Mickey Kropf: How to Successfully Operate and Scale an STR Management Company | Episode 5 | STR Data Lab™ by AirDNA

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Speaker 1

Hello everyone, and welcome to the STR Data Lab. I want to welcome Mickey Kropf here from Vector Travel. Mickey, are you ready to step into STR data lab?

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Speaker 2

I am ready. Thank you, Jamie.

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Speaker 1

Awesome. Well, thanks for joining. Maybe just starting out. Can you give everyone sort of a rundown of what vector travel is and maybe a little bit of background about yourself as well? Sure.

00:00:37:09 - 00:01:02:19

Speaker 2

Yeah. So I'm the co-founder and CEO of Vector Travel. We founded it in March of 2018, basically because we saw a gap in the marketplace. Sonder and Lyric and Stay Alfred and the like already existed. But what we didn't see was somebody doing a revenue share model, really kind of bringing a partnership around short term rentals to the multifamily space.

00:01:03:17 - 00:01:31:07

Speaker 2

And since then, you've kind of recognized sometimes as a result of some, you know, adversity with with the pandemic, but also just through introspection, we realized that what we do can apply to other asset classes. So really, I think the only filter on the supply side for us is that it's business to business. We don't deal with individual vacation homeowners, even if it's a multifamily property, e.g. a condo.

00:01:31:13 - 00:01:50:23

Speaker 2

But but we would work with, say, a build to rent developer. And we're working on a office conversion to hotel, for example now and retail conversion to short term rentals and so forth. So, so really, I think now to put it more broadly, we are a kind of a commercial real estate short term rental provider.

00:01:52:16 - 00:02:03:13

Speaker 1

So you mentioned Sonder, Lyric, Stay Alfred, and two out of those three companies are no longer around. And so what sort of made vector travel different?

00:02:04:06 - 00:02:27:20

Speaker 2

Yeah, I mean, it was the model and I think it still continues to be the model. And I don't, I don't disparage those companies for having gone under. I mean, they took– well they raised a lot of money. They took big chances. They scaled rapidly. And I think generally they did what they said they would do. I think they delivered the service in terms of the consumers.

00:02:28:01 - 00:02:49:17

Speaker 2

And they and they paid rent until they defaulted. What they weren't able to do, I think, was, you know, just achieve the the KPIs and attain profitability. And I do think fundamentally that's a result of their model. When you are so heavily invested in leases, you're really not accreting any other value, right? Like they weren't investing in the real estate.

00:02:49:17 - 00:03:09:08

Speaker 2

They didn't have an ownership stake. And when the market turns and whatever that means, whether it's on the demand side or on the supply side, you’re really left holding the bag. And all you have are those obligations that continue despite what's going on with the rest of the market. And I think they were, you know, kind of victims of their own success in that way.

00:03:10:19 - 00:03:20:20

Speaker 1

So and that leads me to the question of how are you structured then? How did you and how you set up your structure sort of help you succeed during the pandemic?

00:03:21:00 - 00:03:46:01

Speaker 2

Yeah. So from day one, the thesis was that there should be a shared success model in the multifamily space. Now, did I have 100% confidence that it was going to work, that really anyone would say yes? No, I really didn't. I kind of started it on the heels of of putting in about six years co-founding and building up Rented.com, which at the time was was kind of an acquisition marketplace.

00:03:46:01 - 00:04:06:23

Speaker 2

And then we had a rented capital fund that was doing the same activity, frankly. I mean, we were leasing units or guaranteeing income and then, you know, partnering with operators to seek that that margin that, call it rental arbitrage or lease arbitrage. But it was kind of through that experience, even though when I left, I thought everything was going well with that.

00:04:06:23 - 00:04:28:12

Speaker 2

It just still seemed a little broken. It seemed a little risky for, you know, rented or any of the operators that were engaged in that directly. And I don't know, I was even kind of thinking a couple of steps ahead about the about the real estate providers that, yes, they got leases. And at that point in time, you know, you could get some–there was some softness, I guess, in certain submarkets.

00:04:28:12 - 00:04:52:23

Speaker 2

So you could get rent abatement or you could get, you know, rent discounts. And so from the real estate side, it was great. You filled up, whatever, ten, 20, 50 units in one fell swoop. But you know what would happen next year were they were they building in proper escalations? What about the operators, you know, performance and I mean, operationally, were they a good steward of the asset?

