It’s official. Vacasa began trading today as a public company (NASDAQ: VCSA). The TPG-backed SPAC assigned Vacasa a total value of nearly $4 billion, and this morning, Vacasa said its market value was higher—roughly $4.4 billion (market values change as stocks are bought and sold). The company closed its first day of trading at $9.84 per share and a $377.62 million market cap. According to Vacasa CFO Jamie Cohen, only about 10 percent of the company’s shares are publicly floated, or available for investors to trade. Vacasa’s existing shareholders are holding onto their equity, including Eric Breon, who founded the company in 2009.
This afternoon, we were able to catch up with Vacasa CEO Matt Roberts to talk about the company’s IPO, its future, and trends he’s seeing in the vacation rental industry.
Amy Hinote (AH): Did today meet your expectations?
Matt Roberts: It’s been great. I think for us it was nice to get past the SPAC process and just start to become a normally traded company on the NASDAQ. And at this point forward, it’s all about what we do. It’s day to day; you’re going to have volatility in the trading of the stock. But my message to the team, having run public companies for a large part of my career is—in the short term—this stock market goes up, it goes down. It doesn’t mean really much about the business—and over the long term, it ultimately reflects the valuation of the business—but that’s mostly about what do we do. But the day was great; it was a lot of fun. We invited our employees that had 10-years-plus tenure with the company to fly to New York and participate, and that was a special moment. Just to see those people who have dedicated so much of their time to building the business that we have today get to participate live in this was pretty special.
AH: Your press release said you’re bringing in $340 million for growth. How much of that do you think you’re going to put into supply and how much into technology?
Matt Roberts: We’re going to triple the dollars that we’re spending in technology above our 2019 level. We’ve already started a big chunk of that in 2021—hiring engineers, building out our tech—and we have plans to continue to do that in 2022 and into 2023. At some point, we’ll only be able to get the team so big, but we have so many ideas of things that we can do on the technology front and not enough engineers to build it. I don’t think you’ll talk to a CEO who thinks they have enough tech resources. So, we plan to spend a good amount of money there.
We also are going to have the ability to spend more on supply acquisitions, new properties. Half of the sales and marketing line that we have in our P&L right now is dedicated to adding new homes to the platform. And we have the ability to add homes using our local salespeople, people in the market. We [start with our] our direct marketing, and then we sell with sales reps. But we also have this portfolio approach where we, as you know, acquire small property managers across the country, and so that capital will be able to be used for that as well.
AH: Are you at all concerned that you’re going to be overpaying for supply in future acquisitions to meet growth metrics?
Matt Roberts: No, I’m not. Our playbook is to have individual sales reps and do direct marketing. So we spend a significant amount of money on direct marketing to homeowners, and that creates leads. And then we have local salespeople in every market. That’s our primary growth engine. 75 percent of the properties that we plan to hire are from our direct sales channel. It has nothing to do with portfolio acquisitions.
AH: Is that what it is now?
Matt Roberts: That’s what it’s been historically, if you exclude some of the big [acquisitions]. We’ve really done two big acquisitions: We did Wyndham Vacation Rentals, as you know, back in 2019, with roughly 9,000 [properties], and then we did TurnKey back in April. Otherwise, we run this portfolio approach, most of which are smaller sized, small- to medium-sized portfolios of homes that we add. We think there’s an opportunity to do better than that. But from a financial projection perspective, we’ve modeled our business to be this 75/25 percent growth and have built our whole forecast on that. And that’s the forecast we shared with Wall Street.
AH: Do you think Wall Street is ready for the seasonal nature of your business?
Matt Roberts: Oh yeah, for sure. I mean the business is not unlike any other seasonal travel business. That’s why you talk about things on a year-over-year basis versus a sequential change or what have you. Wall Street understands how to value seasonal businesses. If you think about the big example of Apple with its hardware cycles and it hardware upgrades, you learn to figure out what those patterns look like and then forecast accordingly.
AH: Let’s talk about the TurnKey acquisition, I think it was $619 million in stock and cash. Bob Milne said in May that what you paid was not just for inventory, it was a tech play as well. What was in TurnKey’s tech platform that you found attractive?
