Latest / Thanks For Visiting / 249. Maximizing Revenue: Insights on Dynamic Pricing Strategies with Andrew Kitchell

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249. Maximizing Revenue: Insights on Dynamic Pricing Strategies with Andrew Kitchell · Thanks For Visiting

0:00
Sarah: SEGMENT GAP
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Hello, welcome back for another great week.
0:03
My name is Sarah Karakaian.
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Annette: I am Annette Grant, and together we are--
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Both Annette & Sarah: Thanks for Visiting.
0:08
Sarah: We're going to kick off the show like we do every week,
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and that's sharing one of you, our amazing, loyal listeners, viewers,
0:13
using our hashtag #STRShareSunday.
0:16
If you use it on Instagram, we are prowling.
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We want to find you.
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We want to share you.
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Annette, who are we sharing this week?
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Annette: Today we are sharing @vtstays.
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I'm going to do something I haven't done before, everybody, so bear with
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me while I do a little sound effect.
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Okay.
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The reason that's important is our host from VT Stays, Brad, is doing
0:44
a mean guitar riff on a piece of wood with a sander right there.
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Sarah: So good.
0:49
Annette: And him and his wife are just killing their short-term rentals
0:53
in Vermont, VT stays, @vtstays.
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I just dug in to-- he caught me with the guitar riff, and then they really wrote me
1:04
in with their Airstream that they redid.
1:08
So they have an Airstream.
1:10
They have another house on this property.
1:12
It was their dream to move to Vermont.
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They did it.
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I want you to check them out and a couple of things that
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I'm going to talk about there.
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Instagram, that I do with a lot, it goes directly to their direct
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booking site, which is wonderful.
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I love it.
1:25
It gives a little bit about them.
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And if you can make that connection with your guest, I already want to go
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hang out with them and stay with them.
1:34
So putting their picture there and a little bit of their story, I'm
1:36
really invested in them and I'm willing to make that investment even
1:40
deeper by paying to stay with them.
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They show their personalities on their Instagram.
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They have amazing properties.
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And they love Vermont, and they want to show you also why
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you should come visit Vermont.
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If they could, I would love for you guys to reach out so we can
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have you on the show and we can all play air guitar together.
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Sarah: Air guitar.
2:03
So good.
2:04
Annette: Awesome.
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So listeners, please check them out, give them some love, and
2:09
thank you for using our hashtag.
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Sarah: All right, let's get onto this show.
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Listeners, buckle up.
2:15
We've got a story to share with you, and a successful one at that, but I'm
2:20
sure there are a lot of challenges and experiences along the way that you
2:23
all can learn from, be inspired by.
2:25
We are so excited today to have Andrew Kitchell, who is the CEO and founder of
2:29
Wheelhouse, a revenue management platform that serves a leading professional
2:33
operators in short-term rental, vacation rental, corporate rental spaces.
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Annette: Sarah, did you drink a lot of coffee?
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Sarah: Am I talking really fast?
2:39
Annette: Yeah.
2:39
Sarah: I'm really excited.
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Annette: Listeners, I'm going to let you know, it's a million degrees
2:42
in our studio today, we're so hot.
2:45
I think Andrew can see us sweating through.
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We're trying to figure out the temps in here.
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So you can't hear the AC.
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Okay.
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I'm keeping up with Kitchell.
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Sarah: But listen, so Andrew Kitchell is not just the CEO
2:58
and founder of Wheelhouse.
2:59
He is so much more.
3:00
He has 10 years of experience in the accommodation space having built multiple
3:04
technology and operating companies.
3:06
So if you are not looking to build a software company or a revenue
3:11
management company, that's okay.
3:12
Stay with us because Andrew has a storied background.
3:14
Andrew, welcome to the show.
3:17
Andrew: Very excited to be here.
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Sarah: Oh my gosh.
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Andrew: Yeah, so much to cover today.
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Annette: Let's tell our listeners how we met Andrew.
3:25
We've been chatting via LinkedIn, and host, if you're not on
3:29
LinkedIn, get on LinkedIn.
3:32
There are so many amazing vacation rental groups and people posting on LinkedIn.
3:36
If you have your profile up there, check it out.
3:38
Um, ask me to be your friend.
3:40
Are you friend-- do you friend people on LinkedIn?
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I forget what you--
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Sarah: I think you connect.
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Annette: Connect with me on LinkedIn.
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But Andrew, we were all on a, um, Breezeway.
3:50
Shout out to one of our show sponsors.
3:52
We were a part of their Elevate virtual conference and we had
3:58
the pleasure of being in the same virtual room with Andrew.
4:03
He was leading Sarah and I and some other lovely hosts that
4:05
are going to be on the show too.
4:07
And we just had a great conversation about operations and wanted to
4:11
bring Andrew and his expertise and share his story with all of you.
4:15
So make friends on the internet, is what I'm saying there, I guess.
4:18
Sarah: Andrew, take us back.
4:19
Tell us your story.
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What happened?
4:22
I mean, I'm want you to go back all the way to high school.
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How did you get to where you are today?
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Andrew: Ooh, um, a lot of luck.
4:28
A lot of luck and fortuitous bounces.
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Maybe the most fortuitous bounce was hopping on a bike 16 years ago and
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biking to San Francisco because I heard it was going to be a fun place
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to live, and happening to move into a home that was-- one of the members
4:47
of the home eventually was in this startup Accelerator with Airbnb.
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So to zoom through a lot of years, that I moved to San Francisco, meeting the
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right folks, learning about building businesses, learning about this crazy
4:59
idea called air bed and breakfast.
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All of that is luck.
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Annette: You had to ride the bike.
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Andrew: That was hard.
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Annette: Wait, isthat the way you moved to San Francisco, on your bike?
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Andrew: Yeah.
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I shipped a box down.
