Hostmaker, the London-based short-let property management company, has entered administration, just a week after speculation of its possible insolvency was revealed in the Sunday Times.
The company, which previously claimed to be one of the world’s largest property managers for Airbnb and other short-let platforms, has been hit by losses in recent years following its founding by Nakul Sharma in 2014.
Its parent company, Flying Jamon Ltd, has been placed into administration and ceased trading, prompting redundancies for the whole of Hostmaker’s London-based team. It has previously been reported that Hostmaker’s team in London had not been paid their wages for February.
Rival hospitality management firm Houst (formerly known as Airsorted) has taken on the management of Hostmaker’s accounts. As things stand, all bookings that had been made with Airbnb have been transferred to Houst.
Where did it all go wrong for Hostmaker?
It had become one of the biggest names in the short-let property management field since its launch in 2014, becoming almost synonymous with Airbnb and the short-let boom.
Husband and wife team Nakul and Deepti Sharma set up the start-up as short-lets really started to motor in the mid-2010s, raising £23 million in two separate funding rounds, with backers including Thai property developer Sansiri and Hong Kong real estate investor Gaw Capital.
Such large investment enabled the short-let management firm to grow its operations beyond the capital, including in France, Spain, Italy, Portugal and Thailand, and, as recently as last year, Dubai.
But the Sunday Times reported that it had lost in excess of £20 million in the past three years, while generating only £17 million in sales in 2017 and 2018.
The company was also mired in controversy last year when it was at the centre of an advertising storm involving Transport for London (TfL). The Mayor of London, Sadiq Khan, was urged to ban adverts across the TfL network – including the Tube – that encouraged the breaking of short-term lettings law.
It was argued by campaign groups and members of the London Assembly that Hostmaker was encouraging landlords to break the law and flout the 90-day annual limit for short-term lettings in London (introduced in 2015 to help protect long-term renting and enforced by Airbnb in January 2017) through its adverts.
Tom Copley, Labour’s London Assembly housing spokesperson, said at the time that allowing ‘unscrupulous property management companies’ to advertise on the TfL network was ‘sending the wrong message’ when regulation should instead be tightened in the expanding home-sharing sector.
After a considerable backlash and plenty of negative press (which included a petition signed by more than 8,000 Londoners), Hostmaker agreed to pull their ‘misguided’ short-term rental ads from the TfL network and apologised for the controversy caused. The ads in question had suggested that landlords could earn 30% more by switching to holiday lets.
In an attempt to defuse the situation, Nakul Sharma said at the time: “We are sorry for the concern caused by our recent ad campaign and we acknowledge the tone was misguided. The adverts will be coming down this weekend and we will be reviewing all future creatives with our partners.”
“Whilst it’s critical that there is plenty of affordable housing stock available, our portfolio is made up of premium homes in zone one and two postcodes and does not take affordable housing stock away from the market,” he added.
But the reputational damage was already done, and followed on from the issues caused by an undercover investigation in February last year by BBC Inside Out which revealed that Hostmaker and a number of other short-term lettings management firms were offering services to landlords to help them swerve the 90-day limit.
The company spent big on marketing, but this eventually backfired in spectacular fashion. The firm’s most recent accounts, posted in 2018, revealed that Hostmaker had spent £9.9 million with a turnover of £12 million. Administrative expenses totalling £16 million, however, led to an overall £14.3 million loss.
Last week Flying Jamon filed a notice of intention to appoint administrators at the High Court, giving itself 10 days to resolve issues with creditors. Hostmaker said it was in talks ‘with several investors’, but these talks clearly came to nothing.
As a result, Hostmaker’s parent company had no choice but to declare insolvency and enter administration on Friday.
What about Hostmaker’s customers?
The UK Short Term Accommodation Association (STAA) moved swiftly to offer reassurances to those hosts who were customers of Hostmaker, insisting that they will be supported by the industry.
STAA member Houst has taken over the firm’s client base, a big fillip for the rebranded company in its attempts ‘to unify the industry and position Houst as the global home of hosting’. Houst said earlier this year that it would be looking ‘to acquire some of the smaller to medium-size players in key markets’, but it might not have expected to benefit from a large rival’s demise quite so soon.
Merilee Karr, chair of the STAA, said: “It is always sad when a company falls into financial difficulties but it is one of the traits of a fast-evolving and growing sector. My sympathies go out to all the Hostmaker staff and their customers that have been affected by this news. We are pleased that the industry has acted quickly so that homeowners who were customers of Hostmaker have been migrated to one of our member companies, Houst, to ensure, in most instances, the services they signed up for will continue to be delivered.“
Houst has stepped in to deliver services on the same terms as Hostmaker was providing. On its website it has put up a page informing Hostmaker’s customers that: “Our absolute focus is on seamlessly transferring service and ensuring that you’re earning again as soon as possible. We know how important this is.”
Karr added: “The short-stay sector has been one of the most innovative and fast-growing in the UK and is forecast to grow at 30% a year globally in the next few years, according to PwC. In any new sector, the market will gradually consolidate as some companies merge, sell or exit. Our goal, as an industry body, is to ensure that homeowners, guests and companies all work together for the responsible growth of the sector and we will support our members and Hostmaker’s customers to resolve this unfortunate situation.”
Hedi Zidan, founder of PropTech lettings agent Nestify, said the demise of Hostmaker demonstrates the challenges the short-term letting industry, and wider property market, is facing.
"Although the property market has rebounded in recent months, unprecedented long-term uncertainty has not come without impact. Ultimately short-term lets are vital to landlords, particularly those who need greater flexibility for their circumstances, and those who will be affected by the restriction of mortgage interest relief to the basic rate of income tax coming in from April, which could put a significant dent in their profits."
He added: "Landlords need options tailored to them, and offering a mix of short, mid and long-term lets provides exactly this. We have a number of property specialists at Nestify to guide landlords through their options, depending on their circumstances and the market situation."