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[00:00:00] Sarah: Hello. Welcome back for another great episode. My name is Sarah Karakaian.

[00:00:03] Annette: I am Annette Grant. And together we are–

[00:00:05] Both Annette & Sarah: Thanks for Visiting.

[00:00:06] Sarah: Let’s start this episode like we do every week, and that is sharing one of you are incredible listeners who’s using our hashtag, #STRShareSunday on Instagram. If you use it, we’ll find you. We’ll share you on Instagram on Sundays, here on the podcast, to our entire email list. Annette, who are we sharing this week?

[00:00:21] Annette: This week we are sharing @lakeseclusionsml. That’s @lakeseclusionsml. Please go give them a follow. And if you’re not giving people a follow, come on. You got to share the love.

[00:00:33] Sarah: Support each other.

[00:00:34] Annette: You got you to support each other. I’m telling you, it’s going to come back to you tenfold. So go give them some love on Instagram. I just want to go through a couple of things here that I love. Number one, it’s one of the pictures in their Instagram feed. It is actually of their Starlink because they want to show you like, look, we have got it. It is installed. And what I love is they show you the picture of the Starlink. And it’s a carousel.

[00:01:01] And then the next, they just show you how you really are on the secluded 43 acres of property with the lakefront. So there it’s really lovely juxtaposition of, yes, you can have technology if you want it, but if you don’t, you have got so much seclusion at your fingertips. So I thought that was just a really good way to actually just show two very different perspectives, but let the guests know that they can have it all there.

[00:01:29] The other thing that I think they did a wonderful job at, they have this waterfront restaurant map. And so listeners, take other things that have been created already and repurpose it. So they took this map that I’m sure is available to anybody that lives on the lake, shows where all of the waterfront restaurants are, and they put that on their feed.

[00:01:51] I think it’s brilliant. And trust me, I’m hungry right now. I saw that and I was like, wow, there’s a lot of options here. So just want to offer to you, don’t overthink your content. Repurpose things that are already out there. And again, that’s that give back. Every single one of those restaurants, go ahead and tag them, let them know, or put in there something like your favorite spot and what you like to get there to make it a little bit more personal.

[00:02:13] But there is so much information out there that you can repurpose. Just make sure you give the love where the love is due if someone else took the photo. But cheers to you, Lake Seclusion, by using some of that stuff that your town supplies you with. They have some boat safety stuff that they had shared on their Instagram feed.

[00:02:31] So there was just some really great stuff that they’re repurposing. And I advise you take a look at their feed and see how you could repurpose some of your city town’s content that they’re already putting out also. Sarah, let’s give our listeners a little bit of background on who our guest is, and then we’ll tell them how we came to even meet this amazing gentleman.

[00:02:52] Sarah: Absolutely. Today’s conversation, everyone, was one of the most honest and refreshing conversations we’ve had. So get excited because on today’s episode, we have Richard Vaughton, and he has an incredibly diverse background.

[00:03:08] Before he launched into the short-term rental vacation rental scene in the year 2000, he was a private owner and co-founder of a European rental management company overseeing over 900 properties. And he has significant experience in property management, so for owners, and also he had a small portfolio himself. Because once you get into the short-term rental industry, you don’t stop.

[00:03:29] Annette: Yeah. And don’t think he just went to 900 because it was him and his, he will share multiple times, meticulously perfectionist wife who were changing all the linens, cleaning the toilets, doing all the thing on their first purchases.

[00:03:45] Sarah: Oh, and her level of standards were sky high, as I know there are so many of you listeners share that. But he also co-founded Rentivo, which is a rental tech company that he successfully crowdfunded its development before its acquisition by Situ Living in late 2023. And he’s also represented Stay Alfred and Properly in Europe, showcasing expertise in operational software and accommodation services.

[00:04:09] So Richard has a storied career in our industry, and he currently serves an advisory capacity for quality management businesses such as the Ovo Network, My Getaways, and BoomNow, alongside private merger and acquisition clients. So we are in for a treat today, tapping into the brain of Richard, who we met when we were invited to that small mastermind that we talked about over the course of a few episodes in Europe. We thought we were getting punked we got the invite email. Because we showed up to this small gathering of humans, and Richard one of them at a castle–

[00:04:47] Annette: At a castle.

[00:04:48] Sarah: With a moat.

[00:04:49] Annette: And Richard was such a delight and surprise. He basically knocked us over with his wisdom, but just–

[00:04:58] Sarah: He’s so fun too.

[00:04:59] Annette: With a smile on his face all the time. And I just want you to know he is a champion for hard work and also that the cream always rises to the top. So it is a message of you’ve got to be the best. You have to be the cream.

[00:05:14] Sarah: Richard, welcome to the show.

[00:05:17] Richard: Thank you for inviting me. And you two are always smiling so much, so I laugh my way through this.

[00:05:24] Annette: Actually, Richard, we met you not that long ago, and I feel like you had a smile on your face.

[00:05:30] Both Annette & Sarah: The whole time.

[00:05:31] Annette: But I almost feel like, Richard, you had a smile on your face because you were one of the, let’s say, more veteran folks at our castle mastermind. And I feel like it was a smirk of like, oh, aren’t you all so naive? You’ve just seen a lot more in the short-term rental space. I want to say everybody that was at the castle with us, but Richard, can you share with our listeners how you got started in the short-term rental, this wonderful world that we’re all a part of now?

[00:06:06] Richard: Yeah, I can do that. And thanks for calling me old. I appreciate that.

[00:06:09] Annette: No, I said wise.

[00:06:13] Richard: Vintage, veteran, old, they’re all the same thing. Yeah. And by the time I finished, you realize just how old I really am. So yeah, how did I get into short-term rentals? Because it seems to me that everybody in the world eventually ends up in short-term rentals.

