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Financial Management for Short-Term Rentals with Topkey · Hospitable Hosts

• Miles - Hospitable: Hello everyone and welcome to today's episode of the Hospitable Host Podcast. Today I'm speaking to the CEO and founder of TopKey. John is going to tell us all about expense management and accounting in the short-term rental industry. If you liked today's episode, please don't forget to like, share, and subscribe on your favorite podcast platform. Okay, John, thank you so much for joining us today. Okay, thank you everyone for listening to today's episode. We hope you enjoyed it. As always, if you did like today's episode, please don't forget to like, share and subscribe on your favorite podcast platform. We have plenty more episodes coming soon. Jon Sukhia: Thanks, Miles, good to be here. Miles - Hospitable: Awesome. ⁓ great. So really let's just get straight into it, John. ⁓ can you tell us a bit about yourself and the story behind TopKey? Jon Sukhia: Yeah, so I'm the CEO of TopKey ⁓ co-founder and CEO. We ⁓ we are a financial automation platform. So we help operators streamline and really effectively do two things very well, which is to ⁓ close their books faster ⁓ and also to eliminate loss or leakage from spin that otherwise isn't properly billed back to owners. So ⁓ that's a very ⁓ you know broad encompassing value prop, but ⁓ within within our product, there are numerous like sub products ⁓ across the board from ⁓ expense management to AP to ⁓ banking as well as ⁓ things like inventory management, revenue reconciliation, ⁓ full on accounting. And ⁓ ultimately like our our our our focus is on helping operators save time and money and and helping vacation rental companies in particular ⁓ just take a take a huge amount of like ⁓ frustrating work that they have to deal with every day and kind of kind of automate as much of that as possible using AI and using the best ⁓ best clo best in class software. And so that's that's what we're building at TopKey. ⁓ Miles - Hospitable: Nice, awesome. And what was kind of the the frustrations that you saw at the start that, you know, caused you to go and create Top Key and you know, what it was the main problem you were looking to solve in the industry? Jon Sukhia: Yeah, so ⁓ going back kind of from the start, we we had initially ⁓ I I I'd worked at Airbnb and had been in hospitality and real estate for a number of years prior to that. ⁓ was I started my career at investment banking and then worked at Starwood ⁓ in New York doing ⁓ corp dev ⁓ torp development. ⁓ Starwood got bought by Marriott and then I ended up joining a company called Hotel Tonight that was out in San Francisco. We were acquired by Airbnb ⁓ and just had a really cool career kind of ⁓ a and a and a fun ⁓ kind of journey ⁓ on on that road from ⁓ you know being at a small startup in SF to being a part of Airbnb. ⁓ when we kind of initially set out to build Topkey we we'd actually my wife and I had relocated during COVID down to ⁓ a small relatively small town relative to SF where we were before called ⁓ Santa Rosa Beach, Florida, so north northwest Florida. and we had spent a number of months Talking to property managers. ⁓ I had basically ⁓ just been interviewing folks, talking to people in the industry. ⁓ we had we had initially started TopKey to do something a little different. ⁓ we went ⁓ through something called Y Combinator, which is a startup accelerator based ⁓ San Francisco. And so we were going through Y Combinator, it was fully remote at the time. And as we started to like really lean in with our customers, I knew a lot of these folks from my time at Airbnb, ⁓ where I managed a lot of these ⁓ companies, the vacation rental companies and hotel groups. ⁓ but but getting, you know, kind of in person with a lot of folks in in Florida, ⁓ talking to them about their challenges, the big thing that kept coming up and and continues to be a a bane for a lot of operators was just ⁓ ultimately people are running a hospitality business. They're not running ⁓ a financial ⁓ you know accounting company and the pain points around finance just are ⁓ there's just a plethora of things that folks have ⁓ you know would would always talk about. Many of them were just basic things like how do I very easily track an expense back to an owner? ⁓ how do I easily capture that? What can we do to, you know, basically get into a better position so that you know come the end of the month I'm not sitting there scrambling and running, running around like a chicken with my head cut off, trying to find who ⁓ you know, which expenses go to which owners and then how to ultimately get those back to. Miles - Hospitable: Yeah. Jon Sukhia: ⁓ the owner charge or owner statement. It doesn't even take into account all the other things that kind of compound compound this, which is like you might be using Breezeway or you