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I was a bike and kayak guide at the time, so one of my first hospitality
5:19
experiences was taking people out for multi-day kayak trips.
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And it was an amazing lesson in hospitality when you hear
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someone say, I've been saving for this trip for 15 years.
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And the thought is like, okay, well, we have to make this the
5:34
most memorable thing you've done.
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And, uh, I really loved that.
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I ended up working in-- I worked in restaurants, other hospitality things
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before eventually doing some Airbnb things, but I was just addicted to
5:47
the idea of how can you give someone an incredible experience/memories
5:53
that they will remember?
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And for us, the ultimate memory that everyone wanted when we were kayak
5:59
guides was, could we see a killer whale while we're out paddling?
6:03
So we were doing kayak guiding up in the San Juan Islands, and it was fun.
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It was great to try to get people life experiences.
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Sarah: At your core, what were you interested in as a kid?
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Was it hospitality?
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Was it customer service?
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Are you an engineer?
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What did you think you wanted to do when you were little?
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Andrew: Well, I studied history.
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Sarah: Okay.
6:22
Andrew: In college, I studied history of science and technology,
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which I found fascinating.
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And I studied the history of social movements too.
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And I think what both things were-- I left college obviously without a clear
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indication of how to apply those to any professional career but what was
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really interesting about both fields was history of science and technology
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illustrated the inevitability of some technologies impacting people.
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Sarah: Hmm.
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Andrew: And the history of social movements really looks at, I mean,
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the synopsis of it is that every change we see in the world today
6:59
started from a small group of people who really believed in something.
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And what is Airbnb/writ large the people you all are serving building
7:07
brands who believe that there's a more maybe creative connected version
7:12
of hospitality that could exist?
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So I've long looked at Airbnb as a pretty fascinating shift in how people are
7:20
going to live, travel, interact, etc.
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So for that reason, I tracked my love of what I do today back to that.
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And then I would just hope hospitality doesn't come from training, it comes
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from, I mean, I love our industry partly because-- sometimes I say
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to have a great brand, you need a cell phone and a personality.
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And hospitality is just trying to make people feel great, which
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any of us can choose to do.
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So I love that.
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So that's a little bit of all the underpinnings of maybe why I get so
7:51
much joy out of what I get to do today.
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Annette: So when did you host your first guest, though?
7:57
You're this bicyclist and the incubator, take us through hosting
8:02
your first guest and how that happened.
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Andrew: So living in San Francisco in a shared home of, there were five or six
8:09
of us living in the home at the time.
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There are probably four businesses that are being started out of
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that house, and none of us had really enough money to pay rent.
8:19
So we both out of, what a curious idea, but also, hey, rent's coming up, started
8:27
listing couches and rooms on air bed and breakfast, this crazy idea that we loved.
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So our home, I mean, collectively that home hosted hundreds of
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people from all over the world.
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We probably were among the first hundred-ish couches and rooms on
8:47
air bed and breakfast just because we had such early access to it.
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And San Francisco was one of the first real spots that took off, and ended up
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hosting-- in my room, what we'd do, we'd rent out a room and go sleep on the couch.
9:01
And it would lead to some hilarious social experiments.
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Can I share my most famous guest?
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Annette: Well, what's it rated?
9:09
I'm like, I don't know what our show's rated.
9:12
Andrew: There are, uh, this one will be peachy.
9:14
Sarah: Okay.
9:14
Annette: Okay.
9:15
We'll keep a-- I'll do a Patreon episode for the other ones, I guess.
9:18
Andrew: Right.
9:19
There was, um, one day I got a call from someone, they said, hey, it's,
9:23
I can't remember the name of the in individual, but it was a woman calling
9:26
me from Airbnb and she said, Andrew, could you host Brian Chesky tonight?
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And I was a huge Airbnb-- I loved-- of course, I knew who Brian was
9:39
and I knew he was traveling around.
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And I never expected that they would reach out and say, hey, we want
9:44
to stay with you, but they did.
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I said, absolutely.
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And they called back probably two hours later and they said, would
9:51
you mind if ABC News came by and filmed him staying at your home?
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And I had a publishing company at the time I was trying to start.
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And I was thinking in my head, this is my big break.
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And then they called two hours later and I said, of course, ABC News can come by.
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And they said, would you mind cooking breakfast for Brian?
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And ABC News, they'd like to film you serving Brian breakfast.
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And having been a cook in the past cooking at restaurants before, I was like, oh
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my goodness, we're going to do To The Nines' eight-course brunch with Brian.
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So we did.
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And it was an amazing experience.
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And I still have the video of the, uh, a friend filming, I actually think Brian
10:35
was filming this, Brian filming the newscaster interviewing me, saying, so
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you rent out extra rooms in your home to strangers, with this incredulous look.
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And I was saying, yeah, it helps pay for everything.
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So yeah, that was a fun experience.
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And I mean, how could you not be hooked after that to, again, what now
11:01
looks like the greatest unlocking of creativity in the history of hospitality?
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Sarah: Wait, did Brian Chesky sleep over or he just come over for breakfast?
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Andrew: He spent two nights.
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Yeah, he spent two nights on--
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Sarah: So good.
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Andrew: There's some other funny down the road stories that I ended up turning
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that video that he made and sent to me into an application to Airbnb.
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I wanted to join their marketing team.
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They actually did not.
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I did not get the job, but Airbnb ended up eight years later investing
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in one of the things we built.
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Sarah: Is that because of this previous relationship, or is that just--
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Annette: Is it because of your brunch?
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Did the brunch seal the deal?
11:36
Andrew: Okay, so it's funny.
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So I made a video.
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I might have to share it with you now, even though I've hidden it on YouTube
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forever because I'm so embarrassed by it.
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When I got to meet Brian eight years later, which was the final meeting
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to decide whether Airbnb was going to invest with us, I started the
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meeting off by playing the video.
