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A handful of Orlando apartments are wading into new territory, renting out some of their units not to local tenants, but to tourists.

A handful of Orlando apartments are wading into new territory, renting out some of their units not to local tenants, but to tourists.

They’re called apart-hotels.

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It’s a model that’s been allowed in regions of Central Florida for a while but is still somewhat of a novelty. In most cases, buildings can only lease out a tiny portion of their units and bring on professional rental companies to book and manage them. The companies post the properties on home-sharing platforms, like Airbnb, and through their own online booking services.

“People are able to experience a different side of Orlando than the typical tourism corridor," assistant city planning division manager Jason Burton said. “People get to know the real Orlando, if you will.”

Within Orlando city limits, Burton said there are only a few multi-family properties that have been approved for master leases or corporate leases, including five condo communities near Orlando International Airport and three apartment complexes, one in downtown and two out by Mall at Millenia.

Tourists can stay in a furnished apartment at Steelhouse on North Orange Avenue, or Aria at Millenia or Century Millenia near Interstate 4 and Florida’s Turnpike. Altogether, around 150 units in Orlando are set aside for short-term stays, intermingled with permanent tenants.

The Steelhouse STR application was filed this year after the property, built in 2013, was sold for $68.25 million.

Burton expects to get more applications from apartments that want to incorporate apart-hotels.

Leasing out a floor of apartments to a professional rental operator lifts some financial burden off of the apartment’s owners, said Jan Freitag, senior vice president of STR, a company that tracks hospitality data. If an apartment has a lot of vacancies, converting those units to short-term rentals can be a stop-gap and a more reliable payment stream, he said.

And as the city sees more and more multi-family construction, apartments might need another way to get units filled.

Century Millenia apartments, located at 5100 Millenia Waters Drive, is one of a small handful of complexes that have been approved by the city of Orlando to lease out a portion of its units as short-term rentals.
Century Millenia apartments, located at 5100 Millenia Waters Drive, is one of a small handful of complexes that have been approved by the city of Orlando to lease out a portion of its units as short-term rentals.

In a region with about 522 hotels, Freitag said the apart-hotel model is “absolutely a factor in the hotel industry today.” Not only do hotels need to be aware of other traditional hoteliers, but corporate leases popping up in their neighborhoods.

“The Airbnb phenomenon was people sharing bedrooms and renting out individual bedrooms in their houses. Now, Lyric, Sonder, Dio and Stay Alfred are going to the developers of these apartment complexes saying, ‘I’ll give you a 10-year lease on your units,'" said Freitag. "This is very much a corporately run, for-profit business.”

“If those units want to compete with hotel rooms, they should follow the same rules and regulations," he said.

The American Hotel and Lodging Association has sought to impose stricter regulations for short-term rentals and home-sharing platforms. It says some short-terms are illegal hotels that “flout basic safety and security laws, zoning rules and taxes” and “create safety concerns, reduce affordable housing inventory, drive up rent prices, and displace longtime residents.”

“You can argue that people who moved into the neighborhood moved into the neighborhood because they didn’t want to live in a tourist district,” said Freitag.

Jennifer Myers, a spokeswoman for the AHLA, said these types of rentals also lead to lower tax revenues for local governments.

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But Orange County collects a bed tax for tourist development and sales tax on rental stays shorter than six months, comptroller Phil Diamond said. Some companies have also opted into voluntary collection agreements to make sure the proper taxes are being collected and remitted.

Mason Harrison, a spokesman for Sonder, a hospitality company with apart-hotels in the United States and Europe, said Orlando was one of the top cities Sonder wanted to be in. More than 70 million people visited Central Florida in 2018, and 1,500 people move to the region every week.

Harrison said Sonder’s rentals are different from other types of short-term rentals, and its properties are subject to hospitality licenses and laws and have full-time housekeeping, concierge services and security.

"If you stay with us, you’re not staying in someone else’s apartment,” said Harrison.

Orlando recently placed stricter rules on Airbnbs, requiring owners to live on the property and be present during stays, and only allowing owners to rent out half of the rooms. City code also says the number of units in apartment buildings that can be leased as short-term rentals cannot exceed 10 percent.

In Osceola, there is no cap, but multi-family complexes with short-term rentals are restricted to certain areas of the county. Not having a cap has resulted in entire communities going short-term rental, including a few years ago when Miami-based Newgard Development purchased a 324-unit apartment complex near Margaritaville Resort in Kissimmee to be an Airbnb Niido community.

Breonne DeDecker, program manager of Jane’s Place Neighborhood Sustainability Initiative in New Orleans, said cities need stricter regulations for apart-hotels to avoid entire buildings, streets and neighborhoods having only short-term rentals. Recently, her city put a 25-percent cap on apart-hotels and began requiring Airbnbs in residential areas to be owner-occupied during stays.

DeDecker said short-term rentals were eating up available housing and driving up land values. Jane’s Place wanted the city to require developers and property managers to match the number of short-term rental units with affordable units, but that proposal was rejected.

“We really saw this as a housing access issue,” DeDecker said. “Ultimately, what’s the social purpose of housing in our urban centers? It’s to house residents.''

There hasn’t been much public discussion in the Orlando area — dead last among U.S. cities for affordable housing, according to the National Low Income Housing Coalition — about whether to place more stringent rules on apart-hotels.

Burton said Orlando’s policy around apartment-hotel hybrids “creates a level playing field for short-term rentals and hotels" and is designed so the supply of homes won’t be significantly affected.

“We have also been particular that only a small minority of apartments are allowed to be rented on a short-term basis in order to preserve the amount of available housing," Burton said. "Additionally, there are only a small handful of units that are being rented short-term within the city of Orlando.”

Doc Terry, a professor at UCF’s Rosen College of Hospitality Management and former Hilton Hotels executive, speculated that hoteliers aren’t worried about competition from apart-hotels given the strong market right now and the relative newness of master leases.

“They can’t get their arms around it. Airbnb, they can kind of get their arms around. Vrbo, they can definitely get their arms around. This is something that really is tertiary,” Terry said.

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“I think this is more a competitor of Airbnb,” he said. “My sense of when I look at it is people are going stay a little bit longer than two or three days. They’re going to stay weeks or months.”

This story originally appeared in GrowthSpotter. To read more stories about early-stage development in Central Florida, go to GrowthSpotter.com and subscribe.

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