There is no doubt that the short-term rental market is here to stay. Airbnb has experienced a wildfire expansion in the last ten years, and it only continues to grow.
Listen in to learn about a new book that looks at the development of the industry through a series of interviews with eight players, both large and small, exploring the details of its expansion and predicting its future direction.
Today Jasper speaks with Tristan Rutherford, travel reporter for The Times, the Guardian, and the Daily Telegraph as well as co-author of Room for Profit: Make Airbnb and the Short Rent Revolution Work for You. They cover the rise of the short-term rental market and its ecosystem, the regulation of the industry, and how to use negative reviews to your advantage.
How Tristan and his co-author got the idea for Room for Profit
- Interview with neighbor struggling to make ends meet
- Tristan has been a host himself since 2004
- Market has been life-changing for many individuals
The rise of the short-term rental industry
- Consolidation on mega-sites like Tripping.com mirror the automobile industry
- TripAdvisor survey indicates enormous growth in users interested in booking short-term vacation rentals
- 52% in 2014
- 70% in 2016
- Beyond Pricing CEO Ian McHenry predicts that Airbnb-style vacation rentals will account for 20% of bookings worldwide by 2018
Pros and cons of the short-term rental industry
- Potential negative effect on local housing markets
- Helps the ‘little guy’
- Half of the hosts in Berlin make less than the median household wage
- Provides a place to stay in locations where hotels aren’t available
The regulation of the short-term rental industry and Travis’ Law
- Theory introduced by Brad Stone in The Upstarts
- Politicians forced to accept new services (i.e.: Uber, Airbnb) via peer pressure
- Popularity the result of benefits for consumers and profits for users
The importance of reviews
- TripAdvisor survey indicates that 72% will not consider booking a listing without a review
- One or two five-star reviews is a game changer
How to respond to negative reviews
- Be polite
- Thank the guest for their feedback
- Explain the improvements you have made
The exponential growth of the Airbnb ecosystem
- Startups designed to complement Airbnb have become their own industry
- Beyond Pricing CEO Ian McHenry predicts that 50% of hosts will be using a third-party tool by 2018
Connect with Tristan
Connect with Jasper
Email: [email protected]
This episode is sponsored by Hostfully.com where you can create a custom digital guidebook for your guests!
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Complete Transcript for Get Paid for Your Pad Episode 137
Welcome to Get Paid For Your Pad, the definitive show on Airbnb hosting, featuring the best advice on how to maximize profits from your Airbnb listing, as well as real-life experiences from Airbnb hosts all over the world. Welcome.
Jasper: This episode is brought to you by Hostfully, a company that helps you make beautiful guidebooks for your listing. Make your own at hostfully.com/pad, and a special for Get Paid For Your Pad listeners, you’ll get a free guidebook consultation after you make your guidebook.
Welcome, everybody, to another episode of Get Paid For Your Pad. Today I have a very special guest. He is the author of a book that has just been published, and the book is called “Room for Profit”. And it’s all about the short-term market, the rise of the short-term market, how the market’s grown a lot over the last few years, and also the future of the short-term rental industry. So, I’m very excited to talk to my guest, Tristan Rutherford. Welcome to the show.
Tristan: Thanks very much for having me, Jasper.
Jasper: How’s everything going?
Tristan: Yes, it’s very well. The book has been met with some real acclaim. “Room for Profit”, it’s for sale on the Amazon store right now. I think people have really picked up on the interviews that we have on the book. We seem to be the first people to write about the Airbnb trend from a journalistic background. I’m a reporter for The Telegraph, and The Times, and The Guardian in Britain, so it brought a lot of interesting personalities, CEOs from really big short-term letting industry companies, and brought their input and voice into our new book.
Jasper: Awesome. That sounds great, but let’s take a step back and talk about, how did you come up with the idea of writing a book about this topic?