[00:06:29] And there’s a few culprits for that, Airbnb being one of them, of course, in 2008. So I used to run a Finnish public company in biomedical diagnostics, and it went public in the year 2000. And what do you do with a little bit of money that you’ve got? So we did what everybody does and decided to invest in some property.

[00:06:49] And we got into residential property that had a cottage attached to it. What we discovered immediately is a multi-tenanted building with 14 different tenants in it was much more difficult to run than the cottage that everybody came in once a week for seven days. So we sold all that, and we bought six apartments, refurbished them, overlooking the sea in a very ancient building.

[00:07:21] They were beautiful. My wife spent an awful lot of time making sure that everything was absolutely perfect. And that was right about the year 2000, we started that. And in those days, the industry was lovely. So people used to write you checks. You know those things with paper, you put your signature on? And 60% of the guests came back the following year.

[00:07:48] So there was very little marketing to do in terms of how we actually got our guests. And 99% of guests were lovely. They’ve been used to bringing their own linen before that. They were used to coin meters. So this industry has been going in the UK probably since 1930s, really, and we accelerated it.

[00:08:12] So we did all the things like a hotel. We provided all in here. We provided all the extra services and the shampoo bottles, which we’re obviously not doing these days. And we thoroughly enjoyed it for about five years.

[00:08:29] Annette: And it was just you and your wife managing. You were doing all the reservations, all the check cashing, all the linen changes.

[00:08:34] Richard: We did absolutely everything. So I bought the local destination website called talkie.com, which I still own.

[00:08:44] Annette: Ooh.

[00:08:44] Richard: That generated 95% of all bookings. In that period, HomeAway had started, so Carl Sheppard and all his buddies had decided they were going to destroy the market and roll all the businesses up into one Vrbo, Owners Direct. And we had Holiday Lettings and TripAdvisor and everything else. They all came in. It didn’t really affect us, but by the year 2006, I think me and my wife got pretty fed up of cleaning toilets on a Saturday.

[00:09:13] Annette: Oh, you were cleaning. When you say everything, you mean everything.

[00:09:17] Richard: We did actually have a couple of cleaners that were virtually employed by us as well. But we did everything, including me cleaning toilets sometimes on a Saturday. And then not every guest is fantastic. There’s always one or two who are a bit of a problem, and I won’t recount some of them.

[00:09:38] So we sold the portfolio actually within a very short period of time. And I’d like to think that was just economic intelligence, because we sold them just before the crash.

[00:09:50] Annette: Oh, wow.

[00:09:52] Richard: And then we went off to Italy and bought two apartments, knocked them together on Lake Como, and we started a holiday rental business on Lake Como as well, for all our sins, as a management company with a partner.

[00:10:05] Annette: So definitely, you weren’t fed up then. So now I’m utterly confused because you’re like, you sold it. You’re like, we’re done with this. And then you just go and buy two more further away from you.

[00:10:18] Richard: Because we’ve actually got five or six years of experience of running six properties and we leased two as well close by and it was very successful. We got websites. We got payment solutions. We understood everything about the business, and we met a chap on Lake Como. He was Dutch. He said, I’d like to start a holiday rental business.

[00:10:38] Because I got married on Lake Como. I used to live on Lake Como, and I used to work in Switzerland. And I worked in Switzerland after I’d worked in Saudi Arabia. So I’ve been around a little bit there. And my wife just phoned me up and said, “Hey, I met this chap. Why do we start a holiday rental business on Lake Como?”

[00:11:00] Because it was virgin territory. Absolutely virgin territory. No one was really doing it apart from the state agents. And we started with 10 properties, and about 10 years later, we had, I think it’s 650 on Lake Como, Lake Maggiore, and Lake Lagana. And we had eight merchant accounts and cleaners every– seriously, don’t do it. Anybody is thinking of doing this, don’t do it.

[00:11:25] You can lose your life by doing this sort of stuff. So yeah, we did that, and we actually bought a house on Lake Como to rent out as well. Because we thought we were so clever, we’d buy a house. And then we discovered, because we have an obsession, or my wife has an obsession with perfection, even with our own management company on the lake, we couldn’t manage it well enough because the company was too bloody big.

[00:11:57] Annette: That’s interesting.

[00:11:58] Richard: It is interesting because if you want to be really, really good at this business, you really have to really focus and actually have a niche. It will be very small, and pay all attention to all the detail that’s necessary. Because what happened in the year 2000 where people were very, very, very tolerant of absolutely everything.

[00:12:20] So the year 2024, it’s a completely different set of guests. The guests these days are like my kids. Because in the year 2000 they were tiny. And now they are the people who go, I’m just going to book on Airbnb. I’m going to book on Booking.com. And then my two boys have been in the industry with me as part of the software developers, one of my businesses. And even they say, oh, no, don’t book direct. I can’t be bothered. I’ll just go on to Booking.com and book.

[00:12:54] Annette: Oh, wow.

[00:12:54] Richard: Let’s do that. Drives me mad. But it’s the frictionless society. It’s the choice. And then they expect it to work like that. And when they get there, they expect everything to work. Everything has to be seamless and great.

[00:13:12] Annette: Well, I want to go back to you and your wife choosing not to use your own management company on your home.

[00:13:20] Richard: Well, we did, but we sold the house because we became quite frustrated by the whole episode.

[00:13:27] Annette: Okay. Your company wasn’t upholding the standards for the primary home? What did that look like?

[00:13:34] Richard: Well, there’s all sorts of reasons for that, and some of them are our fault, and some of them are the fact that it’s very difficult to run a business that has a lake 26 miles long and two sides. There was a lot of foreign nationals who came in as well and managing all that, and in those days, turnarounds were still done once or twice a week.

