As rental prices continue to rise, more and more apartment residents are tempted to enlist Airbnb to help cover the cost – with or without the landlord’s permission. Luckily, a growing number of landlords recognize that permitting short-term rentals could increase their profits and attract new residents to their buildings. That’s where Pillow Residential comes in. This new product offering allows building owners to offer the Airbnb option as an amenity for residents, and Pillow in turn gives landlords transparency regarding who’s in their buildings and a cut of the profits.
Sean Conway, Co-Founder and CEO of Pillow, has a huge passion for travel. After the sale of his first startup venture, Notehall, Sean backpacked all over the world, staying in Airbnb properties. Sean finds that he is his best self when he travels, when he has the opportunity to interact with other cultures, and he wanted to make it easier for others to afford to travel and feel that same human connection.
Sean launched Pillow in San Francisco in 2014 with the intention of taking the hassle out of hosting. The company has expanded to a dozen cities, providing short-term property management services and promoting the concept of global citizenry. Today Sean talks through the details of the new product, explaining why his team developed the amenity, how Pillow Residential benefits landlords and residents alike, and the demand he has seen for the product thus far. He also shares his point of view regarding the greatest challenges in the vacation rental space as well as his take on the future of the Airbnb ecosystem.
Topics Covered
Why Sean developed the new product, Pillow Residential
- Rental prices higher than ever (35-45% of income in some locations)
- Landlords willing to allow Airbnb, but calling for structure
- Pillow Residential helps residents earn income while on vacation
- Prevents violation of HOA, lease agreement
- Allows landlord to feel comfortable
- Works with city regulations
The benefits of Pillow Residential for landlords
- Amenity attracts residents
- Provides insight, transparency re: who’s in building
- Increases applicant pool, occupancy
- Offers landlords cut of profits
How Pillow Residential works
- Opportunity assessment (gives landlord sense of what might earn)
- One-hour onboarding session
- Pillow creates landing page for residents
- Pillow sends residents an email explaining new amenity
- Residents sign in through landing page, property manager monitors
The high demand for Pillow Residential
- 110 signups
- 60,000 units
Sean’s take on the greatest challenge the Airbnb ecosystem faces
- Pillow has 200 SOPs
- 80% of situations fall into top 20% of SOPs
- Create standardization AND keep personalization
Sean’s conviction that the Airbnb ecosystem will continue to thrive
- Airbnb changing way people live
- Millennials embracing digital nomad lifestyle
- Opportunities for wide range of players
- Room to grow in industry
The tools Pillow uses to manage client listings
- Zendesk customer service software
- Previous partnership with Everbooked (metrics, pricing)
- Built personalized internal tools for customers
Sean’s view of the Airbnb IPO
- Won’t change the landscape of short-term rental industry
- ‘I’m fine either way’
Sean’s prediction of what’s next in vacation rentals
- Consolidation will continue
- booking.com, Expedia and Airbnb will continue to thrive
- Opportunities for niche markets (i.e.: Innclusive, Mrbandb)
Connect with Sean
Email info@pillow.com
Resources
Connect with Jasper
Email: jasper@getpaidforyourpad.com
Twitter: @GetPaidForUrPad
Instagram: @GetPaidForYourPad
Facebook: www.facebook.com/getpaidforyourpad
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Complete Transcript for Get Paid for Your Pad Episode 177
Jasper: Welcome to Get Paid for Your Pad, a definitive show about Airbnb hosting, featuring the best advice on how to maximize profits on your Airbnb listing, as well as real life experiences from Airbnb hosts from all over the world. Welcome.
AD: This episode is brought to you by Hostfully, a company that helps you make beautiful guidebooks for your listing. As as a special for Get Paid for your Pad listeners, you get a free guidebook consultation after you make your guidebook.
Jasper: Welcome to episode 177 of Get Paid for Your pad. Today, I have an interesting guest, his name is Sean Conway. He’s the CEO and co-founder of Pillow, a short-term rental management company, and I believe one of the first in the Airbnb space.
Sean Conway: in the ecosystem, I think yeah. We changed over to Pillow. We’ve been with about 3 years; it’s about 4 years in the running.
Jasper: I’m curious, how did you get started with this company?
Sean: Jasper, first of all, I’m excited to be on here. What you’ve done with this show is incredible. I’m excited to be part of that jingle you have. Everything you’ve built is so needed and offers a lot of value. Back to your question – how we got started, I had a huge passion for traveling. I was at a semester at sea in college, and after traveling Note Hall, our last company, I started traveling the world with my backpack staying in Airbnbs. I have found that I’m personally my best self when I’m traveling when I don’t know my surroundings and I’m interacting with cultures I don’t normally see. I think I’m just the best human being when I’m traveling. I found that more and more people were using Airbnb, and the only reason I wasn’t was because of the hosting work. I wanted to be able to allow anyone to earn income while they were traveling.