Tristan: It seems that the market hasn’t been commented on before, but this is a life-changing market, an industry that’s actually affected people’s lives. At the very start of our book, we interview someone who was…it’s actually one of my mother’s neighbors in my home town who was struggling for money just two years ago, and she realized, and only by chance because her brother-in-law was renting a kind of garden shed out in Brighton in Britain’s south coast for about £60, about €70 a night, that she could do something similar with her spare room.
Now, we’re not talking big sums, Jasper. She started letting out her room for £30 a night, about €40, €38 a night, but then she started doing it really regularly. She undercut local hotels, she offered a better service, and then she started leaving her entire house in the summer and going away for six weeks, renting her entire home. And again, the sums, perhaps, to some of your listeners aren’t huge. She hopes to get about 6,000, 7,000, 8,000 extra pounds a year, but that’s a massive change for her, I mean, so much. So, from the big to the little, we’ve told everyone’s story in this book, and I think it needed telling.
Jasper: Right, because the book basically consists of a number of interviews, correct?
Tristan: That’s right. We’ve got about eight interviews for the book. The rest of the book, about 70% of the book is about the rise of Airbnb and TripAdvisor rentals. We talk about the future and what that will hold. We’ve interviewed people there like Ian McHenry, the CEO of Beyond Pricing, and Laurel Greatrix, an Associate Director of TripAdvisor Rentals, about how they see the market changing, and that has a big impact on many of the hosts who will be listening to your show.
Jasper: Right. And I have to apologize because I introduced you incorrectly. You’re the co-author of the book, right?
Tristan: That’s right. My other author, the other co-author, Gayle Roberts, is the CEO of one of France’s leading holiday rental companies. Gayle Roberts has about 180 short-term apartments under let, and she has done for about 10 years. It’s interesting because Gayle is a six-year post qualified lawyer in Britain, so she brings a legal aspect to the book. We talk about the legalities all around the world of doing this. We’ve even interviewed people in Berlin and in Barcelona, which are cities that have taken a dimmer view of Airbnb. And, we talk about the positives of what Airbnb and the short-term industry brings to many cities in the world.
Jasper: And you’ve been an Airbnb host yourself, correct?
Tristan: That’s right. I’m looking up to have about 20 5-star reviews. In fact, it’s a business I’ve been in for about 12 years. I moved to France as a relatively young journalist and I did struggle to make ends meet in the start, and again, by chance, I rented my apartment through word of mouth. There were no websites that you could advertise on, years back. I had to use Google AdWords. This is 14 years ago, 13 years ago now. So, the industry, I’ve really grown up with, first on HomeAway, and then Airbnb at the very start, so I’ve seen the changes firsthand, which has made it far easier for me to put myself in other people’s shoes when I’ve authored this book.
Jasper: Right. So, let’s dive into the content of the book a little bit. First of all, let’s talk about sort of the rise of the short-term rental industry because it’s been growing a lot and it’s projected to grow even more in future.
Tristan: Yes, that’s right. We’ve compared it to the automobile industry 100 years ago, and this happened all around the world. There was about 1,000 different car firms producing cars at one point, but now, everything’s consolidated. There are only seven automobile companies producing over half of the world’s cars right now. That took over 100 years to occur.
The short-term letting industry, the ability to put your place online and have it booked by someone in Columbia or Shanghai, in many different languages and in a multiple of currencies, has only been around for 10 years, less in fact, but even now, we see a consolidation of the business. We even looked at a website called tripping.com, which is consolidating every different rental website there is, like CanadaStays, VRBO, into one megasite which has 8 million properties listed, and that means a lot. That makes a lot of difference for the industry going forward.
Jasper: Right. And can you provide some numbers about how fast the industry’s been growing and what’s projected for the future?
Tristan: Yes. There’s a few very, very interesting projections. I’ll talk about two different interviewees, actually, quickly.
