249. Maximizing Revenue: Insights on Dynamic Pricing Strategies with Andrew Kitchell

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[00:00:00] Sarah: Hello, welcome back for another great week. My name is Sarah Karakaian.

[00:00:04] Annette: I am Annette Grant, and together we are–

[00:00:06] Both Annette & Sarah: Thanks for Visiting. 

[00:00:08] Sarah: We’re going to kick off the show like we do every week, and that’s sharing one of you, our amazing, loyal listeners, viewers, using our hashtag #STRShareSunday. If you use it on Instagram, we are prowling. We want to find you. We want to share you. Annette, who are we sharing this week?

[00:00:22] Annette: Today we are sharing @vtstays. I’m going to do something I haven’t done before, everybody, so bear with me while I do a little sound effect. Okay. The reason that’s important is our host from VT Stays, Brad, is doing a mean guitar riff on a piece of wood with a sander right there.

[00:00:48] Sarah: So good.

[00:00:49] Annette: And him and his wife are just killing their short-term rentals in Vermont, VT stays, @vtstays. I just dug in to– he caught me with the guitar riff, and then they really wrote me in with their Airstream that they redid. So they have an Airstream. They have another house on this property. It was their dream to move to Vermont. They did it. I want you to check them out and a couple of things that I’m going to talk about there. Instagram, that I do with a lot, it goes directly to their direct booking site, which is wonderful.

I love it. It gives a little bit about them. And if you can make that connection with your guest, I already want to go hang out with them and stay with them. So putting their picture there and a little bit of their story, I’m really invested in them and I’m willing to make that investment even deeper by paying to stay with them.

 They show their personalities on their Instagram. They have amazing properties. And they love Vermont, and they want to show you also why you should come visit Vermont. If they could, I would love for you guys to reach out so we can have you on the show and we can all play air guitar together.

[00:02:02] Sarah: Air guitar. So good.

[00:02:04] Annette: Awesome. So listeners, please check them out, give them some love, and thank you for using our hashtag.

[00:02:12] Sarah: All right, let’s get onto this show. Listeners, buckle up. We’ve got a story to share with you, and a successful one at that, but I’m sure there are a lot of challenges and experiences along the way that you all can learn from, be inspired by. We are so excited today to have Andrew Kitchell, who is the CEO and founder of Wheelhouse, a revenue management platform that serves a leading professional operators in short-term rental, vacation rental, corporate rental spaces.

[00:02:36] Annette: Sarah, did you drink a lot of coffee?

[00:02:38] Sarah: Am I talking really fast? 

[00:02:39] Annette: Yeah.

[00:02:39] Sarah: I’m really excited.

[00:02:40] Annette: Listeners, I’m going to let you know, it’s a million degrees in our studio today, we’re so hot. I think Andrew can see us sweating through. We’re trying to figure out the temps in here. So you can’t hear the AC. Okay. I’m keeping up with Kitchell.

[00:02:56] Sarah: But listen, so Andrew Kitchell is not just the CEO and founder of Wheelhouse. He is so much more. He has 10 years of experience in the accommodation space having built multiple technology and operating companies. So if you are not looking to build a software company or a revenue management company, that’s okay. Stay with us because Andrew has a storied background. Andrew, welcome to the show.

[00:03:17] Andrew: Very excited to be here.

[00:03:18] Sarah: Oh my gosh.

[00:03:20] Andrew: Yeah, so much to cover today.

[00:03:22] Annette: Let’s tell our listeners how we met Andrew. We’ve been chatting via LinkedIn, and host, if you’re not on LinkedIn, get on LinkedIn. There are so many amazing vacation rental groups and people posting on LinkedIn. If you have your profile up there, check it out. Um, ask me to be your friend. Are you friend– do you friend people on LinkedIn? I forget what you–

[00:03:44] Sarah: I think you connect.

[00:03:45] Annette: Connect with me on LinkedIn. But Andrew, we were all on a, um, Breezeway. Shout out to one of our show sponsors. We were a part of their Elevate virtual conference and we had the pleasure of being in the same virtual room with Andrew. He was leading Sarah and I and some other lovely hosts that are going to be on the show too. And we just had a great conversation about operations and wanted to bring Andrew and his expertise and share his story with all of you. So make friends on the internet, is what I’m saying there, I guess.

[00:04:18] Sarah: Andrew, take us back. Tell us your story. What happened? I mean, I’m want you to go back all the way to high school. How did you get to where you are today?

[00:04:25] Andrew: Ooh, um, a lot of luck. A lot of luck and fortuitous bounces. Maybe the most fortuitous bounce was hopping on a bike 16 years ago and biking to San Francisco because I heard it was going to be a fun place to live, and happening to move into a home that was– one of the members of the home eventually was in this startup Accelerator with Airbnb. So to zoom through a lot of years, that I moved to San Francisco, meeting the right folks, learning about building businesses, learning about this crazy idea called air bed and breakfast. All of that is luck.

[00:05:05] Annette: You had to ride the bike.

