So far why hotel is a small player. But it is a unique and innovative business model. The folks at Why Hotel are obviously making a capital investment in the furniture and fittings. The developer is contributing to vacant units on their side of the deal. The profits get split between the developer and why Hotel according to a formula that is negotiated between the two parties.

The first property opened in the Inner Harbor area of Baltimore, the result of a partnership with Monument Realty for 158 of the building’s units. The 347-unit property offers a custom mural, apartments with private balconies, an outdoor rooftop pool, a rooftop lounge, game room, theater room, 5,000-sq.-ft. fitness center, and business center. Today, that property is no longer part of the hotel portfolio and has been fully leased.

One of the criticisms of short term rentals is the increased traffic of hotel guests mixing in with permanent residents. Residents often raise concerns about security. Why hotel has full-time staff on site, just like a regular hotel. But these pop-up hotels also offer an additional benefit to residents. Permanent tenants of the building can have access to the hotel cleaning staff services at very reduced and competitive rates.

If you have a building that is going to be leasing 20 or 30 units a month, the developer can be secure in reserving a portion of that inventory for a pop-up hotel.

While each pop-up is expected to typically last between eight and 16 months, the company expects to remain active in a single market over a sustained period of time in multiple properties.

On the podcast, we keep our eyes and ears open to innovative ideas. Again this one came to us from Hayden in Atlanta. Thank you Hayden. Perhaps this gives you ideas on other ways you can create a master lease agreement with an under-utilized asset to solve a business problem.