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Annette: Nice.
11:54
Sarah: Smart.
11:54
Andrew: And Brian said, who's filming this?
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And I said, you are.
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Annette: Oh wow.
11:59
Sarah: Mic drop.
12:00
Andrew: All of a sudden he's like, oh my goodness, I remember this.
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I remember walking up your stairs.
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And at the end of the meeting, he says, well, we have to work together.
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Annette: Love it.
12:12
Andrew: We have to.
12:13
This is so crazy that we would, years later, take someone who is a host
12:16
and be investing in businesses that were started on top of our platform.
12:20
So anyway, as you can tell, luck and fun pulled us through this crazy experiment
12:29
that is building businesses, etc.
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Sarah: We've had a lot of amazing guest, amazing stories.
12:32
This might be--
12:33
Annette: I know.
12:33
Now I'm already like, we need to have an episode two because we're
12:35
not even going to be able to get to what we thought we were going to get.
12:37
What--
12:38
Andrew: I'm sorry for--
12:39
Annette: No, it's okay.
12:39
Sarah: No, it's good.
12:40
Annette: But really quick, that house, how much money were you making?
12:45
Was everybody the host?
12:48
Was there one person messaging?
12:49
Obviously, it was in the infancy of Airbnb, so did you have financial
12:54
goals or was it like, however much we can make this month, all the
12:57
roommates, you split it or how did that go down with so many roommates?
13:02
Andrew: I was charging what I thought was an absurd price of a $100 per night.
13:07
My rent was 900, and I thought if I can rent it out for a week
13:12
per month, my rent is $200.
13:16
And then I started pushing it to the point where my roommate said,
13:18
hey, you actually have to live here.
13:21
Because all of us were, um, this is 2000, I want to say 2000, maybe nine, 2010.
13:32
I can't remember the exact.
13:34
It was early at that time.
13:35
But we were all-- everyone who had moved to San Francisco, it wasn't
13:38
like there were a lot of jobs.
13:39
It was right after that financial crisis.
13:42
So a lot of us were like, we'll start a business because we can't get hired.
13:46
So it was this interesting area where all of us were basically, we were
13:49
living cheaply and trying to cover rent and other a modicum of expenses.
13:53
So that was my room.
13:54
I had another friend starting a jellyfish aquarium company that ended
14:00
up on the cover of New York Times.
14:02
He was also renting out his room.
14:04
Uh, you had the people who were in the Accelerator with Airbnb.
14:08
There were all sorts of businesses and we all had to break even.
14:11
So there were funny things that happened.
14:13
I remember one of those people sold a website because he didn't have enough
14:17
money for dinner, and he's like, I just need some money, so here's a website.
14:20
Uh, the crazy things that were happening to get by and to build
14:24
businesses that I still look back on as, honestly, some of the happiest,
14:28
most amazing days of my life, certainly.
14:32
Hard to recreate, amazing to live through.
14:35
Annette: All right, so we start with the room.
14:36
Let's talk about Lyric and how you got to that.
14:40
Because I think our listeners, it was you rode your bike to San Francisco,
14:44
you got, obviously already bit by the hospitality bug, but then you got stung
14:48
by it when the CEO of Airbnb stayed.
14:51
Take us to the next step then.
14:54
Andrew: Yeah.
14:55
I started working professionally in the short-term rental
14:58
space about 10 years ago.
15:00
And I founded Beyond Pricing, ended up then going to starting both
15:06
Wheelhouse and a company that came to be known as Lyric at the same time.
15:12
Lyric was an operating company or really a hospitality brand.
15:18
And what we were doing was we were going into apartment buildings, and it
15:22
is somewhat controversial, but we were coming in, we were leasing eventually a
15:25
floor or the whole building, designing all the spaces, and then hosting guests.
15:32
So Lyric was, uh, aimed at corporate travelers in urban spaces, really
15:37
beautifully designed decor.
15:40
Annette: Were you signing master leases with the landlords?
15:43
Is that what you were--
15:45
Andrew: We were.
15:45
Annette: Okay, so aform of arbitrage.
15:49
Andrew: It was arbitrage.
15:50
Yeah.
15:50
And it was-- arbitrage was required for what we were doing.
15:55
Really it was the lease was required by law.
15:59
For the inventory, we were renting apartments.
16:03
And the goal was to prove it out so we could move to a management model,
16:07
which we could talk more about to Dave.
16:08
But for your listeners, a lease/arbitrage is really good,
16:14
I think at a small portfolio size or getting into the business.
16:19
And as you scale, you might want to start looking at property management
16:23
as a way to take less risk and potentially scale a lot faster.
16:29
And happy to talk more about that if valuable anytime.
16:32
But yeah, we were all lease arbitrage, both required by law as
16:36
well as it's a faster way to scale.
16:39
Sarah: And the same time you were starting Wheelhouse.
16:43
Andrew: Yeah.
16:43
It was all one company.
16:47
We thought if you wanted to create a new type of hospitality experience, you would
16:54
ultimately need to control everything from the data to the development of properties.
16:59
So we wanted data to inform what guests want.
17:03
We wanted that data to underpin ultimately about four different software products.
17:06
Everything from cleaning to customized guest experience, digital access.
17:11
So ludicrous that we tried this to be honest.
17:14
And then we wanted those spaces.
17:16
We went and really thought that Lyric could illustrate the highest possible
17:21
level of the Ace Hotel on an apartment footprint was the goal of the design.
17:27
And we thought, if you're the best at technology and you had a great
17:29
beloved brand tied to new travel trends where people wanted these
17:34
larger spaces, we thought that was the way you could eventually build
17:37
the next great hospitality brand.
17:38
And I still believe that to be true.
17:41
Uh, Lyric did not prove that.
17:43
Someone else will.
17:44
Annette: Okay.
17:45
If we can talk about it, so Lyric is not around anymore.
