I’ve lived in the mountains of Colorado for seventeen years now, a transplant from the East Coast by way of the Midwest. Given that winter is coming, a snow metaphor is appropriate. When you’re skiing or boarding down a mountain, in order to turn you need to be able to tip your skis or snowboard up and “get an edge.”
When you do it right, it’s called “carving.” Carving a good turn by using your edges feels fabulous and keeps you moving forward with speed and in style. In business everyone seeks an edge, and the vacation rental business is no exception. When you find an edge, you’ll be able to carve your way to business success. In this article I’m going to describe three edges that I think are becoming increasingly important as the vacation rental industry consolidates.
First, a little background. I’d been with working IBM for fourteen years when I moved to Colorado in 1999 to take a new position within the company. About five years later, my family bought our first second home in Keystone, Colorado. To make a long story short, I started managing it and began managing other properties for friends.
Steve Falk and I started SkyRun in 2004 alongside our day jobs. We grew SkyRun to one hundred properties, and we both left our other full-time jobs. With his legal and market development background and my technology and business consulting background, we made a good team.
This was between 2004 and 2007 and property management was booming. To get back to the snow metaphor, that time frame was what we call a “powder day”: when you get a foot or more of fluffy new “white gold,” the fun and ease of being on the mountain is magnified a hundred times, and staff who are more committed to the snow than to the job take a personal day. Fresh powder is sometimes called “hero snow” because anybody can get an “edge” when turning in powder. It doesn’t matter whether you have perfect technique, how good your equipment is, or how good your physical conditioning is—you’re in for a good day on a powder day.
Wind-blown, hard-packed, and icy days
It’s the same way in business. When conditions are good, business is good. Your weaknesses are most exposed during the bad times. From 2008 to 2011 the powder days we dreamed of turned into the “wind-blown, hard-packed, and icy days” we dread. This became an era when your weaknesses were most exposed and you hoped to merely hold an edge. In 2017, we find ourselves again in a powder day period. But powder days don’t last forever. Better sharpen those edges . . .
As Steve and I learned more about the industry, we gradually realized that the future belonged to multi-location property managers. To be competitive, we needed to have scale.
Our thought process was the following:
- We could remain a single-location property manager and grow by adding properties that compete with the hundred we already have.
- We could diversify our risk by adding a location in another geography, perhaps even at a beach, but we still would have one hundred more toilets to worry about remotely.
- Or we could license our brand, process, and systems to enable other local entrepreneurs to serve vacation guests and property owners the way the industry has for decades. Locally.
We chose option number three, and SkyRun has become a rapidly growing multi-location organization with six hundred properties in twenty-five locations. As poet Robert Frost said, “And that has made all the difference.”
I believe that choice has given SkyRun its particular edge, and that is how you too can get a similar edge. Regardless of how competitive your market is, and whether you’re a single-location manager or part of the growing number of large multi-location companies, whether you’re new in the industry or you’ve been around long enough to know what “GLA” stands for and how to send one (by fax), and whether you operate in the mountains or beaches, you can get an edge.
We’ve developed our edge through three practices: having strength in numbers, being efficient, and operating with a local touch. Let’s take a deeper look.
Edge 1: Go Big—There Is Strength in Numbers
Business leaders from Henry Ford to Amazon CEO Jeff Bezos know that critical mass and repeatable processes are vital to long-term business success and ultimately vital to how well you serve your guests and owners. A company with six hundred properties will simply be able to get better pricing and service than a company with only twenty, on everything from bed sheets to credit card fees to OTA listings. Industry studies such as the VRMA annual survey show that a manager with more than five-hundred properties makes much more profit per property (27 percent more at last measure) than a manager with fewer than 100 properties. In an industry that has a 20 percent to 30 percent commission margin, 27 percent more is a big deal.
Take hotels as an example from our hospitality industry. When I was growing up, there were still mom-and-pop hotels dotting the roads of America. The experience in each was unique, and most of them had some charm. There were no central reservations. There was no online, just a phone line. You could talk to mom or you could talk to pop. Then came hotel chains with buying power, central reservations with one number to call, a consistent experience, and lower prices. Who can blame us as consumers for flocking to the Holiday Inn or Howard Johnson or later Marriott and Hilton? We traded the local experience of dealing directly with mom or pop for what was more desirable: lower prices, consistency, and ease of booking.