Matt Roberts: So a couple things just to clarify: On the transaction with TurnKey, we didn’t have disclosure on what the specific items were. What we said is—and what TurnKey was—it was an equity deal where they got stock in Vacasa. So if you think about what they viewed as their valuation—and then when we looked at them, how we viewed the valuation—is we looked at it on a proportionate basis: where they were relative to their growth rates and where we were relative to our growth rates. And we came up with an agreement about what percentage they would end up with of the consolidated Vacasa entity. So that’s just to clarify how the actual valuation and how the mechanics of that went, but we didn’t disclose specific numbers there.
TurnKey absolutely was complementary in a number of ways. They had some great technology that they had for smart home technology, a lot of which was proprietary. They had some pretty sophisticated approaches to how to handle routing and management of outsourced labor to do the servicing of the properties, because I don’t know if you know, but their model was 100 percent outsourced in terms of the local operations. Whereas Vacasa is more employees than contractors. We have contractors too, but they were more. The ability to leverage some of the ways that they manage and balance that—with the smart home technology and the management team itself—they ran our same playbook, effectively. They were growing properties through local sales teams. In fact, that was the main way that they grew their business. So bringing the two very similar models—but complementary models—together just made a ton of sense and has made a ton of sense as we’ve gone forward here so far.
AH: Looking at the management, you brought in a lot of people who had IPO experience. Does that transition? Do you have enough management that is service oriented, ready to grow this as a really great company past this jumping off point?
Matt Roberts: We’re doing fantastic. So when you say bringing in with IPO experience, I look at it as, yeah, they have experience, like myself, taking a company public; but every single one of them acknowledges that’s one day. They know—just because they happened to be in a position where they could take a company public—it wasn’t why I hired them. I hired them because they’re great operators. They’re great marketers. They’re great salespeople. They’re great executioners of the vision for the business and talented and experienced. They’ve made a lot of mistakes and they’ve done a lot of things right, and they’ve learned from all of that. So if anything, we’ve got a rockstar management team at this point. I mean, we have a great, great super strong management team. And by the way, we heard that loud and clear from all the investor meetings that we did throughout this process, how impressed they were with the quality and experience of our management team.
AH: Internally, when you were talking about meeting with your team later today, what’s the big message that you are telling them going forward?
Matt Roberts: We sort of just talked about it a little bit. I think, this is one day. I mean, it’s exciting. I don’t want to dampen enthusiasm. It’s a big milestone. It’s awesome, and they’re going to get a lot of congratulations from their family and friends, and it’s a big deal. There are a lot of companies that say they’re going to go public and never do; they can never reach this milestone. So it’s something to be celebrated.
But the real work continues each and every day. I think it’s funny that you never get more help from outside of your business than taking you public. And then, as soon as you are public, they all go away. All the expensive advisors and all the helpers, they all go away; and it’s like, okay, we’ve got our next earnings call and we have to execute on growing the business, and they’re gone now. All the bankers, the lawyers, all the consultants—they’re gone, and it’s just you. And the good news is that we have an experienced team. We have a dedicated group of people that are focused.
My message to them would be: keep delivering really good service to our customers, and the value of the business will follow that delivery of those results.
I’ve lived this before. There’s going to be—over the X period of time—there’s a lot of volatility. There’s not a lot of float in the market. So any move in the stock, that’s going to be exaggerated. And when it’s super high, guess what, we’re not brilliant and awesome. And when it goes down a lot, it doesn’t mean we did something wrong either. It’s just volatility. So hopefully they can take that message and take it to heart. There’s this human nature to want to look at it—and I understand that and I appreciate that—but I really want them to focus on delivering great service, and then everything will take care of itself.
AH: For you personally, are you in this for the long term? I mean, are you in the vacation rental industry now?
Matt Roberts: Well, it’s funny because, I know that that’s your focus, and others’ focus has been the vacation rental industry; but I think of myself as an operator. I operate businesses. I have a lot of experience operating businesses. I think I do a good job at that. I understand how to build value for shareholders. And so I am enjoying it. I’m really having fun, Amy, operating this business. I like to solve challenging puzzles. And, boy, property management and doing our business is filled with a bunch of challenges. The logistics, the local operations—it can be really hairy a lot of the times. And I like solving that with technology. That’s what really gets me excited to get up and charge them out every day. So I’m having fun. . . . I’m sticking around.
AH: Let’s talk about the industry. We’ve been riding a pretty big high. We’ve watched these highs and lows over time, and we performed really well in a time like COVID or a recession. But when markets start evening out and the economy gets good, then sometimes the vacation rental industry falls off a little bit. How do you feel about the industry outlook?