[00:05:08] Andrew: That was hard.

[00:05:09] Annette: Wait, is that the way you moved to San Francisco, on your bike?

[00:05:12] Andrew: Yeah. I shipped a box down. I was a bike and kayak guide at the time, so one of my first hospitality experiences was taking people out for multi-day kayak trips. And it was an amazing lesson in hospitality when you hear someone say, I’ve been saving for this trip for 15 years. And the thought is like, okay, well, we have to make this the most memorable thing you’ve done. And, uh, I really loved that. 

I ended up working in– I worked in restaurants, other hospitality things before eventually doing some Airbnb things, but I was just addicted to the idea of how can you give someone an incredible experience/memories that they will remember? And for us, the ultimate memory that everyone wanted when we were kayak guides was, could we see a killer whale while we’re out paddling? So we were doing kayak guiding up in the San Juan Islands, and it was fun. It was great to try to get people life experiences.

[00:06:10] Sarah: At your core, what were you interested in as a kid? Was it hospitality? Was it customer service? Are you an engineer? What did you think you wanted to do when you were little?

[00:06:20] Andrew: Well, I studied history.

[00:06:21] Sarah: Okay.

[00:06:22] Andrew: In college, I studied history of science and technology, which I found fascinating. And I studied the history of social movements too. And I think what both things were– I left college obviously without a clear indication of how to apply those to any professional career but what was really interesting about both fields was history of science and technology illustrated the inevitability of some technologies impacting people.

[00:06:49] Sarah: Hmm.

[00:06:50] Andrew: And the history of social movements really looks at, I mean, the synopsis of it is that every change we see in the world today started from a small group of people who really believed in something. And what is Airbnb/writ large the people you all are serving building brands who believe that there’s a more maybe creative connected version of hospitality that could exist? So I’ve long looked at Airbnb as a pretty fascinating shift in how people are going to live, travel, interact, etc. So for that reason, I tracked my love of what I do today back to that.

And then I would just hope hospitality doesn’t come from training, it comes from, I mean, I love our industry partly because– sometimes I say to have a great brand, you need a cell phone and a personality. And hospitality is just trying to make people feel great, which any of us can choose to do. So I love that. So that’s a little bit of all the underpinnings of maybe why I get so much joy out of what I get to do today.

[00:07:53] Annette: So when did you host your first guest, though? You’re this bicyclist and the incubator, take us through hosting your first guest and how that happened.

[00:08:05] Andrew: So living in San Francisco in a shared home of, there were five or six of us living in the home at the time. There are probably four businesses that are being started out of that house, and none of us had really enough money to pay rent. So we both out of, what a curious idea, but also, hey, rent’s coming up, started listing couches and rooms on air bed and breakfast, this crazy idea that we loved.

 So our home, I mean, collectively that home hosted hundreds of people from all over the world. We probably were among the first hundred-ish couches and rooms on air bed and breakfast just because we had such early access to it. And San Francisco was one of the first real spots that took off, and ended up hosting– in my room, what we’d do, we’d rent out a room and go sleep on the couch. And it would lead to some hilarious social experiments. Can I share my most famous guest?

[00:09:07] Annette: Well, what’s it rated? I’m like, I don’t know what our show’s rated.

[00:09:12] Andrew: There are, uh, this one will be peachy. 

[00:09:14] Sarah: Okay. 

[00:09:14] Annette: Okay. We’ll keep a– I’ll do a Patreon episode for the other ones, I guess.

[00:09:18] Andrew: Right. There was, um, one day I got a call from someone, they said, hey, it’s, I can’t remember the name of the in individual, but it was a woman calling me from Airbnb and she said, Andrew, could you host Brian Chesky tonight? And I was a huge Airbnb– I loved– of course, I knew who Brian was and I knew he was traveling around. And I never expected that they would reach out and say, hey, we want to stay with you, but they did.

I said, absolutely. And they called back probably two hours later and they said, would you mind if ABC News came by and filmed him staying at your home? And I had a publishing company at the time I was trying to start. And I was thinking in my head, this is my big break. And then they called two hours later and I said, of course, ABC News can come by.

And they said, would you mind cooking breakfast for Brian? And ABC News, they’d like to film you serving Brian breakfast. And having been a cook in the past cooking at restaurants before, I was like, oh my goodness, we’re going to do To The Nines’ eight-course brunch with Brian. So we did. And it was an amazing experience.

And I still have the video of the, uh, a friend filming, I actually think Brian was filming this, Brian filming the newscaster interviewing me, saying, so you rent out extra rooms in your home to strangers, with this incredulous look. And I was saying, yeah, it helps pay for everything. So yeah, that was a fun experience. And I mean, how could you not be hooked after that to, again, what now looks like the greatest unlocking of creativity in the history of hospitality?

[00:11:05] Sarah: Wait, did Brian Chesky sleep over or he just come over for breakfast?

[00:11:09] Andrew: He spent two nights. Yeah, he spent two nights on–

[00:11:12] Sarah: So good.

