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Most of you are here as you are looking to learn from others and progress in your success! Even if you manage to acquire more property, and fill all your rooms, you’ll soon have another problem: you have to deliver an exceptional experience to all those new guests. By focusing on scaling rather than merely “improving your company’s profitability”, you can generate greater revenue without ramping up costs or diminishing the guest experience. If you want to scale your business into a profitable entity that continues to grow with or without your fingerprints all over every department, you’ll need to complete the transition from employee to owner. But that’s easier said than done.

Today’s guest is a hospitality champion, an ingenious thought leader, and most importantly a true master of scale. Steve Milo is the founder and CEO of Vtrips. On today’s podcast, he shares a tried and true formula that he has successfully replicated across over 7000 properties to scale the VTrips business. I hope his experience and wisdom will allow you to execute scalability techniques and expand your entrepreneurial horizons with minimum effort in today’s volatile landscape.
 

What We Cover In This Episode:

  • What makes a business scalable?
  • How to prepare for scaling.
  • How to build a strong financial and accounting foundation for your business.
  • How property owners and managers can best react to market volatility.
  • What do you need to start scaling a business?
  • Mistakes to avoid when scaling a business.
  • How to create a strong funnel in place for your business.
  • How to create a world-class team, and unite them around a clear mission.
  • Key challenges for scaleups.
  • Why you need to think outside investor money.

 

Steve Milo is the founder and CEO of VTrips, a growing and innovative vacation rental management company that leverages technology to maximize occupancy, revenue growth, and profitability. Mr Milo is a graduate of the University of Virginia, McIntire School of Commerce and previously held several senior-level eCommerce and internet marketing positions before forming VTrips and Vacation Rental Pros. Steve Milo is considered an industry thought leader regarding the evolution of the highly fragmented Alternative Accommodations industry and is a keynote speaker on the subject at conferences throughout North America and Europe.

Scaling is not always achieved in a linear way, and it doesn’t happen overnight. Having structured systems inside your business helps to secure your business and prepare it for rapid growth. You require a comprehensive business model, a strong team, good plans, and the right tools.

I walk away from each conversation completely energized. I hope you feel the same after listening to this one!

👓   Watch the episode here
📣   Listen to the episode here

Transcription:

Welcome to The Accommodation Show we help accommodation owners like you get the knowledge and skills you need to grow your business, improve your guest’s experience and increase your profitability. Okay everybody, welcome back to another episode of The Accommodation Show. 

Bart: I’m excited this week to welcome Steve Milo to the show. Who is from V Trips. Welcome to the show, Steve. 

Steve: Hey, thanks, Bart.

Bart: How is it going over there? Tell us a little bit about where you are from and where you live. And tell me a little bit more about V trips.

Steve: Yeah, so I’m the Founder and CEO of V trips. In case those in Australia haven’t heard of us. We’ve got about 7000 properties we manage in the United States. Primarily in the southeast region of the country. And these are all exclusive contracts. And we’re based out of Palm Beach, Florida, which is a suburb of Jacksonville, Florida. So for those who are not familiar with Jacksonville, Florida is on the east coast really very far north, so we’re not in Miami. We’re not in Orlando. We’re up in Jacksonville actually, Really close to the beach. Generally, it’s sunny and very warm here. And, you know, we kind of have a real central position as we have about 3000 of our properties in the state of Florida. And in the US, Florida is the largest state for vacation rentals, about 22% of the inventories in Florida are also in some areas like Texas, North Carolina, Georgia, Alabama, and Tennessee, so all the southeast region and we have about 1000 employees. And we’ve mainly grown over the last couple of years through mergers and acquisitions.

Bart: And so, look, I mean, I’ve got so many different questions. I think some people will know the answer, but for those that don’t. I’m super interested in that decision to focus on one territory or one area is that I assume that was superconscious. What was the strategy behind the growth?