17:49
Andrew: No, we shut it all down during Covid.
17:50
Annette: We get asked about arbitrage all the time, um, because it's
17:54
how a lot of people want to get started in short-term rentals.
17:57
And Sarah and I, a sentiment that you just said that scaling property
18:01
management is way less risky because obviously Covid did happen.
18:06
The worst-case scenario did happen.
18:07
And is that what happened to your organization?
18:09
It's like, hey, you had no guest and you were responsible for all of these leases.
18:13
Is that the downfall there?
18:15
Andrew: Yeah, exactly.
18:17
When I talk about what happened to us during Covid, I think
18:19
about-- it wasn't one factor.
18:22
It was, one, scaling the business of that size quickly is really
18:25
hard, whether it's from, I mean, we were in 15 different markets.
18:29
We went to 25 buildings in about two years, whereas most
18:33
hospitality scale slowly just because the details really matter.
18:37
Scaling the team to support that is not easy.
18:39
So we were, uh, north of 150 people when Covid hit full-time, probably 300 plus.
18:45
And that was with a CEO who had never managed more than candidly,
18:48
probably about 10 people.
18:50
So I think those were all things, but then when you look at Lyric, we
18:54
were venture-backed, lease-exposed urban corporate hospitality.
19:02
That was not a great place to be.
19:06
Occupancy went from about 80% to 7%.
19:12
We actually had a pretty good amount of cash in the bank, but we also started to
19:17
look at burn that was, not to talk too much money, but in the millions per month.
19:23
And we said, when will the market recover?
19:26
Uh, corporate urban response has been slow, much slower
19:30
than vacation destinations.
19:32
We look to, uh, basically what happened in New Orleans post-Katrina.
19:34
So New Orleans post-Katrina has never gotten back to the same
19:38
level of travel as pre-Katrina.
19:41
New York after the great financial crisis took five years to recover.
19:44
And so we said, well, what's the recovery rate for a global panemic.
19:49
Is it months?
19:50
That feels irrational.
19:52
However, we have this technology company that serves a ton of different types
19:57
of businesses, so therefore we have very diversified risk on Wheelhouse.
20:02
So we, uh, for us the call was a painful one, was to say goodbye to 92% of our
20:07
team, move out of 25 buildings across US during Covid, and see what the world
20:12
looked like when everything settled down.
20:14
That was the "rational" thing to do.
20:17
To the question on lease exposure, we could dive into that
20:20
more explicitly if you'd like.
20:22
Annette: Well, we can maybe do another episode about that just because we
20:26
don't really talk about lease arbitrage.
20:27
I have one more question just about Lyric and then we can get into--
20:29
Andrew: Yeah, of course.
20:30
Anything.
20:31
Annette: I know our listeners are dying to know, how in the heck are you
20:36
getting cleaners for all these places?
20:38
Was that the biggest pain point?
20:42
It's the biggest pain point of, I feel like, most hosts.
20:45
And I don't want to say pain point.
20:46
They have excellent cleaners, but when you don't, you don't.
20:49
So you saying these numbers, cleaning's the first thing that I go to.
20:55
Andrew: So it's interesting.
20:56
Some things get harder with scale and some things get easier.
20:58
Cleaners is something that gets arguably easier because all of a sudden
21:03
you have enough inventory where--
21:04
Annette: Uh, to keep them busy.
21:05
Andrew: You can come to someone and say, hey, look, we can guarantee
21:07
you some amount of cleanings, and all of a sudden you're a great
21:10
contract where they prioritize you.
21:13
So cleaning, ironically, was a great lesson in why density within a building or
21:18
within a market was actually our cleaning costs went down and our scores went up.
21:23
So that was a non-obvious learning from us scaling cleaning.
21:27
Uh, the hardest thing was, and still is in my mind, was digital access,
21:33
because we needed to get someone into the front door of a building, up the
21:36
elevator, and then into the room.
21:38
Whereas if you have a single-family home, digital access is relatively solved.
21:43
So yeah, there's all sorts of interesting problems.
21:45
This is why hospitality is so fun.
21:47
You are in the business of solving a problem best for what stage
21:50
you are currently at/what you're trying to achieve with your brand.
21:55
So yeah, there, um, there are, uh, cleaning became easier, specifically.
21:59
Uh, we can talk about what became harder or what else.
22:02
But that is the shortest answer, is cleaning became easier.
22:05
Sarah: As a fellow entrepreneur, I'm guessing our listeners are
22:08
thinking the same thing I am though.
22:09
Andrew, is like, how brave of you to make, number one, to look at
22:13
historicals and see what could happen.
22:16
History repeats itself.
22:17
Let's look to Katrina, New York.
22:19
That's so sensible especially a time when you must have been so stressed out
22:23
or you could have become so stressed out if you didn't just think logically.
22:27
And then just to make that really great decision, I want to offer our listeners
22:29
too, we had an episode about this a few weeks ago, just about pivoting
22:33
and just looking, being really honest with yourself and knowing even if it's
22:39
the "wrong decision", vacillating for too long can also be incredibly cruel.
22:45
Anyway, I just want to commend you on pivot that you've made
22:48
and just how brave that is.
22:49
And it's really inspirational for fellow entrepreneurs, everyone listening.
22:53
I just love hearing that story.
22:55
Andrew: Oh, thanks.
22:55
I'll share that it was because really wise folks in January had
23:01
said, run a down scenario of what happens if what's happening in Italy
23:05
and China if Covid comes to the US.
23:07
So people smarter than I.
23:09
I was myopic like, no, we're going to be great, whatever.
23:13
They said, just assume you aren't and run a down scenario now and tell us,
23:19
so this is our board, they said, tell us what happens if revenue drops 90%.
23:22
So when revenue dropped literally 90%, we already had the plan in place.
