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231. Making Vacation Rentals The Most Respected Travel Vertical · Thanks For Visiting

0:00
Sarah: Hello, welcome back for another great week.
0:02
My name is Sarah Karakaian.
0:03
Annette: I am Annette Grant, and together we are--
0:05
Both Sarah & Annette: Thanks for Visiting.
0:06
Sarah: We're going to kick off this episode like we do every week, and
0:08
that's sharing one of you our amazing listeners, our Instagram followers who's
0:11
using our hashtag #STRShare Sunday.
0:15
We'll share you here on the pod, to our entire email list, we'll shout
0:18
you out on YouTube, anywhere we can, and of course on Instagram on Sunday.
0:22
Annette, who are we sharing this week?
0:24
Annette: This week we are sharing at _homesuitedome_.
0:29
Again, that's _homesuitedome_.
0:32
And this is a dome home on 40 acres in Kenny Bunk, port Maine.
0:37
And it is, to say the least, unique.
0:40
Would you not agree?
0:41
Sarah: It is a very unique, and I'm very impressed you knew how to say that town.
0:44
Annette: I've been to Kenny Bunk port.
0:46
Sarah: Oh.
0:46
Annette: And I can tell you this because I was looking through their, feed,
0:50
it is difficult to get a short-term rental license there, so kudos to them.
0:53
They have it.
0:54
the town is, I want to say persnickety, but they have their rules and
0:58
regulations and you need to abide by them.
1:00
Couple of things we want to talk about this space.
1:02
It is truly unique and they've done a wonderful job with their drone footage.
1:07
Giving you a feel of what this dome home is and what the 40 acres looks like and
1:14
what that feels like because it is remote.
1:16
It's off the grid, and I think it's a great way to let the potential
1:21
guest see what they're getting into.
1:23
A lot of times we go heavy on the interior photos, and this is a special place.
1:27
So people need to know what they're getting themselves into, and so
1:30
they've really done a great job of letting us see what the exterior
1:34
looks like because it is unique.
1:36
But then on the inside, Sarah, let's talk about some things that
1:39
they've done a great job of too.
1:40
Also, they have a piano and that is something on the amenities list
1:43
that you do not see all the time.
1:44
So, this might be one of only two places I've ever seen with a piano inside.
1:49
Sarah: I love these hardwood floors.
1:50
I think they're pine, hardwood floors and they're beautiful.
1:52
But the one thing I really enjoy too is they mention how
1:55
it's essentially an open space.
1:56
There are no doors other than to the bathroom.
1:58
And so there are more than one bed.
2:00
You have visual privacy because there's walls, but there are no doors.
2:03
You can hear the guest you're with if you're chatting or snoring or whatever.
2:07
So--
2:08
Annette: Or whatever you do in bed.
2:09
Sarah: But they're very clear--
2:10
Annette: Clear noise you make in bed.
2:11
Sarah: They're very clear about that in their listing.
2:13
And it's not hidden.
2:14
It's like at the top, which just setting the right expectations for
2:18
your guests, it's going to help you get a good match when it comes to
2:20
guests who actually book your place.
2:21
They're going to know exactly what they're getting.
2:23
They're going to love their stay.
2:24
It's going to be great for you.
2:25
So well done there as well.
2:27
Annette: well.
2:27
Awesome.
2:28
Well, thanks again for using our hashtag and we will be combing
2:31
through the interwebs, our Instagram, finding the next one for next week.
2:35
But Sarah, let's get on to our episode.
2:38
Sarah: Okay.
2:38
We have a short-term rental celebrity on the podcast today.
2:42
Annette: International celebrity,
2:45
Sarah: International celebrity.
2:46
And listeners, get ready to have-- it's going to be a really special episode.
2:51
Annette: Let's just say we did our pre-interview for like two minutes
2:54
and Sarah and I were already taking notes, so get out your pen and paper.
2:58
He's coming to us live from Barcelona, so we're not lying when we say international.
3:02
We feel very lucky for him to share his time with us and expertise.
3:07
Sarah, who do we have today?
3:08
Sarah: Yeah, so today we have Simon Lehmann, who is one of the world's
3:10
foremost experts on short-term rentals and vacation rentals, and we mean that.
3:14
He leads-- okay, I'm going to brush up my French here-- AJL Atelier.
3:18
Annette: Yes, you got it.
3:19
You got it.
3:19
Sarah: Thank you.
3:20
Thank you.
3:20
A specialized vacation rental and business consultancy, while also
3:23
advising multiple companies as board member and executive chairman.
3:27
He's hosted some very notable people in our industry.
3:31
I want him to chat about that a little bit.
3:32
He's a sought-after speaker, panelist, and moderator.
3:35
Simon loves to broach high level and technical topics alike from
3:39
the future trends of short-term rental to the specifics of online
3:42
distribution in the top five OTAs.
3:46
Previously, Simon was the co-founder and chairman of Vacasa Europe, former
3:50
president of PhocusWright and ex board member of HomeAway, to name a few.
3:55
But he's also an accomplished operator having led Interhome as a CEO, Hotelplan
3:59
Group, deputy CEO, and Swissport as EVP.
4:02
Simon, welcome to the show.
4:04
Annette: Sarah's tired saying that.
4:07
Sarah: the list goes on and on.
4:08
Annette: Yeah.
4:08
I'm like, how is he having-- like I don't even know how Sarah said all
4:11
those things, so I don't know how you--
4:12
Sarah: But I wanted to make sure the listeners really understood
4:15
who they're in presence of today because, Simon, the industry is, I
4:19
mean, it's been on a rollercoaster ride since-- you were involved before
4:23
Airbnb was even a household name.