[00:14:00] At least now everybody’s expecting to arrive and depart on any day. But if you can imagine doing 600 turnarounds on a Saturday over 100 miles, essentially it’s a very, very, very, very tough. I don’t recommend anybody attempt it.

[00:14:18] Annette: When do you think that changed? Because that still happens here in the US of the Saturday to Saturday booking and all these vacation rental companies still have this seven-day guarantee. When did that shift for you and Lake Como where people could come and go and it wasn’t a guaranteed same date, check in, check out? What shifted that?

[00:14:41] Richard: It probably changed about halfway through our tenancy, between 2006 and 2016. So probably halfway through. A part of the reason for that is that we had this complete avalanche of OTAs going, and we had Airbnb coming in in 2008, and they accelerated very quickly. We had HomeAway rolling up all these businesses. We had TripAdvisor, FlipKey, and everybody else doing these things.

[00:15:05] They, to a great degree, were driving the market as well. So as a manager or an individual owner, you’re constantly under pressure to actually provide what the guest wants. And the guest doesn’t really want to come on a Saturday or a Friday every day, every week, and stay for a week. They actually want to come for shorter periods. It’s just normal.

[00:15:27] So you’ve got inbound pressure from marketing and OTAs who obviously know they’re going to make more money if they can actually do this. They’re going to apply pressure to you to obey because it’s the only way you’re going to get the bookings unless you spend an inordinate amount of time doing direct marketing, which you can do, and you can get bookings for sure, but it is hard work.

[00:15:51] So that changed quite a lot. Actually, it makes life easier if you’ve got a lot of cleaning staff and things as well. So if you look at the UK right now, and I work with a few management companies, the UK is a really mature market, and there are a lot of owners still out there have been owning properties for years and years and years, and no one seems to like change.

[00:16:16] So they’re very dyed in the wool owners of properties. They say, in the summer, I’m only going to do seven days, and they’re going to have to come on a Saturday. And then you can see this happening. You can see them going, I’m not getting so many bookings. Why am I not getting so many bookings? Well, people don’t want to come on a Saturday. They want to stay seven days.

[00:16:36] They want to come on a Friday and stay four days. So I’d like to think we were well ahead of the game, and it’s probably my wife again. When we actually started our own portfolio, we actually did exactly that. We discovered that if we got a couple of really good cleaners, we could check people in for four days and three days, and we make more money actually because we charge them a higher price for each of those groups.

[00:17:04] And it worked really, really well, and our occupancy was unbelievable. It was incredibly successful, and it actually helped sell the properties. Because when people came to the properties, they wanted to buy them as a holiday home.

[00:17:15] And we went, well, you’ve got a year’s worth of bookings. This is how much we take. And people just went, oh, wow, I’ll buy it. Simple as that. But we’ve actually also started a management company where I lived in Torquay at the same time as the Italian one. We had 130 here, which we sold in 2016. But it’s just one of these things, you just fall into it.

[00:17:39] People just say, well, can you look after my property? And can you look after my property? And I can tell you what happens, is you get to three or four and you think, this is easy. I’m making quite a lot of money for three or four properties. Imagine if I had 1,000. I’d have a super yacht and a jet. Trouble is soon as you start getting to 20, you need more staff.

[00:18:02] People in the industry will quote you a number of how many properties you need before you need another full-time member of staff, and it’s 30. So you can work, you and your wife. You can have some subcontract people. When you get to 30, you need another member of staff.

[00:18:20] When you get to 60, you need another member of staff. 90, you need another three members. The whole thing doesn’t scale as well as people think it does. So you’ve got to spend a lot of sleepless nights. I joke about my wife because she’s such a perfectionist.

[00:18:40] Everything has to be done to an incredibly high level. It’s very difficult to take on staff. She wants to do everything herself. So when you find her lying on the bed at night, crying, you know you’ve got too many properties and you have to sell them.

[00:18:54] Sarah: I want to unpack that a little bit because a lot of our audience, Richard, when we talk to them, they’re probably a lot like your wife. Their standards are incredibly high, and we applaud the attention to detail, but at what point do you think that is a deterrent for not even scaling in terms of adding more property, especially if you’re a property owner operator, you may not think it’s possible to purchase 30, 40, 50 properties on your own.

[00:19:27] But at what point do you think that held you back in terms of being able to provide incredible hospitality? Or do you think that she was on to something and that is what that secret ingredient that’s missing from a lot of today’s operators?

[00:19:44] Richard: There’s a lot of answers. So if you want to run a really, really good short-term rental property, then my advice would be to keep your portfolio very small, because it’s incredibly difficult unless you actually have people who think like you.

[00:20:05] Sarah: Mm-hmm.

[00:20:06] Richard: And are staffed like you. And you can only do that if you make enough margin. There’s two types of owners. There’s the owners that I think you probably have a lot of who are very diligent. They’re very caring. They spend a lot of time on the properties. They’re very knowledgeable. They understand zip and link beds. They understand air conditioning. They understand door locks. They understand how to clean properties properly.

[00:20:31] They understand disinfection and all those things. They really understand it. They probably got insurance and fire safety, and health and safety, and access statements, and all sorts of stuff. Those people are doing a really, really good job at what they do, which is why they get better reviews than managers get.

[00:20:50] So if you can make enough margin out of your individual properties to allow you to take on small numbers of well-developed staff, then it’s going to work for you. But don’t forget, it’s very hard to make decent margin out of small properties, particularly in oversupplied areas. And there’s a lot of oversupplied areas right now.

[00:21:12] So you have to be very careful about this small growth, what your properties look like, where they are, how you’re going to manage them, what the margins you’re going to make on them are. So small portfolios, high quality properties, very diligent about it, good prices. You’re going to be successful.