might have work orders or you might have ⁓ you know different vendors that you're paying out of ACH, you might have multiple credit cards. So there was all these like ⁓ conversations that I had with people and the the crux of it kind of distilling it down to the core piece of feedback was what do I do to better like get my books in order when I when I go to you know close my books ⁓ it's a monthly pain point, but it also is a bigger pain point that that occurs when anyone's trying to sell their business. ⁓ often like kind of the chickens come home to roost, if you will, and like either you're underwater on your trust account or you don't have like the the structure or the organization in a good spot, or you're you're you're actually like ⁓ you know in trouble with some sort of like compliance entity because you haven't done things correctly. So you know these are all things that property managers are kind thinking about and often inadvertently kind of became ⁓ get kind of got into that. without realizing that ultimately that's a big part of the job and ⁓ something that just kept coming up. So that was like the initial impetus. ⁓ when we initially launched TopKey we were just helping managers very easily track expenses more more cleanly back to owner charges and doing that through ⁓ you know a really sleek mobile interface that you know integrated directly to the PMS into the accounting software. And that was kind of our core value prop was like, hey, we can help you capture an expense and really quickly tag it back to a property in a category and sync it back to the owner statement on the on the PMS. Miles - Hospitable: Mm-hmm. Jon Sukhia: ⁓ and then, you know, kind of it's expanded a lot since that initial ⁓ since that initial product. But that was really the core of what we what we heard and what we talked to a lot of operators about when we were kind of exploring this. This is twenty twenty two, late twenty twenty two, early twenty twenty three, really when we we effectively launched Topkey. So that was like about the time we we were having these conversations. But ⁓ yeah, coming a long way since then, but that was really the biggest thing we were talking and dealing with when we talked to people. Miles - Hospitable: Nice. Nice, yeah. And is it, you know, predominantly, you know, property managers that you see these issues with, or do you also see kind of operators that are kind of struggling with their ⁓ you know, individual operators that predominantly, you know, manage in their own properties? Are they also seeing kind of expense management issues and opportunities to do better? Jon Sukhia: Yeah. Definitely like an opportunity. We we have typically focused more on the companies because there's just more opportunity ⁓ to have errors when you have bigger portfolios. ⁓ as we've gotten more sophisticated in like the the team and the and the product, we've had more people come to us that are smaller that ⁓ and we have companies as small as, you know, two to five units that have said, Hey, I have a pain point around this. I think it's definitely it's a different problem because you're maybe not necessarily having to ⁓ account for as many owner charges or maybe you don't have as much in the in the in the way of legal obligation just if you only manage a few units. ⁓ the kind of flip of that coin is that you're also probably not nearly as well staffed as some of the operators who are bigger. So you might have like less resources to be able to support, ⁓ which is where, you know, we've seen just people using us that are a little bit smaller can find a benefit. It for many people it's like, hey, it's just one person perhaps. Maybe they're a co host or maybe there's someone that just doing ⁓ you know doing this on the side, they have a day job and then they're having to kind of get thrust into the middle of how do I manage this and then get like, you know, ping from the the property owner asking them questions. So ⁓ yeah, it's it's both, but I would say like we typically have started and been more focused on these larger groups, ⁓ mostly just because that's been where the biggest need was when we were down in ⁓ in and talking to folks and ⁓ but definitely definitely room for both sides to kind of benefit. Miles - Hospitable: Yeah. And do you think that, you know, financial management or proper financial management can be a bottleneck for growth as well. So, you know, growing to that next level, I assume it's something you kind of should be getting in order before you adding on more properties? Jon Sukhia: Yeah. Yeah, I mean it it the word should can get thrown around. In this case, I I think it's really important that we use the word should because like in a lot of states it's like required legally. And so what I found really funny and also kind of alarming sometimes is when you talk to people and they don't realize the extent to which they are