Laurel Greatrix, an Associate Director at TripAdvisor Rentals, was kind enough to be interviewed for the book. She talked about, over the past few years, in 2014, and this goes by TripAdvisor rentals, and they said there were about 52% of their users who would be interested in booking a vacation rental for that particular year. But two years later, in 2016, over 70% of their users were interested in actively booking a short-term rental property. So, the market has become part of the furniture. People are actively looking to book an Airbnb-style apartment when they would have booked a hotel until a few years ago.
There were some very interesting quotes from Ian McHenry, who, as your listeners probably know, is the CEO of the rental revenue tool, Beyond Pricing. He predicted that by 2018, 20% of accommodation bookings worldwide are going to be with the short-term accommodation holiday rental type properties, not with hotels.
Jasper: Right. So, those are some big numbers.
Now, you know, I’ve talked a lot on the podcast about how a lot of people are using Airbnb and other platforms, and how it’s growing very fast, and how the hotel industry isn’t particularly happy with that. And one question that I always have in mind is, is this travel incremental or is it substitutional? Because when I look at some hotel data, I don’t really see the number of rooms that are booked in hotels going down, so my guess is that a lot of this travel is actually incremental, so these are people that would have, otherwise, maybe stayed with family or they wouldn’t have traveled at all. What are your thoughts on that?
Tristan: Yes, it’s a very interesting subject. I’ve been a travel journalist for New Eastern Europe magazine, for The Times, for many, many years, and I’ve traveled the world, about 65 countries so far. I haven’t noticed the travel industry going down. In fact, according to the UN World Tourism Organization, travel goes up by about 4% every single year, and that would be for hotels, that would be for short-term accommodation. People are booking more stays in a variety of different options than ever before, and that trend will continue every year. Yes, there may be a few less French traveling, influenced by a recession in France next year, but it’s more that I’d look for more Americans, more Chinese, holidaying in the future.
Now, on a personal level, we stay in a lot of Airbnb apartments and short-term letting apartments around the world every year. We travel more than ever before because it’s easier. I personally have a young family, as does my older sister, so we can stay longer because apartments are better made for us. They’re larger, they’re less expensive, you can fit in a baby cot, and make your own lunch, if you need to.
So, I think there’s more travel than ever before. I haven’t noticed the hotel industry in crisis. I’ve simply seen more people traveling, and certainly, more people staying in short-term accommodation properties.
Jasper: Exactly. That’s my observation, as well. So, I don’t really see a big problem on the horizon for the hotels so much. It just seems that, because of the short-term rentals being so much more available, it’s just more people that are traveling, or at least, they’re booking accommodations.
Tristan: Yes. Yes. Some of the statistics we had from Airbnb, from London, was the actual length of stays. People tend to book stays of four or five days rather than two or three days, simply because it’s easier when you have your own apartment. It’s, hitherto, been less expensive when you’re staying in a short-term stay rather than in a hotel. I think this brings in a lot more money to the cities involved. It should be applauded, really. I know there are downsides, stuff we’ve talked about in our book from our interviews in Berlin and Barcelona with city officials there, but I think the positives far outweigh that, and the truth of the matter that we found from our book, “Room for Profit”, is that the industry’s here to stay.
Jasper: Yeah, I would definitely agree with that. What are some of the biggest downsides, do you think?
Tristan: Well, let me look to the people in Barcelona and in Berlin. The downsides, they said, was about… Well, actually, let me give you some quotes, Jasper. It’s quite interesting.
There were some flats that we looked at in Berlin. We looked at some studio apartments in the Neukolln area. The Neukolln area’s a very trendy part of Berlin. By coincidence, it’s somewhere that I’ve stayed several times. I visit Berlin every year. It’s a brilliant city. You used to be able to book an apartment there for about €500 a month, but now, the issue is, the sort of apartments I would have booked are about €60, €70, €80 a night. So, I see people are going to buy those apartments and rent them out as a short-term stay.