23:29
And then, uh, with Lyric, the hardest part was, when you're building a
23:34
business, scaling a business, it's impossible not to love the people you
23:38
work with/we've become friends with them.
23:40
And the scariest thing is, oh my goodness, all these people who have invested all
23:44
their time, I now need to tell them that everything we believed in is gone.
23:48
And the thing that made it easier was close enough relationships.
23:52
A number of people who came to me and said, there's no way we can
23:56
survive this, we know what you have to do, permission to do it.
23:59
So I would say bravery wasn't the word that came to mind.
24:03
I appreciate that reframe, but it was more like, hey, great
24:06
people told me what to do.
24:08
It was the, uh, the compassionate thing to do was to move quickly.
24:12
By moving quickly, ironically, we were actually able to take better care
24:16
of the people we were letting go of.
24:18
So there were enough reframes that framed it for me and something I'm comfortable
24:21
with of this is the compassionate move.
24:24
We do it as opposed to we're just saying goodbye to all our friends.
24:28
The reframe of that was powered by other people's work that had put us
24:31
in a position to make, ultimately, what I think was the right decision.
24:36
Not fun, but right.
24:37
AD MARKER
24:38
Annette: So your revenue management, your dynamic pricing, we have
24:41
listeners, let's help them right now.
24:43
If they have to take their individual property, we see it a lot right now, we
24:47
see airbnbust, we see that there's so much, there's saturation in markets, how
24:53
can you guide an individual homeowner, a host, and how they can look at that report
24:58
if their revenue is going to decrease?
25:02
Can you help us with that?
25:03
What should we be looking for?
25:05
How can we use these tools?
25:06
Put yourself in their shoes.
25:08
Andrew: What I like to say about revenue management/pricing is that there's
25:13
no-- I don't believe in a macro story.
25:16
So it can be like, hey, there's an Airbnb bust, and maybe some people are
25:19
experiencing a drop in revenue, and there are plenty of people who are not.
25:24
So you'll see-- the really interesting thing about Airbnb is because you have
25:28
everything from TBs to 12 bedrooms across every market out there.
25:34
There's no one universal this is the best thing, bland advice that
25:38
I can give for your business.
25:40
So what--
25:41
Annette: You can.
25:42
Let's start here.
25:43
Can you at least start by saying that every host should be paying
25:47
attention to revenue management?
25:49
When I first started hosting, revenue management, uh, a
25:52
hotel does revenue management.
25:53
I don't even know what that is or why I need to do that.
25:55
So is that the first message?
25:58
Is that if you are a host, you're a revenue manager also?
26:01
Andrew: I would say, uh, as soon as you post a price online, you are in the
26:04
business of doing revenue management.
26:06
Whether you choose to do it actively or not is your choice.
26:09
Whether you choose to use a machine or not is your choice.
26:12
But you are selling something for a price that the market will evaluate.
26:15
So pricing and revenue management, we might have time today to
26:18
break down the difference.
26:20
The short version is dynamic pricing, you're usually using a
26:23
machine to look at demand patterns and automating certain aspects.
26:28
Revenue management, you're starting to maybe look at different
26:32
strategies of how you could, in some ways better guide the machine.
26:35
We'll talk about that more.
26:37
But in short, almost every asset out there, so airline, flights, obviously,
26:42
the price changes dramatically, gas, fruit in high season, low season.
26:47
Pick a commodity, it changes.
26:49
Clothes that are in fashion versus not in fashion.
26:51
Everything is tied to supply and demand.
26:54
What gets attention in the accommodation space is the practice of revenue
26:59
management where hotels and airlines have proven you can drive real returns
27:03
off of it on basically paying attention to demand signals and supply signals.
27:09
I don't know what business is at scale without it at some point, because
27:13
there is a science to it where you can see the actual revenue uplift.
27:19
Um, and then there is the art piece to it, which I think of a revenue management,
27:23
which is sometimes if you're doing property management, you might have an
27:25
owner who wants to achieve a particular goal such as, hey, I want to never go
27:32
below this price, or I want to have my summer 50% booked X amount of time
27:36
out, which are, uh, revenue management decisions where you're defining a
27:40
strategy to achieve a different goal other than just revenue maximization.
27:44
Again, we're not going to go too deep unless you tell me to on that stuff.
27:49
Uh, but yeah, I think everyone in time does pricing/revenue management.
27:53
Annette: Yeah.
27:54
Okay.
27:54
I think that's the thing, is people's thinking, I don't
27:56
need to do revenue management.
27:57
I put my prices on Airbnb and that's my dynamic pricing and
28:00
that's my revenue management, is just putting that out there online.
28:04
Andrew: Yeah.
28:05
Again, most businesses, I don't think it's the first thing
28:07
you need to do as an operator.
28:09
I think if you're an operator, what I would normally say is start with
28:13
a property to three properties.
28:16
Find revenue in resonance.
28:18
Do you love doing this?
28:20
And are your initial investments financially a good decision for you?
28:25
If you find revenue in resonance and you're scaling, then you look at a
28:29
property management software first.
28:32
Maybe you get up to scale to five to 10 listings.
28:36
Certainly, we have customers with a single listing using us, but that's
28:39
when you really want to look at maybe a more advanced system like maybe
28:41
a Breezeway at that point, maybe for operational software, maybe a
28:45
Wheelhouse for price labs or others for pricing revenue management.
28:49
So it doesn't need to be the first thing you do.
28:51
There are ways you can manually adjust pricing that are fine.
28:54
They just are very time consuming.
28:56
I'm not going to lie and tell you it's the first thing you have to do, but I
28:58
think in time, as you scale your business is going to be a very good investment
29:02
for you to drive better results.
29:04
Sarah: Let's say you have a listener right now who is, okay, Andrew, I am scaling.
29:09
What do I look for in a software?
29:11
I don't know.