[00:11:14] Andrew: There’s some other funny down the road stories that I ended up turning that video that he made and sent to me into an application to Airbnb. I wanted to join their marketing team. They actually did not. I did not get the job, but Airbnb ended up eight years later investing in one of the things we built.

[00:11:30] Sarah: Is that because of this previous relationship, or is that just–

[00:11:33] Annette: Is it because of your brunch? Did the brunch seal the deal?

[00:11:36] Andrew: Okay, so it’s funny. So I made a video. I might have to share it with you now, even though I’ve hidden it on YouTube forever because I’m so embarrassed by it. When I got to meet Brian eight years later, which was the final meeting to decide whether Airbnb was going to invest with us, I started the meeting off by playing the video.

[00:11:53] Annette: Nice. 

[00:11:54] Sarah: Smart.

[00:11:54] Andrew: And Brian said, who’s filming this? And I said, you are.

[00:11:58] Annette: Oh wow.

[00:11:59] Sarah: Mic drop.

[00:12:00] Andrew: All of a sudden he’s like, oh my goodness, I remember this. I remember walking up your stairs. And at the end of the meeting, he says, well, we have to work together.

[00:12:11] Annette: Love it.

[00:12:12] Andrew: We have to. This is so crazy that we would, years later, take someone who is a host and be investing in businesses that were started on top of our platform. So anyway, as you can tell, luck and fun pulled us through this crazy experiment that is building businesses, etc.

[00:12:31] Sarah: We’ve had a lot of amazing guest, amazing stories. This might be–

[00:12:33] Annette: I know. Now I’m already like, we need to have an episode two because we’re not even going to be able to get to what we thought we were going to get. What–

[00:12:38] Andrew: I’m sorry for–

[00:12:39] Annette: No, it’s okay. 

[00:12:39] Sarah: No, it’s good. 

[00:12:40] Annette: But really quick, that house, how much money were you making? Was everybody the host? Was there one person messaging? Obviously, it was in the infancy of Airbnb, so did you have financial goals or was it like, however much we can make this month, all the roommates, you split it or how did that go down with so many roommates? 

[00:13:02] Andrew: I was charging what I thought was an absurd price of a $100 per night. My rent was 900, and I thought if I can rent it out for a week per month, my rent is $200. And then I started pushing it to the point where my roommate said, hey, you actually have to live here. Because all of us were, um, this is 2000, I want to say 2000, maybe nine, 2010. I can’t remember the exact. It was early at that time. But we were all– everyone who had moved to San Francisco, it wasn’t like there were a lot of jobs. It was right after that financial crisis.

So a lot of us were like, we’ll start a business because we can’t get hired. So it was this interesting area where all of us were basically, we were living cheaply and trying to cover rent and other a modicum of expenses. So that was my room. I had another friend starting a jellyfish aquarium company that ended up on the cover of New York Times. He was also renting out his room. Uh, you had the people who were in the Accelerator with Airbnb. There were all sorts of businesses and we all had to break even. So there were funny things that happened. 

I remember one of those people sold a website because he didn’t have enough money for dinner, and he’s like, I just need some money, so here’s a website. Uh, the crazy things that were happening to get by and to build businesses that I still look back on as, honestly, some of the happiest, most amazing days of my life, certainly. Hard to recreate, amazing to live through.

[00:14:35] Annette: All right, so we start with the room. Let’s talk about Lyric and how you got to that. Because I think our listeners, it was you rode your bike to San Francisco, you got, obviously already bit by the hospitality bug, but then you got stung by it when the CEO of Airbnb stayed. Take us to the next step then.

[00:14:54] Andrew: Yeah. I started working professionally in the short-term rental space about 10 years ago. And I founded Beyond Pricing, ended up then going to starting both Wheelhouse and a company that came to be known as Lyric at the same time. Lyric was an operating company or really a hospitality brand. And what we were doing was we were going into apartment buildings, and it is somewhat controversial, but we were coming in, we were leasing eventually a floor or the whole building, designing all the spaces, and then hosting guests. So Lyric was, uh, aimed at corporate travelers in urban spaces, really beautifully designed decor.

[00:15:40] Annette: Were you signing master leases with the landlords? Is that what you were–

[00:15:45] Andrew: We were.

[00:15:45] Annette: Okay, so a form of arbitrage.

[00:15:49] Andrew: It was arbitrage. Yeah. And it was– arbitrage was required for what we were doing. Really it was the lease was required by law. For the inventory, we were renting apartments. And the goal was to prove it out so we could move to a management model, which we could talk more about to Dave. But for your listeners, a lease/arbitrage is really good, I think at a small portfolio size or getting into the business. And as you scale, you might want to start looking at property management as a way to take less risk and potentially scale a lot faster. And happy to talk more about that if valuable anytime. But yeah, we were all lease arbitrage, both required by law as well as it’s a faster way to scale.

[00:16:38] Sarah: And the same time you were starting Wheelhouse.