00:04:52:23 - 00:05:16:08

Speaker 2

Was there any incentive for them to do so? Yes, you could evict them, perhaps. But would you be able to if you had 50 leases with them and the market still was soft, would you be able to? And so it really just started connecting the dots from, you know, previously in my career. And so, you know, to kind of answer that too, I worked in commercial real estate for the first, I don't know, eight years of my career professionally.

00:05:16:13 - 00:05:34:15

Speaker 2

Part of that I played baseball. But, but, but when I actually had a job, it was, you know, I worked in development. I worked in commercial mortgage banking, you know, as an analyst in these fields. And so I was thinking about all of these things. I had underwritten deals that had a percentage rents from retail. And I just said, why can't this work?

00:05:34:15 - 00:05:58:04

Speaker 2

And then I also was looking at hotel deals, hotel management, rev share. Right. I mean, different model but still a revenue share fee. Long term apartment management, similar revenue share. So I just thought, hey, there's enough going for this. I think there's enough comfort and familiarity with a revenue share model, even if it's a totally different activity that it's worth trying.

00:05:58:10 - 00:06:23:09

Speaker 2

And you know, thankfully for us, we got it out there. We started small, you know, local developer in L.A., local developer in San Diego, and then, you know, a handful of other kind of small time clients. But in year one, we signed our first institutional client and thankfully we still have them as a client, which I think is a testament to our model, in addition to, you know, just our commitment to to our clients.

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Speaker 1

So and assuming that meant that you had to grow maybe slower than some of these other companies that were doing sort of lease arbitrage, taking those long term leases. Is that right?

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Speaker 2

Yeah. So I would say, I think objectively slower, but you know, 2019 I think was 300% growth. 2020 was something similar. Believe it or not, you know, even though the pandemic hit and we were hurt badly by it, but we pivoted, we tried different things. We managed to continue to grow. But I think.

00:06:59:15 - 00:07:00:11

Speaker 1

Overall.

00:07:00:11 - 00:07:39:00

Speaker 2

Slower than VC backed companies and those willing and able to lease and do these commitments. I also think it does not happen as smoothly for us. So we may have a quarter of being flat or even declining. And then all of a sudden we get rapid growth again. And that's actually really difficult to manage because ideally you have a consistent flywheel and whether it's steady growth or it's a rapid pace of growth, but it's the rate is somewhat consistent so that you can plan for it and you can manage it and you can staff it and you can find partners to service it and you can get funding around it

00:07:39:00 - 00:07:59:08

Speaker 2

and so forth. But when it's, when it comes in chunks, it is more difficult. But I think that's also been a product of our model. But again, hey, we're still standing as a result of our model too. So I'm careful not to sort of disparage that approach because I do think it's a winning formula and I think we're seeing more and more companies get into it, at least versions of it.

00:08:00:07 - 00:08:03:10

Speaker 1

Yeah. So how many properties do you guys currently have under management?

00:08:03:12 - 00:08:26:12

Speaker 2

Yeah. So we're around 350 listings right now. We I mean, I'll admit we started the year far larger and so this could be viewed in some ways as a cautionary tale, I guess. But, you know, to to land the plane here in a second. We also have a really big pipeline right now, and I think we'll get back to it.

00:08:26:12 - 00:08:54:19

Speaker 2

But I think we started the year somewhere around 1500 listings and they were not all exactly what you would think. They weren't all full time short term rental units. So basically during the pandemic, we looked at what do we have in terms of an operation? Where else can it be applied and one of the places we stumbled upon was the timeshare industry just kind of through our network, but then some initial exploration pilot project, pilot deal and you know, it turns out we crushed it.

00:08:54:19 - 00:09:19:12

Speaker 2

We deliver 2 to 3 X what they had been doing in rental income, which makes sense. This is all we do. We're specialists in this. They're specialists in timeshare. I have no idea how to run a timeshare program or sell somebody a timeshare. Nor do I want to. But anyway, through through a you know, we did the pilot, then we signed a portfolio level deal with independent but you know relatively large timeshare resort company and we built custom integrations.