Matt Roberts: I feel very good about the industry outlook. The trends are really our friend. The preference shift to vacation rentals started back in 2010. Well, before that, even. It went from 10 percent preference in 2010 to 30 percent by 2019, and the pandemic has really just accelerated that preference shift when at least 20 percent of the people that stayed in a vacation rental were brand new, and 52 percent of them said they now prefer it. So we had a lot of trial that I think is going to be helpful.
We have another trend, which is the work-from-anywhere trend, so people can take off and do a four-day stay where they work on Friday and Monday, but they rent a house, which is perfectly suited for that. They’ve got wifi, maybe an extra bedroom that they can cut away and do some work during the day, and then rejoin their family to have some vacation experience as well. So I see really positive momentum behind the category continuing for a long, long time.
I think the opportunity or the challenge is really just supply. When we add product, meaning available nights, to our platform, it sells. So we just have to figure out how to continue that momentum and run our playbook to continue to add properties to our platform.
AH: Speaking of the trends on supply, real estate values have gone up quite a bit, and so have expectations for rental income. Every time we see an explosion in real estate and we also simultaneously see high yields on rental properties, there’s often an unrealistic expectation that continues. Do you think that we might see some supply constraint in the future?
Matt Roberts: I don’t think so. Here’s what we’re seeing: Obviously prices on second homes have spiked considerably. You can look at any of the national Realtor reports on this. I think it was up 35-plus percent, maybe 50 percent in certain markets, for sure. Those are huge movements up. I don’t think that kind of increase is sustainable, but what has happened as a result though, is people who are interested still in buying second homes have become more dependent on the income that they would generate from renting out their house. So in many ways, we’re really cementing our value proposition with these new buyers because they need to count on that income to afford the million dollar home. And so I think there’s a good lock in on the new buyers, And to the extent that there are trends where the real estate value goes down, or if there’s some correction in that, well then the same buyers or existing buyers will still look to monetize those available nights that they’re not using to support that versus even maybe selling.
AH: Can I ask about your distribution strategy, in terms of being reliant on third-party channels?
Matt Roberts: I don’t view that we’re reliant on third-party [channels]. Just to give you the math, we’re our largest distributor of our availability. We’re our single largest distributor. We sell more of our nights than anybody else.
AH: I think you said 35 percent is direct right now?
Matt Roberts: Exactly. Now the key is that we are a really important partner to the distribution channels. So Vrbo, Booking, Airbnb, of course, because we have a really significant—in many cases, a really high share in terms of number of listings in our top markets—but even more importantly, we create higher performing inventory. For example, because we do our yield management, we get more availability and sell it through at a higher rate than anybody else. And at the same time, our guest reviews are higher. So we create a higher performing inventory.
We try really hard—I think this is lost on people, but we try really hard—to simultaneously sell our availability on any given property, on every site simultaneously. Our computer basically tries and we optimize by channel. For example, we’ll show different pictures on Airbnb than we show on Booking than we show on Vrbo, because our testing has said we should lead with this copy, we should have this picture, we should have this configuration of amenities listings, and it will perform better on this channel if we do that. The reason we try hard simultaneously to sell is that’s what our homeowners need us to do to maximize their revenue. So we look at it as we could help create the product, and then we sell, we merchandise and sell that product in every retail store that we can, and we try to sell it through at every retail store that we can. And so if you look at it that way, we’re not dependent on any given one channel; we partner with every channel so that our homeowners can make more money.
AH: Do you think Google’s vacation rental platform is going to impact Vrbo and Airbnb?
Matt Roberts: I don’t know. On that, I think that the Google is always a competitive risk profile for anybody that’s focusing on the demand side of the equation, because they have the ability to shift demand because they’re Google and it’s the search engine. I think that they’re always more of a risk when they try to get in the demand side of the business.
From our perspective, on the supply side, I really don’t see them taking on the work required to do what we do with local operations teams and all the logistics and feet-on-the-street side of the business. So because we do all that hard work, we get this exclusive rights to the calendar where we can market and do market in all these different locations. Our search engine optimization, so our free search, if you just put in vacation rentals in Austin, Texas, if we’re not the first search result, we’ll be in the top two or three, and that’s because our content is the most relevant.