Steve: Well, originally the strategy for growth was fairly opportunistic. Back when I started the business in 2006, I grew organically initially. And then the recession here hit some of the smaller companies pretty hard. And I started to do mergers and acquisitions just in our region, and I bought four companies within a four-year span. Starting in 2014, though, I started to look at m&a as a way to really diversify our risk. We were starting to face some regulations in the state of Florida. And I started to see that it was possible to take what we had learned at V trips in the state of Florida and apply it across other areas we went into and so we began on this merchant acquisition path and we’ve done about 30 mergers and acquisitions over the past couple of years.

Bart:  Right. So that’s only accelerating.

Steve: Yeah, definitely. We, you know, we’ve done a good job because we’re profitable. We’ve never been unprofitable. And so that’s allowed us to kind of build up credibility with banks. So the primary way we’ve been able to fund merger and acquisition has been through banks and now private debt facilities. And you have to be profitable to do that. And but once you are, it’s the best way of dealing and in terms of you don’t have to give up a lot of equity, or any equity really the way we’ve structured it to build debt.

Bart: Amazing. And look so for today’s episode, there are a few things I want to cover and I’m so glad to have you on the show. I’ve been excited about it all week. And I wanted to talk to you today about sort of the landscape that we’re in and how to build a short-term rental business from two perspectives one if you’re small. You’re trying to grow it, and then the other perspective would be the kind of the end game like when does Steve say Hey, this is a great company welcome. What makes it a great company to acquire? But before I do, Steve, I’m super curious. So in 2006, the landscape you know, short-term rentals as they are we’re going to be even called short-term rentals. I guess it’d be in vacation rentals. I’m guessing Airbnb will be the main distribution channel. So you went into this game very early and you’ve seen a lot of change. Can you tell us a bit about sort of those early years?

Steve:  Yes, sure. So I think we’ve, you got in right as hosted systems were starting, which meant from a technology standpoint, you weren’t, you didn’t have to do network. And I was early on getting on to hosted systems with a group called Escapia, which eventually was purchased by HomeAway software. But back then, distribution was really like a classified like Craigslist. You had companies like VRBO, and great rentals and Reynolds dot vacation, rentals.com, etc, etc. And you would, if you were a consumer, you would literally email or call the property manager. And then the property manager would try to book it over the phone or book it through email. That was a very, very inefficient system. And Airbnb didn’t really start till about 21 2009. And they’re the ones who took this industry transactional. So I was kind of in early before it truly became transactional. I remember 2014 was when we started to actually do transactional with OTAs prior to that, we had a website the website was transactional, but all the OTAs were coming from this very, very inefficient classified listing type situation, which mentioned you had to have a pretty large call center to manage all the volume.

Bart: You okay, and then so in terms of the real growth of V trips, and that, that I guess, a transition where you started to acquire companies, when did the vision really kind of cemented so for you because, obviously, the industry is changing. The way that you’d be engaging with homeowners as well would start to change with time and people would see it as you know, not just a holiday home was something that seemed like an investment opportunity. What was, I mean, you tell me like what was that sort of that transition? Where was the point where you what you did start to acquire and really have the vision that that has led you to where you are today?

Steve: So there’s really around 2014-2015, we were having extraordinary success with the distribution. So we were really early with the integration of VRBO to direct booking. Early on, we were getting Airbnb so we were really outpacing our competition. And I believe that with our ability to kind of leverage hosted system and the fact that we were leveraging technology, we had a competitive advantage. And there is definitely you gain cost. synergies as you grow. So you’re gonna gain synergies on accounting, marketing it reservations, even the reservation staff. And so if you could manage this, you could, you could scale and do it in a way that was profitable. 

And that’s really what I saw I was able to convince a bank to lend me $10 million to do some additional merger and acquisition. And that was really where it all started, I was able to convince banks to lend me money based on our profitability at you know, a ratio at that point. It was about three, three times the profit that we’re able to borrow but you know, that allowed me to start to really expand into other areas.