liable for like damages or errors in this process. And it creates like a lot of ⁓ stress with with management when they don't realize that they're actually potentially liable. So for example, if you're in California Miles - Hospitable: Mm-hmm. Mm. Jon Sukhia: ⁓ the state can audit you, you know, and you can get in trouble if you don't have your your your trust account in order. People don't necessarily know about these things because it's not always apparent like that that is ⁓ you know something that could happen. And only after it happens then do people start to kind of get get wise to it. And obviously like smaller operators are less likely to kind of trigger something like that. But ⁓ to answer your question, like I've we've often kind of thought of it in three kind of tranches. I I I think like zero to call it 10 properties is kind of the first tranche. ⁓ meaning like at zero to five to ten, you're kind of able to manage things on your own. After about 10, there's there's definitely a an inflection point where you need some additional help to scale. Either you're just unable to track everything in one or maybe you're not able to like and I'm talking a little bit more generally about like the management and like it's hard to be in 10 units at once if you say have are at 90% occupancy. ⁓ Again, I would say that the same kind of inflection point hits between call it like 10 and ⁓ thirty. And at about thirty units, that that kind of breaks down again. ⁓ and then another is like between thirty and like seventy-five. And at seventy-five units, you really need to like start getting more structure around the business because you are really going to have a hard time scaling. ⁓ past that, it's it's two fifty for for us is typically another number. At two fifty, you really are at that point likely hiring more people. You're likely having systems broke breaking down. there's some really good resources out there. There's a guy named ⁓ folks might know Jed Stevens. He's written a a book ⁓ and I'm blanking right now on the book, ⁓ it's in my bookcase ⁓ over there. But ⁓ he talks a lot a lot about this. And basically he he's a former engineer who ⁓ has built out a vacation rental company called Kaloakai, ⁓ based in based in ⁓ Kauai, but he's in California. ⁓ and Jed is just really, really ⁓ adamant about. Building systems and processes. And so ⁓ I encourage anyone that this is not a plug for Jed, but I not I'm not a paid promotion for Jed, but anyone to like check out that book because it's such a great like ⁓ starting point for people. But but the the the the meta theme is like you need to have like systems in place as you scale a business. If you don't, stuff breaks down. Everyone kinda knows this intuitively, but it's often like harder to ⁓ kind of practice what you preach when you're in the busy season and things are going crazy. ⁓ But we typically see those kind of inflection points like that at 10 units at 30, 75, and then two fifty. ⁓ all all of which kind of beget like a new system, if you will, to kind of think about because at some point you you just you just start drowning in in in workflows that aren't being able to be maintained by by whoever on the team is kind of there. ⁓ Miles - Hospitable: See, I that makes sense. And you very briefly touched on kind of trust accounting there and, you know, a requirement in California. ⁓ maybe if people were really kind of starting out on their whole journey of understanding kind of the the accounting practices that they should be following. Can you maybe just give a brief description of trust accounting in its most basic terms, I guess? Jon Sukhia: Yeah. Yeah. Yeah. I mean, simple put, a trust account is a is a is a is an account that you have that is basically ⁓ to hold funds that are not necessarily yours. ⁓ so it's most commonly used in property management and in ⁓ the legal profession. So, you know, if you have like escrow funds that you you give to a lawyer for a period of time, it's not the lawyer's money, but he's holding that money in a in a dedicated bank account. ⁓ depending on which state you're in. The accounts have different requirements in terms of whether you you are able to put them in a standard account or an escrow account. Most most operators are able to kind of put those in just a standard deposit account in the vacation rental world. But ultimately, funds need to be basically ⁓ accounted for at all times. And essentially you need to think about it as like having enough funds to cover whatever obligation you owe. So ⁓ there's a there's an asset, but there's also a concurring liability, and you need to basically match that up. And in the simplest form, trust accounting just involves the kind of matching of the liability and the asset and ⁓ the kind of assurance that at any given time you have enough money in the account to cover whatever obligation you have, in this case to really