Jasper: Awesome, and you started in 2014?
Sean: Yeah, it’s, summer 2013 is when we really started. The big launch was 2014.
Jasper: What cities are you currently available in?
Sean: Wow, I should know this right off the bat: Seattle, San Francisco, San Jose, LA, San Diego, Albuquerque, Santa Fe, Denver, Salt Lake City, Phoenix, Chandler, Flagstaff – there’s quite a few.
Jasper: So you guys basically started in San Francisco and expanded throughout California and now you’re in some other places in sort of the West, Midwest.
Sean: You can think of this as the in and out expansions plan.
Jasper: You’re doing it in the opposite direction of the settlers 100s of years ago.
Sean: Awesome, awesome.
Jasper: The main thing I wanted to talk about with you is the recent product you’ve launched, it’s called Pillow Residential and the reason I wanted to is because everyone is aware of the recent short-term rental market trend where there’s more regulations and the managers are getting more aware of what short-term rental is and a lot of people have been renting out their places regardless of their lease. It leads to all sorts of problems. I think you recognize this issue and you came up with a solution.
Sean: Yeah, absolutely, there’s a few triggers that made us fully focus on pillow residential, but one was that our investors invested in us because they said Airbnb was a wave we needed to embrace, but there needs to be structure around it in order for residents to do this. That got us listening. At the same time, we’re at the 8-year cycle in the real estate side where rental prices are higher than ever. I remember moving to San Francisco and sharing a one bedroom with my brother and paying $875 for my room, which is now $3500. The way to subsidize this is to allow Airbnb, but as you said, it’s a violation of their lease, so there needed to be a platform in place that allows you to host but keep the landlord comfortable. That’s what we put in place; it works with city regulations, which is first and foremost.
Jasper: So how do you convince landlords and apartment buildings to allow Airbnb?
Sean: There’s a few mechanisms, but more so, there’s a lot of progressive thinkers that come to us and say that it’s an issue, they’re trying to police it and it’s the wild West. Instead of looking at it like it’s ruining the community, they try to see it as something could attract residents to their communities. Being able to show them Airbnb is already happening within their residents. That they don’t have all that control over it, they want some transparency, and looking at it as a way to make a profit when guests do stay. They do get some profit sharing.
Jasper: Right, because I imagine there must be a lot of buildings with vacant apartments and so you’re saying if you offer people the ability to rent out their units when they go on holiday or traveling, that would be a way to entice people to sign up for these apartments.
Sean: Exactly. What we’re seeing in San Francisco is that a lot of these residents are spending 45 percent of net income in a given month on rent, which, maybe they’re at their place 10 hours a day. That’s an absurd amount daily. If you can earn income back or subsidize by 15 percent a given year by renting it while it’s empty, that’s our goal.
Jasper: It’s not meant as a tool to rent out full time?
Sean: Within the cities where that’s allowed, where you can rent out vacant units, yes. We’re having multiple family owners utilize those spaces at those times but also letting long-term residents utilize their property.
Jasper: Can you explain a little bit how the product actually works? How you sign up and what are the details?
Sean: Right now, we’ll run an opportunity assessment for our owners; from there they get a good sense of the profit sharing and the desirability. From there, they sign up with pictures; create a landing page for residents. We let the residents know this amenity exists, from there we can monitor it, and the property manager gets full visibility of guest and profits and what they earn when the guest leaves. It’s a quick process, it takes about an hour. It’s fairly quick and simple.
Jasper: Do you see a lot of demand?
Sean: Oh my gosh, yeah. I didn’t expect how many sign ups we’d get. Since we announced it, we had a mass amount. We had 110 signups with over 60,000 units. We’re just signing up quite a few people and getting them on the schedule.
Jasper: Basically what you do is you find the people that run these buildings, the managers, the owners, and you sign them up and they let the residents know and you approach the residents.
Sean: The owners can, if they have 5 percent vacancy in 300 units, they can take 3, 4, 5, to turn into furnished units and allow it as an amenity for their residents and now offer this as a new amenity they advertise on short-term rental sites to draw new residents in.
Jasper: You guys raised 13.5 million dollars, in the Airbnb ecosystem that’s the largest amount of money I’ve seen.
Sean: Airbnb dwarfed us, but hey, it’s an incredible amount of money, we’re using it to expand. Airbnb showed it’s not going anywhere so I expect to see more funding in the ecosystem, so yeah, hang on.
Jasper: I noticed one of your investors Gary Vendercheck; he is a pretty interesting guy.
Sean: Yeah, I know Gary. We’ve met a couple of times. His energy is there, it’s just as high if not more. He’s super passionate and incredibly authentic and wants to help.