Bart: Got it? Okay, you are saying that was 2014, 2015 mark where that change happened, and I take it from a lot of the large companies that I’ve talked to, it’s, you know, it’s all centered around the PNL. And really understanding that and being able to go and raise the capital in that money. When did you kind of figure out your p&l is going to be the massive driver for this particular business?

Steve: Well, we had talked to some advisors early on and they definitely said because we were profitable, we had the access to capital. I think what happened between 2016 and 2019. was very interesting. We were expanding but nowhere near as fast as some of these other companies, like turnkey and Bokassa, who were getting basically venture to fund and they were getting venture funding based on a multiple of revenue. They weren’t they didn’t have to be profitable. And so you know, they were greatly outpacing V Trips at that point. And so it’s really been an interesting kind of pivot and I think in some cases we forget how many companies that are out there who are no longer even with us like stay Alfred or lyric, or Tomio. And some of the other companies like Wonder John, and some that may not be here for much longer, who were not based on profit. So the companies you’re talking to today, are the ones who actually stuck kind of to their principles and said, you know, we’re going to run this business the way we think it should be run, which is based on profitability, which by the way is how the hotel companies are based, right, so the hospitality industry, Marriott, Hyatt, Hilton, they are all valued, their stocks are valued based on a multiple of their EBITA and that’s earnings before interest, taxes, depreciation, and amortization. And so, you know, that’s how the hospitality industry has been valued for, you know, 30,40 years. And, you know, the companies that have kind of been very, very profitable and stuck to profitability, have been the ones that are surviving this kind of disruption, the right disruption created first by COVID. And now disruption created by inflation and in the US at least a recession.

Bart: Look. In my mind, the part that I want at the path that I want to take I’m super interested in is actually that venture capital path and in talking about you obviously, you’re giving up equity to get the money, and then you’re working on different multiples as you said on revenue rather than profitability. Like a lot of big tech companies out there so it’s kind of a rabbit hole, which I’d love to scratch out, but I don’t think I’m gonna do that today. The reason being is I think that you might have some tips for our audience that might help more than that part. I think that you’re absolutely right. Like in terms of what you’d be saying about profitability, so, put that in the bank for later.

Steve: Well, I will say this. You know, the private equity route is one that is fraught with a lot of risks. I know that there are movies like The Social Network, which is the evolution of Facebook that make it sound exciting and fun to go to. Get into bed with venture capitalists, having been involved with them in a past life, and see kind of the grimy underbelly of them. You know, I was very prudent to say that that is not what we want to do early on, you know, we’re going to be based on profitability. And if we ever do take money, it will be based on working with private equity, in particular, family funds, who are aligned with that vision. So those are growth funds. They’re not, you know, the typical venture capital that you hear about growth funds are very, very different and they have you know, they’re looking for companies that are profitable, and believe me, the number of investors now that has changed their tune is enormous, because right now you the capital markets are not going to allow you to invest in companies that are losing vast sums of money, they have to be profitable. 

And so it is very, very interesting. What’s happened? But you’re right, it’s a complex, you know, area because things have kind of pivoted so fast. But, you know, we did take it around to private equity almost a year and a half ago. And it created a kind of a supercharge for us where we were able to then get a lot more debt. But it was with family fun. It was growth capital. We were very, very careful to negotiate our letter of intent very carefully to make sure governance and things like that was addressed right at the beginning. And so we took that to be able to accelerate our growth, but too many CEOs and you know, their boards take capital at the wrong point, and they take it for the wrong reasons. And that really can get you into trouble. And, you know, we’re seeing companies that have taken capital that now are in deep trouble founders going. And some of the consequences, I guess, the crypto markets another you know, tale of woe right now, but you know, this is the beginning stages of a reset that’s gonna go across every single industry where these companies that were based on you know, revenue only grow customers at all costs. A lot of them are going to have trouble surviving.