Yet we consumers made a trade-off. Most of us would still prefer local knowledge and would prefer to deal with mom or pop. Perhaps that’s one reason the direct-from-owner renting of VRBO and shared spaces of Airbnb has taken off so rapidly.
What if we could, as an industry, have both scale and local touch? That’s a teaser; more on that later.
Edge 2: Operate Efficiently
We experience increasing competition from professional property management companies that offer a lower commission (if you are one of these, then kindly skip to Edge 3). Of course we traditionally priced managers will argue that they get you with other fees, and that’s true in many cases. I’m sure both mom and pop would have made this argument too, right until they put the “Closed” sign on the front door or sold out to a larger company. The point is that the manager who is built from the ground up to be able to operate at a lower commission will always be able to provide a better product in the long term. You can add more and more fees and charge more and more for light bulbs, but as long as your cost of providing the same level of service is higher than that of your competitors, your profits will eventually shrink or you will have to cut services.
Our industry is very people-focused, so an industry benchmark that I always pay attention to as a measure for efficiency (but which is not widely measured) is how many properties you manage divided by how many full-time equivalent (FTE) employees you have.
That gives you the number of properties you manage per FTE. If this number is less than ten, you should consider whether there are valid reasons for it to be that low. Perhaps you manage single-family homes and not condos, your properties are farther apart, or you have a higher-end clientele who require more attention (hopefully at premium prices). I find that an ideal number is about fifteen or twenty properties per FTE.
So how do you become more efficient?
A manager can get to twenty properties per FTE overnight by firing people and letting quality suffer. That is unequivocally not what I am suggesting here. I am talking about a superior product being the foundational assumption and the number of people it takes to provide that product being the measure of your efficiency.
By this measure, a better quality staff is key. Those people we all know and have working on our teams who can do more with less. Those who show up on a powder day. This measure doesn’t factor in the cost of higher-quality staff, and that’s on purpose. Always hire the better person.
Quality people require quality processes, and quality processes require quality technology. Some industries are ripe for technology. That vacation rentals is one of those industries is what attracted me and is what attracts so much venture capital.
Examples of processes that are ripe for automation abound in this industry.
As much as they like talking to you and we like talking to them, our guests would rather self-serve in almost every phase of their stay. Most guests would prefer automated online reservations and lead tracking; a good website with detailed information that anticipates and answers all of their questions; clear and accurate pricing; online, instant, and secure booking; the ability to look and book on their mobile, tablet, or desktop; preparation and arrival instructions by email; and an app that stays with them on their device. From shopping to preparing to staying to checking out, today’s guests would rather interact with you on their devices than call. I submit that this is a good thing because it is a much more efficient way for us to interact and doesn’t require as many staff.
Being able to automate all this without dropping quality depends on several factors. First, guests and owners must be able to reach a real local person 24/7 when something inevitably goes wrong. And second, preparation and maintenance of the property and the accuracy of listings and instructions must be outstanding. These are not easy things.
Many other examples exist of processes ripe for technology in the client/owner interaction aspect of the business. These include an owner self-serve portal for onboarding and ongoing communication; remote home care and monitoring through home automation; operational processes such as checklists, real-time call-in updates from housekeeping, good work order and property needs tracking; and marketing/remaining in contact with guests after their stay (which hopefully means prior to their next stay).
At SkyRun, our background in technology and having several locations sharing the cost allows us to use our own proprietary software for most of our core functions. It is tailored to our needs and priorities. So if we want to add a function to meet a market demand, we just do. We buy off- the-shelf software for some functions but always do a build-versus-buy analysis to determine whether that’s the best choice.
Interestingly, most multi-location property managers have chosen the path of developing their own proprietary software. With software development advances in open-source and standard APIs, this is becoming an option for more and more companies. It can be a competitive advantage if implemented wisely or a huge waste of time and money if not.