00:09:19:12 - 00:09:39:06

Speaker 2

We had all that flowing and then they had a change of leadership and, you know, defaulted on the agreement and it went away. And then, you know, so that's sort of an outside circumstance, in my view. Not exactly directly related to our operation or our inputs. And then another client that we've had for four years now sold off a bunch of assets.

00:09:39:06 - 00:10:01:04

Speaker 2

It's just market timing. They happened to overlap with where we had lots of density. One, we had maybe 30 units, another we had 25, another we had 15. Other we had 30, you know, so that starts to just chip away at your inventory. And I do think that that is something that's different about a revenue share model also, is that there almost has to be some flexibility, it has to be some optionality, and it is a partnership.

00:10:01:04 - 00:10:20:03

Speaker 2

And so you can't you can't simply rely on your attorneys or your legal agreements and say, hey, I've got a lease, I have a leasehold interest here and it's going to transfer or whatever. You have to take their needs into account, whether it's maybe they changed, maybe they refinanced and their new lender will not recognize this income. Well, guess what?

00:10:20:03 - 00:10:38:06

Speaker 2

You're going to shut down your operation. That's going to hurt. But but then again, if you are a good partner, if you play the long game, then at least in our experience, they tap you for some other opportunity. You know, they're probably not going away. So they're they're going to continue to invest in commercial real estate. They'll find ways to bring you in.

00:10:39:10 - 00:10:42:19

Speaker 1

So what does that you mentioned the pipeline. What does the pipeline look like today?

00:10:42:19 - 00:11:07:17

Speaker 2

Yeah, it's it's interesting. So some of it feels like a random walk at times like that timeshare story. You know, we've signed a we've signed 165 unit apartment hotel deal in the Charleston market. So that's a you know, probably late to probably late 2023, probably Q3, Q4. So it doesn't help us now, but we've signed that. And so that's full building management.

00:11:08:16 - 00:11:35:09

Speaker 2

You know, you have central out there now doing full building management, but I would say multifamily first and then the hospitality second. And that's generally how we operate in multifamily too right now. But but not, you know, instead of doing the, the full service, full building, we're just taking a piece anyway that's leaning into hospitality first. One of the things we sometimes complain about just about the business internally is, you know, hey, it's a square peg round hole here.

00:11:36:00 - 00:11:54:03

Speaker 2

And it's what's paradoxical there is that's the reason we can exist, right? That's the value we're bringing is they have a vacancy. We can come apply this different use and generate value for them. And it's hard enough. It's different enough. It's a different tech stack, it's different culture. That's why they need us and that's why we can earn a fee doing it.

00:11:54:03 - 00:12:15:07

Speaker 2

Otherwise they just do it themselves. Right. But but anyway, we like these hotel deals for that for that purpose, we do want to be a little bit careful about what we're doing and what that total mix looks like. I think we'd prefer you know, we prefer that they stay on the apartment hotel side for for various reasons. You know, I think the product differentiation makes sense.

00:12:15:07 - 00:12:34:19

Speaker 2

I also think hotels do a great job. I mean, especially, you know, branded hotels and the the established operators, they do a great job. Yes. We're coming in with a different model and some of our competitors are doing the same thing. I know the kind of tech first, human second sort of model, which can drive NOI on their behalves.

00:12:34:19 - 00:12:59:10

Speaker 2

But, you know, we do just want to be somewhat thoughtful around that. Keep to boutique, keep to keep to the product that has some of that unique feature that the apartments had, too. You know, additional space kitchens and so forth. So that's part of it. We've also gotten into, instead of just doing one off sort of transactions around a given property, but portfolio level deals with multifamily clients sales cycles forever.

00:12:59:10 - 00:13:20:13

Speaker 2

I mean, I don't know how long some of these I've been working on, but, you know, we have we have a really big one that's that's pending right now. And we expect to go set up, I think, hundreds of units as a result of that here in the next quarter or so. So that's fun, right? And so it's not all negative to stick to your model generally and do that now.

00:13:20:17 - 00:13:55:22

Speaker 2

We've also as related on a related front, I guess just gotten comfortable enough in our own skin as an organization and as operators to take a step toward what Lyric and Stay Alfred and Sonder you know had been or continue to do. We don't lease units. It's really a different structure. You know, you've got payments up front, you've got deposits, you've got I would even just say like a an oppositional relationship less or lessee, versus, you know what I was talking about being a little bit more as a partner with our with our other operation.