Bart: I don’t disagree for a second, especially with everything that’s happening in the economy right now. It’s a really, it’s a very deep topic. We could go on for quite a while. And as you said that things have changed and it’s kind of nice to hear as well, that sort of that journey through to profitability. I’ve heard many, many CEOs say, “oh, once we get X amount of dollars, everything’s going to be fine.” It’s going to solve all of our problems, which and I remember just kind of looking at the guy oh my god now the problems you need fix your problems to get the capital, not the other way around.

Steve: Well, there’s also a culture, right? So again, I probably have had close to 50 term sheets from private equity. So I turned down 49 of them before accepting one and I talked to a lot of private equity companies in I just think in many cases, their mindset was just so screwed up where they wanted. Early on, they thought I was too conservative because I was not growing fast enough. And I think, you know, I stuck to my guns and I made a decision at that point on, I’m going to do it my way. I may not necessarily win the race, based on what I was seeing with some of these other companies getting massive amounts of capital, but I’m not going to veer off the cliff. And that also means as a CEO, you build your company, your management team, and your C team, around your vision, and my vision was a culture of profitability. And that means every single person that I brought in, into leadership is focused on profitability, and that means various reporting budgets.

Taking a look at the cost of goods sold, taking a look at you know, just mundane things like you know, cleaning supplies, laundry costs, all of the things that create, you know, cost and then even on the sales and marketing side, when you build a team like that, and you build a culture like that. It allows you to then handle capital in a responsible way. I think it’s going to be very, very hard for companies that weren’t built with a culture of profitability to suddenly become profitable. I think it’s just so different. And I’ve met some of these firms who were revenue only. And my guess is because I’ve seen the writing on the wall, from the PE firms are ruthless. You know, they get that way for a reason. The first thing they do is bring in a chief financial officer from outside. And soon enough, the founders are gone. And the reason why the founders are gone is they don’t know how to operate a profitable company. All they’ve learned is how to grow at all costs. They do not have the financial discipline to run a company during a recession, which is what we’re in and you know, who knows how long we’ll be in this recession. But you know, the markets are certainly betting that it could be a while.

Bart:  Good look, I’m gonna wrap that one up, and I’m gonna move on to the next thing and I think that you kind of let us in a little bit. I don’t know if you did that deliberately or inadvertently around vision and goals and that sort of thing. Most of our audience won’t be at the scale that you’re you’re at. But I think that you’d have some great tips to give people that are trying to scale that are trying to go that are going through different stages of their business. And maybe I don’t know whether we start off at the end and then go back or whether we start off at the start and then go forwards. But I think maybe a good starting point would be talking about vision and goals and building a property management business because one of the things that I get a lot is, you know, a lot of people will just get into the business. They’ll start off with one or two short-term rentals. Then they’ll build the five and 10 and so on and so forth, but they haven’t thought about exit they haven’t thought about what the business is actually worth where do you think we should start? And what are your thoughts?

Steve: Well, I think you start with what you want. So I think it’s impossible to give someone advice and he finds out what you want? So what is your goal in terms of entering this space? Is it to have a business that basically provides for your family and provides your ability to, you know, have nice things like houses, and good schools for your kids, those types of things, or are you willing, he really care to want to take you to know, additional risk, and how much time effort hassles headaches Do you want and do even have the skill sets? Do you have the skill sets to manage people and to manage remote offices? And these are things that you really have to ask people and everybody’s at a different point in their life. But I think if you ask them first, what do you want? Then it’s easier to start to figure out what’s the right plan because there’s been a lot of discussions about why some companies have been able to scale and some haven’t, you know, and what is that leadership and what is the makeup and I’ve talked to many, many, many successful people, they don’t want to get too big.

