2014 is shaping up to be the most expansive year to date for the vacation rental industry. We recently sat down with executives from seven on-the-grow vacation rental management companies to discuss everything from growth strategies to company culture, technology and marketing to future predictions for the industry.
The outcome was a veritable avalanche of industry expertise and insight. VRM Intel’s Under the Hood Series details each of the interviews and includes widespread topics that cover every aspect of the vacation rental business.
Recognition + Opportunity = Success
The success of each of these growing companies is grounded in their owners’ abilities to recognize need and seize opportunity in the marketplace.
Rick Elliott, Elliott Beach Rentals
North Myrtle Beach, SC
Following Hurricane Hazel in 1954, South Carolina State Senator Dick Elliott, previously a property maintenance man, saw the need for post-hurricane development and professional property management. Elliott plunged headfirst into real estate and opened the doors to Elliott Beach Rentals. At the time he handled rentals, maintenance, owner relations, guest services and anything else that came along. According to son Rick Elliott, current CEO for Elliott Beach Rentals, “Dad wanted to be on the front line and do it all…greet everyone, check everyone in, and meet with all the owners.”
After receiving his MBA from Univ of SC in 1990, Rick Elliott joined forces with his dad to scale the business; between 1990 and 2013 property management grew from 100 properties to over 1,400 vacation rentals.
Steve Milo, Vacation Rental Pros Property Management LLC
Ponte Vedra Beach, FL
In 2002 Steve Milo, Managing Director and founder of Vacation Rental Pros Property Management LLC, purchased his first vacation rental and struggled to find a competent property management company in the area. He decided to self-manage and explore the opportunity in the market. By 2006 Milo owned or co-owned 10 vacation rentals, and was having great success renting his properties on his website. Seeing the opportunity in the marketplace, he decided to launch Vacation Rental Pros. By the end of 2006, he was managing 25 properties.
Milo’s initial growth was organic. “I started the business in a recession. Many property managers had stopped taking new homes because they were having trouble getting bookings. In hindsight the recession was an opportunity. It allowed us to take advantage of a tougher playing field. By running a lean organization, we were able to be profitable, and we used that profit for marketing. We ended up having more bookings than units.” Only seven years later, Milo’s company now manages over 635 properties in Northeast Florida and along the Southwest Gulf Coast.
Sarah Bradford, Winter Park Lodging Company
Winter Park, CO
Sarah Bradford had little experience with vacation rentals when she and husband Chris purchased their Winter Park, CO condo. Like Milo, Bradford searched high and low for a property manager to market, book, and maintain their rental property. She began marketing and self-managing the property and was soon inundated by requests from a network of friends to help manage their Winter Park properties.
Bradford was managing 25 homes when she and her husband decided to take the leap and make property management her full time job. Within a 3-week period in 2007, they sold their Denver residence and bought a home in Winter Park. Sarah quit her job in Denver, and Winter Park Lodging Company was born, just prior to the arrival of twins in the Bradford home. Through leveraging technologically and bold, beyond-the-box thinking, the company grew. Only six years later, Winter Park Lodging Company now manages 150 homes.
Ashley Hamm, 360 Blue
Santa Rosa Beach, FL
In 2007, Jason Sprenkle was involved in developing condos in the Florida Panhandle, and an opportunity arose to manage some of the properties. Jason reached out to his brother Jeremy Sprenkle, and together founded 360 Blue in 2007 managing six vacation rentals. With a focus on technology and service, by the end of 2013, 360 Blue was managing 237 properties.
Amy Gaster, Tybee Vacation Rentals
Tybee Island, GA
Fresh from a visit to Europe, Amy Gaster thought it would be fun to welcome travelers into their home and decided to turn their downstairs into an apartment-sized vacation rental. At the time, other than a handful of realtors offering rental services to their clients, there wasn’t an established vacation rental presence on Tybee Island. Amy used local online marketing to list the property and, before the renovations were complete, the new apartment was booked for the entire summer. Amy continued to receive calls and quickly recognized the opportunity before her. She contacted her sister Carrie who agreed to come on board.
After earning their real estate licenses in 2000, the sister-team mailed introduction letters to local property owners announcing they were the new “rental girls” in town who were going to do things differently. With high quality service and all-online marketing, they began signing homeowners. Tybee Vacation Rentals now manage over 200 vacation homes.
Brooke Pfautz, All Star Vacation Homes
Sixteen years ago serial entrepreneur Steve Trover was approached by his mother, owner of a real estate company in the Orlando area. She was having difficulty finding competent property managers to manage and rent her clients’ vacation rental homes. Trover analyzed the opportunity and, with $1,000 startup capital, founded All Star Vacation Homes. Today the company manages over 250 high-end vacation rentals in four markets.