29:12
Do they all do the same thing?
29:13
If I'm a smaller operator, which our listeners tend to be, under 20 properties,
29:17
I would say, is that a big factor?
29:21
What should they look for when they are deciding to take this next step?
29:25
Andrew: Almost every software out there in our space in particular, the
29:29
better you know it, the more value you're likely to extract from it.
29:34
So I think design is an incredibly important aspect of
29:38
all software because design isn't about making things beautiful.
29:41
It's about making things, in our case, easy to use.
29:45
So I think compassionate design is really like, how can we as quickly as
29:48
possible, help you achieve your goal?
29:51
So at Wheelhouse, we invest a lot in design, partly because
29:53
we're like, well, we want you, yes, to make a lot more money.
29:57
And so design helps us illustrate different ways you can achieve that.
30:01
But b, we actually ironically want to see your time spent on
30:05
platform go down for listing.
30:08
We're not a social app.
30:09
We're not trying to get you to spend all day on us.
30:12
We want you to get the job done faster and have better results.
30:14
So design is something I would evaluate across property management software,
30:18
operational software, any software you choose because it might help you
30:22
learn the platform better, faster.
30:25
It might help your team.
30:27
It will help your team learn the platform better, faster as well.
30:29
So design is the thing that helps you scale faster.
30:32
So I would say a very blanket statement there, I'd look at the quality of
30:36
design, really around ease of use.
30:39
I would deeply diligence software as I say, you should diligence Wheelhouse
30:42
more than you diligence your bank.
30:44
If you're going to hand some pricing control over to someone, you
30:47
should do a lot of diligence on us.
30:49
I would look at their integrations.
30:51
I would argue that, uh, your business is more scalable the more integrations the
31:00
platform you choose, especially if it's what your property manager software has.
31:03
And the reason for that is you want to be able to switch out your op
31:08
software or switch out your pricing software and have one team or one
31:12
teammate learn a new set of processes as opposed to if you have a property
31:16
management software that you fully switch your whole teams now training.
31:21
So probably too much on that front.
31:24
Design and integrations put you in a position to scale your business, whether
31:28
it's your own time or whether it's a team.
31:31
Sarah: Andrew, we have a membership with operators oN the inside, and I know a
31:34
couple of them who have dissed certain property management softwares because
31:39
they're just too hard to navigate.
31:41
They're not attractive and therefore it's extra challenging
31:46
to even just understand it.
31:48
And a lot of our audience gets started into the short-term rental
31:51
hosting spaces for wealth building, but also they love hospitality.
31:55
And so when you talk about pricing, they're like, whoa, I got to do that?
31:59
And so if it can be fun and easy to implement, I think their game-- so
32:05
my next question for you, Andrew, is if someone came to you, hey
32:09
Andrew, I have five properties.
32:10
I want to start revenue management via a dynamic processing software.
32:13
How much time should I allow myself to learn and then to operate?
32:17
What time blocking should I give myself to master this for a smaller operator?
32:22
Andrew: So dynamic pricing softwares, I think all the major ones do offer
32:29
a link your account, we'll analyze your properties, and you can turn
32:33
on automated pricing right away.
32:36
So you could just do that.
32:40
And the results are even at that baseline, that will almost certainly
32:45
be a profitable decision for you.
32:48
And it's because-- not always.
32:50
I mean, if you just think about a market, if you're a totally unique property,
32:55
if there's no bookings, that's a system where a dynamic pricing tool doesn't have
33:00
enough data yet to price you perfectly.
33:03
So it depends a little bit about how much data a machine like us can see.
33:07
But if you have, call it 20 bookings, I have a lot of confidence that our
33:11
machine will be a set it and forget it.
33:13
We're going to make you some more money.
33:15
If you wanted to come in and start to change operational things, so say
33:20
you wanted to say, I really want to have a seven-day minimum stay policy
33:26
throughout my high season, my summer.
33:28
Well, now you need to come in and set that.
33:30
A machine right now doesn't know that's your strategy so you
33:33
need to come in and set that.
33:35
And if you're setting it across a lot of properties, you want a software that
33:38
makes that change really easy to do.
33:40
I think some of the revenue management systems are-- I think Wheelhouse
33:43
is very strong in that domain of if you do have, call it north of five
33:47
properties, I think we're a very fast way to make blanket changes across
33:51
your whole portfolio very fast.
33:52
So to answer your question, you could set it and forget it.
33:56
I think you probably, honestly, with a couple of hours, know
34:03
most platforms inside and out.
34:06
And then over time you learn about excellent revenue management theory.
34:10
We do have a one hour video that you can watch that will make you probably in
34:13
the top, I don't know, 20%, 10% revenue manager pricing people in your market.
34:18
It's not that hard.
34:20
Annette: Okay.
34:21
We're going to have to link to that.
34:22
We're going to help everyone out.
34:24
Here's my question.
34:24
Dynamic pricing, we have so many people that, they try it, they
34:28
test it, and they get scared of the rates right out of the gate.
34:32
Sarah: Oh, yeah.
34:33
That's huge.
34:34
Annette: And it's both ways.
34:35
It's either super high, or super low, or they immediately think that the dynamic
34:40
pricing software messed up their listing.
34:44
Take us through that initial shock of someone connecting
34:48
to a dynamic pricing software.
34:50
How would you take them through that--
34:53
Sarah: Do you have dynamic pricing therapy for--
34:54
Annette: I mean, this is what we get.
34:56
People are scared and then they connect it and they're like, I swear I'm not getting
34:59
any bookings and this pricing looks off.
35:02
So talk to us about how you would--
35:04
Andrew: That is--
35:04
Annette: Without those objections, what would you do you do or--
35:06
Andrew: Ihave never heard that objection before.
35:08
No, I'm joking.
35:08
I'm, uh, yeah.
35:09
Uh, so totally fair.