4:25
And we're going to talk about that, through Covid and all what that did to
4:29
the industry and where we are today.
4:31
So welcome to the show and yeah, we're just really excited to have you.
4:35
Simon: Thank you Sarah and Annette.
4:36
This is long in doing and actually, I was so looking
4:39
forward to speaking to you guys.
4:40
I mean, I love your energy and, we never really had the chance to meet in person,
4:44
but our first conversation was already very important to me and I said like,
4:49
one day we're going to do something together and I'm super happy to be here.
4:52
My introduction sounds somewhat boring, right?
4:55
Because at the end of the day, vacation rental is all about the
4:58
human beings that are behind it.
5:00
So it's all about human capital.
5:02
It's more important than any titles or any other achievement.
5:05
That's what we love about industry.
5:07
Sarah: And that's what we love about you, the fact that you're
5:09
bringing the guest to the forefront.
5:10
So when we first met you, we were on a Zoom call several months back,
5:14
and we didn't know what to expect.
5:16
We knew that you were a prominent figure in our industry.
5:19
But right off the bat, we understood your deep passion for quality.
5:24
And I want to kick off this conversation with that topic of quality.
5:29
Annette and I preach it all the time here on the podcast, but I know
5:32
that you've done some deep work.
5:34
You've talked with a lot of prominent people in this industry.
5:36
Where we are today after the pandemic, drivable destinations were really hot, and
5:42
now here we are going to be normalizing, especially here in the States.
5:45
But let's talk about quality.
5:47
How important is quality to you?
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What are you seeing?
5:49
Because I know you also oversee a lot of businesses, in your consultancy, and I
5:53
know that it's an important topic for you.
5:55
Let's start there.
5:56
Simon: Yeah, absolutely.
5:57
It's a big term, and I don't want to demoralize anybody, but I think
6:01
we still have a lot of-- I actually don't want to talk about quality
6:06
just an independent or single word.
6:09
I want to talk about product consistency.
6:12
It could be extremely high quality, and for other people, absolutely
6:16
no quality at all because you have to go downstairs to go to the
6:19
bathroom or whatever it might be.
6:20
So the question is, what is quality?
6:24
Quality can be different to many different people, right?
6:27
And depends on what you need, what you're looking for, what's
6:30
your definition of quality.
6:32
A treehouse, could be extremely high quality and for other people,
6:36
absolutely no quality at all, because you have to go downstairs to go to
6:40
the bathroom or whatever it might be.
6:42
So, definition of quality is an issue here that I would rather name consistency of
6:48
product, and I think one thing that we have to do a lot more work in vacation
6:53
rental, it's getting better over time, is providing a better consistency of product.
6:59
And consistency of product has many different facets.
7:02
Guest experience, guest communication, the interiors, the houses, the quality
7:07
of services we deliver, the quality of bed linen, anything that has
7:12
got to do with the stay has to have better consistency so the guest has
7:18
similar experiences all the time.
7:21
Because one thing we need to remember is we're not differentiating
7:25
ourselves by the brands.
7:27
We're actually differentiating ourselves by the product consistency
7:32
that we deliver to the customer that goes to the short-term rental.
7:35
And that's one thing that I always talk about in especially at conference, is
7:39
to say, we can't afford not to deliver a consistent experience or product
7:45
because everybody else suffers from it.
7:47
So if somebody had a bad experience in short-term rental,
7:49
everybody else suffers from it.
7:51
It's not about a bad experience with brand XYZ, it's a bad day.
7:55
I did a rental and it was horrible.
7:57
Does that mean that everybody else is horrible too?
7:59
And I think that's something we need to be mindful.
8:01
And this is the hardest thing to do in our industry, deliver consistent product.
8:06
Why?
8:06
Because at large we still depend on individual homeowners to deliver us
8:12
good properties with good interiors, good furniture, good decorations.
8:16
If you don't obviously owner manage, then you know as large, let's remember 95%
8:21
of supply is individually owned, which means we need to deal with what we get.
8:25
And to deliver a consistent product to our guests is a massive challenge,
8:29
but absolutely paramount if we want to compete with other hospitality vertical.
8:33
Annette: So we have thousands of people listening to this show,
8:37
that could be potentially tens of thousands of homes, but will definitely
8:41
be tens of thousands of stays.
8:42
What can you offer our audience of how our audience, we can be consistent?
8:47
What are some tangible things that they could do today to make sure that all of us
8:51
that are a part of our Thanks for Visiting community are giving that consistency?
8:55
What are some marks that you think that we could do immediately?
8:59
Simon: Well, if you're a rental manager with multiple properties, the first thing
9:02
I would recommend to deliver consistency is go and sleep in your own properties.
9:08
And this sounds so simple, and I say that all the time.
9:13
When you run a property management company, make sure that all your staff
9:16
are spending at least one holiday a year in one of the properties.
9:18
And negotiate terms with your homeowners that you're allowed to use it for company
9:24
use so you can actually start experiencing the product because then you know when
9:29
you get out of the shower with red hair that the hair dryer is crap, right?
9:32
Because you can't dry yourself because the cord is not long enough
9:36
or the mirror is at the wrong place.
9:37
And then you need to iron something because you need to go to work
9:39
and there's no iron board.
9:41
And believe it or not it's going to rain outside.
9:43
Well, good luck in finding that umbrella.
9:46
This already helps to deliver a consistent product.
9:49
I'm amazed that products are so inconsistent when it comes
9:53
to the basic needs of a stay.
9:55
And we don't have about fancy stuff, amenities and branded soaps and all
10:00
this stuff that's already sort of champion league in vacation rental.