[00:16:43] Andrew: Yeah. It was all one company. We thought if you wanted to create a new type of hospitality experience, you would ultimately need to control everything from the data to the development of properties. So we wanted data to inform what guests want. We wanted that data to underpin ultimately about four different software products. Everything from cleaning to customized guest experience, digital access. So ludicrous that we tried this to be honest. 

And then we wanted those spaces. We went and really thought that Lyric could illustrate the highest possible level of the Ace Hotel on an apartment footprint was the goal of the design. And we thought, if you’re the best at technology and you had a great beloved brand tied to new travel trends where people wanted these larger spaces, we thought that was the way you could eventually build the next great hospitality brand. And I still believe that to be true. Uh, Lyric did not prove that. Someone else will.

[00:17:44] Annette: Okay. If we can talk about it, so Lyric is not around anymore.

[00:17:49] Andrew: No, we shut it all down during Covid.

[00:17:50] Annette: We get asked about arbitrage all the time, um, because it’s how a lot of people want to get started in short-term rentals. And Sarah and I, a sentiment that you just said that scaling property management is way less risky because obviously Covid did happen. The worst-case scenario did happen. And is that what happened to your organization? It’s like, hey, you had no guest and you were responsible for all of these leases. Is that the downfall there?

[00:18:15] Andrew: Yeah, exactly. When I talk about what happened to us during Covid, I think about– it wasn’t one factor. It was, one, scaling the business of that size quickly is really hard, whether it’s from, I mean, we were in 15 different markets. We went to 25 buildings in about two years, whereas most hospitality scale slowly just because the details really matter.

Scaling the team to support that is not easy. So we were, uh, north of 150 people when Covid hit full-time, probably 300 plus. And that was with a CEO who had never managed more than candidly, probably about 10 people. So I think those were all things, but then when you look at Lyric, we were venture-backed, lease-exposed urban corporate hospitality. That was not a great place to be. Occupancy went from about 80% to 7%.

 We actually had a pretty good amount of cash in the bank, but we also started to look at burn that was, not to talk too much money, but in the millions per month. And we said, when will the market recover? Uh, corporate urban response has been slow, much slower than vacation destinations. We look to, uh, basically what happened in New Orleans post-Katrina. So New Orleans post-Katrina has never gotten back to the same level of travel as pre-Katrina. New York after the great financial crisis took five years to recover.

And so we said, well, what’s the recovery rate for a global pandemic. Is it months? That feels irrational. However, we have this technology company that serves a ton of different types of businesses, so therefore we have very diversified risk on Wheelhouse. So we, uh, for us the call was a painful one, was to say goodbye to 92% of our team, move out of 25 buildings across US during Covid, and see what the world looked like when everything settled down. That was the “rational” thing to do. To the question on lease exposure, we could dive into that more explicitly if you’d like.

[00:20:22] Annette: Well, we can maybe do another episode about that just because we don’t really talk about lease arbitrage. I have one more question just about Lyric and then we can get into–

[00:20:29] Andrew: Yeah, of course. Anything.

[00:20:31] Annette: I know our listeners are dying to know, how in the heck are you getting cleaners for all these places? Was that the biggest pain point? It’s the biggest pain point of, I feel like, most hosts. And I don’t want to say pain point. They have excellent cleaners, but when you don’t, you don’t. So you saying these numbers, cleaning’s the first thing that I go to.

[00:20:55] Andrew: So it’s interesting. Some things get harder with scale and some things get easier. Cleaners is something that gets arguably easier because all of a sudden you have enough inventory where–

[00:21:04] Annette: Uh, to keep them busy.

[00:21:05] Andrew: You can come to someone and say, hey, look, we can guarantee you some amount of cleanings, and all of a sudden you’re a great contract where they prioritize you. So cleaning, ironically, was a great lesson in why density within a building or within a market was actually our cleaning costs went down and our scores went up. So that was a non-obvious learning from us scaling cleaning. Uh, the hardest thing was, and still is in my mind, was digital access, because we needed to get someone into the front door of a building, up the elevator, and then into the room. Whereas if you have a single-family home, digital access is relatively solved.

So yeah, there’s all sorts of interesting problems. This is why hospitality is so fun. You are in the business of solving a problem best for what stage you are currently at/what you’re trying to achieve with your brand. So yeah, there, um, there are, uh, cleaning became easier, specifically. Uh, we can talk about what became harder or what else. But that is the shortest answer, is cleaning became easier.

[00:22:05] Sarah: As a fellow entrepreneur, I’m guessing our listeners are thinking the same thing I am though. Andrew, is like, how brave of you to make, number one, to look at historicals and see what could happen. History repeats itself. Let’s look to Katrina, New York. That’s so sensible especially a time when you must have been so stressed out or you could have become so stressed out if you didn’t just think logically. 

And then just to make that really great decision, I want to offer our listeners too, we had an episode about this a few weeks ago, just about pivoting and just looking, being really honest with yourself and knowing even if it’s the “wrong decision”, vacillating for too long can also be incredibly cruel. Anyway, I just want to commend you on pivot that you’ve made and just how brave that is. And it’s really inspirational for fellow entrepreneurs, everyone listening. I just love hearing that story.