And that there’s nothing wrong with just kind of staying in your area. Taking the money you make buying investments, real estate and just being very, very successful in your community. So again, I mean, this is not I’m trying to meet trying to say, hey, scale, this is me first saying, What do you want? Once you figure out what you want, and if it is and there are certain people I talked to that say, Well, I want to get to you know, 500 properties, and then I want to sell? I think the question is first before arbitrarily coming up with a number first try to figure out well, what’s the money that you want? Is it enough money to retire? You know, what’s that number? And let’s back into it because you may get there by having a company with 200 luxury properties than just 500 properties scattered all over the place. And you may actually get there faster, and it may just be much saner. So think about what you want first.

Bart: And then one of the things that really is really striking about what he said is, quite often if you ask someone what they want, their responses are long, you know a lot, and then it’s probably hard to actually quantify what that number is whether it’s a million 5,000,00, 2 houses, 10 houses, holiday homes all over the world traveling in a jet or not in a jet. But one thing that you said is what kind of lifestyle do you want? What is important to you in terms of your family, your friends, and your stress levels and that sort of thing? All around lifestyle. Do you have any comments on that?

Steve:  Well, I think it’s all interrelated, right? So when you ask people what they want, and they say, Well, I want to make $10 million, and that’s how much I need to retire. And, so, okay, well, that’s a fairly reasonable goal. It’s not an unattainable goal. But then the next question is, is in order to do that you’re going to need a company, give or take, that makes $2 million a year in EBIT da. And so, first, do you have a budget do you do? Are you good with accounting Do you know how financial statements work? And, you know, when I ask people in these panels or these conferences to raise your hand if they’re actually even doing a budget, it’s less than 5% of the people. And at that point, I would go back to people and say, okay, you know, are you willing to run a company in a financially disciplined way? Are you willing to make the commitment either to learn accounting or to hire an accountant, for your company? And are you willing to start to work on a business plan? Because, you know, again, you can operate profitably. 

A lot of people I meet or husbands wives or even just sole proprietors without a lot of overhead and management when you start to layer on that management. That’s where you get into trouble. So, again, you know, these questions have to do somewhat with personality and profile and some people are raising children, and you know, they don’t want to take all this risk. And so I can spend 20 minutes with someone and just really kind of push back and just really ask them, “What are you trying to do here?” and sometimes it’s effective because they haven’t really thought through what they’re trying to do. And then there’s another group of people who they just, you know, they Well, up until recently, they thought they could just, you know, go out and, you know, get to under Properties and it’d be easy and it’s not easy. Again, you know, this, as you grow, it gets harder and harder. And there are a lot of reasons why it gets harder, but you should never underestimate how difficult it is to scale a business unless you really are disciplined and it was this talk

Bart: Let’s talk about that. So the beauty of short-term rentals, the barrier to entry is negligible. You can probably watch some YouTube videos, make a few phone calls, get some contracts together, and you can have a business right? So it’s not like a lot of other businesses. Where you need capital to actually put into it to get going. He can do it with Thailand, some education, rather than actually needing lots of money just to get going. Right. So then we get to a certain stage and we’re now growing the business for up to 10 properties. That sort of transition between Alright, I’ve just got some stuff going on to now I want to start to make this into a business. What does it take? What do we have to start to think about? Obviously, we’re upskilling ourselves as we go, but then we’re going to have to start hiring people and starting to change things up. What advice would you give to someone that sort of at that, like tiny scale?

Steve: Well, the advice I would give them is, there are things that you have to do that are hard but you need to do them early on. Because the earlier you do them, the less hard they will be. So one of the first lessons I’ve given people if they want to scale is really the thing through their property management system. You’re going to want a system that scales and too many people make the decision to get something that looks easy, or maybe it’s cheap. And then they get into a bind because it doesn’t have the ability to scale. And that scale is really in many cases the accounting piece which takes more enterprise-level software to obtain. But also the distribution piece, you know, does it truly have the ability to distribute? Can you run work orders can you run housekeeping? Can you manage a business of scale through that? Property Management System and too many people are just kinds of not, you know, disciplined? You know, they don’t do a request for a proposal. They don’t look at all the alternatives. They don’t ask people that are larger companies for recommendations they tended to be kind of swayed by salespeople, which is really the worst way you should make a decision. 