[00:21:31] And now you’ve got the other owners, and these owners are the ones who say I want nothing to do with it. But I’ve got the best property in the world, which is what you hear all the time. And I’d like you to manage it for me and look after it for me. And honestly, some of the owners are lovely people. But a lot of them don’t really understand that this isn’t just the box that people come and stay in. This is hospitality.

[00:21:59] So you can be a manager with 650,000, 150 properties, but you still have that many owners attached to them. And then you’ve got to try and educate all these owners about all their different properties, that they need to invest in their property to maintain the levels of hospitality.

[00:22:20] I shouldn’t joke about these things in public because I’ve been a manager, but managers will just joke and say, the guests are great. If we could get rid of the owners, it’d be a really good industry. So you’re challenged because you’ve got two clients. You’ve got an owner, and you might say, yeah, the bed is 10 years old. The mattress is worn out. You need to replace it.

[00:22:44] It’s fine for me, I sleep on it, I’ve got no trouble. And your TV, you need an LED TV, and you need Netflix on it. Seriously, I’ve had all the conversations over all the years with all these people. Our property in Italy was right on the lake, and it was beautiful. We spent a huge amount of money on it.

[00:23:07] And I do remember a guest coming in. We were there at the time, and they came in, and they sat straight down, and they turned television on at 3 o’clock in the afternoon, and one of the world’s most famous lakes is 20 meters away from you. And they turned around and said, I can’t get Eastenders, which is a soap opera in the UK.

[00:23:32] And that’s a really good reflection actually on what people expect. Everybody comes in and turns the TV on. It’s the last thing I do, is turn the TV on, but it’s actually what those people do, and you have to accommodate their wishes to get the great reviews and to make it feel like they had great hospitality.

[00:23:53] So attention to detail is the winner, and it’s very difficult to do that at scale. It’s very difficult, indeed, because you’ve also got cleaning staff at scale, and you’ve got to train the cleaning staff, and they can’t be sick, and they can’t have a bad day. They can’t miss something. So I don’t think anybody’s got it absolutely right. There are some fantastic companies out there, but even the best really struggle sometimes to be as diligent as an owner who does a really, really good job.

[00:24:25] Annette: Now that’s very comforting, I’m sure, for so many of our listeners to hear that keeping it small, keeping it tight, keeping it control, and if the margins are there, that can be a bigger winner than all of the noise about scaling that’s out there.

[00:24:42] Richard: It’s true, isn’t it? I get asked a lot, if you’re going to start another management company, by the way, which I’m never going to do–

[00:24:50] Sarah: The word never has so much–

[00:24:51] Annette: Tell us how you really feel. Yeah.

[00:24:54] Sarah: Vigor.

[00:24:54] Richard: What would you do? I’d rather have five really high quality, slightly larger properties in nice destinations than 500 average properties. Because it’s a lifestyle business that can make you a decent amount of money as an individual, as opposed to a very large concern making moderate amounts of money off a large volume of properties with an enormous amount of headaches attached to it. There are some huge companies out there that have 20, 30,000 properties. I don’t have to tell you though that some of them they’re not making any money.

[00:25:31] Annette: I actually love what you just said there too, because I think this can be an offering to our listeners of so many people think that they’re going to get one property or two properties and they’re going to be able to quit their W-2, and this is going to be all the cash flow. But I think we discount, man, the power of keeping your full-time job, maybe your partner’s full time job, and really digging in to those lifestyle properties and doing the math that way of how could we stay where we currently are at our current incomes, save and put down payments on these– take the time and energy to do the math, do the location where you’d like to be, and really look at it from this holistic lifestyle.

[00:26:19] And it might take longer to get there, but I just really think that message of keeping it smaller, keeping it tighter, and knowing your margins. And then you only have that one client, which are your guests versus having the owners and the guests. I know sometimes it’s slower to get there. People are like, how can I scale quickly? But I love this thought of slowing down and keeping it smaller.

[00:26:42] Richard: Yeah, it’s a really good point about keeping your job at the same time. We live in very uncertain times, and we have done since COVID in reality. That was a wake-up call for many people. A lot of people went belly up. They went bankrupt. They over leveraged. They got all sorts of issues.

[00:27:02] Interest rates are still much higher now than they have been for a very long period of time. It depends how risk averse you are and how, let’s call it entrepreneurial. It’s like danger max, really, some of this stuff. You’ve got to have sufficient equity in your properties, I think.

[00:27:24] In the year 2013 to 2017, you could leverage yourself to death. You could actually put 5% down, borrow 95%, and then reborrow as the capital value increased. And it all sounded great, but actually, at the end of the day, it was going to be a recipe for disaster.

[00:27:47] So if you can keep a job, get sufficient equity in the property so that it’s never going to drop by 25%, but it might well drop by 10%, then you’re in a much safer place to actually do that. I actually work with some young people who are entrepreneurial and want to scale very, very quickly.

[00:28:09] It’s a very hard thing to do. So it’s very hard, and you do tend to be tempted by taking the wrong properties. And once you’ve got the wrong property, you’ve got a headache. Another of the commonest things from managers over recent years since COVID is I’ve got rid of 20% of my inventory. That 20% is losing the money, and it’s giving them the biggest headaches.

[00:28:35] So they off board it and either the owner takes it on or another manager takes it on and they’ll off board it in three years as well. I think caution is probably a good idea still right now. There’s a lot of legislation around. There’s a lot of health and safety issues. There’s a lot of noise particularly in sunshine destinations, oversupply.

[00:29:00] Sarah: Mm-hmm.

[00:29:01] Richard: From what I see, I don’t know about you over on your side of the Atlantic, but occupancy seems to have levels off. ADRs are just about holding up. You have to think we’re coming back to a 2018/2019 status quo. If people keep buying Airbnbs and keep piling it in, this is the bell curve. They’re all going in at the wrong time, and it’s going south. Be cautious. Buy well.