[00:22:55] Andrew: Oh, thanks. I’ll share that it was because really wise folks in January had said, run a down scenario of what happens if what’s happening in Italy and China if Covid comes to the US. So people smarter than I. I was myopic like, no, we’re going to be great, whatever. They said, just assume you aren’t and run a down scenario now and tell us, so this is our board, they said, tell us what happens if revenue drops 90%. So when revenue dropped literally 90%, we already had the plan in place.

And then, uh, with Lyric, the hardest part was, when you’re building a business, scaling a business, it’s impossible not to love the people you work with/we’ve become friends with them. And the scariest thing is, oh my goodness, all these people who have invested all their time, I now need to tell them that everything we believed in is gone. And the thing that made it easier was close enough relationships. A number of people who came to me and said, there’s no way we can survive this, we know what you have to do, permission to do it. 

So I would say bravery wasn’t the word that came to mind. I appreciate that reframe, but it was more like, hey, great people told me what to do. It was the, uh, the compassionate thing to do was to move quickly. By moving quickly, ironically, we were actually able to take better care of the people we were letting go of. So there were enough reframes that framed it for me and something I’m comfortable with of this is the compassionate move. We do it as opposed to we’re just saying goodbye to all our friends. The reframe of that was powered by other people’s work that had put us in a position to make, ultimately, what I think was the right decision. Not fun, but right.

[00:24:38] Annette: So your revenue management, your dynamic pricing, we have listeners, let’s help them right now. If they have to take their individual property, we see it a lot right now, we see Airbnb bust, we see that there’s so much, there’s saturation in markets, how can you guide an individual homeowner, a host, and how they can look at that report if their revenue is going to decrease? Can you help us with that? What should we be looking for? How can we use these tools? Put yourself in their shoes. 

[00:25:07] Andrew: What I like to say about revenue management/pricing is that there’s no– I don’t believe in a macro story. So it can be like, hey, there’s an Airbnb bust, and maybe some people are experiencing a drop in revenue, and there are plenty of people who are not. So you’ll see– the really interesting thing about Airbnb is because you have everything from TBs to 12 bedrooms across every market out there. There’s no one universal this is the best thing, bland advice that I can give for your business. So what–

[00:25:41] Annette: You can. Let’s start here. Can you at least start by saying that every host should be paying attention to revenue management? When I first started hosting, revenue management, uh, a hotel does revenue management. I don’t even know what that is or why I need to do that. So is that the first message? Is that if you are a host, you’re a revenue manager also?

[00:26:01] Andrew: I would say, uh, as soon as you post a price online, you are in the business of doing revenue management. Whether you choose to do it actively or not is your choice. Whether you choose to use a machine or not is your choice. But you are selling something for a price that the market will evaluate. So pricing and revenue management, we might have time today to break down the difference.

 The short version is dynamic pricing, you’re usually using a machine to look at demand patterns and automating certain aspects. Revenue management, you’re starting to maybe look at different strategies of how you could, in some ways better guide the machine. We’ll talk about that more. But in short, almost every asset out there, so airline, flights, obviously, the price changes dramatically, gas, fruit in high season, low season. Pick a commodity, it changes. Clothes that are in fashion versus not in fashion. Everything is tied to supply and demand.

 What gets attention in the accommodation space is the practice of revenue management where hotels and airlines have proven you can drive real returns off of it on basically paying attention to demand signals and supply signals. I don’t know what business is at scale without it at some point, because there is a science to it where you can see the actual revenue uplift. 

Um, and then there is the art piece to it, which I think of a revenue management, which is sometimes if you’re doing property management, you might have an owner who wants to achieve a particular goal such as, hey, I want to never go below this price, or I want to have my summer 50% booked X amount of time out, which are, uh, revenue management decisions where you’re defining a strategy to achieve a different goal other than just revenue maximization. Again, we’re not going to go too deep unless you tell me to on that stuff. Uh, but yeah, I think everyone in time does pricing/revenue management.

[00:27:53] Annette: Yeah. Okay. I think that’s the thing, is people’s thinking, I don’t need to do revenue management. I put my prices on Airbnb and that’s my dynamic pricing and that’s my revenue management, is just putting that out there online.

[00:28:04] Andrew: Yeah. Again, most businesses, I don’t think it’s the first thing you need to do as an operator. I think if you’re an operator, what I would normally say is start with a property to three properties. Find revenue in resonance. Do you love doing this? And are your initial investments financially a good decision for you? If you find revenue in resonance and you’re scaling, then you look at a property management software first.

Maybe you get up to scale to five to 10 listings. Certainly, we have customers with a single listing using us, but that’s when you really want to look at maybe a more advanced system like maybe a Breezeway at that point, maybe for operational software, maybe a Wheelhouse for price labs or others for pricing revenue management.

So it doesn’t need to be the first thing you do. There are ways you can manually adjust pricing that are fine. They just are very time consuming. I’m not going to lie and tell you it’s the first thing you have to do, but I think in time, as you scale your business is going to be a very good investment for you to drive better results.