So you know, starts right there. And there are many companies that have made foolish mistakes where they get a property management system it’s not scalable, and they find that out in a hurry once they get to a certain level of properties where things start to break pretty bad and you can’t just throw bodies at it. So that’s the first thing. 

The second thing really is financial discipline. If you truly are going to grow are you running? Do you know financial statements are you running various reports? Because you can’t just throw bodies at things and just expect there to be money to pay for those salaries. You gotta run financial statements run a budget and run a budget report variance report every single month. And make sure you’re scaling and running against it. You know, those are really kind of the two core issues accounting, and, you know, property management systems. All the other stuff kind of falls underneath that. 

I talked to one person in England, who was at a conference someone put me on a conference with this guy who had 200 properties in London, and he had no website. And I was shocked. And he said he didn’t need a website because Airbnb was his website. Well, if that’s something you believe in, you should stick to five properties because if you’re not willing to create your own website and build an email list and capture your customer contact information. You should not manage any other person’s property so that in your own because you’re going to have major problems staying around and that person found out the hard way when you know during the pandemic, Airbnb, changed or extenuating circumstances policy, and they were gone, you know, business with quote-unquote tuner properties was gone because they built their business on one distribution channel. 

You know, those are some of the people that when I hear them, and they start talking, how smart they are, you know, sometimes I get a reputation of being a little brash because I say things like, you’re not going to be around and I said, right at that panel, you are playing Russian roulette, and there are five bullets in the chamber. So you know, you don’t have your own website. That’s inexcusable at this point. If you’re if you want to scale not to have your own website, and if you’re not willing to do that, stop, you know, trying to scale just manage the properties you have and be done with it. But it’s not difficult to create your own website. It’s just part of the things that you’re going to need to do if you are going to scale and grow at any size.

Bart: I love what we build with Steve, like magic. And I’m not paying Steve for this. So I appreciate that. And I think that there’s a bigger topic there about sort of what this business actually is, you know, like that it is a hospital hospitality business that we are providing experiences for customers and we want to engage our customers in a certain way and that’s why at the start as you asked you, why did you choose to go to the certain area was it because of you know, your cleaners and all that kind of stuff and you know, building into that customer experience, but before I can, if we have time, I’ll get back there. But I do want to ask you. So we’ve talked about building the right systems, having the right fundamentals in terms of accounting, and understanding your numbers. 

And then you said that the people side of it I think is probably one of the parts that a lot of companies struggle with because once you get to a certain size in terms of properties, you hire someone, but then they just smash your profitability because you’re not making any money anymore. And then each time you get to, you know, between 50 to 100, you got to hire more people because you want more problems, and I’m positive that V Trips has similar experiences where you’re getting to a certain size, and then you have to hire and hire to make up for it. So what advice would you give to someone that’s on the smaller side and looking at their team and their growth from two points of view one from you know, what, what are those first hires? And do you have an idea? And the other one if we’re trying to sell the business later on. What is it Steve’s looking for?

Bart: Well, I would say it’s kind of cute and clever, but you’re going to kind of have a step of costs that you’re gonna have to take on at 50, 500,  and 5000 properties. And what I mean by that is, once you get to 50 properties, it’s probably not possible to manage those properties by yourself. And so you’re going to have to start to take on overhead just to run a small business over 50. You’re gonna have to have you know, people who can help you so people who can help, you know, manage the booking process. Back in administration, Owner Statements, picking up the phone, if you’re taking still taking calls, texting people back you know, setting up registration for Airbnb, getting marketing, website support. I mean, there are only so many hours in the day and at 50 properties give or take, depending on the type of properties you have. Homes are much more labor-intensive than condos, etc. 