[00:29:33] Sarah: But no. Actually, just saying that, buy well, the amount of time Annette and I hear people thinking that turning it into a short-term rental is going to save their bad buy is infuriating because, especially now, maybe you may be able to buy yourself a year or two when it was towards the end of 2020, 2021.

[00:29:54] But listeners, I’ve run a couple of rental properties recently where I actually ran the numbers and the client made more having it as a long-term rental, not even leveraging midterm stays. Because the expenses are higher. The cost of management is higher.

[00:30:12] And so these people actually were better off running as a long-term. But anyway, Richard, you have a lot of backstage passes to a lot of companies, and I would love for your point of view on– I know for you direct bookings were the way of life in the year 2000, but now it seems to be a movement of educating owner operators on the fact that you can get people to book directly with you.

[00:30:41] But just seeing what you see across many companies, how possible is it with the growing empire of Airbnb and Booking.com for an owner operator, even the smaller “co-host”. They’re not quite property managers. They do help other owners manage their property. And do you think that’s something they should focus on, actually? Should they be focusing on booking direct?

[00:31:03] Richard: Oh, wow. You’ve shot me under the bus here. I know. So yeah, I actually raised on my company, my tech business, because I started a tech business as well and sold that last year. Yeah, I actually raised half a million off the back of book direct. And you’re right. In the year 2000, everything was book direct.

[00:31:24] It was so easy in those days before American corporations decided to rip the fabric of bookings apart. Well, it’s always American corporations. I don’t even know. It’s Apple, Facebook, Microsoft, Booking.com, Airbnb, Expedia. And you come across the Atlantic and hurt us. I’ve got lots of opinions on this, and they’re not all good. And so you need to categorize how tough it’s going to be for you on day one.

[00:31:55] So if you’re somebody who owns a property in the center of a major city, or even a leisure urban city like Barcelona, you’re going to find it incredibly difficult to actually get direct bookings. Because most of those destinations are completely dominated by OTAs, Booking.com, Airbnb, and everything else.

[00:32:19] Airbnb started in an urban area. Everybody seems to forget that that’s where they started, and the leisure industry wasn’t of that interest to them until COVID. So I think urban areas and the numbers are somewhere between 3% and 6% bookings are direct. It is embarrassingly small. So the only direct bookings you’re going to get are people coming back, and if you do a really good job, if you do a really good job, then they will come back.

[00:32:49] But unfortunately, people don’t come back to cities every year. They tend to move to different cities. Short haul airlines are guilty of actually pushing people to different parts of the world, as opposed to the places you go. You could go every year. So the urban areas, I just think it’s going to be incredibly difficult.

[00:33:09] And you’re just as productive as being very, very conscientious about what you’re pushing into the OTAs. And let’s face it. The guest pays the commission these days anyway. Everybody’s realized that the guest wants to pay that extra money. They’ll pay that extra money.

[00:33:26] So give them a great quality product, and you will come out tops. The leisure industry is slightly different because it’s not major cities. It’s very specific destinations. And you’re going there for different reasons as well. You’re going to Barcelona because you actually want to go and visit the cathedral and you want to do a bit of beach. You want to do a bit of eating and all like you would in a normal city.

[00:33:52] Leisure destinations tend to be different. You might want to go skiing. You might want to go surfing. You might want to go out in the countryside. You’re going to need a lot more information about where you’re going because it isn’t really available. So you do have more of an opportunity for providing information that will allow people to hit your website.

[00:34:12] So there is a bigger opportunity for driving more direct traffic to your website. And now you’ve hit the real problem because 99% of websites on this planet do not convert. So I ran a tech business that had 600 websites at one point running, and I’ve spent a lot of time looking at websites.

[00:34:35] The vast majority of websites do not convert half as well as they actually should. And there’s all sorts of reasons for that. It can be the design. It can be the photography. It can be the checkout process is too long. You’re asking too many questions. A payment solution doesn’t make them feel as trustworthy.

[00:34:54] There’s a whole bunch of stuff in there that the OTAs have done incredibly well. Don’t forget, if you copy an OTA, you’re copying a company that spent billions making sure that actually it works. So websites don’t convert very well, and it’s a whole industry that needs completely revising, I think. And I think with AI, with new tech coming along, you will see improvements in that part as well.

[00:35:21] But can you get direct bookings even if you have a great website? I think the metrics for Europe are somewhere between 30 and 40% of bookings are direct in season. I think in the US, it’s less. I think it’s slightly less than 30% in season at leisure destinations. I work with some companies like OVO who have 80% direct bookings.

[00:35:45] So they have a couple hundred ski chalets, but they have an incredible team behind them actually doing content, doing SEO, doing revenue management and everything else. And they’ve been at it for a very long time. And history counts in this industry when it comes to search and things.

[00:36:05] So the answer is yes, you can do it. As an individual owner, I think you can improve your chances, but you’re going to have to think, what am I offering? If I’m offering an apartment in the middle of a city like everybody else, you stand very little chance of actually being able to outdo the competition and outdo OTAs.

[00:36:29] If you’re sitting on the edge of a lake in Ohio, somewhere with a water feature, and it’s got carp in it, you know you can target the fishing community, and you stand a much higher chance of actually bringing people in direct because at that point, they’re going to start researching stuff that the OTAs don’t have.

[00:36:48] You can advise them on the best bait on the size of the fish, what season to do it. You’ve got much bigger opportunity, but I’m going to be wrong. It’s going to take a lot of hard work. And it’s the hard work that generally means people fall over. Because I’ve been to a lot of book direct conferences, and I was in Barcelona and played devil’s advocate and told everybody they should forget book direct and just sit back in their armchairs and put on my OTAs.