[00:29:04] Sarah: Let’s say you have a listener right now who is, okay, Andrew, I am scaling. What do I look for in a software? I don’t know. Do they all do the same thing? If I’m a smaller operator, which our listeners tend to be, under 20 properties, I would say, is that a big factor? What should they look for when they are deciding to take this next step?

[00:29:25] Andrew: Almost every software out there in our space in particular, the better you know it, the more value you’re likely to extract from it. So I think design is an incredibly important aspect of all software because design isn’t about making things beautiful. It’s about making things, in our case, easy to use. So I think compassionate design is really like, how can we as quickly as possible, help you achieve your goal? 

So at Wheelhouse, we invest a lot in design, partly because we’re like, well, we want you, yes, to make a lot more money. And so design helps us illustrate different ways you can achieve that. But b, we actually ironically want to see your time spent on platform go down for listing. We’re not a social app. We’re not trying to get you to spend all day on us. We want you to get the job done faster and have better results. 

So design is something I would evaluate across property management software, operational software, any software you choose because it might help you learn the platform better, faster. It might help your team. It will help your team learn the platform better, faster as well. So design is the thing that helps you scale faster. So I would say a very blanket statement there, I’d look at the quality of design, really around ease of use. I would deeply diligence software as I say, you should diligence Wheelhouse more than you diligence your bank.

If you’re going to hand some pricing control over to someone, you should do a lot of diligence on us. I would look at their integrations. I would argue that, uh, your business is more scalable the more integrations the platform you choose, especially if it’s what your property manager software has. And the reason for that is you want to be able to switch out your op software or switch out your pricing software and have one team or one teammate learn a new set of processes as opposed to if you have a property management software that you fully switch your whole teams now training. So probably too much on that front. Design and integrations put you in a position to scale your business, whether it’s your own time or whether it’s a team.

[00:31:31] Sarah: Andrew, we have a membership with operators on the inside, and I know a couple of them who have dissed certain property management softwares because they’re just too hard to navigate. They’re not attractive and therefore it’s extra challenging to even just understand it. And a lot of our audience gets started into the short-term rental hosting spaces for wealth building, but also they love hospitality. 

And so when you talk about pricing, they’re like, whoa, I got to do that? And so if it can be fun and easy to implement, I think their game– so my next question for you, Andrew, is if someone came to you, hey Andrew, I have five properties. I want to start revenue management via a dynamic processing software. How much time should I allow myself to learn and then to operate? What time blocking should I give myself to master this for a smaller operator?

[00:32:22] Andrew: So dynamic pricing softwares, I think all the major ones do offer a link your account, we’ll analyze your properties, and you can turn on automated pricing right away. So you could just do that. And the results are even at that baseline, that will almost certainly be a profitable decision for you. And it’s because– not always. I mean, if you just think about a market, if you’re a totally unique property, if there’s no bookings, that’s a system where a dynamic pricing tool doesn’t have enough data yet to price you perfectly. So it depends a little bit about how much data a machine like us can see.

But if you have, call it 20 bookings, I have a lot of confidence that our machine will be a set it and forget it. We’re going to make you some more money. If you wanted to come in and start to change operational things, so say you wanted to say, I really want to have a seven-day minimum stay policy throughout my high season, my summer. Well, now you need to come in and set that. A machine right now doesn’t know that’s your strategy so you need to come in and set that.

And if you’re setting it across a lot of properties, you want a software that makes that change really easy to do. I think some of the revenue management systems are– I think Wheelhouse is very strong in that domain of if you do have, call it north of five properties, I think we’re a very fast way to make blanket changes across your whole portfolio very fast.

So to answer your question, you could set it and forget it. I think you probably, honestly, with a couple of hours, know most platforms inside and out. And then over time you learn about excellent revenue management theory. We do have a one hour video that you can watch that will make you probably in the top, I don’t know, 20%, 10% revenue manager pricing people in your market. It’s not that hard. 

[00:34:20] Annette: Okay. We’re going to have to link to that. We’re going to help everyone out. Here’s my question. Dynamic pricing, we have so many people that, they try it, they test it, and they get scared of the rates right out of the gate.

[00:34:32] Sarah: Oh, yeah. That’s huge. 

[00:34:34] Annette: And it’s both ways. It’s either super high, or super low, or they immediately think that the dynamic pricing software messed up their listing. Take us through that initial shock of someone connecting to a dynamic pricing software. How would you take them through that–

[00:34:53] Sarah: Do you have dynamic pricing therapy for– 

[00:34:54] Annette: I mean, this is what we get. People are scared and then they connect it and they’re like, I swear I’m not getting any bookings and this pricing looks off. So talk to us about how you would– 

[00:35:04] Andrew: That is–

[00:35:04] Annette: Without those objections, what would you do you do or– 

[00:35:06] Andrew: I have never heard that objection before. No, I’m joking. I’m, uh, yeah. Uh, so totally fair. I’ll put it this way, so pricing is imperfect. Let’s just start there.