You’re going to need people to help you. And so you’re going to expend money to hire those people. And you’re going to start to see a return on that investment once you hit 100 100 Plus property. So there’s going to be an area where from 50 to 100, you’re not really seeing any additional money, it may actually be costing you money. But those people are going to help you get to a certain level of scale that you wouldn’t have if you hadn’t hired them, then give or take around 500 properties, and again, it depends on the type of properties you manage houses definitely are more intensive than condos. You’re going to need to build a middle management team. And that means you’re going to have to have an accounting manager, a reservation Agent Manager, a marketing manager, you’re going to have to put in a level of management between you and the people you’ve hired. And it’s gonna be painful because those people are expensive.

And there’s a lot of competition for competent managers. And you’re gonna have to do a lot to recruit and hire and bring them in and start to train them on your culture. And again, I mean that’s a big expense, so you may be better off if you’re quote-unquote, trying to sell your business you know, sell it at 300 rather than pick up all this middle management that’s gonna start to eat up your profitability at that 500 range. And then, you know, and very many very few companies go beyond this range where they get beyond 1000 or 2000 properties, but you know, where we’re at 5000 Plus, we’ve had to hire a whole C team, so chief financial officer, a Chief Operating Officer, Chief Strategy Officer, CFO, etc. Chief Financial Officer is really super critical to raising money. And, you know, that is just a huge level of compensation. And, you know, if you’re trying to figure out what positions cost, I mean, there’s salary calculator out there and they’ll give you ranges of what CFO costs or CFO or you know, those different heavy salary pieces, but you’re going to need them if you’re going to scale an enterprise business and again, you know, it may be better off to sell before you take on all of that overhead.

Bart: And you’ve led me to guess where we’re gonna go. And by the way, that answer to me was probably one of the best that I’ve heard for a long time in terms of those, those inflection points where you’re going to basically say you’re going to suffer, you’re going to suffer, but the payoff is once you get to the biggest, biggest stage and all of this leads backs back to the budget and the numbers, which you’ve talked about before. He said a lot of people don’t have them. So as long as you’ve got that sorted out, you’re going to be okay.

Steve: I mean, that’s what you should be looking at. And, you know, fortunately, I’m very good with numbers. I’m very good with financial statements. I’m the one who ran the financial statements early on for the company and created the budget and the operating budget for really the first 12 plus years of the company so I can read various reports, I can read balance sheets, and I started talking to my executive team back in April, May, that we were going to have to start to really take a look at cost containment because I started to see a slowdown in the United States. And our markets on occupancy. And, then also clearly there was inflation. And there was a discussion of interest rate hikes and so we started early on to prepare for 2023 and being a different reality and that means you know, we tell it tightened our belt. 

We did RFPs to our vendors, and we really kind of pitted them and leverage them against each other in some of the seasonal workforces. We made sure that we let go of them early and we didn’t try to carry them through the season which might be something you have to do if you’re in a labor-tight situation but you don’t need to call we’re not going to carry seasonal cleaners and seasonal inspectors through the of, offseason, we’re going to let him go like we have, you know, traditionally and we’ll count on the fact that once we get to march you know, we’ll start hiring again to gear up for the summer. That’s how we used to run things and you know, the labor market got so tight in the United States. You know, we carried a lot of people in 2021. Also, 2021 was a super occupancy year, but 2022 was not as strong as 2021. And so you’ve got to just start to tighten the belt and make decisions and drive cost and all we’ve been talking about is 2023 and really maximizing profitability in 2023. And that’s really something again, if you’re going to, if you’re going to take bank debt, if you’re going to have investors, you’ve got to be willing to make those hard decisions. And if you’re not, don’t do it

Bart: To wrap us up. I would love to know your thoughts about how to create the best value and a short-term rental property management business for Steve to be fighting for that particular business with competitors saying hey, this is really good. I really want to it’s worth it. You might say hey, you know what, it doesn’t matter what the business size is, but you know, there is opportunity. Where do people go How should How should people be thinking from the outset to really find a nice exit? And if that’s what they want