00:13:55:22 - 00:14:16:13

Speaker 2

But we are we have rolled out something called vector guarantees where we will guarantee our performance to our clients. And, you know, we fit it into how we operate now in a few important ways, but we'll take on a little additional risk in terms of the performance, but also the furnishings, you know, covering all of that directly, which is not something we've been accustomed to doing in the past.

00:14:16:13 - 00:14:34:14

Speaker 2

We might, right manage the setup process, but the operation might repay the the cost of that. And so so that's gained quite a bit of traction. We've got that's specifically focused in the student housing space for us. That's a it's an area we've worked in for a while and and we're only doing that program in that space right now.

00:14:34:14 - 00:14:35:10

Speaker 2

But it's working.

00:14:36:15 - 00:14:57:13

Speaker 1

So leads me to maybe two follow up questions. One, when you're thinking about your strategy of how to expand it, it sounds like you're very focused on on multifamily. And then when you're thinking about how to expand, is it the partners in finding the right partners and being in any market that partners in or willing to have you in?

00:14:57:19 - 00:15:04:13

Speaker 1

Or are you going after specific types of markets too, and then finding the partners that you'd like to work with in those cities?

00:15:04:13 - 00:15:30:20

Speaker 2

Well, I mean, it's for good or ill. It is mostly sort of top down client, client first, you know, doing the account level selling. And then we sort of based on their needs, you know, we sort of get funneled into where they have an opportunity for us, which is generally around vacancy, you know, assuming we're talking about multifamily, if it were a hotel or or whatever, I think that's a little bit different, but I think still similar.

00:15:30:20 - 00:15:59:03

Speaker 2

Hey, we've got this plot of land, we're going to build something new or Hey, we have this office and we're going to convert it or whatever. Now that said, we look at AirDNA data and we key in on basically high rev par markets with very low seasonality. And we want to be in those markets. Right. You know, some of those traditionally may not even allow short term rentals, but like the New York's and San Francisco's and LA's and Seattle's and so forth.

00:15:59:03 - 00:16:24:21

Speaker 2

But what we found are these kind of tier two and even tier three markets can have the same dynamic. It just may not be we may not know what the depth of that demand is or, you know, how many units it could really handle. But we're willing to try. And so like Charleston, Athens, Georgia, Oxford, Mississippi, you know, I don't think these have happened, like Nashville's happened or Austin's happened.

00:16:25:19 - 00:16:43:00

Speaker 2

They're happening. And and there's some data and we'd like to be, you know, in front of that. And we're working on on doing that in some of those markets. And I think we may get more aggressive with some of those some of that outreach and even just do some bottom up stuff, you know, property levels like, hey, we looked at the data.

00:16:43:09 - 00:16:50:22

Speaker 2

We like, we like your building, we'd like to work with you, which is kind of going back to the start for me with, with Rented.com days.

00:16:51:07 - 00:17:02:15

Speaker 1

And markets like Charleston with such strong restrictions on short term rentals to be able to get in with a short term rental product zoned and sort of operating like a hotel. And it seems like a great opportunity.

00:17:02:22 - 00:17:27:03

Speaker 2

Yeah, no doubt. I mean, if we can be in a place that is supply constrained and also has great just sort of market fundamentals, I mean, that's that's ideal. There's, there's a property we're working on, I guess I shouldn't say since we don't have the deal yet, but in a kind of, you know, tier three beach market in California and it happens to be a former hotel property and it could go multifamily, it could go hotel.

00:17:27:07 - 00:17:48:10

Speaker 2

And so we're in there right now, you know, working with a small deal. But, you know, 20, 30 units. But we want to win that sort of stuff and we'd love to get into higher rev par markets. I think another, you know, just I won't say I mean, it’s a consequence of the business model at times has been a little bit of the mindset of like, well, we have to take what we can get.

00:17:48:13 - 00:18:11:20

Speaker 2

I mean, you know, there's a minimum a minimum standard in terms of quality and expectation of guest experience. It's hard to know before you get in there. I will say, until you're actually you know, if you were a resident living there or, you know, in our case operating there, it's really hard to know. Just doing a property tour, you know, they know how to clean it up for you, the common areas and inside the units and they may not let you into some of the units and so forth.