10:04
Let's get the basics right and I think the consistency will be driven if you
10:08
experience your own product and make sure like a catalog of what is a basic
10:14
requirement for a vacation rental company property like number of glasses,
10:19
forks, and knives and things like that.
10:21
And I'm still amazed that even these basics are not met, and that's when
10:24
we talk about product consistency.
10:26
Sometimes you have a kitchen that allows you to do, um, a 10 meal course and you
10:30
have everything that you need and other times you have kitchen with a knife that
10:35
wouldn't even kill a dead dog, right?
10:37
So that's something that we're aiming very high, but we still
10:41
need to work on the basics.
10:42
Use your properties and see what's missing.
10:45
Annette: Okay.
10:45
That is a challenge I want to put out to all of our listeners.
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It's the beginning of the year and guarantee-- Um, and Sarah and I will
10:52
take ourselves up on this challenge.
10:53
Go stay on your property and if not you, someone on your team.
10:57
I think that every single one of us would find a handful of things that need to be
11:02
either improved or repaired, and that will impact every future stay at your home.
11:07
So, listeners, please take that.
11:09
If you stop listening to the episode right now, but you shouldn't, that's
11:13
the one thing I want you to take away is please spend at least one evening,
11:16
shower, cook, all the things in your home, and that will offer consistency
11:19
across the board for all of us.
11:21
Because if we're all doing, the compound effect of all of us staying
11:24
in our property will be invaluable.
11:25
So Simon, we're going to put that challenge out.
11:28
So, listeners, if you do that and you notice some things, email
11:31
us and let us know and make sure that we get that back to Simon.
11:34
All right, so what's next?
11:35
Simon: In regards to consistency and quality, or how do we get better?
11:40
One thing that is interesting, I've had a lot of debates just recently
11:44
actually to think about when we look at the tech landscape and see where a
11:47
lot of investments are now happening, it's all about guest experience, so
11:50
being capable of delivering a solid, consistent, seamless guest experience.
11:55
And we all believe that technology will take care of that.
11:59
This is total nonsense because one thing, when you look at the
12:02
hospitality industry, the hotel industry, I love the hotel industry.
12:06
I love it.
12:07
And they need to get better at it.
12:09
The dinosaurs, [inaudible].
12:12
I'm currently reading an excellent book, which I would absolutely
12:16
recommend to you all your listeners.
12:18
It's called Excellence Wins from Horst Schulze, chairman and CEO of Ritz Carlton.
12:27
Interesting enough, a very dear friend of mine, Andrea Stingio Jiomani,
12:31
he's the CEO from [inaudible].
12:32
He actually sent that book to me by, by Amazon as a present, which I love, and
12:37
I've read it within like three days.
12:39
So, and this brings it to the point, the human capital to deliver solid experience
12:44
is far more important than technology.
12:45
Technology will help us to enable to create standards with door locks, with
12:50
check in, checkout processes, etc.
12:53
But the smile on the face will not be replaced by tech.
12:57
And while we're trying to make these business as less interactive
13:00
as possible, we should think about what does our guests want.
13:03
Is that the right way to go about it?
13:05
And in the hotels, the human capital of the service is paramount because you
13:10
have far more interactions obviously in a hotel than you have in a rental.
13:14
But we, in vacation rental, we sort of get that human capital piece.
13:18
Yes, we cleaners, we need uh, maintenance, we need salespeople, but customer service,
13:25
resolving challenges, problems, defects, etc, etc, even though that they're
13:30
happening in remote, they're so important.
13:32
We should do more in training our staff, setting brand standards.
13:37
Hotels are all about brand standards.
13:38
What is this brand standing for?
13:40
What for you is a good complaint handling?
13:42
Within an hour?
13:43
Within a two hour?
13:44
Does that end up in a good review afterwards?
13:47
Do we take the review seriously enough?
13:50
Do we have the processes for them to come back down again?
13:53
How do we train staff?
13:55
Who is out there?
13:56
In vacation rental, who offers customer service training at
14:01
a level of a five-star hotel?
14:03
We all talk about tech, but the human capital gets forgotten.
14:07
I think that's where we have a lot of opportunities to increase
14:10
that consistency and that product quality by having everybody
14:14
understand what a good delivery is.
14:17
And a smile is the cheapest thing you can provide.
14:20
Sarah: It's so simple and it's so basic, but it-- like, you're
14:23
right, it is paramount, Simon.
14:25
And I know we're going to get on our soapbox a little bit here.
14:28
But Annette and I, we continue to be frustrated by some of the
14:32
content that's shared out there.
14:34
It's all about the acquisition for some people.
14:38
It's all about how to get the home, how to get the owner, how to get
14:42
the contract, and then it stops.
14:44
It's like, it's not sexy to talk about that next step.
14:47
It's not fun to talk about how to create brand standards.
14:49
What brand standards are important to nail down?
14:52
What do you think is at stake if we don't, as an industry, come together
14:57
and dial this in so that we can continue to have the trust of the traveler?
15:04
I mean, how do we get our listeners fired up enough to know that we need
15:08
everyone to be on the same page when it comes to demanding our fellow short-term
15:13
rental owners and operators and partners, that we all are in this together.
15:17
What do you think's at stake right now?
15:19
Simon: Well, commoditization is the biggest risk, commoditization
15:23
and standardization.
15:23
But we're far away from that, so I don't think we have to worry about it.
15:27
Is this short-term rental, vacational rental industry ever
15:29
going to be commoditized like a married or a Hilton brand maiden is?
15:34
Probably not, because we still have individual properties that we manage.