Steve: The companies we’re looking at, and we’re looking to do a lot of acquisition in 2023 are companies that have profit and at least three years of profitability, and they have financial statements, and then we can verify with tax returns. You know, the average company we’re looking at in terms of profitability is $3 million. So, you know, we’re looking at some that are much higher than that and some that are a little lower than that. But you know, those companies in general, they’ve had principles or partners, at least one of them has been willing to put in the time and the effort to make sure that they’re profitable and to document their profitability. And so the companies we’re looking at, have done that. And we’re asking, you know, we got we definitely want full 2022 year, not just 2021 And so, you know, being profitable is critical for us. We can’t really we can’t touch a company that’s not profitable.

Bart: And $3 million would be roughly how many homes? Well, it depends on the market, right?

Steve: It depends on the market. We’ve seen some companies with about 150 properties be about 3 million we’ve seen some with 400 properties be at 3 million. A lot of it has to do with again, we just kind of went through that few if you’ve been smart and you’re in luxury and high revenue properties and you keep a lean staff you could potentially throw $3 million is so many companies we’ve looked at though, where they’ve had profitability challenges is you know, they’re bloated with staff. Or, in some cases, you know, they had properties that really aren’t really performing and they don’t even pay attention to them. As I said, you know, the numbers game is really the worst thing for this industry. It shouldn’t be about how many units you have. It should be revenue per unit and that’s all you should be looking at. And if you’re carrying properties where there’s just not a lot of revenue for that property you’re doing yourself and your staff at this service, Mike you know, my guess is you’re probably losing money on those.

Bart: Look, I think there are so many topics for another episode. I think the profitability piece and talking about the bits and what you can do to be more profitable, will be invaluable to everyone but I’m conscious of our time running out, are there any final thoughts of the day?

Steve: Well, you know, we talked about this, this myth of an easy exit. There’s not going to be a myth of an easy exit. For people out there. If you really want to do this, then put in the time put in the effort to create financials right away. And that should be the first order of business. And then take a look at some of the hosted systems you have and make sure that they’re scalable, but there’s no reason even if you just have 10 properties, you shouldn’t be running financial statements. It’s really inexcusable. And it’s just in many cases, it’s laziness. I mean, it’s just a lazy way to be about business and you’re never going to be able to get to where you need to go. If you’re not willing to put the discipline in to run profit and loss statements and to do it on a monthly basis and they have an operating budget and to kind of take a look at how you’re faring versus that operating budget. I mean, this is how you drive success. And if you’re unwilling to do that, then you’re going to really shortchange yourself and it’s going to definitely hinder your ability to be successful.

Bart: And make sure that you pay yourself a wage as well. Right.

Steve: That goes without saying.

Bart:  Steve, thank you so much. For one like we barely know each other. We met, almost a month ago in Vegas and you’ve been incredibly amiable, with every conversation I’ve had with you to try to contribute, give back to the industry, and grow it. So it’s incredibly clear to me where your motivations lie, and it is to actually help people out. You know, the rest will kind of look after itself and I think philosophically we’re quite well aligned. So thanks for sharing your time, your experience, and your knowledge with everyone. I know that with that ASTRA, hopefully, we’ll get you in to have some chats about regulation and that sort of thing. And look, I hope that we can reconnect and I know that you’re doing 1,000,001 different projects. I’d love to share that journey with you.

Steve:  All right. Well, thanks, Bart.

Bart: I really appreciate it. Let’s again take care and have a good rest of the day. 

Thank you so much for listening to the show. You can find this at theaccommodationshow.com where you can find all the show notes, links to resources we have talked about, and transcripts from the show. I really do appreciate you listening. And if you’d like to support the show, please subscribe. Leave a comment and share it with others.

 

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