Ryan Goodman, Kokopelli Property Management
Santa Fe, NM
Charles Goodman, CEO of Kokopelli Property Management, has been in the real estate business as an owner, investor, and property manager since 1976, when he acquired a 5-unit apartment complex in Albuquerque, NM. Operating out of a garage with only a handful of properties, he began managing more rentals and soon launched Residential Property Management in 1996. Goodman recognized that, through economies of scale, the business of property management could be highly profitable. With the help of his wife and two sons, Goodman grew the company and re-branded it as Kokopelli Property Management. Today the company manages 600+ rentals.
Company Culture: How to Keep It
In interviews with CEO’s of rapid-hiring companies across America, Inc. asked, “What’s the biggest challenge in managing a growing workforce?” The No. 1 answer, from 72% of respondents: “Maintaining company culture.”
Ashley Hamm, CFO of 360 Blue, agrees, ““Our top priority is our company culture. The larger you get, the harder it is to maintain.”
So how do vacation rental companies manage to preserve company culture in the midst of high growth? Both Hamm and Brooke Pfautz, Chief Business Development Officer at All Star Vacation Homes, focus heavily on the hiring process.
“We have a strong, passionate culture. Our people ‘bleed’ 360 Blue,” explains Hamm. “To maintain high morale and a consistent company culture, we typically weed through 300 resumes and interview 100 people for each position we hire. If necessary, we opt to delay hiring in order to find the right person for our team.”
All Star Vacation Homes uses the Culture Index as a tool in putting the right people in the right seats. “We live and breathe it,” says Pfautz. “We create the job profile beforehand, determine the optimal profile for the position, and match candidates to appropriate profiles. A high percentage match between the Culture Index and the job profile is a big factor in our interviewing process.”
Another strategy in promoting and motivating company culture is sharing key business information with team members. According to Ryan Goodman, CMO at Kokopelli, “We’ve decided to open our books to our employees. In giving them manageable, simplified job expectations, we’ve found, if they aren’t looking at a budget or P&L, it’s hard to expect them to make the best decision. They also know if they want to ask for a raise, they need to demonstrate how their contribution directly affects the bottom line.”
Sarah Bradford, Winter Park Lodging Company, said, “When we first started, we didn’t even think about company culture. We knew we wanted it to be fun. I read Tony Hsieh’s (CEO, Zappos) book Delivering Happiness, which focuses on making company culture a top priority and helping employees grow personally and professionally.”
Bradford advises, “Formalize your culture and don’t make it cliche. Come up with your values and include your employees in the process. I learned – largely through networking with other managers in VRMA – when new people come on board (that) I, as the owner, have to be the company cheerleader. Now I spend one-on-one time with each new employee and tell them about our growth, our values, and our goals. I also make a conscious, consistent effort to create fun. I bring chocolate, make t-shirts, and have off-site team building activities. If you don’t stay on top of it, one employee can bring the whole culture down and make it seem cool to have a bad attitude.”
Amy Gaster at Tybee focusses on hiring and empowering capable team members: “My advice is to grow a competent core staff. It’s important to Carrie and me that we invest in (the way) our organization is growing. We make sure everyone is communicating, and we implement shared systems to keep people connected. We train and empower our team to ensure they portray our vision to guests and owners. The end goal is for everyone to be confident in what the company stands for, and to be able to speak in the same voice when interacting with customers and co-workers.”
To preserve company culture in his energetic, bottom-line-focused business, Steve Milo leads by example and focuses on accountability. “In our experience, company culture is incredibly important. Our company has a culture which is high-energy and doesn’t mix with traditional models,” said Milo. “I’m a high-energy owner. I get up early, and I don’t have time for wasted effort. I task people in our company. I hold them accountable and expect them to meet deadlines. Once you start to build a like-minded team, if you bring someone in who’s not a good fit, they typically won’t last for the 90-day probationary period.”
Owner Relations: Smooth Turf or Minefield?
In the vacation rental business maintaining quality relationships with homeowners can be a minefield – one that cannot be ignored.
When asked about the number of properties Elliott Realty manages (1,400), CEO Rick Elliott answers, “We manage one property at a time, one homeowner at a time.”
Elliott added brick and mortar locations to his target areas. “Guests and owners have an increased comfort level and familiarity when they see and feel a physical presence. We staff these offices with Owner Service Professionals, who serve as the point of contact for homeowners in the area. We make sure we hire professional and skilled personnel and we pay them well. It’s a key factor to our success with owners. Elliott Realty’s owners like the continuity that comes with seeing the same face.”
The satellite offices also help Elliott target specific complexes and developments. “It’s our way of investing in a targeted area and taking a large portion of inventory. Our homeowners appreciate that we have made a commitment to them and their area.”