[00:37:19] But it was contentious. It was meant to be contentious. It was meant to actually get people up and say, you’re going to come to a book direct show, and you’re going to learn about content management, and you’re going to learn about niches, and you’re going to figure out actually how to generate more direct traffic and bookings and conversions and remarketing and everything else that goes with it.

[00:37:41] You have to spend time. And don’t forget. A lot of your readers, a lot of your viewers will actually be working full-time. I can’t imagine they’ve even got the time they need to put into it to actually do that. You can get rebookings only if people come back. And it’s amazing how many people go back and book through the OTA again, because it’s frictionless.

[00:38:07] So I was a big advocate of book direct many, many years ago. In fact, I’ve got some tales I might tell you privately about OTAs not being very happy with me about things I said. And very outspoken about it, but actually it all came to pass. They moved from inquiry mechanisms into fully commerce businesses, taking a percentage of every booking that goes through it.

[00:38:35] So, very hard to compete with– very, very hard. If you’re a manager at scale, you do stand a better chance because you’re advertising all that investment on, let’s call it, 150 properties into marketing muscle, and you can start to dominate a local area. So in the UK, we have companies like Sykes who have 20,000 properties.

[00:39:00] They’re almost like a national OTA because of that volume of properties, and they are completely tech centric. Very tough indeed. If I had a property right now, actually– I have this conversation with my boys. If you’re going to buy a property, how are you going to market it?

[00:39:19] I’ll just stick it on Airbnb and make sure it’s the best one in the locality. And the guests can pay the extra money. If the guest wants to pay an extra 15%, let them. Don’t forget, there was technology in here too. The technology does allow you to do more things than in the years when technology wasn’t around.

[00:39:43] So it is easier to remarket to your previous guests. It is easier to give yourself a little bit of a social presence. There’s unified inboxes for managing your email, so you can actually respond much faster and stuff. But unfortunately, everybody’s got those as well.

[00:40:01] Annette: Right. The playing field’s leveled.

[00:40:05] Richard: Yeah, I’d love to say it’s that easy, but seriously, it’s really tough.

[00:40:13] Sarah: It is tough. And I think we can turn that into– everyone out there listening, I don’t think that means to give up and raise your hands but to just give yourselves a little grace in how hard it is and to do what you can do and to keep your eye on it too.

[00:40:31] Richard: Yeah, I think so. I’m always quite an Amazon, actually, when you think about it. I hate Amazon, but I use it all the time. And why do I use it all the time? It’s because it’s frictionless. It gets delivered to your door. Plus, when you go online, you can check to see the reviews, to see which has got the best reviews, and you can check to see the prices.

[00:40:51] The one with the best price for the best reviews comes through my door. And that’s no different at the end of the day. It’s the way we expect things to work. Humans are embarrassingly easy objects. I want it, and I want it now, and I want it cheap.

[00:41:10] Sarah: Right. That’s a really good analogy for everyone to just wrap their– especially when you get mad as a host. I would never go see who’s a seller is and go to their direct website. I would never do that.

[00:41:23] Richard: I know. I think maybe 10 years ago we would, because the process was never that good in those days either, but it’s been very sophisticated. These large businesses are not just technology machines. They’re psychology machines too. You can bet Airbnb has a whole room full of psychologists trying to figure out how to influence you to get you to work with them more.

[00:41:50] Sarah: You are right.

[00:41:51] Richard: It’s not just a room full of people just making bookings. It’s an influencer.

[00:41:58] Annette: Right. It’s not just the term user experience. It’s like the psychology is baked in to that user experience of where the button is, what color the button is, the copy. All of that is really based on psychology. And then the tech is layered on top of it, for sure.

[00:42:15] Richard: It is, yeah, and all that PR and all that messaging. I think Airbnb is probably the best PR company on the planet. That was their real power, I think. Live like a local. That was such a great strapline and an absolute nonsense. How many times have you gone to a city and lived like a local? You’ve lived like a tourist.

[00:42:39] Sarah: You’re right. You’re not wrong. I used to live in New York city, and I would take my friends to my local spots, but they did not want to go there. They wanted to go to Times Square. Right. Richard–

[00:42:49] Annette: That amazing.

[00:42:51] Sarah: As we wrap up the conversation, because you’re a busy guy, we got to get you on your way, but what would you say to someone in terms of where this industry is going? What are you talking about in terms of forecasting, whether in the UK or the US? That’s a big question, I know, but the first thing that comes to mind, what would you share with our listeners?

[00:43:10] Richard: Well, because I guess most of them are independent owners or very small portfolios, then I’m pretty sure we’re going to see a swelling of inventories still for a while. I don’t think the message is actually filtered out into society yet that you can’t make as much money as you could have done five years ago if you jumped on the bandwagon at that point.

[00:43:34] So I think we’re going to see a bit of a stabilization curve. We’re going to see a reduction eventually in a lot of destinations because of the pushback on legislation and everything else, and home ownership and politicians trying to make money out of it because that’s generally what they’re trying to do.

[00:43:53] So I don’t think we’re going to see a dramatic increase in ADRs, hence occupancy. I think, will have all settled down. In terms of working with OTAs, because that’s where most of your viewers actually work, I think this is just my personal opinion. I think Airbnb has an issue. I think it has a problem.

[00:44:19] So we have guest favorites, and we have super hosts. So we had super hosts, and everybody wanted to be a super host. And now, they have to be a guest favorite. So you have to have 4.9 and so many reviews, and you can’t have any cancellations, etc. I don’t think that the market as a whole is really ready for that.

[00:44:41] So you’re going to see the cream rise to the top, and they will get a higher percentage of the book. So if you want to be successful, you better make sure you’re the cream and you’re just not average. So don’t forget. People only go to an Airbnb. I think the average income for an Airbnb is $13,000 or something.

