From Puerto Rico to Cartagena, I've met some of the world's top short-term rental operators at STR Legends. These operators run 7-figure businesses with anywhere from 50 to 600 units.
The four-day mastermind revealed a lot of important insights about the industry and its future.
In this article, I'm going to share the most important takeaways with you.
Lesson #1: Shift Towards Professionalism
The industry has changed tremendously in the past few years.
A few years ago, it was super easy to enter the space. You could put units on Airbnb, take a couple of photos, automate some processes, and make a ton of money.
That's no longer possible.
In the last 12-24 months, there's been significant investor activity. There's more investors, professional operators, and companies entering the industry than ever before. As a result, the entire industry is becoming more professional.
Guest expectations have changed. In 2011, when I booked my first Airbnb, I didn't expect much from my host. I only wanted a place to sleep, WiFi, and AC. Nowadays, guests are expecting more from hosts. There's also increasing competition for the same guests.
The time of “list-it-and-forget-it” is over. 2020 will be the year of the professional host.
It doesn't matter if you're running 1 unit or 1,000 units. You're going to have to treat it like a real business.
Hosting is no longer just a side-hustle.
You'll have to be professional in standards, branding, and guest communications. This means having world-class standards and understanding which properties are actually profitable.
Related Post: Lodgify Review: Create Your Own Vacation Rental Website
How “Standing Out” has Evolved
In the beginning, if you put your apartment on Airbnb, you were good. You could literally sit back and watch the bookings flow in.
Then, it was all about listing optimization. You had to have great photos, descriptions, and reviews. You also had to respond to guests quickly.
Now, it's no longer about having a listing and optimizing it. It's about building your brand.
All my clients have pretty good listings, but many of them are still struggling to get traction. Once you've optimized your listing, the next step is understanding that you're running a business. You need to approach it from a business perspective.
Here are some questions to get you in the right mindset:
- Are you in a city that is conducive towards growing your company in the short-term and long-term?
- Who are you targeting? Who are the people that would love to stay in your place?
- How are you going to stand out from the competition? Is it your standards? The theme you're using? The way you designed your home? The service you're providing? The connection you're building with guests?
You want to understand who you're targeting and what your unique selling point is. Once you know that, you'll have a better idea of how you can use Airbnb and other platforms to attract your ideal guest.
By knowing who you want to stay in your apartment, you can tailor your messaging to appeal to them.
Lesson #2: Focus on Operations and People
You might think that the hosts with 100+ units have it all figured out. After all, they already have their systems and operations in place.
No. The biggest companies continue to struggle with operations. It's their number one challenge.
At STR Legends Cartagena, I met someone running 300+ units and someone who's going to scale to 600+ units in 2020. Both of them have said that operations and people are the biggest challenges they have.
You not only have to become more professional but also stay professional, grow your business, and actually be profitable. It doesn't matter if you have 1-2 units or 400-500 units. You need to have your operations and people dialed in.
The operational model of “list-it-and-forget-it” no longer works. You're going to have to sit down and figure out what systems will work for you.
Build the systems that will allow you to run whatever you do the best you can. This means figuring out the software and processes. But once you do that, you should spend a lot of time on who you're hiring for your company.
Having the right people is crucial to a successful business.
In the investing world, VCs don't invest in a company because of the idea. They invest in it because they believe in the people.
Look at Airbnb's story.
When the founders pitched to Y-Combinator, 100+ investors had already rejected them. Y-Combinator invested in them not because of the idea (because they didn't believe in it) but because they believed in the people. They thought that the founders would pivot once Airbnb “failed”.
Lesson #3: Know Thyself
Can you describe to someone your business in one sentence?
If you're like most hosts, you probably can't.
To answer this question, you need to know what your business is about, who you are, and what your values are.
Yes, you list properties, but so does everyone else. Who are you specifically?
A lot of the operators at STR Legends Cartagena struggled with this question as well. These are people doing over $1 MM in revenue!
So many people are focused on growing and operating (e.g. getting more units and talking to landlords). They're almost blinded by their ambition to grow that they forget to understand who they are and what their business is about.
It's easy diving into the numbers and the revenue. But, so many operators don't even understand who they are, who they're servicing, what the core values are, and what their mission statement is.
No matter how many units you have (even if you're renting out a spare room), you're still running a business and should figure out what your values are.
When you align your messaging with what your values are, that's huge. Because that's when you start attracting the right clients.
Example: Finding a Restaurant on the Last Night in Cartagena
On the last night of STR Legends Cartagena, we wanted to host a farewell dinner. We found a restaurant and looked at the website. We saw right away they had a paragraph about their vision, goals, values, and mission statement.