00:18:11:20 - 00:18:32:06

Speaker 2

You know, we've wound up with certain assets, you know, I think we would call them kind of B-minus. And if they don't have the best maintenance operation or they don't have great pest control or whatever, that can really negatively impact your reviews. And it really makes it an uphill battle to operate short term rentals, where we're the, you know, consumer expectations continue to climb.

00:18:32:06 - 00:18:36:18

Speaker 2

The OTA expectations for their operators and their listings continue to increase, too.

00:18:38:08 - 00:18:56:03

Speaker 1

And so you mentioned funding and sort of working with your partners and how are you guys funded today? Is and is it bootstrapped or you do you have outside funding? How do you sort of fund your expansion, assume it's not cheap to sort of go into a new market, add 150 new units.

00:18:56:10 - 00:18:57:09

Speaker 2

Yeah. So,

00:18:57:09 - 00:18:57:23

Speaker 1

How are you funding it today?

00:18:57:23 - 00:19:21:15

Speaker 2

We've bootstrapped it to date. I mean, that's and that's not always been easy, but it is a business that can cash flow. I mean, it does mean making some tough decisions at times. It means you know, for us expanded quite a bit to start the year like I talked about in terms of that unit count. And then when unit count goes down, we had to we had to, you know trim the staff, corporate staff, obviously any local support staff that was going with it.

00:19:23:02 - 00:19:52:02

Speaker 2

So yeah, so that's difficult. Now we were probably getting ready to explore the markets force of fundraising earlier in the year, but we had that happening and then just those sort of external circumstances with the markets and Russia and so forth, we just said, all right, let's table that. We'll, we'll focus on the business, will focus on quality and improving what we're doing and then find new avenues for growth, which is, you know, I think right where we are right now.

00:19:53:09 - 00:20:13:00

Speaker 1

That's great. So let's get into current performance. So. Q3 we just got done with the summer. I'm sure that was a big high season for most of the markets you're at. So how did Q3 sort of end up how does that compare to prior year? And maybe how's it looking going forward?

00:20:13:05 - 00:20:44:06

Speaker 2

Yeah, so I mean something you know well is that our category? And actually even our our overlay of markets, we didn't suffer greatly, I mean, at least relative to hotels and maybe certain tier one markets, but we had a lot of exposure to some smaller markets that that did relatively well in 2020. I mean, an anecdote would just be we didn't really lose inventory in 2020 and then, you know, and then we then we added quite a bit and grew.

00:20:44:06 - 00:21:01:21

Speaker 2

But in terms of the stuff we started with, you know, pre March 2020, we kept that the rest of the year. And I think the view points from our clients was like, well, even if it's less than expectation, it's still something and they're paying and whatever. When there was so much uncertainty around regular tenants, you know, will they continue to pay rent?

00:21:02:03 - 00:21:30:23

Speaker 2

And and then compared to the lease, our operators defaulting left and right on on obligation where they weren't making money. So we looked relatively good and relatively safe during that period of time. 2021 was was, you know, a pretty strong year overall with the blips in the data coming with Delta and Omicron waves. And so, you know, we feel like everything was was unleashed and, you know, COVID was almost behind us.

00:21:31:04 - 00:21:54:14

Speaker 2

And then we get that new variant and all of a sudden we'd have cancelations. I wouldn't say spike, but cancelations would increase again. And that's something we've been tracking really closely since about April of of 2020. You know, that's that's something we we follow closely by market and then just drill down. Is that something that's in our control or something that's outside circumstance, like a hurricane or whatever?

00:21:55:12 - 00:22:28:01

Speaker 2

But but yeah, generally speaking, you know, 2021 was, was pretty strong with the exception of like August. And so overall, you know, up slightly in 2022, we were, you know, July was around like 75% occupancy for us. And, you know, that's that's not taking it. We the data that I'm reporting on if a unit were offline, it's it is showing it's vacant for us but if we're offline for maintenance so maybe there's a couple of points here and there that we could add back.

00:22:28:09 - 00:22:50:13

Speaker 2

But, you know, it's directionally, directionally close. We're around 75% and we are in some of these smaller markets, too. So I should mention that, you know, we've said yes to places that I guess I'd say we wouldn't white board to be in like Midland Texas is a market in West Texas highly dependent upon oil and gas market.