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Jasper: Awesome, so you’ve been helping Airbnb hosts manage their units for about 4 years now, so you’re familiar with the different challenges. What’s the biggest one?
Sean: So, I think anyone who says managing Airbnb is easy is, I don’t know, I don’t know how they do it. It’s challenging regardless of what space you’re in. One of the biggest things is we have, we’re in the hospitality industry. You’re going to see a different range, we created SOP, standard operating procedures, even though 80 percent of those are falling into 40 SOPS, you have all these nuance cases that happen, you have to treat them differently or standardize as much as possible. It’s like death by 1,000 cuts to create as much standardization while also having personalization is one of the biggest challenges. We’ve done our best to create standards that guests and hosts like, and create a great stay.
Jasper: The ecosystem has been exploding. In 2014, I’d heard o you guys and then Beyond Pricing and the only ones I think.
Sean: Man, we go back. I remember Beyond Stays and Beyond Pricing and Ever Booked, it’s been fun.
Jasper: But if you look at the ecosystem now, I get emails about a new products or service for Airbnb every day. There’s literally 100s and not to mention short-term vacation rental companies that have popped up, some don’t even have websites. What are your thoughts on the ecosystem and the start- ups that are there? Will they grow or disappear?
Sean: This ecosystem is going to thrive. Airbnb is changing the way people think about living and rentals. The digital nomad life is something that’s wanted by millennials and this platform is enabling it. I think there’s going to be an incredible demand for standardized hospitality experience, that personalization is always going to be in demand as well. I think it’s a wide range of businesses that can play in this industry and I don’t think, I think we’re at the very early stages and someone that’s entering could flourish into someone with 100s of properties easily.
Jasper: Do you use any of the other tools that are out there for managing your client’s Airbnb units.
Sean: We use Zen Desk, things within the tech industry. As far as the hosting side of things, we built our internal tools and we listen to our customers and build personalized for them. We partner with Ever book in the past and they’ve been resourceful on the metric and pricing side.
Jasper: I was recently in New York and I had a talk with Deanna who is a reporter for Skiffed and she wrote a long article about when Airbnb is going to IPO and if it’s good for them, what are your thoughts on that?
Sean: Why is there such big talk on that? They have evaluation, they’re a private company, what’s going to change when they IPO? I guess they’re right down the street and yes, it’s going to create rumbles in the industry, but we already have Home Away that is highly valued, they just took down a 17 story building in Austin for 2000 folks. I don’t know if it will change the landscape all that much by it going public. I’m fine either way.
Jasper: All right, let’s talk about some other platforms. When you manage someone’s home, you don’t just use Airbnb? What do you feel about the different platforms? DO you see them all existing in five years from now? Or will there just be 1 or 2 that will dominate?
Sean: I think there’s going to be some consolidation. They’ve shown it makes sense in the industry. I think you’ll see Booking.com, Expedia, and Airbnb to thrive. I think there’s opportunities for places like Tripping. I think there’s opportunities for all and they can cater to different customers.
Jasper: you’ve seen a lot of smaller platforms that cater to very specific niches, like Inclusive or Mr. Bnb, thoughts on those?
Sean: I’m not as, we love to plug up to each and every one, and I think it’s just the dead work associated with. Yeah, I think if they cater to a niche and can acquire the customers at a reasonably price, it makes for a good business.
Jasper: For the people out there who are managing their listing in the cities where you are available, how can they get involved with Pillow?
Sean: You’re asking from the resident side? Go to Pillow.com. You can sign up and go through the demo process and see if you’re building makes sense. In the meantime, just look for, you can email info@pillow.com and understand buildings in your city that offer this amenity.
Jasper: That’s an interesting feature. I’m sure there are people who want to do Airbnb but might not be able to do it because of their building, so if you have a list that tells them where they can do Airbnb, that would be a useful tool
Sean: Yeah, it’s a feature that’s coming out very soon and we’re excited about that. Anyone that thinks, “hey, I’m looking for an apartment to subsidize rent” they can search for that.
Jasper: I’m excited about this feature that you’ve implemented because I think this is one of the things people are struggling with most. It’ll be interesting to see. Let’s keep in touch and thank you so much for coming on and being on the show —
Sean: you rocked it, 177!
Jasper: 177 episodes
Sean: Can we celebrate with beers after 200?
Jasper: Absolutely, I’ll definitely be in San Francisco at some point. I look forward to hanging out again. We hung out at the Airbnb open in 2016, hopefully again in 2018? Any thoughts on where it might be?
Sean: They’re skipping this year, right? Maybe Austin? Oh, no Austin doesn’t like Airbnb. Somewhere Central. I’ll get back to you on that one.
Jasper: Maybe New York would be a good option. Cool! Thanks for coming onto the show, for the listeners out there, thanks for listening. There will be another episode on Friday, so see you then!
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