Coronavirus Can’t Stop This Pioneering Apartment Hotel Brand

This past week, I’ve been in Miami staying at a hotel that’s 85% occupied. It seems so incongruous that after the American hotel industry lost 7.7 million jobs in April and major operators are predicting occupancies below 20%, Domio appears to be thriving during the coronavirus pandemic. The pioneering apartment hotel brand has seen their average length of stay increase from four to 11 nights across properties and customers booking directly through the Domio app are staying an average of 25 nights.

“People aren’t looking for traditional hotels for now,” says Domio CEO Jay Roberts. “They’re looking to cook their own meals, stay longer term, kick back and relax.”

The coronavirus certainly hit the travel industry harder and more immediately than any other, but Domio is poised to recover more quickly than competitors thanks to their technological advantage and stringent cleaning standards, including a 100-point CDC-compliant checklist. As an apartment hotel, Domio promises the consist standards in security and cleanliness of a large hotel brand but without the large staff, minimizing human interaction with keyless entry and contactless check-in and check-out. They’re hitting the sweet spot between trustworthy corporate brand and authentic Airbnb.

For example, Domio Wynwood is their largest flagship property, opened in January 2020 ahead of the Super Bowl which was held in Miami. It’s the first hotel in Wynwood, with 175 units and 304 rooms, plus a rooftop pool, full gym and work space. They were sold out for the Super Bowl and 97% occupied during spring break prior to COVID-19 shelter-in-place orders. 

Quant-based algorithms help identify new locations, honing in on trendy developing neighborhoods popular among Millennials. In artsy Wynwood, there’s certainly no need for Domio to operate a restaurant with outstanding options within a couple blocks. There’s dōma for authentic Italian pasta, crudos and whole roasted fish while Bakan has more than 500 mezcals and tequilas to accompany succulent tacos and crisp blue corn tostadas. Former President Barack Obama favored Coyo Taco when he visited in 2018. Restaurant recommendations are easily accessible in the Domio app, and the hotel manager is practically a concierge, just a quick text away.

Domio partnered with the Wynwood Museum of Graffiti for a graffiti installation on the interior of the hotel, with 14 rooms featuring one-of-a-kind murals by local artists – a miniature Wynwood Walls. A percentage of revenue from these rooms is donated to the non-profit museum. “We partner with local designers and want to incorporate ourselves with the surrounding neighborhood,” Roberts says.

Scaling Up

When Roberts and co-founder Adrian Lam launched Domio in 2016, they began by signing individual units in cities like Chicago and Austin, scaling what Roberts had been doing when he started renting a single apartment in New York on Airbnb in 2015.

When Domio Baronne St. opened in New Orleans in 2019, with 92 rooms and 50 units, it was the first upscale apartment hotel in the city. Within a few months, they were the top-rated hotel in New Orleans on TripAdvisor.

“That was the launching pad and proof of concept,” Roberts says. “From there, investors saw our great reviews and scores and understood that this was a new model. The short-term rental industry had been for professional property managers. When Domio signed the first full building in the industry it became a new asset class. This is the year that short term rentals grow up from being short term rentals to becoming the apartment hotel industry.” After the success of Domio Baronne St. investors began buying properties specifically to lease to Domio.

Roberts’ investment banking background and Wall Street connections helped tremendously with fundraising. His experience working in real estate finance in Los Angeles and New York include leading Paramount Group’s $2.6 billion IPO, the largest REIT IPO in U.S. history. In 2018, Domio raised $12 million in Series A funding, followed by another $100 million in Series B funding – an even split between equity and debt – led by GGV Capital, that closed in December.

Moving forward, they’re closing their legacy vacation rentals in Chicago, Nashville and San Diego to focus exclusively on full-building apartment hotels.

Competitive Advantage

The coronavirus has cleared the way for Domio as several competitors flounder. VC-backed short term rental company Stay Alfred has gone under while competitors like Sonder and Lyric have downsized and are looking for funding. Domio has not lost momentum though, and continues to power through the crisis. Domio Monte Carlo on Miami Beach just opened June 1 and was sold out its first weekend. Currently, Domio has 3,000 keys in the pipeline and deals in Denver, Puerto Rico and Toronto are in the LOI phase while Roberts says they’re looking at opportunities in San Diego and Hawaii. 

“We’re focused on leisure and resort markets coming out of COVID and staying away from markets like New York and San Francisco for now,” he says. “COVID-19 has accelerated our focus on an asset light brand managed model.”

Roberts considers amateur hosts on Airbnb and similar platforms to be his biggest competitor, but they’ve been hit just as hard as the hotel industry during this pandemic. A recent survey by IPX 1031 revealed that 47% of hosts don’t feel safe renting to guests while 70% of guests are fearful to stay at an Airbnb right now. If the pandemic lasts another six months, 45% of hosts report that they won’t be able to sustain operating costs.

Moving forward, Domio will be focused on brand management and franchising. Domio Tulum, expected to open in October 2020, will be the first brand managed project that Domio isn’t directly leasing. “It’s very capital intensive to lease ourselves,” Roberts says. “This is more asset light and we collect a fee. You get higher valuation doing management franchising and it’s a higher return on investment.” For example, instead of spending $5 million to furnish Domio Wynwood, the owners will invest in the décor and design at Domio Tulum to meet Domio brand standards.

Domio Tulum will be the brand’s first international property, with 30 units and 64 rooms. Half the rooms will have private pools and this will be the first Domio with a spa and penthouses. 

Tech Touch

Roberts has always defined Domio as a tech-forward company, and they just launched the Domio app at the end of March. “Our app is the first app in the apartment hotel space where you can book directly in the app,” Roberts says. The reservation management and mobile key system aren’t new but worked splendidly during my stay. Domio also has an in-app rewards program similar to Hotels.com, where 10 nights earns one free night worth the average daily rate of those 10 nights. In contrast, Airbnb still doesn’t have a rewards program.

The app will make things easy for franchisees and help the owner drive revenue while creating a seamless guest experience. For example, guaranteed early check-in will be available for a fee and guests will be able to upgrade their room directly from their phone as well as pre-order items from the mobile mini-bar.

As important as the technology is, Roberts is positioning Domio as a soft brand. “We want Domio to be a feeling,” he says. “I want to make sure that when you stay at a Domio, you get more space, you feel at home and you’re very comfortable. We want to make sure that we grow responsibly and are investing back into the community. A lot of venture-backed companies grow too fast and lose their sense of who they are.”

This post first appeared on Forbes.com. To see the original, click here.