15:38
They're all different.
15:38
They look different, architects, different interior designs, house apartments,
15:43
alls shapes and sizes and forms.
15:45
Why do people like vacation rental?
15:48
Because of the convenience of many different things.
15:50
Traveling with family, traveling with friends and location is
15:54
very important, all the amenities around, the swimming pool, lots of
15:58
space, privacy, safety, security.
16:02
I mean, there's so many things that I can think about that still makes us
16:05
unique and we need to cherish those.
16:08
And I think that's one thing that is very important.
16:10
On the other side-- you've mentioned it before, we need to
16:14
also think about the properties.
16:17
And I see property owners and guests, by the way, equal of importance.
16:22
And that's one thing we have all the time when we go and consult property management
16:26
companies we're working with and we have all size and shapes of property
16:30
managers that we're working with as well.
16:33
And one thing that I always ask and one of my first question is, would you
16:37
consider your company to be customer-- a guest focused or owner focused?
16:41
And in 99% it's either or.
16:44
Nobody tells me, we're 100% balanced.
16:46
We treat the guests and the owners in equal important.
16:50
That needs to change.
16:52
That is exactly what is needed.
16:55
In good times, properties are very important because you can't get
16:58
enough because demand is up too.
17:00
But when all of a sudden the guests are not coming, well,
17:02
you need to come back to you.
17:04
And we always tend to forget that.
17:06
So we need to be in the balance of how we're structuring focusing our business.
17:11
The homeowner is equally important then to the guests.
17:14
Obviously, with the exception, if you're owner operater and
17:17
you own all your assets, then of course it's the different aspects.
17:20
But the large majority of vacation rental globally, 95%
17:25
plus is guests and homeowners.
17:27
And one thing that we are not doing well, and you just said that before,
17:31
which I found very interesting, we sort of get that owner to the signature
17:36
and then we need to think about what is next and how do you stay, a
17:40
unique and commoditized and standard.
17:43
But that's not done there.
17:44
The homeowner also wants to be part of that journey.
17:48
He wants to be part of what's going on as well.
17:49
And when we ask property managers, what is your biggest challenge out there?
17:52
They'll say, well, dealing with homeowners.
17:54
Well, we need to think about that.
17:55
Yeah.
17:56
It's all their own costs.
17:58
If you give your own cost to somebody to manage, of course, it's challenging.
18:02
But one thing we need to get better at towards the homeowner
18:05
is our value proposition.
18:07
And that's something I criticize in the industry for years.
18:10
We're not doing a good job in communicating our value
18:15
proposition to a homeowner.
18:17
The average homeowner has no idea how much hard work, dedication, sweat,
18:23
blood, and tears go into running a property management company.
18:26
They just see, well, you take X amount of commission.
18:29
That's too expensive.
18:30
I can do it with an OTA a lot cheaper.
18:33
Well, excuse me, sir, who cleans the toilet?
18:35
Who receives the guests at 3:00 in the morning?
18:37
Who deal with broken pipes and damages and all that?
18:41
There's so much work.
18:42
We should be proud of what we're doing.
18:45
Being proud of managing properties.
18:48
And if you think about it, and we talked about this already two years ago,
18:52
we're actually not property managers.
18:54
We are asset managers.
18:56
That's what we're because we're managing assets.
18:59
So think about if you manage an asset, what other things are already
19:03
becoming extremely important?
19:04
Because then you can say to your homeowner, hey, by the way, if we
19:07
throw in a jacuzzi into the backyard, we make another 200 ADRs or whatever.
19:11
So we start engaging the homeowner into the conversation.
19:14
So it's not all about guests, it's very much about the homeowner as well.
19:18
Sarah: I am obsessed with that viewpoint.
19:20
Annette: The asset management.
19:21
Sarah: The asset management, yes.
19:22
That's a mind blown statement too.
19:24
And we're going to share that with other people and give you all the credit, Simon.
19:27
But you're right, it's involving the owner too and not getting defensive.
19:30
And Simon, I want to bring this up too.
19:33
So a lot of our listeners, they're owner operators too.
19:37
And then they often get into property management because they're so good
19:40
at what they do and they really fall in love with what they do and
19:42
then they start doing it for others.
19:43
But one thing I see too is these owner operators don't treat themselves like
19:49
if they were their own client in terms of really dialing in how the month
19:53
went, what was our ADR, what was our occupancy, what are our goals this year?
19:57
And really treating their home like the business it is.
19:59
Do you work with a lot of owner operators maybe who own more than one property
20:03
and are really wanting to take the next level in their own asset management?
20:07
And how can they do a better job of helping themselves and their own assets?
20:11
Is it as simple as maybe just treating themselves as if they were
20:14
a client or a third party, or what do you see there in your consultancy?
20:18
Simon: Yeah, absolutely.
20:19
I mean, owner operating is becoming more and more popular.
20:22
But before I go deeper into that answer, I would also remark here as
20:26
inflation is rising and as interest rates are rising, owner operating
20:30
models are also under massive risk and can change again very, very rapidly.
20:35
I'm a dinosaur.
20:36
I've been in vacation rentals since 2005.
20:37
I've seen a few crisis over the past.
20:40
And one thing that I remember extremely well was 2008 financial crisis.
20:45
I can assure you, owner operators disappeared, all of them.
20:49
So we need to be extremely mindful of that business model, going forward as well.
20:53
In good times, great gold mining time.
20:55
In bad times, down very fast.
20:58
So if it's not managing somebody else's assets, and so that
21:01
already has a certain risk to it.
