Alternative hospitality startup WhyHotel Co-founder and CEO Jason Fudin spoke with HousingWire and gave us an inside look at his company, its growth strategy and what’s on the horizon for the young company.
For those who don’t know, in a nutshell, WhyHotel is a short-term rental platform that operates pop-up hotels inside large, luxury multifamily properties in the process of their lease-ups.
WhyHotel is a spinoff of Vornado Realty Trust, born from its strategic projects division. Fudin ran the strategic projects division in 2016, and it was there, while mulling over the future of commercial real estate, that he helped come up with the WhyHotel concept.
“[WhyHotel] was kind of born out of internal needs, the ability to deliver large developments in the most economically efficient way possible…producing interim income and hedging absorption bets so that lease-up doesn’t necessarily affect the success of an asset,” Fudin said.
Soon, Fudin and his co-founder Bao Vuong realized that the WhyHotel concept could be scaled up to address lease-up as a universal pain point for high-rise developments across the nation.
So, in 2017, with the support of Vornado and a handful of other investors, Fudin and Vuong spun WhyHotel off into its own berth as in independent company set to change the way urban core developments go about their lease-ups.
The project began last year in Pentagon City at a Vornado property called The Bartlett, where WhyHotel managed a number of unleased units from January to May. The Bartlett pop-up exceeded initial performance expectations, garnering widespread use as an amenity in the resident base as well as regular use from non-residents, and spurred the release of WhyHotel into the wild.
“It beat all of our expectations financially; it was well used by the residents; 20% of all our residents used it as an amenity…and it became really clear that this was a product that was could work not just for Vornado; it was ready to develop as WhyHotel,” Fudin said.
The first non-Vornado property to partner with WhyHotel was in Baltimore at Monument Realty’s 225 North Calvert Street building, where WhyHotel is still operating units there today.
This month, WhyHotel opened another pop-up, this time in D.C., at Equity Residential’s 100 K Street NE, set to run through the spring of 2019.
Fudin told HousingWire, WhyHotel has plans to launch one or two more pop-ups this year, with six to 12 on the horizon for next year and hopes of further expansion in the years to come.
As some types of short-term rentals have come under fire from municipalities and trade groups in the multifamily space, WhyHotel has taken a different tack, marketing to multifamily owners and operators promising to maximize returns and minimize the pain of lease-up.
WhyHotel’s strategy is to approach developers nine to 36 months before their properties open to pitch a partnership and consult on the development process to ensure that partner properties are able to be used as hotels as well as residences.
In and out in two years, WhyHotel doesn't plan to overstay its welcome at any partner property. Instead, the company will thrive on constant motion, setting up one deal after the other as fast as it can. Though it may seem like a frenetic and tenuous model, Fudin is confident in the longevity of his company for two reasons: first, multifamily construction trends indicate that there will never be a shortage of potential clients, and second, commercial, high-rise product is moving toward mixed-use.
“You’re going to start to see all those types of stays (pod, apartment, standard hotel) in a single building, and you’re going to start seeing co-working blended in–as an option but not an obligation–where people will be able to stay in a building that has conference rooms in it and it’s a workspace and people live in it, and if they pay a little more they will have access to their own personalized home space within the building,” Fudin explained.
“That comingled asset is where the world is going,” he added.
Fudin feels WhyHotel is a forerunner of this trend and that in the next five years, WhyHotel will be an integral part of the pre-development process for high-rise multifamily properties. Fudin says that in five years, developers without a plan to make money during lease-up will struggle to find underwriting.
“We’ll end up being part of people’s financial modeling. If you don’t anticipate an interim income source like us, you’ll end up not being competitive on land development,” Fuding said.
“Our product will exist in perpetuity for every high-rise built, and so that’s why we are very bullish about our pop-up product type becoming part of the regular market,” he added.