00:22:50:13 - 00:22:59:18

Speaker 2

So, you know, maybe it maybe it correlates to the overall economy, but it doesn't it doesn't necessarily follow the rest of travel patterns. Certainly not leisure travel.

00:23:00:05 - 00:23:09:05

Speaker 1

I've looked at the numbers in Midland. It's like you plot Midland rev par and oil prices and it's they follow each other almost. Exactly. Exactly.

00:23:09:05 - 00:23:35:00

Speaker 2

It's yeah. So it's a weird one to be in, but it's actually been it's been good, it's been fine. And I feel like we've, we've done what we set out to do on behalf of our client, which was activate vacancy, generate additional NOI. And then in terms of consumers, you know, the actual paying customers, those who pay all of our bills and our clients bills relative to our units, I think we've delivered a good experience for them where they got to live in an apartment on a temporary basis.

00:23:35:00 - 00:23:56:10

Speaker 2

They had everything they needed. They got to show up, they with a suitcase and, you know, work their job and not have to worry about anything. So I think it's I think it's worked out well. And I'm glad that we've maybe, again, as a result of our model, just found ways to say yes to things like that, because we've really been pleasantly surprised when we looked at Midland data, you know, there were no pro operators at the time that we could find.

00:23:57:22 - 00:24:18:12

Speaker 2

We saw some some highlights, you know, some surprisingly good looking ADR on some units in occupancy. So rev par. But we didn't, we didn't see enough to warrant like a 50 unit investment. But that's what we wound up doing is setting up 50 units and it worked out similarly in Wichita, Kansas. You know, I think when we went there really weren't any professional operators.

00:24:18:12 - 00:24:41:15

Speaker 2

We've been there a few years and and we've like rents are so much lower there that when you hear, let's say an $80 ADR that we generated in our $55 rev par and like that doesn't sound very good. Well, we still generated rent premiums on behalf of our client. And so so yeah, it's been it's been relatively successful in that market too.

00:24:41:19 - 00:25:08:02

Speaker 2

But yeah, you know, overall, I think we're it looks like we were at Q3 70, 72%, $92 ADR. And so you know, that's not anywhere close to say like a mint house or Sonder ADR. I think our occupancy is probably higher, though. I'm not I'm not 100% on that, of course. But they also have great density, oftentimes in a given location.

00:25:08:12 - 00:25:34:14

Speaker 2

But I do think that we're really quite good at taking a I mean, we're good in A property, too. Of course, it makes it all easier, a brand new, A property, CBD location, so forth. But I think we're we're pretty good as an organization of taking something that is a more challenging market or more challenging property and, you know, setting it up, positioning it in the market, still promising, you know, what we're delivering.

00:25:35:00 - 00:25:38:18

Speaker 2

But but then ultimately repeating that over time on behalf of our clients.

00:25:39:06 - 00:25:51:00

Speaker 1

Yeah. So and primarily how do you guys drive bookings to the property? Is it direct bookings, the OTAs. So where, where are you seeing the most traffic there.

00:25:51:00 - 00:26:13:07

Speaker 2

Yeah. So we are still in OTA first booking sort of organization I guess I should say. You know, it's really almost all online bookings as opposed to maybe a more mature like vacation rental company that may have a higher percentage of phone bookings. We do a handful of those, but it really even when a call might come in, we're still going to probably drive them back to the website to book.

00:26:14:08 - 00:26:35:00

Speaker 2

But yeah, we've been in the kind of 20% range on direct bookings, which is, you know, I think we're comfortable with that range right now. Strategically, maybe in a year or two, we'd love to be up in the 40 or 50% range. But for me, driving the business and thinking about, you know, how do I build value here and what really grows the business.

00:26:35:00 - 00:26:53:16

Speaker 2

For us, it's client acquisition and unit growth, more so than direct bookings, even though direct bookings help that to, you know, increases our margins and and so forth and helps our clients helps with client payouts. And we have this general belief that when the clients do well, we do well as a result, hard sometimes to to tie those two together.

