Posted by: Martin | February 20, 2010

The daily rental mystery

To sum up the previous post, I think it can be a very good business to be in the quartier populaire part of the market with a trusted local partner. I don’t exactly know what problems can arise or how big they will be, but I’ll try it with the piece of land in Yopougon and see what happens.

Another thing that looks promising, but which I haven’t tried yet is to rent per day to temporary visitors.  This doesn’t sound too much like passive income, but an employee can be hired to manage it, and there are management companies that do this kind of work.

Rentals made on a daily basis seem to only exist in the nicer part of Abidjan, and prices are in the 25 – 60 EUR per day range including the cheapest hotels. It doesn’t seem possible to find per day accommodation cheaper than 15 EUR, and even if there are no backpackers to speak of, I still think there is a demand for 10 EUR per day accommodation. I’d really like to know why it isnt offered on the market.  My theories on it:

(1) Letting accomodation per day is essentially being in the hotel business, and there could be so many rules and regulations and taxes making it unprofitable to rent at 10 EUR per day.  However, if this was the case there should have been people offering cheap daily rentals in the informal sector, and I have not seen that.

(2) There really is no demand, people who can afford to travel and rent on a daily basis, want to pay more for a nice place to stay.  On the other hand, I stayed for a while in a building where the apartment next to mine was rented daily at about 30 EUR/day, and there were frequently groups of people of 5 or 6 or so staying in apartment next door sharing the rent and filling up the floor with mattresses.

(3) Nobody wants to stay in a poor neighbourhood, and if you offer a daily rental in a well-off neighbourhood you have no reason to offer a lower price as there will be sufficient demand at a higher price.  Well, there are greyzones between well-off and not so well-off areas where a lower price should make sense.

(4) Nobody has thought about making more money by offering lower daily rents yet. After all, it took a while before low cost airlines emerged.

If point (4) is the case it would be nice to rock the market by offering low cost daily accommodations, but I am thinking it might be a combination between (1) tax/regulations (2) limited demand and (3) too small/few not-rich not-poor greyzone areas.


Responses

  1. Ah, ha … another misconception !!!

    You don’t make more money by lowering rents … you make more money by increasing rents and offering more services and better value for moeny !!

    There is a very nice hotel, with 33 studios, night rate from 15 000 CFA to 25 000 CFA, not far from the airport (if you know where the IBIS Marcory is located, it is not far from there!

  2. I’m puzzled by what appears to be a gap in the market, not primarily for possibly exploiting it – as it is likely that the gap is there for a good reason – , but more for understanding the underlying fundamentals of the market.


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