Now, I don’t think there’s so many that it will completely change the housing market. When you look at Airbnb in Neukolln as I have done in the past because I have lots of friends in Berlin and I love to stay in that great city, it’s not all Airbnb apartments. It’s not saturated, simply people making money on the side. Half a million people stayed in Berlin in 2015 in holiday apartments, at no loss to the local economy.
You know, so I don’t think it’s changing that much, but people will still have an issue with that, that perhaps people buying up buy-to-let properties will change the local housing market and make it more expensive or indeed too expensive for people who have habitually been living there.
Jasper: Yeah, I definitely think that the rise of Airbnb and other short-term platforms, it probably has applied pressure on house prices, but I think there’s bigger factors at play, though, because if you look at sort of the last 20 years, I mean, housing prices and rents have been going up every single year, pretty much.
Jasper: Maybe, in the crisis, it came down a bit, but the overall trend has been going up, and it seems that, you know, Airbnb’s just kind of like an easy scapegoat to blame everything on.
Tristan: That’s right, yes. It is a very easy scapegoat, I would agree. I think the Airbnb studies showed that half the Airbnb hosts in Berlin earned below the Berlin medium household wage, which is about €1,600 a month. So, these are people who aren’t making so much money, certainly not making it from Airbnb. They’re making it on the side. And, indeed, the first person that we spoke to for our book, “Room for Profit”, as the first interview, the lead part of our book, is someone that was struggling for money and made ends meet by renting a spare room in her property.
So, I think it’s helped the little guy, really, and certainly in places that there weren’t any hotels previously, in Neukolln or in Brooklyn in New York. These are places that haven’t had many hotels previously. It’s why Airbnb and its competitors have really taken off. So, if you want to stay in those places, this is the only accommodation, really, that you’ve been able to book.
Jasper: Right. There’s just no hotels available. Exactly.
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You mentioned that your co-author has a lot of experience in the legal industry?
Jasper: Do you talk about the legal situation and what you expect for the future in the book, as well?
Tristan: Yes, we do. Well, one of the interesting things was… This is a direct quote from the book, and we’ve had this happen to us. Gayle Roberts, my co-author, the CEO of Pebbles Letting Agency, has had this happen before.
“Just imagine this legal conundrum for one moment: Who should pay up for an accident caused by a Portuguese cleaner inside a Spanish villa owned by a Swiss national that was booked using an American credit card by a Mexican citizen on a holiday rental website based in Luxembourg?”
Now, this is the kind of legal issues that holiday companies, and booking.com, and local councils are facing in the future. We delve a lot more deeply into this in our book, but this is the sort of ideas that are coming forward now, and no one knows quite how to deal with that.
The other aspect is the future of Airbnb and the legality of the short-term letting industry. There’s something very interesting called Travis’ Law, which was a phrase invented in 2017 by Brad Stone, a famous Silicon Valley travel journalist. His new title, “The Upstarts”, how Airbnb and Uber are changing the world, talks about this Travis’ Law, and Travis Kalanick is obviously the CEO of Uber.
Now, Uber’s expansion, its wildfire expansion into 200-plus cities, has met with regulatory issues. Any company that expanded that fast would have the same story. But, with Uber’s Law, according to Brad Stone, Uber’s Travis’ Law states that politicians can be forced to accept a service better than an existing one by peer pressure alone.
Now, Brad Stone quotes a London Black Cabs driver in 2014, when 12,000 taxi drivers, 12,000 cabbies blockaded the British capital in an anti-Uber strike. Now, that strategy didn’t work, Jasper, because, on that day, uptake of the Uber app in London increased by 850%, and 200,000 Uber supporters went on social media to complain about the taxi strike by 12,000 Black Cabs strikers. I mean, faced with those numbers and the demand for Uber, you’re not really going to win, and what Travis’ Law, what Brad Stone states, is the likes of Uber and Airbnb are here to stay. They simply have so many users and so many people profiting from them, rich and poor, that they’ve become part of the furniture.