21:03
So you need to be a risk averse and you need to also understand your risk
21:07
profile and therefore all the questions you need to ask yourself as an owner
21:10
operator will also help you how do you run this business, in terms of an asset.
21:14
And I think one thing I would see more dangers in the owner operating
21:18
model is that we are commoditizing what we're offering to our guests
21:23
in terms of types, how do we furnish standard quick, and easy?
21:28
Are there differentiators in terms of how you do interior designs, etc, etc.
21:33
And what drives ADR?
21:36
What are, like if you do revenue management, obviously, you need
21:40
to do a lot of revenue management.
21:41
You need to consume a lot of data.
21:43
You need to consume hotel data.
21:45
You need to understand which amenity can potentially drive
21:49
better returns on your asset.
21:52
And this is not just a comp set from your revenue management tool that shows
21:56
to you vacation rental XYZ is this much.
21:59
And I think that there's a lot more to it if you're an owner operator,
22:04
to actually go deep into data, understand the value drivers that
22:08
you have, where you can make impact.
22:11
But then you also need to understand your cost drivers and everything else
22:15
in order to optimize your margin.
22:16
And yeah, you probably run your business a little bit different if
22:20
you're an owner operator versus a, a classical property manager, and I think
22:25
you would have lot more data driven.
22:26
Doesn't mean the others don't have to be, and very much you need to
22:29
have models in place that you know what are levers that will have an
22:34
impact on ADR occupancy because-- and RevPAR, because that's something that
22:42
might have a different correlation.
22:44
Because all of a sudden you might be better off just renting for a certain
22:49
period of time instead of the full year because the others are less
22:52
profitable, doesn't make profit at all.
22:54
So I think there's a lot we have to look into.
22:57
And while you drive the cost of your own assets, you can also be more aware
23:02
of what can you do, what you do to reduce fuel and electricity consumption?
23:08
You can introduce sensors for your air conditioning so it turns off
23:12
automatically when people leave.
23:14
I mean, energy is becoming a massive cost to our industry, and if I would be an
23:19
owner operator, especially in Europe and energy costs, energy consumption, that
23:24
will have a definite impact on my P&L.
23:26
So I'll make sure I want to save electricity.
23:28
Labor is another one.
23:29
What is best?
23:30
To have an external laundry?
23:32
Internal laundry?
23:33
Is it better to have internal cleaning people?
23:35
Is it external?
23:36
Is it a mixture of both?
23:38
All these aspects in relation to the operation will become important
23:42
to think about as an owner operator while you're managing your own asset.
23:46
Needless to say, it also applies to property manager, obviously, but there's
23:50
a few different levels of what you can influence also towards homeowners in terms
23:55
of type of rent and how much rent you have, and when you have availability as
24:00
well, which you cannot always control by if the asset is owned by somebody else.
24:04
AD MARKER
24:05
Annette: If you don't mind sharing with us, I want to
24:06
go back to 2008 for a second.
24:08
Sarah: Yes, me too.
24:09
Annette: And you said that a lot of the owner operators disappeared.
24:13
Were they selling their assets off?
24:15
Were they too risky?
24:16
Can you talk about what you saw there?
24:18
Was it like just these vacation rentals one after one after one, like
24:22
the inventory completely reduced?
24:24
I feel like we're starting to-- Sarah and I, we get a lot of emails, DMs
24:29
from people that are like, oh my gosh, like is the market turning?
24:33
I'm not getting the reservations that I used to get.
24:35
I don't know if this is making sense anymore.
24:36
So what happened in 2008?
24:38
Can you take us back there and what you saw with the owner operator?
24:42
Simon: I mean, maybe I need to specify a little bit.
24:45
So first of all, I can talk about Europe and talk about US.
24:48
Annette: That's okay.
24:48
Simon: At the time, I was running Intrahomes as the CEO.
24:52
And I was more like-- actually it was interesting.
24:56
So owner operator as a business as such didn't exist at that time.
25:01
The only thing I make in comparison, if we would've had owner operators in
25:05
2008, they would've all disappeared because they wouldn't have been able to
25:09
sell their assets because they wouldn't have been even able to serve their debt.
25:14
So the banks would've sold them on their behalf.
25:16
So it would've been going a lot faster than that.
25:18
So what happened was the real estate market devalued massive.
25:22
So you had a ton of-- especially Spain was one of the most affected.
25:27
Many second homes by people who live in Germany, Switzerland, England would
25:31
have houses in Spain, and real estate prices have gone through the roof, and
25:36
we've seen the same in the United States.
25:38
We see how challenging it for large real estate investment
25:42
firms to find good properties that provide you with good return of
25:46
investment, very, very difficult.
25:49
So while the market is inflated, when a crisis like that happens, interest
25:54
rates goes through the roof, valuations will drop, the buyer market is over.
25:58
So you sit on these assets that you still need to rent at a higher rate,
26:03
but the market is flooded with supply.
26:05
So one thing that happened when we were running into home at a time, we had
26:09
Spanish banks who set on thousands of villas that people couldn't pay anymore
26:15
their mortgages and they had to sell them.
26:18
So the banks came to us the entire holiday apartment blocks and said,
26:21
please take it off our hands and at least create some rent while we're
26:25
trying to find a buyer at the time.
26:27
So the market just turned totally upside down.
26:30
So while real estate prices are overheated and now, interest rates are
26:34
going to go up and what you do if you can't serve your debt anymore, well,
26:38
the bank will liquidate your property.
26:40
So, I mean, this is the devil on the wall, of course, but
26:43
we need to be mindful of that.
26:44
And one thing I would highly suggest to owner operators is to
26:49
think, okay, how far can I go?
26:52
That I can still run a profitable business.