In addition to a quality team and technology, another way to be more efficient is to share or centralize processes or assets. You can do this in many ways. If you are a single-location property manager, you can buy off-the-shelf software to share the cost of software development. You can attend VRMA to learn from your industry peers. Additional opportunities for sharing data and resources include the VRM Intel’s Dashboard Reports with comparative market analytics and VRMA’s government advocacy resources. By sharing, you will gain efficiency.
Efficiency is where multi-location organizations have a distinct edge. In addition to the sharing described above, they can leverage shared infrastructure, processes, and staff. Sharing can happen in technical areas such as a phone system, HR and IT resources, and a reservations or on-call service as well as in marketing. Ultimately, the biggest advantage multi-location organizations share is building their brand.
Operating in a multi-location organization is like operating a single-location business without needing your own phone system, IT or HR department, reservation call center, or a team for marketing, search engine optimization, and social media. You have an edge by being able to concentrate on your guests and your owners and their properties. At SkyRun, we even share physical items such as two Matterport cameras and our SkyEye drone—things that one location doesn’t necessarily need completely to itself, so efficiencies are gained by sharing.
Edge 3: Local Touch, Local Fun™
Being big and efficient gives you two edges but can also come at a huge cost. Our business, after all, is to provide personal vacations and local experiences for our guests. Both VRBO and Airbnb, arguably the two most successful companies in the vacation rental industry, have that direct connection to the location through the property owner as their foundation. If we get an edge on efficiency by cutting staff and therefore service level, that’s not an edge. If you get an edge by doing everything the way it’s done in headquarters somewhere far away (hypothetically in the Northwest) or by relying only on technology without a personal touch, is that an edge? The question I posed earlier was, “What if we as an industry could have both scale and a local touch?”
Having a local touch is the area in which single-location property managers should and do have an undeniable edge. Being able to provide guests a personalized and local experience only comes from a local company or local owner. At SkyRun we refer to this as Local Touch, Local Fun™. Every location is independently owned and operated by a local owner and/or local staff who know the area and who are passionate about it. Also, all SkyRun guests receive a SkyCard with discounted or free local activities and in-room information written by our local staff that helps them enjoy the location the way a local would.
So it’s possible to get this local edge as a multi-location organization. In fact, ironically, done right, we (speaking as a multi-location organization myself) can use our edge in efficiency and numbers and shared processes to be better at being local too.
Examples of being both global and local are Ace Hardware and True Value Hardware and the Best Western hotel group in our industry. These owners are local businesspeople who pay local taxes, serve on the boards of local nonprofits, send their children to local schools, and are part of the community. When you go in, the owner is there to chat with, and he or she knows what product works best in the local area and what time is best to plant or paint. They stock snow sleds in Colorado and beach toys in Destin. And by being part of a larger brand, they leverage shared buying power, technology and processes, and loyalty programs to provide businesses that are tailored to be local yet are competitive with the box stores. It’s a remarkable innovation that we can emulate in the vacation rental industry.
So if you are a single-location property manager, your edge comes from leveraging your focus and expertise and list of past visitors to your location to provide the best locally focused guest experiences. To be competitive, you must also strive to be efficient and to sign as many properties as you can to grow.
When you are a multi-location manager, your edge comes from leveraging your inherent advantage of size and efficiency. To be competitive, we must also strive to provide the same local service that a single-location manager provides.
Perhaps the time has come for single-location managers to consider forming or joining a group of locally owned and operated locations with multiple locations. For a single-location manager, this could be an alternative to retooling or selling your business.
Any pursuit is more enjoyable when you have an edge. In an increasingly competitive and global industry such as vacation rentals, you need as many edges as you can get. Edges help you enjoy the powder days and survive the coming days when things inevitably become more challenging.
*I hope this article isn’t too edgy!
About the Author
Barry Cox is cofounder and CEO of SkyRun Vacation Rentals, a multi-location property manager with twenty-five independently owned and operated licensed locations in nine states in the United States, Mexico, and Canada. Although Barry may be able to help you get an edge in business, he admittedly is not the best “carver” on the mountains of Colorado, but he’s working on it . . . a lot . . . You can learn more about SkyRun at biz.SkyRun.com or www.SkyRun.com, or contact email@example.com.