Jasper: Yeah, that makes a lot of sense. And, I mean, to me, at the end of the day, it’s just better technology, right. It’s better for the consumer, so you can’t stop it.
Tristan: That’s right, and not just the consumers, Jasper. For me, as a person with 12 to 14 years’ experience in renting my own home on a short-term letting basis, it’s been very beneficial for me as a host, as it has with many of the people we’ve interviewed in our book.
Jasper: Right, absolutely. It’s been very profitable for myself, as well.
Jasper: Let’s talk a little bit about the importance of reviews. I know that’s something that you get into, as well, in the book, right?
Jasper: I noticed that one of the quotes in the book, it says that on TripAdvisor, 72% of people would not book a listing without a review.
Jasper: I think that’s quite significant.
Tristan: Yes, it’s very significant, isn’t it? This is from Laurel Greatrix, an Associate Director of TripAdvisor Rentals that we interviewed. I mean, TripAdvisor went into the vacation rentals business in 2008. They only had 50,000 listings then, but now, they’ve purchased Niumba, Holiday Lettings vacation and rentals, HouseTrip, all these different websites, and they now have a million properties in 190 countries, nearly half that of Airbnb. So, these guys are a major player.
One of the interesting things was about the parallel review that Laurel was stating. In 2015, Jasper, TripAdvisor Rentals undertook a survey, and it showed that 72% of their users would not even consider booking a rental property that had zero reviews. I think, even if you have one review or even two reviews, that makes such a difference with the amount of traffic, the amount of interest you would have in your property.
Jasper: Absolutely, yeah. The reviews are so important, and I always recommend, people who are just starting out, to do whatever they can to get those first couple of guests in because once you have one or two 5-star reviews, it’s a game-changer.
Jasper: Interesting. What are some other topics that you would like to mention that you cover in the book?
Tristan: You know, just back to the reviews, some very interesting things about dealing with negative reviews that Laurel Greatrix told us. It was very nice to have a Director from TripAdvisor to actually talk to about this subject, as it’s so dear to many of your hosts, something that you always want to chat to a TripAdvisor person about.
Her advice in managing negative reviews was to try to tackle the points raised, and she mentioned that everyone has the right to reply, to explain how those issues have been addressed. She said to be polite about it. If you want to bullet-point form every negative point that’s been raised about your place, or your hotel, or your restaurant’s reviews, you look a bit churlish. It’s a bit of a churlish thing to do. You look a bit mean. She says, instead, to respond to any review, thanking users first for their comments and then explaining how you’re going to address each of the issues raised.
Now, Jasper, I don’t think the person who is reading your review, a negative one, will be interested in what the person has said about you. They will be interested in how you’ve made it better. So, if you’ve got a bad review, maybe, one year ago, and you’ve replied to say, “Yes, I have changed that broken washing machine; yes, I’ve now put blackout lines in the second bedroom; yes, I’ve now got 10 MB Wi-Fi instead of just 1 MB Wi-Fi,” they know that now, so you can move forward and advertise your better-wares.
Jasper: I think that’s a really, really good point. I wrote an article about two years ago, just after I launched my book, and I titled it “How a Negative Review Can Help Your Airbnb Business” because I had just received my first negative review and there’s a few positive things that came from it. Well, first of all, I was able to make a few adjustments based on the feedback, but also, I responded to the review in a very professional way, you know, thanking the person for their review and, exactly like you said, mentioning how I’ve made improvements. And I was thinking, you know, if you’d never get a bad review, then you also don’t have the chance to show that you take the feedback serious and you deal with it.
Jasper: And one negative review with, let’s say, 50 really good ones, it gives you the chance to show that you’re a professional host, but at the same time, I don’t think there’s going to be many negative consequences from that one bad review because everybody knows that you can’t make everybody happy.
Tristan: Yes. Yes, true.
Jasper: So, that’s a pretty interesting sort of counterintuitive thought to have.