[00:35:16] Annette: Ooh, I like that.

[00:35:18] Andrew: By imperfect I mean that we are trying to guess the right for your unique property every single day, 18 months in the future. 

[00:35:31] Annette: Better get it right.

[00:35:34] Andrew: Yeah. And the truth is no one knows what the right price is. We are all trying to use data to make a guess. Now, for your unique property, to make that guess, we need to look at other similar properties, which in and of itself is an incredibly interesting question like, well, what is a similar property? 

[00:35:55] Annette: Mm-hmm.

[00:35:57] Andrew: So our machine needs to now look at, uh, let’s say we identified a 100 competitors, but we’re also looking at a whole market. So what we are looking at is, I want to see every booking at your property in the past, as far back as you’ll show us, and I want to see everything looking forward. And then I need to compare that to every other listing in your market and every other listing in your comp set. Even your comp set, that is an opinion. Some people tell us, we only compete against premium properties. We only compete against two bedrooms. We only compete against properties on the beach. We only compete against the other property manager in town. So even your competitive set, there’s actually an opinion that you have.

So all these things illustrate that a machine is an imperfect way to try to assess your unique property. And we don’t know everything about your strategy yet, so you might look at us and say, you’re totally wrong. It’s like, well, actually, if you helped us build a better competitive set, we’re going to be more accurate. And again, your comp set, I would argue, is still emotional for most folks. 

[00:36:55] Sarah: Yes. 

[00:36:56] Annette: Just like residential real estate when you’re selling your home. I mean, these comps, you’re like, the comps are only getting you this much for your home. I know you think it’s the bee’s knees, but the comps aren’t there. 

[00:37:11] Andrew: Yes. Right. You always sell a home and buy a house. And, um, so the market tells us as accurately as possible what the booking patterns are, and then things change. A new event pops up. Having a very reactive pricing engine is important, but I don’t think there’s any software across revenue management or operational software or anyone out there that literally you just turn it on and it works. You have to come in and put a little opinion into the machine. Now, I would still tell you, uh, the size behind our set it and forget it approach is a revenue lift of about 18%. You might disagree with us on– we are wrong. We definitely are wrong

[00:37:50] Annette: Say that percentage again. 

[00:37:53] Andrew: I’m probably low balling it right now.

[00:37:54] Annette: And I’m thankful that you’re doing that because that, the points that you were just making of what the machine is taking into account, I sure as heck know I am not building out any spreadsheet anywhere near that machine to do any of that work. So that is where I think we have foolish pride as like, oh, we know the market, we know our place. It’s like, no. The machine is pulling so much data. It’s not possible or it’s not anything that I would ever try to do, but 18%, everyone, if you’re not using the dynamic pricing software, take a look at your revenue from last year, and heck, just do 10%. Wouldn’t you like to have that 10% more? And that’s all super low ball.

[00:38:33] Andrew: Yeah. If you go read the reviews, I mean, you’ll see plenty of people who come in without pricing set up, and they will write, we made a 100% more last year. I don’t want to oversell it because I don’t want it to seem trivial. I actually think it’s incredibly important to come in and do deep diligence on your pricing engine and do deep diligence on your revenue. Think about your revenue management approach and what you’re trying to achieve. Um, so I don’t want to undersell that, and it doesn’t work for everyone.

 In some ways, if you were to buy some stocks, if you were to buy the whole market, you de-risk. And that’s what a pricing engine does. We’re looking at a whole market and trying to de-risk your listing. You can come in and try a strategy that you’re more confident in that might actually end up outperform the market. That’s where revenue management and an opinion comes in. And you might have operational consideration.

So again, you might want to look at your minimum stays. You might want to say, I don’t really feel comfortable renting my home out two days before, if it’s a large home because that’s likely to have a party. So you might say, hey, no one can book my place two days out or a week out. So all of a sudden you’re starting to get operational parameters around a machine like ours.

Or you might be able– to your question earlier about cleaning, you might say, well, I can’t guarantee I can schedule a cleaner to come in if someone books four days before. So my calendar is basically closed four days before a stay date. So all those things are operational considerations that you come in and you work with a system like us, we make it very easy to build that and to execute the pricing strategy within the confines that you give us. 

And then your risk comes into it. Your risk profile says, hey, I got to make a 1000 bucks this month to cover my lease. And once I make a 1,000 bucks for July, take a lot more risk. Totally rational strategy. Well, a machine doesn’t know that you– we don’t know your lease. You can see your strategy changes over time. So that’s where someone interacting with a system like us is the way to maximize really the performance of your business.

[00:40:38] Sarah: And I would arguably say, and I know this because I, used dynamic pricing, it gives you more time to do things you love about hosting. Maybe that is revenue management. That doesn’t mean you still can’t leverage this machine and really rock out and nerd out with it. But for me, the operational side in terms of perfecting our turnovers, and really rocking out our par levels, and wowing the guests, that’s what gives me life. And so I can spend almost less time doing the other components. 