Vacation Rental Pros has a different approach to maintaining owner relations, with overall storefront rent less than 1% of gross income. “I don’t believe in fancy offices, and I don’t believe in offline marketing,” says Milo. “What separates us from other companies in our area is that our bookings are so much stronger; occupancy is higher so we have happier owners. We have a dedicated person for owner relations, and the bulk of our correspondence is through email. We also have a customer service department to answer our owners’ questions. But owners still have my cell phone number.”
Ryan Goodman at Kokopelli says their owners have his cell phone number too, plus he has implemented a proactive strategy in communicating with owners. “No matter how much we’ve grown, we have prioritized the relationship with the homeowner.”
Goodman generates an arrival report every week to see which owners are coming into town; he attempts to schedule face-to-face time with them. “Why try to chase them down when you can proactively get in front of them while they’re in town?” said Goodman. “I have a big face with a big smile and that doesn’t come through in an email or on the phone. I want them to know they are taken care of.”
“Having the right number of people staffed is important, so the owner knows someone is designated to always be watching their home,” adds Ashley Hamm at 360 Blue. “Every 360 Blue homeowner has a point of contact. We also have an owner retention program in which we proactively call to check in with the owners.”
All Star Vacation Homes views the homeowner relationship as a partnership. “The way we look at the relationship with homeowners is (that) we are an asset manager and the homeowner is our partner. We call our owners partners,” said Pfautz. “We have a team member in each market who is the point contact for the owner. When an owner is in town, we know when they are coming and we arrange to meet with them at their home and do a walk-through.”
Winter Park Lodging Company takes a highly personalized approach in their owner retention strategy. “We are always selling to owners,” says Bradford. “We send owner newsletters to keep them informed. We schedule regular proactive phone calls with owners. We give them free lift tickets and passes when we can. Sometimes, we even babysit their kids.“ Bradford adds.
During growth periods, Kokopelli Property Management, Vacation Rental Pros, and All Star Vacation Homes have all acquired property management companies, producing both opportunities and challenges. Kokopelli entered the vacation rental space in 2003, when they acquired a company which had a small inventory of short-term rentals. By 2013 the company had acquired 11 other companies and currently manages 220 vacation rentals, along with 500 long-term rentals and 60 commercial spaces.
“When we acquire a company, we typically don’t absorb their employees,” says Ryan Goodman, Kokopelli CMO. “They are less likely to adhere to our standards and procedures. We absorb the work load, closely analyze performance, decide if we need to hire, and hire fresh. There have been a few exceptions when we have absorbed employees if they have some important relationships we feel strongly we would lose without their being on board.”
Steve Milo, Vacation Rental Pros, has acquired four companies, one per year, since 2009, adding 225 properties to his inventory. “The first one was a smaller company that was struggling during the recession. We don’t absorb the employees. We do what is known as an asset purchase. For us, expansion is about quality, not quantity.”
In November 2013 All Star Vacation Homes tapped a new market with its acquisition of Southern California Vacation Rentals. “We surveyed the guests who have stayed in our vacation homes in Orlando since 1998, guests who also continued to request California as a western U.S. destination,” says CEO Steve Trover. “The La Jolla and San Diego destinations are a good fit for expanding the All Star brand on the west coast.”
All Star Vacation Homes retained most of the staff in the acquisition. ““We were very excited to bring the strong leadership and operations team that was in place in Southern California on board as members of the All Star team.” said Brooke Pfautz, Chief Business Development Officer at All Star.
Technology: Staying on Top of It
Although their marketing strategies differ, our company executives agree that leveraging technology is a key component in their success. They reference three areas of focus:
1. Property Management Software
2. Company Website
3. Revenue-focused Technology Platforms
1. Property Management Software
In 1990 when Rick Elliott established Elliott Realty, he didn’t have a property management system. Like many VRMA members at the time, he used the “Rez Board” system, a manual method of keeping up with reservations which became inefficient as the company grew.
Putting a solid system in place was a critical part of Elliott’s strategy; he focused first on designing an efficient, scalable reservation system and reached out to IBM certified consultant Rick Flanagan who, in 1993, built a custom system for Elliott Realty – a system still utilized by the company today. Elliott emphasizes, “As a result, we were the first in our area to have online booking on our website.”
From their 2006 beginning, Vacation Rental Pros invested in web-based property management software. “The best thing you can do with your software is to work directly with your vacation rental software provider,” Milo adds. “For example, we worked with Escapia to open up our API so we could create an interface with Salesforce to have a better help desk.”
Tybee Vacation Rentals also implemented web-based software early. “In our first year, we started with a windows-based application, but we quickly identified the need for a web-based solution,” Gaster explains. ”It was our Number 1 goal when we attended our first VRMA conference.”