26:54
Labor costs becoming more expensive.
26:56
We see inflations.
26:57
Interest rates go up, so all that goes actually against my operating expense.
27:02
Now, at the moment, we can say, well, demand is still super high.
27:06
Do we remember what happened in March, 2020 when the big OTAs decided
27:11
to turn the tab off and refund all the guests instead of the owners?
27:15
I mean, all the master lease arbitrage companies went out of business with
27:18
exception of Saunder because they raise capital at the right moment.
27:22
So we've seen it before what can happen.
27:25
If it's master lease arbitrage or owner operator, same thing.
27:29
Huge risks.
27:30
And I would think about, am I capable with my business model to afford
27:35
to charge eight, nine, 10% interest rates and still have a profit rate?
27:40
So you need to stress test on your business what is doable and what is
27:43
not doable to define your strategy.
27:45
Annette: Ooh, I love that, stress test.
27:47
We might steal that from
27:49
Sarah: stealing it stealing a
27:49
Annette: we're
27:49
Sarah: of things
27:49
Annette: to
27:49
gonna steal some well we're gonna
27:50
Sarah: we'll
27:51
still
27:51
Annette: from our mentor.
27:52
That's what we're going to say.
27:54
Sarah: No, but you're not wrong.
27:54
And again, as I go back to this-- being a conversation that I want
27:58
to see more that, you're right.
28:00
Whether it's an arbitrage or owner operator is yes, you've got the property.
28:05
That's wonderful.
28:07
Have you done any forecasting?
28:09
Do you know what's ahead?
28:11
What can you withstand?
28:12
We are seeing different occupancies than we were last year.
28:17
When did you buy the property and on what numbers did you run?
28:21
Where did you need to hit?
28:22
Yeah, sitting down and running those numbers and really looking
28:25
at your operations and I just don't-- people aren't doing that.
28:28
And then they just get kind of like the world is falling syndrome.
28:31
You know what I mean?
28:31
Like everything's, I don't know what to do.
28:33
There's no guests here.
28:34
But then you ask them about what they're doing to get guests, which leads me to
28:37
the next thing I want to talk about with you, because I know you're very passionate
28:40
about it and it is, reducing our industry to the Kleenex or to the Hoover vacuum.
28:47
What do you mean when you say that?
28:49
Simon: I love it.
28:50
Before I go there, I want to say one additional thing.
28:53
It still puzzles me.
28:55
So we talked about interest rates, the risk in businesses,
28:58
etc, on the supply side.
29:00
But let's one second think about demand side.
29:03
It's still puzzles me in a great deal people are building their sole business
29:09
on a company based out of San Francisco.
29:12
This for me is absolutely crazy.
29:16
Okay.
29:16
I would never invest into a property management company that
29:20
has one demand generation channel.
29:22
And in the best case is two.
29:23
The other one is based somewhere in Seattle.
29:27
So having these two companies as your demand generation channel, that is not,
29:33
excuse my word, sexy at all because that-- what happens if one of them will,
29:40
whatever happens, regulatory impact.
29:43
Something that I urge when people do about stress test, you need to have from
29:48
a demand generation standpoint, you need to have as many eggs and different baskets
29:52
as you possibly can and do multichannel distribution because one channel to
29:58
create all your demand and your success, that's not a sustainable business model.
30:03
So this leads exactly to the question about the Kleenex, because that
30:06
company that we're talking about, and I'll not say the brand, has
30:11
made it happen, that we have been reduced to glorified cleaning people.
30:19
And don't get me wrong, cleaners do an incredible job.
30:23
We can't do without them.
30:25
And we need to be very, very, very mindful of them.
30:28
So this is why this company has now made it possible for people to say,
30:32
hey, where did you go on vacation?
30:36
And then they will say that word and it's say, well, like how often
30:40
did Brancheski clean toilets?
30:42
I don't know exactly how many.
30:44
It probably wouldn't be too many.
30:46
So for me, we can't accept that.
30:49
Property managers are the ones who are doing the hard yards.
30:51
They're the ones who make sure the property's there, the product
30:54
is consistent, guest experience is amazing, everybody's happy.
30:58
People come home with [inaudible], holiday and then you asked them,
31:03
hey, what did you do for vacation?
31:05
Well, we did-- what did you do?
31:07
Who was actually your property manager?
31:09
Uh, I don't know.
31:10
I I know where I booked it, but I dunno actually, who made sure my bed
31:14
was nice and it was smell beautiful.
31:16
The linen was great.
31:17
It was clean.
31:18
I had great sharp kitchens knifes.
31:22
I had a wonderful pool.
31:23
The family had a great time.
31:24
So this company made it happen, and I have a lot of respect for
31:29
that company, don't get me wrong.
31:31
Massive brand marketing, absolutely amazing.
31:34
Unfortunately, we have become too lazy to-- because somebody else
31:39
is doing the demand work that we just say, okay, well it's coming,
31:42
so why should I worry about it?
31:44
And that has now taken over and now being reduced of just cleaning properties.
31:50
But actually we should be proud of what we do as an industry and
31:53
not being dependent on a company that brings all the demand that now
31:57
we're being reduced to that brand.
31:59
Annette: What if one of our listeners though today is only on one of the OTAs?
32:04
I will say it.
32:05
What if they are just on Airbnb or Vrbo?
32:07
What would you suggest?
32:08
Today they're listening to this.
32:11
They're like, that was a gut check, what you just said to them.
32:14
Oh my gosh, all of my reservations are coming from one place.
32:19
How can they start?
32:20
What would you advise them to do today to start to get those direct bookings?