three parties, which is to the ⁓ owner of the of the property and the you know a a as a revenue, to any vendors that the ⁓ that that that you're working with and to the state for taxes and and for other liabilities. ⁓ You could also break down ⁓ you could add a fourth vendor, which is the guest, like in the event that there's like a there's like a r ⁓ you know, rebate or something. But generally those those parties are ⁓ are are the primary ones and then of course back to of course to the business because you have revenue as well. So ⁓ there's these like audit trails that need to be maintained for operators to be able to basically say definitively, I have enough money in the account, I have ⁓ everything adjudicated and down to the dollar, and then at the end of each month I can say I have ⁓ enough to pay out my owners, to pay out my ⁓ to pay out my ⁓ my my company and to pay out the state or whichever government entity I owe money to. ⁓ those are just things that are standard, but it's it's an area where people often ⁓ fail to realize they're they're missing things. And the core a big challenge and and kind of starting point for all this is is expenses. So getting the expense side right is is like tip of the spear. If you don't have that right, then it's really hard to know whether you're even at all accurate. And then of course the other piece is the revenue side, getting all the revenue data right and accurate, making sure it's ⁓ accounted for and then making sure that what's in your bank actually matches what's in your ⁓ PMS or your your ⁓ what what's showing in the OTA. So these it it's complicated. I mean a lot of people ⁓ I think don't realize the extent to which it's quite complex and ⁓ even for people who are in it every day. Like there's there's like all these edge cases you find and you go, wow, that's actually really tricky. And ⁓ Even people who are like really good finance people struggle with it, much less someone who's just not used to it or not comfortable doing it. It's like, wow, that's actually really gnarly to have to go through. ⁓ and it varies in terms of the complexity as well, of course, by like where you are and which state, which jurisdiction, which city, county, et cetera. So ⁓ just adds up as you go deeper and deeper into it. I d I don't know if that was as succinct I wanted to be in terms of our definition, but yeah. Miles - Hospitable: Yeah. That was great. I mean it was nice and in-depth. I think I think you did all the different levels. There was the good intro piece and then you went into a bit more advanced. It's good. I think we covered something for everyone there. Yeah, true, true. awesome. And so and you also kind of talked ⁓ before we talked about kind of I guess ⁓ sort of like you know breaking points or points of inflection where you kind of needing more process, more software. ⁓ typically, ⁓ what do you see people doing before they come to Topkey? Are you seeing that they're Jon Sukhia: Yeah. Yeah. Should ask Claude. Claude'll give you a good answer. We should just ⁓ yeah. Miles - Hospitable: they have some kind of accounting software, expense management software, and then they come to you? Are they in spreadsheets and ⁓ pulling their hair out ⁓ before they kind of come and cry for help? Jon Sukhia: Yeah. It yeah, it it varies. I mean, I think a lot of people will ⁓ I think the biggest thing that we see initially is that they have a PMS. ⁓ they have typically an accounting system. So that's kind of the first that's the first roadblock. Like most industries just have one accounting system, but a lot of operators have ⁓ or are doing some sort of accounting in multiple places. Even if the PMS doesn't necessarily have a full trust accounting system, they often will be kind of recreating that maybe in QuickBooks. ⁓ But they also have an operating ledger for their business. ⁓ and this is a very simplistic business, right? Like you might have companies that have multiple sub businesses, or you might have like a real estate company, ⁓ an interior design firm, and the vacation rental company, all of which have different like PLs, have different balance sheets, etc. ⁓ typically they're using a third-party AP system. So maybe they're using something like ⁓ bill.com, or maybe they're just using their local banks or you national banks bill pay system. And then ⁓ many operators we work with use ⁓ a combination of different credit cards. so those combinations create like kind of the initial stumbling block because what you end up having is like people who are just kind of looking at like a bunch of different credit card statements, a bunch of different AP ⁓ statements. Maybe they have payments coming out of Zell or Cash App or Venmo or whatever. ⁓ ACHs that are being paid. Maybe they're paying utilities with another ⁓ with a debit card or with ⁓ with an ACH draw. ⁓ and so you you end up just having this like ⁓ this