[00:41:02] Annette: It’s also you’re a business owner and business owners try things. They test things. You should have a line item in your budget. Like you said, it doesn’t work for everybody, but as a business owner, you at least have to try certain things that are working for majority of other businesses in your space.

And I think that’s the message that Sarah and I want to get across is that we don’t want hosts leaving money on the table because they have foolish pride or their stubborn or they don’t want to learn something. And we’re not saying it’s going to work for everybody, but we have to, as business owners, test it, try it, and make an informed decision, not just a feeling, it’s data over drama here, of like, okay, I tested it. I didn’t see the return that I wanted. That’s not just my feeling about it. 

And so that’s what we want to offer to everybody, is that it might not work for you, but as a business owner, we want you to know what the softwares are, what they can do, what they should be doing for you. And if it doesn’t work, fine, but at least you also know that you tried it, boom, onto the next thing.

[00:42:01] Andrew: I love that. So pricing engine, revenue management platform, different, and we could explore that for literally two hours. A revenue management platform gives you the ability to run a really controlled AB test. So let’s say you don’t trust a pricing engine yet for whatever reason, or maybe you have an owner because you’re managing the property, who doesn’t– whatever it is.

But let’s say you don’t trust it. It was like, well, what if you wanted to try your own, just run an AB test on your own strategy? And maybe that’s minimum length of stays longer on one property versus the other. Maybe you only allow check-ins on certain days one property versus another. Maybe you have a more aggressive last minute discounting policy. Well, a revenue management platform, so Wheelhouse, we make it possible to set an AB test in about a minute. So don’t even use our pricing, use our capabilities to run an AB test and learn about your business. And what’s interesting about that, what we find is that, a, it gives you a lot of clarity on–

[00:42:59] Annette: Can you run a AB test though just on one property? Could they do it just with one door?

[00:43:05] Andrew: You would probably do– harder.

[00:43:07] Annette: Okay. 

[00:43:07] Andrew: Harder. But what you what you could do is you could say– what I would do in that case is I would probably take two months farther in the future.

[00:43:16] Annette: Okay. And then do–

[00:43:17] Andrew: I would take October and November. Yeah. And I would say, hey, I’m going to raise prices in November, 10% higher than I’m comfortable. And I’m going to watch those two months and as they approach, I still have plenty of time to change the strategy, but maybe you just take a little bit of a– or maybe it’s like you go to November versus October and you say, I’m going to raise the price 20% on the weekends. There are ways you can still test pricing strategies and track that.

 And whether you would need our AB testing infrastructure, whether you probably would just measure that on your own, relatively easy to do, but in some ways if you’re not using a pricing engine, revenue management is your own explorations of how to price your property in a way that hopefully makes that lease easier to cover, your cleaner, whatever you’re trying to do, pay for your business or pay for your life, uh, we’re trying to give you more time and more money. And sometimes that takes a little time too to get. 

[00:44:16] Sarah: Andrew, this was so good. From stories with Brian Chesky and pancakes to revenue management versus dynamic pricing, this has been incredible. Is there anything you want to leave our listeners with that we haven’t touched on that you think would be really important for them to walk away with today?

[00:44:33] Andrew: There’s a reason I like to say hospitality is hard. These are not easy businesses. I take so much pride in the fact that when Covid hit, the most amazing thing for me to witness was how quickly all these independent operators started adjusting their business moving so much faster than hotels did. And what you saw there was vacation destinations and Airbnb, this inventory flourished. And it was partly because independent operators made really fast decisions around changing market conditions. And I would remind folks that hospitality is hard, but your strength is responding quickly to things that change.

You are the owner of your business and your brand. That’s an opportunity for you to go out and ask that last guest, why do they buy your property? What do they love about your stay? And deliver that to the next person. I think putting in that extra work, that speed of execution that you have permission to do to change your business is the most amazing part about our space. And I would just say, keep leaning into that. And it is hard. It is fun. And it’s rewarding. And congrats on trying to build something really powerful in the world.

[00:45:41] Annette: Love that.

[00:45:42] Sarah: Oh my gosh. That’s a–

[00:45:42] Annette: Hospitality is hard.

[00:45:44] Sarah: I want to get a bumper sticker. 

[00:45:46] Andrew: It’s hard.

[00:45:46] Annette: No, it’s great.

[00:45:46] Sarah: It hard. And that’s the thing too, we love to share with everyone, Annette and I, we like to have fun in our content delivery for sure. But that’s because it’s so hard. There are so many components, especially as independent hosts, as smaller operators, we wear almost all the hats if not all of them. And so Andrew, thank you so much for your time today. Listeners, let us know what was your favorite part about today’s episode. You can DM us on Instagram, email us, hi@thanksforvisiting. Go check out the show notes. We will link to so much stuff that Andrew talked about and touched about today. With that, I am Sarah Karakaian.

[00:46:18] Annette: I am Annette Grant, and together we are–

[00:46:20] Both Annette & Sarah: Thanks for Visiting. 

[00:46:21] Sarah: Talk to you next time.