[00:45:03] It’s not a great deal of money in actual fact. That’s gross booking values. It’s not a lot of money. It came from a home sharing environment. Come on, do you want to go and share a home with somebody for a holiday? Not really. I don’t want to share with me. But you’re only going to go there once or twice maximum in a year.

[00:45:25] You might only use Airbnb once in a year. You might only use it for two days or three days. So their problem is they don’t have a continual churn of customers like Amazon where you order every two or three days and money comes in. And hence that’s the experiences play. So they’ve got the experiences play. They want you to have experiences.

[00:45:43] I think that’s it. I think that’s probably an intangible. They can’t break over the next two or three years because technically it’s an incredibly difficult task. It’s like herding cats. None of these experiences have any technology, and they’re all like cottages were 100 years ago in terms of bookings and things.

[00:46:02] So I think you have to be a little careful about Airbnb. And if you want bookings and they’re your major player, then I think you have to obey their game a lot. The other platforms, Booking.com, I’m a great fan of Booking.com if you’re an investor. Because they have hotels, and they have lots of other platforms associated with them.

[00:46:23] I don’t think they have the best guests, but I do think they will drive harder into the short-term rental market. So there is an opportunity for that. Same rules apply. Cream rises to the top. Simple as that. Vrbo, God bless them. I think they probably lost the game. So why they changed the name from HomeAway to Vrbo in Europe, it’s complete mystery to me.

[00:46:51] It’s a mystery to everybody else because no one had ever heard of the Vrbo in Europe. It was FeWo-direkt, and Owner Direct, and HomeAway and stuff. So from an OTA perspective, I’d say that’s the challenge. I’m a big AI advocate. I’m a board advisor to Boom, which is AI integration across a whole technology platform.

[00:47:13] I think if you’re looking for light on the horizon, then it might well be AI that actually assists. So if anybody’s looked at Google search recently and what’s happening, that’s pretty terrifying. So you’re asking about book direct and all those companies invested literally millions in being the top listing organically.

[00:47:40] I think a lot of them are right now seriously worried about where it’s going because it’s been tested in the US where you’ve got an AI summary and then you’ve got links under it. And presumably, they’re the ones that pay the most money. I think there’s going to be a lot of fallout.

[00:47:53] I do actually love AI, and I’ve said this for almost 10 years, it hasn’t happened yet, but AI might allow it to happen. At some point, you might actually have your own personal individual bot.

[00:48:08] And that bot, well, it could be on your phone. It could be broadcast onto your TV, and you could actually say, listen, I want to go and stay in a place in Ohio on a carp fishing lake. Can you find some for me? And it’d say, well, normal budget, family going? Yes. What dates? Sometime in June. Just find it for me.

[00:48:33] And it’ll go off, and it will find this stuff for you. And then it will come back and say, these are your options. And you’ll go, that looks great. Can you book it for me? Yes. Okay. I’ll put it securely for you through this system, which will not necessarily be an OTA system. It’ll be a payment company system.

[00:48:49] Annette: Mm.

[00:48:51] Richard: Because payment companies are very big in this space right now. So if there was some Nirvana at the end of the day for book direct and how things might change, I think that would be it.

[00:49:02] Annette: Because that bot could shop pricing too and say, I found it on Booking.com. I found it on Airbnb, but I found their website, and their website was the best price. So that’s where the bot could really catch it out.

[00:49:15] Richard: Yeah. So you see [Inaudible] right now, you’ve got a meta search engine. You’ve got plugins. You’ve got all sorts of stuff where you can compare prices. It’s coming out there, called high chi, which does all this sort of stuff, and even Google’s meta search, you can see the different prices for the different things. It’s not really been infiltrated by individual hosts.

[00:49:34] It’s mainly large managers or large platforms in there which get all these listings. But presumably, it’s only a matter of time before Google actually says– and Google knows this. Google actually knows that hosts have better reviews than managers. But having had conversations with Google about that, and they never give anything away, they do have certain prerequisites to allow people to be commercial with them.

[00:50:01] And that means if you’re going to have something on Google, it essentially needs to be online bookable. It needs to be online bookable and trustworthy, and it has to have real time availability and real time pricing. So if you imagine what you see right now on Google, it might have eight different online bookables.

[00:50:20] It could be Airbnb, Plum Guide, Vrbo, any number of these third party. HomeToGo, Holidu, all this sort of stuff. If you actually manage to have individual properties in here somewhere, and Google said, we trust this website, and we trust where the booking is coming from, because they tend to trust large companies, which is crazy, really, but they do trust large companies, the fabric of it will change.

[00:50:48] Because I tend to think, but Google’s been making a lot of money out of these big companies for years, Booking.com, Expedia. They’ve been charging them billions. None of these large companies want to pay Google. They say they do. They say we like working with them, but why have they got a focus on apps?

[00:51:05] Because if you’ve got an app, you don’t have to worry about Google search. So you push to the app, no money to Google. So Google must be thinking, we need to go more granular. We need to have wider reach. We need to provide the best service, which is what their mantra always used to be before it was I need much more money. So yeah, the industry as a whole from a technology perspective is oversaturated.

[00:51:33] I’m sure many of your owners are being swamped by emails from people saying, do you want to use my new PMS, or channel manager, or guest app or something? Very tough because there’s too many of them, and I think that will start to shrink and consolidate. And I think we’ll see individual companies blossoming through the use of American investment money. Yeah, it’s a large picture. I’m trying to think what an individual owner should be wary about really. I’d be wary about being miss old tech, for sure.

[00:52:17] Sarah: Yeah.

[00:52:18] Richard: I would actually also say that I think there is a great variation in the cost of technology between providers, even though that many of them provide exactly the same service.