00:26:53:21 - 00:27:17:03

Speaker 2

But yeah, and then we are adopters of new platforms. So if anything comes along that is integrated or guest to user and you know, if there's, whether it's through a channel manager or direct integration, as long as we don't have to pay upfront, you know, we just pay for success, we're going to say yes. So, you know, we're of course, on homes and villas by Marriott with the inventory that qualifies.

00:27:17:03 - 00:27:41:00

Speaker 2

We're on Hopper, Whimstay. You know, At Ease. Who knows? We say yes and see what happens. Of course, those are the long tail. You know, the the fathead is it's actually it's actually kind of switched for us in some of the markets lately where Booking.com takes up an even greater percentage. And that's kind of been interesting to see.

00:27:41:08 - 00:28:04:17

Speaker 2

And some of it seems to be related to when they started accepting some of the payments on behalf. It's still kind of consumer driven on that front, but that's interesting for the operator. You know, it should reduce fraud, assuming they continue to pay us out or at least fraud from our perspective and chargebacks. But yeah. And then Airbnb and then VRBO and Expedia and then that long tail that I mentioned.

00:28:06:00 - 00:28:31:00

Speaker 1

Awesome. So we're coming up to the end of the interview. I've got two final questions for you, and I know you're a smart guy, Mickey. So one of my my favorite questions is sort of what is that one stat you look at on a regular basis? Is it and whether it related to the economy, related to your business, so what sort of gives you your health check on how things are going?

00:28:31:17 - 00:29:12:16

Speaker 2

Yeah, it's like I said before where, you know, the consumer is the one that really funds the entire operation for us. We focus on on guest experience. And ironically, it has not been a strong suit of ours for long. I'd credit the director of operations on our team, Jesse Brown, for bringing in a very data driven approach maybe six, eight months ago to our guest experience, where basically he pulled all of our data and and analyzed it and put it through some filters and and looked at essentially he calls it the cost of poor quality.

00:29:12:20 - 00:29:29:00

Speaker 2

And so, again, sometimes that poor quality was somewhat outside of our control. Maybe it's the maintenance provided by the building, or maybe it was, you know, some some issue related to the building and not directly our operation, but plenty of times it was our operation to maybe we had a poor cleaner in a given market. We didn't change that fast enough.

00:29:29:05 - 00:29:53:21

Speaker 2

Or maybe we had somebody having pretty bad days for a consistent stretch on the on the customer service team, guest experience team, whatever it may have been. We looked at review scores by property, by unit, you know, because we tend to have multiple units per asset and you know, and then and then overall and we looked by category, you know, overall cleaning check in and so forth.

00:29:54:03 - 00:30:14:00

Speaker 2

And we use that data first to quantify what is the impact of us going from, let's say, maybe last year at a given asset, we were at four six and now we're at four three and it's like, what does that cost us? And then we drill down into the performance in that, you know, in that specific multifamily asset unit by unit.

00:30:14:00 - 00:30:27:09

Speaker 2

And we'd say, All right, this one's out of four seven, this one's out of four two. Let's look at the output difference in terms of the in terms of the revenue. And we quantified all of that. And then we picked it apart and we said, all right, well, let's find the underlying issues. Let's find the root causes of all of these issues.

00:30:27:13 - 00:30:43:06

Speaker 2

And, you know, I do think that if we were VC backed, maybe we would have gotten through that whole the output of that exercise. Right. So like the first the first thing is just dealing with it, like recognizing you got a problem facing it, understanding it. And that's that's what we did.

00:30:44:00 - 00:30:46:12

Speaker 1

Are you are you losing sleep over bad reviews?

00:30:47:05 - 00:31:04:14

Speaker 2

You know, I think at times it pisses me it pisses me off. You know, we do a reviews meeting. We used to do them weekly. We've spaced them out a little bit more just to give a little more data and smooth it out a little bit. And I mean, there's a cost to that, of course, that if there's an issue, you know, you're behind it.

00:31:04:18 - 00:31:25:04

Speaker 2

But I'd rather have more data than less data, I think. And so we spaced this out to every or every like three weeks now. But anyway, I attend those too. But yeah, it's taken us some time. You know, to, to dissect those things. And we've said, okay, in this market, you know, we need to do preventive maintenance. We, you know, we need to go in and paint and we need the maintenance team to come in or whatever.