information silo problem where you have data just spread across all these different systems, and then you're basically having to go and try to kind of cobble that all together. ⁓ so that's typically what we see. ⁓ there's now with kind of where we are, there's a lot of other systems that we're either replacing or consolidating data out of. So it can get much more complex. But that was kind of the initial pain point, and for a lot of folks who are a bit smaller. That's probably what they're they're using, some combination of a different bill pay system, a different credit card system, a different bank and a different ⁓ you know, PMS and and and those things kind of create the complexity. Miles - Hospitable: Awesome, that makes sense. And then just kinda, you know, you've obviously touched on the the PNMF's partnership. ⁓ obviously ⁓ TopKey fairly recently integrated with Hospitable. ⁓ how do you see kind of I guess that ⁓ that combination, that text that combination, maybe not just what it's like now, but how do you see that kind of evolving in the future ⁓ and how that's gonna help hosts and property managers as well? Jon Sukhia: Yeah, I mean what's great about Hospitable is you guys have basically a ton of companies who who love the system and love the product. And like that's something that I think we're what we see is like basically helping PMs as they grow. And I think historically what you've had is a lot of operators who might say, ⁓ like, you know, we we've hit a certain size, we're gonna graduate to another system because we're we're getting bigger now and we have ⁓ we have bigger needs than what a PMS can maintain. You know, every system kind of focuses on a different vertical. Hospitable historically is focused on maybe a bit smaller operators, but I I certainly know bigger companies now that are choosing and staying with Hospitable as they're growing. I think we have been able to help people ⁓ already just showing that hey, you don't necessarily have to go graduate to a new system. You can continue to use Hospitable, but get more structure around your financial systems. And a lot of what we built and are are continuing to build out is just more structure to kind of plug right into Hospitable. ⁓ That's huge because for a lot of operators, the idea of even thinking about a PMS shift and switch is a massive pain in the neck. And ⁓ to the extent we can kind of work together to kind of build a better ⁓ tool to basically allow them to kind of continue to use the tools they're at. Like our our goal is like meet people where they are. And ⁓ so it starts with the PMS, but it also is credit cards. Like we can support any credit card that folks come come and bring in. ⁓ we integrate. really deeply to like every card provider. ⁓ both Visa MasterCard, we have a direct partnership with Amex, RAMP, all these tools. So you can basically plug in the cards you're using. You can plug in the bank you're using. We have our own ⁓ bank system as well. Like you can use our bank, but like ultimately we're a bit more agnostic around like ultimately what you're using. ⁓ but everything's kind of around how do you basically automate more and more these processes. ⁓ something our team does really I think better than most and I would encourage every vendor in this industry to think about doing more is like just go through a process of watching your customers ⁓ execute a task. Like it doesn't could be anything. ⁓ YC kind of talks about this a lot. Like, how do you look at like product development? Well, a lot of times it just comes down to the very basic thing of like how many clicks do you have to complete to get something done? In software, maybe today it's 22 clicks. take a charge and get it onto an owner statement depending on like what systems you're using. If you're trying to pay a a bill, it's you know X number of clicks. ⁓ and then just compare that to like maybe what they're doing before and what and then you're just constantly going back and saying, how can we kind of cut things out of this to make it faster? ⁓ when it when it really becomes like a value add is when people we talk to bookkeepers or people on the finance teams or the owners of the business who are kind of drowning in different workflows and they're like, I got 18 units, but I've got, you know, 15 expenses per unit. And then I've got 18 owner statements and I've got a bunch of bills. Well, you can see it's just exponential as you scale. ⁓ one property isn't just one more statement. It's five more transactions. Maybe it's 30, you know, on a given month. ⁓ so figuring out where there are just like very obvious kind of like areas either in our product or in another system that they're currently using. Miles - Hospitable: Mm-hmm. Jon Sukhia: And we'll just be like, hey, how do we how do we make that smaller and smaller and reduce those clicks? A big piece of it is like we integrate to