[00:52:32] Sarah: Yeah, you’re not wrong.

[00:52:33] Richard: Yeah, one thing I have heard owners say is that they’ve got too much technology.

[00:52:37] Annette: Yes.

[00:52:38] Sarah: The tech stacks, they look their P&L, and the amount of money they’re spending on all these “solutions” make their life easier and they’re like, wait a minute.

[00:52:47] Richard: Yeah. The big thing I’ve been hit with over the last three or four months is it’s generally from managers actually, KPI stuff. So years gone by, we’d all own properties and clean the toilets, and we’d have money coming in at the end of the year. You go, I made a few thousand pounds as well [Inaudible].

[00:53:08] We made a little bit of money. These days, it’s much more about your metrics and your KPIs, and these are now turning into small professionalized businesses. It’s not just, I’m just renting it out to hope and make money. These are now concerned about how much they’re paying for their leases, how much their operational costs, how much the cleaning costs, how much the tech costs, how much the insurance costs, how much the fire and safety checks are, how much are the guests paying?

[00:53:39] And do I do revenue management? And should I put dynamic pricing? No, I need a PMS for dynamic pricing. You can possibly go a little too far. I don’t know. But I guess my question for you is do you think Airbnb will provide all these tools pre charged as part of their offering? Because I think that’s–

[00:54:02] Sarah: Oh. You see it every summer or winter release. It’s the lock management now or the being able to speak to all the members of the party in your messaging. Because there are people in our world, Richard, our owner operator world where they argue against, why do I even need to book direct? Why would I need to worry about all these expenses when I can get it all “for free” on Airbnb? And you have to stop and think like, God, Airbnb is smart.

[00:54:31] Richard: They have, and you still got to get the bookings. I’ve spoken to a few co-hosts who’ve hit 20 properties.

[00:54:40] Sarah: Mm-hmm.

[00:54:41] Richard: And co-hosting at 20 properties is, want to call professional managers, but actually, everybody’s a professional manager if they do it right. I’m a bit contentious about the word professional manager, managers with 20 plus properties, which is 140,000 worldwide or something. At that point, because of the scale they’ve got to, the headaches become quite significant. So all of a sudden, you are now beginning to worry about your pricing online.

[00:55:15] Sarah: Mm-hmm.

[00:55:16] Richard: You’ve got individual owners questioning you, going, well, I know you’re co-hosting with me and stuff, but actually I didn’t make as much money last month as I did this month. Have you taken your eye off the ball? They’ve said to me, well, I’ve got this far, and now I’m a bit concerned because I’m not doing so well on all the Airbnb stuff I had on some of them. So I want to now distribute it to Booking.com and Vrbo. Okay. This is just the beginning of your headache.

[00:55:42] Annette: Mm-hmm. Right.

[00:55:44] Richard: Because once you start doing that, you might get more bookings. Therefore, we need more cleaners. You need more staff. You need more payment solutions. Your channel manager is going to fall over. Seriously, why I ever go into this I’ve no idea.

[00:56:02] Sarah: Richard, as Annette wrote down, my eyes are popping out. It’s just an eye-opening conversation. If our listeners wanted to connect with you in some way, shape, or form, what’s the best way for them to do that if they can?

[00:56:17] Richard: Just go on to LinkedIn and find me on LinkedIn. I inhabit the LinkedIn space because I hate social media apart from LinkedIn, which is a business social media. I know why–

[00:56:32] Annette: Also based in America, right? Also based in America.

[00:56:37] Richard: Yeah, everything is, I think, actually, isn’t it? Yeah. Well, I think the Chinese are catching up with you, and I think some of the Middle Eastern countries are catching up with you.

[00:56:46] Annette: Yes, they are.

[00:56:48] Richard: But yeah, you do tend to influence us quite a lot. Although saying that, I haven’t really seen any large US management companies in Europe.

[00:56:58] Annette: Right.

[00:56:59] Richard: The castle came over and tried its hardest and failed, didn’t it?

[00:57:04] Annette: That’s very, very true. Very true.

[00:57:07] Richard: Yeah, we do have 27 different states in Europe and the United Kingdom which is not part of Europe anymore. So we have a lot of different languages and a lot of different problems, but from your perspective, actually, everybody has the same issue when it comes to rentals.

[00:57:25] You just have to do a really, really good job, and you will win by doing that really good job. No one teaches you hospitality at school. It’s not something taught, and I think you have to be conscientious. You have to worry about the detail. You have to worry about the guest.

[00:57:49] And the guest is not the guest they used to be. Their expectations, compared to what they were 20 years ago, have gone through the roof. They expect a hotel, essentially. They expect a really good quality hotel as well.

[00:58:04] Sarah: And listeners, it’s a big component of why Annette and I show up twice a week here on the podcast, to help with the hospitality component. And I know a majority of you, if not all of you, are obsessed with the details, and that’s why we love you so much.

[00:58:18] And thank you so much for tuning in each week because it is the cream that’s rising to the top. And what Richard is saying here is absolutely true. And I know that’s what helps us smaller owner operators have that fighting chance of being profitable, is that attention to detail. And we’ve got our own issues, of course, like we pointed out in today’s episode, but there’s a way to overcome.

[00:58:41] So Richard, thank you so much for your time and expertise today. Listeners, take him up on finding him on LinkedIn. If nothing else, what you post is really interesting to keep on top of industry trends, technology, things of that nature. So we’ll make sure to link to Richard’s LinkedIn page in our show notes. But with that, I am Sarah Karakaian.

[00:59:04] Annette: I am Annette Grant. And together we are–

[00:59:06] Both Annette & Sarah: Thanks for Visiting.

[00:59:07] Sarah: Talk to you next time.