Like Tybee, 360 Blue decided to change software systems. “It was a difficult process,” Hamm says. “It was tedious and time-consuming, but beneficial for us to change software at the beginning of the year. We ran dual systems at first and still anticipate using our old system for another year for data purposes.”
All Star also early on sought a web-based property management solution that would also integrate a CMS and better website management. Limited existing options led Steve Trover to contract with Tracy Lotz to build All Star’s own proprietary system, which has now evolved into the LiveRez platform. “In this evolving industry and with rapidly changing technology, we needed a solution that could grow with us,” said Trover.
2. Company Website
All company leaders agree – a high-performance company website is essential to their marketing strategy. It must include the following components: online booking, software integration, easy navigation, high-quality photography, original content, area information, and mobile-friendly design.
Milo emphasizes that Vacation Rental Pros immediately invested in their website. “We invested in a user-friendly website and have incorporated a high quality mobile site.”
Amy Gaster at Tybee also prioritizes their website. “We started with a good website, improved it, and continue to find ways to make it better for our guests. It’s also important to remember that many potential owners make decisions on which company they will chose to manage their property based on your online presence and the functionality of your website.”
After outsourcing their website to Blizzard Internet Marketing, 360 Blue has seen an improvement in their conversions. “As we have been looking at our marketing data, more and more of our rental revenue is coming from organic traffic to our website,” said Hamm.
3. Revenue-focused Technology Platforms
Every executive we interviewed utilizes additional technology with heavy attention to return on investment. “Everything we do at Tybee is technology focused,” says Gaster.
Kokopelli’s Ryan Goodman emphasizes, “We are careful to analyze ROI with the technology we utilize. Everything we spend eats into our margins. We have to ask, ‘What is it adding to our margins?’ For example, we funded our Glad to Have You App as a Santa Fe Tourism App and sold advertising on it. It’s now a profit center with 100 strategic partners in Santa Fe, NM.”
360 Blue also closely monitors ROI on new technology. “We work in an industry of pennies. In order to determine what software and technology we use, we have to evaluate the ROI,” Hamm explains. “We open our P/L to employees, including software prices. So we have 43 employees monitoring whether or not a technology platform is making sense for us. We have a competitive advantage with our relationship with Glad to Have You, as we’re able to beta test any new technology they think up.”
Crystal-balling the Industry
Most of the executives we interviewed agree that the trend toward consolidation, improved technology, and increased attempts by local and state governments to regulate short-term rentals will impact the vacation rental management industry in the near future.
“Consolidation is a given. We’re in the beginning stages of consolidation, and Wyndham has demonstrated a big appetite for acquisition,” says Milo. “It reminds me of the 90’s with e-commerce sites. What evolved was that Yahoo and AOL attracted eyes, then the consumer sites like Amazon came after. The consumer sites were able to grow because the eyeballs were there. Wall Street has funded some big portals in the vacation rental industry which are drawing eyeballs now, and there are opportunities for property managers to leverage the technology to allow for consolidation and efficiencies. The opportunity is there. No organization has been able to effectively manage vacation rentals on a large scale… yet.”
Goodman agrees. “Consolidation on the online side and the listing side has happened. Consolidation on the service side is coming… next is the franchise model. By establishing a national brand, you get all accounting, marketing, sales, best practices, increased purchasing power, and branding power.”
Hamm at 360 Blue anticipates new technology will be a big factor in the industry. “Technology is (only) going to improve. When we started in the industry, we were decades behind as an industry. And now technology is taking off.”
Concerns about government regulations have prompted several of the executives to encourage participation in local and state government and elections.
According to Amy Gaster, “Following the growth of the vacation rental industry on Tybee, and several proposed rental restriction ordinances, we added two vacation rental managers to the Tourism Council. We were able to demonstrate to the officials and the community that 68% of revenue came from vacation rentals, and we ensured them that we wanted to be good neighbors. We showed the value of tourism and, more specifically, the value brought by vacation rentals to the destination. We knew we had to balance the quality of life issues with residents and we figured out ways to coexist.”
Tybee remains active in government affairs. Gaster adds, “There’s always a risk there could be more regulations and restrictions created. We’re in the process of compiling an official economic impact study, and we continue to communicate with the City and residents as needed in order to be more proactive.”
Steve Milo also stays active in government affairs relating to the vacation rental industry. “If you haven’t faced it, consider yourself lucky, but don’t think you won’t. In Florida, it’s been frustrating to see how few property managers will help fund advocacy initiatives and political campaigns. To me, it would be like not paying for insurance. In our industry, it’s a cost of doing business.”
By Amy Hinote