everything. So we can really quickly like onboard someone, get them into the product, and just help them very quickly like basically triage through transactions. ⁓ that's huge because it just saves them a lot of time. And then from there, they start to like understand more of the capabilities of our system. ⁓ we have an inventory module that we just ship to ⁓ a new product for us. incredible the amount of complexity with inventory that people have to deal with, especially as they start to open warehouses and buy goods that are sitting on s in stock. These are the type of workflows that we're like really excited about solving because there's just so much more. ⁓ you know, I would I'd like to think we've solved it, but it's not true. Like there's a lot more we we are doing. and everyone, you know, you talk to any CFO of a company, it's like, are your finances clean, simple, and and automated? It's like the answer is is unequivocally no. Depending, you know, no matter if you're talking to like the CFO of Amazon or the CFO of like, you know, Fun in the Sun, 30, you know, vacation rental company, it's it's it's the same issues just at different scale. So ⁓ this is the industry we are focusing on. And it's like everything is around how can we help the CFOs of vacation rental companies just do this work better. ⁓ that's that's kind of our pitch in a nutshell. ⁓ Miles - Hospitable: Yeah. Nice, yeah. Makes sense. Cool. Okay. ⁓ just a couple more questions for you. So, ⁓ I you know, we we've talked about a bunch of different, I guess, ⁓ problems and and the things that ⁓ TopKey helps with, I guess. ⁓ if someone's walking away ⁓ from this with maybe just even just one piece of advice, something that they should think about to kind of have a more profitable, scalable short term rental business, what is that piece of advice? What should they go and kind of focus on first, maybe? Jon Sukhia: Yeah. I would say don't neglect finance. It is the number one reason your business will fail. So figure out a way to work with the best tools to automate and get a handle on all of this. And if you have questions, go talk to like different operators or and your friends and ask them what they are doing who who are a bit farther along than you. Miles - Hospitable: Mm. Jon Sukhia: ⁓ so for example, we talked about those inflection points. If you have fifteen to twenty properties, go talk to the person who has seventy and understand like where the pitfalls are. ⁓ it's no different from any business. But ultimately, like if you're gonna succeed or fail in business, you have to have good finances. It's like kind of core to the core to the the the structure of like scaling. And when we see people fail, ⁓ and not to not to dwell on that, but like there are I've talked to many people who have struggled and like, you know, the businesses don't work out. And it's like a lot of times it's just not having a good handle on that stuff. And you know, it's unfortunate, but like that's the beauty of capitalism on some level is like we have a a competitive society and like there's a lot of opportunity, but it's also ⁓ you know, just requires you to be thoughtful about that stuff. And so just be just be mindful. And I would just say talk to talk to as many people as you can. ⁓ be very open to getting feedback because that's I think the at least for me, the best way to learn ⁓ and and understand what others are doing. Miles - Hospitable: Definitely. And it can be a daunting subject, I guess, for some people. It's kind of like a an off putting one if you're you know you're not comfortable with it. ⁓ but ⁓ you can't really hide away from it, right? ⁓ so yeah. And so yeah, I I I think yeah, encourage ⁓ that ⁓ sentiment of going and asking. ⁓ if anyone ⁓ here's listening ⁓ you know, is a hospitable customer, you obviously have ⁓ the hospitable community as well. ⁓ we've got over five thousand ⁓ hosts in there that are Jon Sukhia: Yeah. Yeah. Miles - Hospitable: ⁓ I'm sure a lot of them have already come through these challenges. ⁓ so you can obviously ask questions in there. ⁓ and I think we have a couple of TopKey ⁓ team in there as well. ⁓ if they're not already in there, we'll make sure to get them added. ⁓ so you can go to community.hospitable.com and you can ask questions in there as well. Cool. ⁓ John, ⁓ if we want to find out more about TopKey or we want to get in touch with you guys, ⁓ where do we go to find out more? Jon Sukhia: Or hit me or anyone on our team on LinkedIn. We'll get you a demo and you can learn about why we have ninety-eight percent customer retention ⁓ since we launched in twenty twenty three. So yeah, that's a ⁓ that's an easy there's easy ways to find us and and love to show you the product if you're interested and ⁓ excited about our partnership with Hospitable. Miles - Hospitable: Awesome. Thank you so much for joining us, John. Jon Sukhia: Awesome. Thanks, Miles.