Tristan: Yeah. We also interviewed someone for the book, a chap called Stewart, and he sends all of his previous guests a really nice email every year. He’s worked out that many people book around Christmastime or the first week of January. I imagine that’s because families have time to get together and talk about their next vacation over the Christmas/New Year period.
So, he emails, maybe on Boxing Day or the 27th of December, and tells them what changes he’s made to his holiday rental property that year. During that time, he’s taken lots of private feedback from the guests that have stayed. He’s asked them, “Thanks for the 5-star review, but is there anything I could do better?” And they may say, “Yes, we would like a Bose sound system,” or, “You have an iPad dock, or an iPod dock, but that’s not good enough for my iPhone 7. If you have Bluetooth, that’s better.” So, he’ll tell everybody what he’s bought for that year, so he’s kind of forward-thinking into that negative review, and he’s told all his previous guests how he’s made it better without them even asking him to make it better. So, that’s a kind of way of managing before a negative review happens, what customers next year will want.
Jasper: That’s really interesting. That’s good advice.
We’re getting to the end of the interview. Can you tell people who are interested in the book, what’s the best way for them to find it?
Tristan: The best way to find “Room for Profit” is simply to go to the Amazon store. It’s published in paperback if you’re wanting to read it that way, and you can also buy it as a Kindle e-book, as well.
Jasper: Awesome. So, for everybody who’s interested, just go to Amazon and you can find the book “Room for Profit”. It sounds really interesting and I’m definitely going to read it.
Any final words that you want to share with the audience?
Tristan: Yes, there’s one final one. One of the interviewees whom we’ve spoken about, Ian McHenry, I think someone you’ve interviewed in the past, the CEO of Beyond Pricing, really talked about this industry being here to stay and the whole industry going around it. He said, “Look, Tristan, short-term rentals are a $100 billion a year market now. There’s all these add-ons and plug-ins, like Beyond Pricing, like Everbooked, like Guesty, that are going to go with this business.” And he also said that 50% of hosts are going to be using one of these add-ons, or these inserts, or these third-party tools by 2018. Half of all hosts around the world, that’s a massive number.
And he also said that, by next year, 20% of all accommodation bookings around the world are going to be with Airbnb or short-term property websites. Now, that’s just changed in 10 years. I’m sure, a decade ago, 99% of accommodation was in hotels and guesthouses. This market didn’t exist, Jasper, that we’re in and we’re talking about in our book, “Room for Profit”, but now, 20% of bookings this year are going to be with this, and that, in this industry, that is massive change.
Jasper: That is massive change, indeed. And it’s funny that you mention these quotes from Ian McHenry because, back in 2014, when I launched my book “Get Paid For Your Pad”, I was looking for players in the Airbnb space and I couldn’t really find many players, and Ian McHenry was actually the first person that I talked to. I think Beyond Pricing was probably the first start-up in sort of the Airbnb ecosystem, or at least one of the first ones, but that has changed dramatically because, right now, almost no day goes by that I don’t get an email from a new start-up in the Airbnb space, asking for collaboration or promotion, or something like that. So, it’s definitely, it’s really interesting because some of these services and companies that have popped up are really interesting and very out-of-the-box creative thinking.
Tristan: Yeah, they’ve all grown as well there. As a final word, Jasper, when I spoke to Ian, he said that in 2014 when he spoke to you, his firm was managing $4 million of bookings per month, but last week when I interviewed him, he was managing $4 million of reservations per week.
Jasper: Wow, that’s 4x.
Tristan: 4x, yeah. 4x-plus. So, this is how the market’s heading and it’s growing, and for myself and you, and your hosts listening to this, it’s just very nice to be a part of it.
Jasper: Absolutely. Well, Tristan, thank you so much for coming on the show. It’s been super-interesting to talk to you, and I wish you all the best with the book.
Tristan: Okay then, Jasper. Thanks for having me on the show. Look forward to chatting with you soon.
Jasper: All right. And for the listeners, thanks for listening, and we’ll see you next time.