35:12
I'll put it this way, so pricing is imperfect.
35:15
Let's just start there.
35:16
Annette: Ooh, I like that.
35:18
Andrew: By imperfect I mean that we are trying to guess the right
35:25
for your unique property every single day, 18 months in the future.
35:31
Annette: Better get it right.
35:34
Andrew: Yeah.
35:34
And the truth is no one knows what the right price is.
35:40
We are all trying to use data to make a guess.
35:44
Now, for your unique property, to make that guess, we need to look at other
35:49
similar properties, which in and of itself is an incredibly interesting question
35:53
like, well, what is a similar property?
35:55
Annette: Mm-hmm.
35:57
Andrew: So our machine needs to now look at, uh, let's say we
36:00
identified a 100 competitors, but we're also looking at a whole market.
36:04
So what we are looking at is, I want to see every booking at your property in the
36:09
past, as far back as you'll show us, and I want to see everything looking forward.
36:13
And then I need to compare that to every other listing in your market and
36:16
every other listing in your comp set.
36:20
Even your comp set, that is an opinion.
36:22
Some people tell us, we only compete against premium properties.
36:25
We only compete against two bedrooms.
36:27
We only compete against properties on the beach.
36:29
We only compete against the other property manager in town.
36:31
So even your competitive set, there's actually an opinion that you have.
36:35
So all these things illustrate that a machine is an imperfect way to
36:40
try to assess your unique property.
36:42
And we don't know everything about your strategy yet, so you might look
36:44
at us and say, you're totally wrong.
36:46
It's like, well, actually, if you helped us build a better competitive
36:48
set, we're going to be more accurate.
36:50
And again, your comp set, I would argue, is still emotional for most folks.
36:56
Sarah: Yes.
36:56
Annette: Just like residential real estate when you're selling your home.
37:00
I mean, these comps, you're like, the comps are only getting
37:03
you this much for your home.
37:05
I know you think it's the bee's knees, but the comps aren't there.
37:11
Andrew: Yes.
37:11
Right.
37:11
You always sell a home and buy a house.
37:14
And, um, so the market tells us as accurately as possible what the booking
37:18
patterns are, and then things change.
37:20
A new event pops up.
37:22
Having a very reactive pricing engine is important, but I don't think
37:26
there's any software across revenue management or operational software
37:29
or anyone out there that literally you just turn it on and it works.
37:32
You have to come in and put a little opinion into the machine.
37:35
Now, I would still tell you, uh, the size behind our set it and forget it
37:39
approach is a revenue lift of about 18%.
37:45
You might disagree with us on-- we are wrong.
37:48
We definitely are wrong
37:50
Annette: Say that percentage again.
37:53
Andrew: I'm probably low balling it right now.
37:54
Annette: And I'm thankful that you're doing that because that, the points
37:57
that you were just making of what the machine is taking into account,
38:01
I sure as heck know I am not building out any spreadsheet anywhere near
38:04
that machine to do any of that work.
38:06
So that is where I think we have foolish pride as like, oh, we know
38:11
the market, we know our place.
38:12
It's like, no.
38:14
The machine is pulling so much data.
38:16
It's not possible or it's not anything that I would ever try to
38:20
do, but 18%, everyone, if you're not using the dynamic pricing software,
38:25
take a look at your revenue from last year, and heck, just do 10%.
38:29
Wouldn't you like to have that 10% more?
38:31
And that's all super low ball.
38:33
Andrew: Yeah.
38:33
If you go read the reviews, I mean, you'll see plenty of people who come in
38:36
without pricing set up, and they will write, we made a 100% more last year.
38:43
I don't want to oversell it because I don't want it to seem trivial.
38:46
I actually think it's incredibly important to come in and do deep
38:48
diligence on your pricing engine and do deep diligence on your revenue.
38:52
Think about your revenue management approach and what
38:54
you're trying to achieve.
38:56
Um, so I don't want to undersell that, and it doesn't work for everyone.
38:59
In some ways, if you were to buy some stocks, if you were to buy
39:05
the whole market, you de-risk.
39:07
And that's what a pricing engine does.
39:08
We're looking at a whole market and trying to de-risk your listing.
39:11
You can come in and try a strategy that you're more confident in that might
39:16
actually end up outperform the market.
39:17
That's where revenue management and an opinion comes in.
39:20
And you might have operational consideration.
39:22
So again, you might want to look at your minimum stays.
39:26
You might want to say, I don't really feel comfortable renting my home out
39:30
two days before, if it's a large home because that's likely to have a party.
39:34
So you might say, hey, no one can book my place two days out or a week out.
39:39
So all of a sudden you're starting to get operational parameters
39:43
around a machine like ours.
39:44
Or you might be able-- to your question earlier about cleaning, you
39:47
might say, well, I can't guarantee I can schedule a cleaner to come in
39:53
if someone books four days before.
39:54
So my calendar is basically closed four days before a stay date.
39:57
So all those things are operational considerations that you come in
40:00
and you work with a system like us, we make it very easy to build that
40:06
and to execute the pricing strategy within the confines that you give us.
40:10
And then your risk comes into it.
40:12
Your risk profile says, hey, I got to make a 1000 bucks
40:15
this month to cover my lease.
40:18
And once I make a 1,000 bucks for July, take a lot more risk.
40:21
Totally rational strategy.
40:23
Well, a machine doesn't know that you-- we don't know your lease.
40:27
You can see your strategy changes over time.
40:29
So that's where someone interacting with a system like us is the way to maximize
40:35
really the performance of your business.
40:38
Sarah: And I would arguably say, and I know this because I, used dynamic
40:41
pricing, it gives you more time to do things you love about hosting.
40:44
Maybe that is revenue management.
40:45
That doesn't mean you still can't leverage this machine and really
40:48
rock out and nerd out with it.