32:26
To not have all their eggs in one basket?
32:28
What could be your advice, their takeaway, that they could doing today?
32:30
Simon: Absolutely.
32:31
That's the whole idea.
32:32
We need to create value.
32:34
And one thing you guys and and us have in common, we want to
32:37
professionalize vacation rental.
32:38
That's what we're passionate about 24/7.
32:40
We want vacation rental to be the most respected travel vertical in the world.
32:45
That's our ambition.
32:46
I met Brian Sharples, the founder of HomeAway in 2005.
32:50
I asked him, what's your mission when nobody knew what HomeAway was?
32:54
And he says, I want to build a respectable travel vertical.
32:58
And since then, we were friends.
33:01
2005, vacation rental was on the level of a type ware party.
33:06
So we've come a long way in professionalizing this industry, and
33:10
we still have a long way to come.
33:12
And one is the distribution strategy.
33:14
Yes.
33:14
That question is asked.
33:15
So for me, it's part of the risk profile.
33:18
Where is my supply coming from?
33:20
Where is my demand coming from?
33:21
If the demand patterns all of a sudden change, when all of a sudden
33:25
the Asians coming back, well, who is going to get you those?
33:30
Now who can help you to balance your demand generation, if
33:33
it's not just one channel?
33:35
So what I'm telling to these people is to think about, first of all-- that's one of
33:39
my first questions when we consult people, how does your distribution make look like?
33:43
How many bookings are coming from which channel?
33:45
How many do you do direct?
33:46
How many do you do from Airbnb, Booking, Vrbo, you name them, and others.
33:51
Method search.
33:53
How many reservations are coming from Google?
33:55
Who out there works with Google Homes?
33:57
They're going to come and they're doing a lot of work right now, Google.
34:01
And actually we're working very closely with the team to-- and I
34:04
see they have massive opportunities to come into this market as well.
34:09
Google Flights is well established.
34:11
Google Hotel ads well established.
34:14
Google Homes will be there too.
34:16
So I'm not saying it is wrong.
34:18
What I'm saying is it is super risky.
34:22
So think about it and say, okay, what alternatives do I have?
34:25
What other channels are out there?
34:27
In how many different baskets can I put my demand strategy?
34:32
There are unique channels out there, niche channels, we call them.
34:36
If you are in a leisure destination in Florida, for example, close to golf
34:41
course, we'll make sure your properties are listed on some of these niche sites
34:46
that are made for golfers or on niche sites that are made for pet owners or, I
34:52
mean, there's even niche sites for people who like to smoke dope, like Airbnb.
34:56
Sarah: There are, yes.
34:58
Simon: So you can lease properties on Airbnb if you
34:59
welcome mag, cannabis consumers.
35:01
I mean, that's incredible.
35:03
There's a lot of different alternatives out there.
35:05
Do you work with college game organizers who bring demand as well?
35:09
There's so many different-- it's not just direct bookings
35:12
because that's the hardest part.
35:14
Let us remember in 2019, Booking.com and Expedia, both together
35:19
spent 12 billion on Google.
35:21
So building a direct brand is a bit of a challenge.
35:24
But for me, building a direct brand is a commitment in your
35:28
strategy and takes years.
35:30
But it's definitely worth doing.
35:31
But it's not a work in the park.
35:33
Sarah: I don't know if you know this, Simon.
35:35
You probably do, but your company just sent out a wonderful email that
35:38
actually shows all the really wonderful different channel distributions
35:44
and technology that's out there.
35:45
And it is a colorful document.
35:48
And I mean that, and there's all these different logos and brands.
35:51
Annette and I pride ourselves on keeping up with the industry and there were so
35:55
many on there that I had never heard of.
35:57
And so I don't know, Simon, if we can work a way for us to like link
36:00
to it or something in the show notes, but it was one of those valuable
36:04
emails I've gotten in a long time.
36:05
And obviously your company sees the value in exposing our industry to all
36:10
the new technology companies and channel distributions and just different ways
36:15
to diversify ourselves as an industry.
36:17
Do you want to talk about that email a little bit because it, blew me away?
36:19
Simon: Oh yeah.
36:20
I mean, you made my day.
36:21
I love you forever.
36:22
Right.
36:23
I said we have a team meeting today in Barcelona.
36:26
So we're all here in Barcelona right now where our office is.
36:28
And I said literally an hour ago, this technology landscape was the
36:32
biggest event that AJL has ever done.
36:34
So we had 23,000 views on LinkedIn.
36:36
It went totally haywire, and I knew it's going to go that way because
36:40
we've been asked about this for years.
36:42
And I've had roles in my previous life at PhocusWright where we looked
36:46
at many different landscape slides.
36:49
In every tech vertical you see these slides, but in our industry,
36:52
the tech landscape never ever anybody did something in the same
36:57
breadth and depth that we did it.
36:58
And I wanted to do it for a time, for a long time.
37:01
It's a lot of work.
37:01
It's 410 tech companies on there categorized in 22
37:05
subcategories on technology.
37:08
So navigating technology in our industry is brutal for a PM, like
37:13
how much technology do I need?
37:14
What is an over kill?
37:16
Guest experience is the most crowded space.
37:18
We see consolidation in the PMS front.
37:20
We see hospitality companies from the PMS coming in, so I could
37:23
talk for hours on this slide.
37:25
The idea that we have behind it was manyfold.
37:28
First, we wanted to have every company in the vacation rental
37:31
industry to use that slide in their pitch deck, to their investors, etc.
37:36
We want all the investors to look at it.
37:38
We want all the tech companies to look at it because then they now know who else
37:41
is out there, who they can partner with.