This is super powerful stuff. How many restaurants actually take the time to understand who they are?
We didn't click on the menu or see any photos. Just from looking at their homepage, we could tell that they had the highest standards. We went to reserve and found out that they were completely booked for the next few days.
At the end of the day, it's about creating brands, experiences, and memories, not just listing properties.
Lesson #4: Double Down on a Single Lane
At STR Legends Puerto Rico, a lot of the operators there were doing a bit of everything, from leasing to managing to investing.
From speaking with these returning operators, I've realized that more and more of them are picking their lane. They're no longer doing multiple things.
You have to choose one business model and go 110% into the lane.
But how do you know which one's right for you?
You must understand your identity and see which model fits you the best.
Lesson #5: Smaller Companies Must Adapt or Die
There's going to be a significant decrease in the number of fly-by-night operators.
Smaller companies with 20-50 units will have to adapt if they want to survive this industry shift. As of now, I see three potential ways.
1. Become Professional
Smaller companies can choose to focus on one lane and dedicate everything to dominating that lane. This will allow them to become professional and profitable.
2. Sell The Business
There's a huge opportunity for M&A in this space. This is especially true if you have solid operations, people, and branding. A lot of larger companies are looking to acquire smaller companies to enter this space.
But, you'll have to get your company to a certain point where larger companies actually want to buy it.
3. Go Out of Business
While going out of business is never a pleasant thing, it's a part of reality. Not everyone is going to be able to dominate their lane or sell their business.
Tips for Smaller Companies
If you're a small company, you really have to understand who you are and the business you're building.
Build those systems and operations.
Get the right people.
Understand your profitability.
Are you profitable or are you just making money?
A lot of companies don't know their profitability. They see their revenue but don't always understand how profitable their business is. You want to know what the cost of acquiring a new unit is and the cost of running that unit.
Because once you start running 15, 20, or 30 properties, your operational costs are going to go through the roof. You have to understand your profitability if you're going to make the right business decisions.
But, those with 30-40 units will have it easier than those with 15-20 units. That's because of the efficiencies of scale.
For operators who scale up to 50 units, they'll face different challenges. But, if they're able to solve these issues, they'll be more efficient than smaller operators. This can mean hiring your own cleaning team or VA team.
Tips for Independent Hosts
I wouldn't be surprised if the industry ends up consisting of only larger, professional operators and mom-and-pop hosts.
There will still be amazing opportunities for small hosts because they can offer something the big companies can't. They can leverage the personal connection they have with guests to stand out.
A lot of us got into this business because it allowed us to run our properties remotely. We can still do that on a smaller level (e.g. a personal portfolio), but it's much harder to do if you're trying to grow a company.
It's often difficult being in multiple markets because business is hyper-local. After all, having knowledge of the area and connections with guests are super important in hospitality.
Operators trying to scale quickly in multiple markets will have a hard time developing a profitable business model. Especially if they want to dominate these markets. The biggest operational issues stem from having to rely on your systems and people. This can mean dealing with time zones and making sure people are following your processes and procedures. It's often hard having synergy and culture in this scenario.
The people who are going to be successful will be the ones who focus on a single market and dominate it.
Lesson #6: Build a Strong Community
Having a support network is crucial in whatever industry you're in.
When we organize our mastermind retreats, we don't just book a place and invite a bunch of people. We sat down and identified our values. We wanted to create a culture of vulnerability, openness, integrity, authenticity, and supportiveness. But, most importantly, we picked the people who wanted to raise the tide and not just their own boat.
This leads to an atmosphere where people are willing to open up and share things they wouldn't normally share.
People are able to connect with each other on such a deep level that we're like family. We've even had people share details about how to manage marriages.
STR Legends is much more than just discussing numbers and business. It's a place where people are authentically connecting with and helping each other grow.
As a result, these individuals are more willing to be open about their businesses, seek applicable feedback, and put the advice into action.
In fact, at our last mastermind, we had an operator sign a deal on a hotel with the help of other operators who'd done similar deals before.
Here are some books if you're looking to get these parts of your business dialed in:
- Traction by Gino Wickman: This book will walk you through all you need to know about core values and mission statements.
- Who by Geoff Smart: This book will teach you how to hire the best people for your operations.
STR Legends Cartagena has been an amazing experience. All the attendees want to help others and want to share how they became successful. We will be sharing the journey of these legends in future content.
If you'd like to see what we do on these retreats, check out our Instagram (@STRLegends). We post highlights from all our previous STR Legends events.
Do you feel like you belong in STR Legends?