Most global cities now have restrictions, and in some cases an effective ban, on short-term rentals. Here are some examples, along with their annual nightly rental cap as I understand them (and by this, I mean what ChatGPT is telling me):
Berlin: Secondary residence rentals are limited to 90 days per year
London: Annual cap of 90 nights
Mexico City: Annual cap of 180 nights
New York City: Only host-present stays allowed
Paris: Annual cap of 120 nights
Rio de Janeiro: Annual cap of 90 nights
San Francisco: Annual cap of 90 nights
Singapore: Minimum stay of 3 months for private properties and 6 months for HDB properties (Singapore's public housing authority)
Sydney: Annual cap of 180 nights
Toronto: Annual cap of 180 nights
These rules and caps will have nuances to them. Like if you want to rent your place on the third Tuesday of a month and your property faces west and has a view of an outdoor terrace with no more than 6 brass bistro tables, you probably require a special license. Okay, this isn't true. But broadly speaking, most cities now have strict caps in the range of 90-180 nights and differentiate between whole-home rentals and host-present stays.
What this, of course, means is that most big cities don't want people operating short-term rentals as a business. They'd like hosts to be people who maybe rent out their place while they're away on vacation and/or offer up an extra room when some conference or event is taking place in town. In other words, cities do not want short-term rentals to negatively impact their supply of long-term rentals.
It's no wonder that Airbnb is investing heavily in both its "experiences" and "services." It has to do this because its core "homes" business is facing significant regulatory headwinds. But what this also means is that the hospitality industry is now shifting toward other solutions — things like aparthotels/serviced apartments. These are purpose-built solutions that typically require commercial zoning.
Globally, the aparthotel segment is expected to be the fastest-growing subset in commercial lodging for the remainder of this decade. And that makes sense. With STR regulations only becoming more stringent and with the continued rise of digital nomadism, the demand for this kind of apartment-like product is going to need to be satisfied in other ways.
There's clearly a market for kitchens, washing machines, and a bit more space.
Cover photo by Aquilion Property on Unsplash
The Monte Palace Hotel on São Miguel Island opened in 1989.
Perched up 500 or so meters above sea level, the hotel offered panoramic views of Lagoa das Sete Cidades. It had 88 rooms, two restaurants, a bar/nightclub, and a total construction area of approximately 13,104 m². Notably, it was the first luxury five-star hotel in the Azores. And in 1990 it was even awarded "Hotel of the Year" in Portugal.
Then, the place closed — just 18 months after its opening.
Today, it looks like this:
Supposedly the hotel failed for a number reasons. It was hard to get to. It lacked on-site amenities. It didn't, for example, have a pool. And the unpredictable (and often foggy) weather of the Azores made it so that a lot of the time you couldn't even see the main attraction, which was the view. The sponsors may have also overshot the market at the time.
In 2017, the abandoned property was finally listed for sale at €1.5 million. Level Constellation ended up buying it for an undisclosed amount at the end of the year. They are a Lisbon-based developer founded by Chinese entrepreneurs. The plan was/is to reopen another 5-star hotel, but that hasn't happened yet. Though there's certainly no lack of visitors to the property today!
I don't know how you address the weather thing, but nowadays there are many other 5-star hotels on the archipelago. Regardless, my bet is that the existing structure will end up being demolished. I mean, it's been abandoned and unmaintained for about 35 years.
I was reminded of this duality the other day while listening to a Scott Galloway podcast where he talked about his love for expensive hotels, and how he travels to hotels, not to places. This is a bit abnormal. Traditionally, people stay at a hotel because there are things they want to see and/or do in the place where the hotel happens to be located. Meaning they choose the place first, and then figure out where they're going to stay after.
But there is also a statistically significant percentage of travellers who work in the opposite direction. Scott seems to be one of them. Now, his examples were all at the highest end of the spectrum, and that makes intuitive sense. If your M.O. is to travel to hotels, and you're kind of agnostic to place, then presumably the hotels are going to be super nice. But I don't think this market segment only exists at the very top. I don't stay at the same kind of hotels as Scott, but I still love hotels.
One example that I have talked about before is Tuba Club in the south of Marseille. Bianca and I stayed here a few summers ago. We read somewhere that it was about to open, we loved the vibe, and so we organized our travel itinerary just so we could stay there. We ended up loving Marseille (so much so that we went back), but Tuba came first. It was the catalyst.
A local example I can give is the Drake Devonshire in Prince Edward County, Ontario. When it opened in 2014, "The County" was not on my radar. Maybe I had been there as a kid? I don't know. But as soon as it opened, I wanted to go, as did many others judging by the lack of room availability. The design by John Tong was a hospitality offering that just wasn't available in the rest of southern Ontario at the time.
This is a powerful position to be in for a hotel. Because it means that through some magical combination of design, brand, service, and experience, you have a product that people specifically want. They're not just stopping by and need a place to stay, they're actively seeking you out. This is not to say that location doesn't matter; it does. But it is to say that a highly-coveted offering that people love is always better to have than not.
And if you get it right, there's the opportunity that people will even choose you over place.
Update: A previous version of this post incorrectly stated that John Tong had passed away. John unfortunately had a severe stroke, but he did not pass away. Sorry, my mistake, John!
Cover photo by Toni Osmundson on Unsplash