37:43
And we will see M&A opportunities coming out of that.
37:46
So this slide has changed AJL literally in terms of reach and the way we can
37:54
position ourselves as a thought leader in creating business intelligence
37:57
on vacation rental overnight.
37:59
So we have a lot of passion about this, and we're actually in the process
38:02
of thinking to do the same about the property management side as well.
38:06
Sarah: No, It was-- it was good.
38:07
Annette: We'll, make sure to link that there.
38:09
As we wrap up this episode, Simon, I want to kind of go back to our
38:13
pre-conversation before we hit record and let's just talk about the toaster.
38:19
I want to go through a couple of spots for our listeners too, that they can
38:22
take a look at their property when they're doing their overnight stay
38:25
Simon: Yeah, I thought our conversation was quite engaged, but
38:29
it sort of became very technical.
38:31
So to close it a little bit more on a human front is
38:35
definitely not something wrong.
38:36
And as I said, at the beginning, human capital remains the most
38:39
important capital in our industry.
38:41
And we talked about standards and product standards as well.
38:45
And when we talk about basic standards as well-- in 2005, just a little anecdote,
38:49
when I got contacted by Head Hunter saying, are you interested to become the
38:53
CEO of the one of the largest property management companies in the world?
38:56
I said, you must be out of your mind because the perception at the time was
39:02
sticky, bad, smelling apartments in the ski fields, carpet that haven't been
39:07
cleaned for 30 years, the couch is gray.
39:09
Like really bad guessing, like big bad spirit that was rental at the time.
39:14
Vacation rental is very old in Europe and very well established.
39:16
And now fast forward, we still work on some of the basics.
39:20
So one thing that I've sort of became, whenever I stay in customer properties
39:25
of our, I would only rent anyway with my family, I sort of have a Simon
39:29
Lehmann checklist of stuff, and I always say I find at least five to 10
39:34
things that I believe are not in order.
39:37
And one is the toaster.
39:39
So I always go and turn a toaster upside down and trust me in 99%
39:44
cases, the crumbs from the previous guests fall out the toaster.
39:47
Then I go and check out the dishwashing filter.
39:51
You can see the breakfast that the customers have reported and checked out.
39:54
And then you go and not try to commit suicide, but go to the knives and see
39:59
what you can do with these knives.
40:01
Apart from maybe hurting your finger, you can't do anything with these knives.
40:05
They won't even chop a tomato.
40:06
So that's another issue.
40:08
And then there's many more.
40:09
Fluff in the drier.
40:11
And I always make fun of that.
40:12
So I had, once I was visiting a luxury rental company in Colorado, who has ultra
40:19
properties and, they already knew-- and I was staying in this massive mansions,
40:24
like a six bedroom with a jakuzi.
40:27
The master bedroom was as big as my own house.
40:29
It was crazy, huge.
40:30
And I was in this house on my own.
40:32
I arrived some day, so I had enough time to take this place to find something.
40:37
And I was literally taking this place apart.
40:39
And the next morning I came to the boardroom, everybody waiting,
40:42
smiling, did you find something?
40:45
And uh, they looked at me, as in, no, he didn't.
40:48
And then I put my hand in the pocket and I reached out and I
40:52
got a capsule from the espresso machine out of the coffee machine.
40:55
It's the only thing I found.
40:57
So basically the espresso capsule was still in there from the previous guest
41:01
because it was not open where the capsule falls out, because obviously
41:04
you get the coffee when it's closed.
41:06
So I find an espresso capsule.
41:09
So between finding only an espresso capsule and not a single hair in
41:12
a six bedroom home all the way to really disastrous properties
41:17
is, we have a long way to go.
41:19
Sarah: Wow.
41:20
All right, listeners, the challenge has been set and we expect all of
41:24
you to meet Simon where he's at.
41:26
Annette: I mean, the toaster check.
41:27
I'm going to have to do some-- we're going to do some content on that too.
41:30
Sarah: I also want to-- that makes me think of my cleaner, who deserves all
41:33
the shoutouts as that's the first thing she does is turn that toaster upside down
41:37
and it's when you've got a good cleaning team who really cares about those details.
41:41
Annette: Or if you're like, I like bedroom.
41:42
Simon: I mean, if you dare make a fried egg with one of the pans that
41:45
you find, good luck to get it out.
41:47
Annette: Oh my goodness.
41:49
Simon, where can our listeners learn more from you, learn more
41:53
about you and your organization?
41:54
What's the best place for them to follow along on all the
41:57
amazing work that you're doing?
41:59
Simon: Absolutely.
41:59
Thank you so much for asking.
42:01
So obviously my name Simon Lehmann on LinkedIn is one and then AJL Atelier.
42:06
We have our own website.
42:08
It's very simple.
42:08
It's ajlatelier.com.
42:11
I'm sure we can make that visible somewhere.
42:13
Nobody knows about French spelling as well.
42:15
Be complicated.
42:17
And, uh, obviously simon.lemman@ajlatelier you'll find team on LinkedIn and on our
42:23
own website and come to conferences.
42:26
We're literally at every single conference with one of our team
42:29
members, either speaking, moderating, or being part of the crowd.
42:34
So, uh, yeah, we're all over there.
42:35
Sarah: Thank you for all the work you do for showing up all the places
42:39
and not being afraid to say the things that we're all thinking.
42:42
We really appreciate all the work that you're doing, Simon.
42:45
With that, my name is Sarah Karakaian.
42:47
Annette: I'm Annette Grant, and together we are--
42:48
Both Sarah & Annette: Thanks Visiting.
42:49
Annette: We'll talk to you next time.