40:50
But for me, the operational side in terms of perfecting our turnovers, and really
40:54
rocking out our par levels, and wowing the guests, that's what gives me life.
40:58
And so I can spend almost less time doing the other components.
41:03
Annette: It's also you're a business owner and business owners try things.
41:06
They test things.
41:07
You should have a line item in your budget.
41:09
Like you said, it doesn't work for everybody, but as a business owner,
41:13
you at least have to try certain things that are working for majority
41:17
of other businesses in your space.
41:20
And I think that's the message that Sarah and I want to get across is
41:22
that we don't want hosts leaving money on the table because they have
41:27
foolish pride or their stubborn or they don't want to learn something.
41:29
And we're not saying it's going to work for everybody, but we have to,
41:32
as business owners, test it, try it, and make an informed decision, not
41:37
just a feeling, it's data over drama here, of like, okay, I tested it.
41:42
I didn't see the return that I wanted.
41:43
That's not just my feeling about it.
41:45
And so that's what we want to offer to everybody, is that it might not work for
41:49
you, but as a business owner, we want you to know what the softwares are, what they
41:53
can do, what they should be doing for you.
41:56
And if it doesn't work, fine, but at least you also know that you
41:58
tried it, boom, onto the next thing.
42:01
Andrew: I love that.
42:02
So pricing engine, revenue management platform, different, and we could
42:05
explore that for literally two hours.
42:08
A revenue management platform gives you the ability to run
42:11
a really controlled AB test.
42:13
So let's say you don't trust a pricing engine yet for whatever
42:17
reason, or maybe you have an owner because you're managing the property,
42:19
who doesn't-- whatever it is.
42:21
But let's say you don't trust it.
42:22
It was like, well, what if you wanted to try your own, just run
42:25
an AB test on your own strategy?
42:26
And maybe that's minimum length of stays longer on one property versus the other.
42:30
Maybe you only allow check-ins on certain days one property versus another.
42:34
Maybe you have a more aggressive last minute discounting policy.
42:38
Well, a revenue management platform, so Wheelhouse, we make it possible
42:41
to set an AB test in about a minute.
42:45
So don't even use our pricing, use our capabilities to run an AB test
42:51
and learn about your business.
42:53
And what's interesting about that, what we find is that, a, it
42:56
gives you a lot of clarity on--
42:59
Annette: Can you run a AB test though just on one property?
43:03
Could they do it just with one door?
43:05
Andrew: You would probably do-- harder.
43:07
Annette: Okay.
43:08
Andrew: Harder.
43:08
But what you what you could do is you could say-- what I would do in
43:12
that case is I would probably take two months farther in the future.
43:16
Annette: Okay.
43:16
And then do--
43:17
Andrew: I would take October and November.
43:18
Yeah.
43:19
And I would say, hey, I'm going to raise prices in November,
43:22
10% higher than I'm comfortable.
43:24
And I'm going to watch those two months and as they approach, I still have plenty
43:30
of time to change the strategy, but maybe you just take a little bit of a--
43:33
or maybe it's like you go to November versus October and you say, I'm going
43:37
to raise the price 20% on the weekends.
43:39
There are ways you can still test pricing strategies and track that.
43:44
And whether you would need our AB testing infrastructure, whether you probably would
43:48
just measure that on your own, relatively easy to do, but in some ways if you're
43:53
not using a pricing engine, revenue management is your own explorations
43:59
of how to price your property in a way that hopefully makes that lease easier
44:05
to cover, your cleaner, whatever you're trying to do, pay for your business
44:10
or pay for your life, uh, we're trying to give you more time and more money.
44:13
And sometimes that takes a little time too to get.
44:16
Sarah: Andrew, this was so good.
44:19
From stories with Brian Chesky and pancakes to revenue management versus
44:23
dynamic pricing, this has been incredible.
44:25
Is there anything you want to leave our listeners with that we haven't touched on
44:27
that you think would be really important for them to walk away with today?
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Andrew: There's a reason I like to say hospitality is hard.
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These are not easy businesses.
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I take so much pride in the fact that when Covid hit, the most amazing thing
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for me to witness was how quickly all these independent operators started
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adjusting their business moving so much faster than hotels did.
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And what you saw there was vacation destinations and Airbnb,
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this inventory flourished.
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And it was partly because independent operators made really fast decisions
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around changing market conditions.
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And I would remind folks that hospitality is hard, but your strength is responding
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quickly to things that change.
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You are the owner of your business and your brand.
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That's an opportunity for you to go out and ask that last guest,
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why do they buy your property?
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What do they love about your stay?
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And deliver that to the next person.
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I think putting in that extra work, that speed of execution that you have
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permission to do to change your business is the most amazing part about our space.
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And I would just say, keep leaning into that.
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And it is hard.
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It is fun.
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And it's rewarding.
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And congrats on trying to build something really powerful in the world.
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Annette: Love that.
45:42
Sarah: Oh my gosh.
45:42
That's a--
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Annette: Hospitality is hard.
45:44
Sarah: I want to get a bumper sticker.
45:46
Andrew: It's hard.
45:46
Annette: No, it's great.
45:46
Sarah: It hard.
45:47
And that's the thing too, we love to share with everyone, Annette and I, we like to
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have fun in our content delivery for sure.
45:53
But that's because it's so hard.
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There are so many components, especially as independent hosts, as
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smaller operators, we wear almost all the hats if not all of them.
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And so Andrew, thank you so much for your time today.
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Listeners, let us know what was your favorite part about today's episode.
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You can DM us on Instagram, email us, hi@thanksforvisiting.
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Go check out the show notes.
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We will link to so much stuff that Andrew talked about and touched about today.
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With that, I am Sarah Karakaian.
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Annette: I am Annette Grant, and together we are--
46:20
Both Annette & Sarah: Thanks for Visiting.
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Sarah: Talk to you next time.