00:31:25:08 - 00:31:50:05

Speaker 2

And in this market, we also need to address the check in process. And so when we look at the the auto messages, we look at, you know, even just the structure, like we use something for automated check in no matter what usually is Key Cafe or it's keyless entry locks. And in some of those markets, because Key Cafe has some limitations, we had to swap out a machine even if we had to stick with cafe or we had to switch from cafe to links in the in those locks there.

00:31:50:11 - 00:32:13:09

Speaker 2

And then customer service, I mean, I call it insourcing. When we started the business first, it was just me doing everything. But then, you know, as quickly as we could, I think we hired a U.S. based ops person and then just soon after that, we heard a handful of folks in the Philippines to do remote support. And that's a whole that's a whole business now, right, with extent team and

00:32:13:09 - 00:32:37:09

Speaker 2

My co-founder has one called the clear desk and he does that for for businesses outside of this. But yeah, we've actually started insourcing some of the hospitality people based in the U.S. across time zones. And we do an NPS score to you know in stay NPS score and the NPS scores have spiked since since we've done all of this work I won't I won't attribute it to any single factor.

00:32:37:14 - 00:32:56:23

Speaker 2

But my guess is the single biggest factor is, is the just somewhat improved talent. And, you know, native English speakers, same culture, same everything that just seems to help them connect a little bit more and maybe understand the needs and concerns a little bit better than than what we've been able to do in the past. Now, we still have the remote team.

00:32:57:13 - 00:33:05:22

Speaker 2

They're just, you know, they're doing some overflow guest services now and they're doing other admin functions for us. But yeah, it seems to be a winning formula shaping up now.

00:33:06:18 - 00:33:16:01

Speaker 1

And probably and a lot of it is just tracking it and you can't make improvements and you know, and start tracking over time and start to see what works and what doesn't.

00:33:16:02 - 00:33:39:06

Speaker 2

That's right. Yeah. I mean, there's that cliche of you manage what you measure and you measure what you manage and so forth. So I think that that's really that what what we've been engaged on. And then, you know, what's, what's cool about that is it's, it's self fulfilling, right? Like you do that and then you kind of raise the bar and then they're going to want to shoot for, you know, an even higher score.

00:33:39:10 - 00:33:58:01

Speaker 2

And we can incentivize that. But furthermore, the performance tends to increase, right? And so then those clients that have that good experience, they can become advocates, whether it's internally in the organization to help expansion with that one account or they become advocates for you across the industry. It's a big industry, but it's tight knit and even the niches within it.

00:33:58:01 - 00:34:17:12

Speaker 2

Same thing. Student housing within multifamily, pretty big, but it's very well, I mean, it's, you know, somewhat incestuous. The folks move around from from company to company at times, but they're specialists. And so as the word gets out that we specialize in this, that we're a good partner and that we do what we say we'll do, I would say operationally then, you know, it gets easier for us even on the acquisition side.

00:34:18:15 - 00:34:31:20

Speaker 1

So Mickey, last question. If we came back a year from now, Lets say October 2023. What do you think the headline is for either Mickey or Vector Travel?

00:34:31:20 - 00:34:51:15

Speaker 2

I think if we're doing it right, we stay out of the headlines. I mean, honestly, we've been know we've been flying generally under the radar. It's not it's not that we shy away from press or doing a podcast or whatever. But I think it's more that we have this blue collar ethos where we operate and we find the needs and we and we do it for them.

00:34:51:20 - 00:35:13:11

Speaker 2

But I mean, to actually answer your question, we got to get back over that. Maybe it's a vanity thing, but we got to get back to the thousand plus unit mark in terms of the four units, not not even a partnership where you've got variable calendars, but I'm just a growth oriented guy. That's what's fun for me. That's what I like doing and I like managing that and leading that.

00:35:14:11 - 00:35:40:10

Speaker 2

And ultimately I like delivering a solution in a broader scale. I didn't do this to do a small business. Maybe it's a small business still, but I want to do this at a bigger scale. I do think, you know, we probably will look at raising or some kind of recap at some point here as as you know, despite what's going on in the outside market, if we have a good company and we have a good growth story, I have confidence that we will raise and do so on terms that we want.

00:35:40:19 - 00:35:57:09

Speaker 2

And it's just that's what we've been thoughtful about to date, is we just didn't want to do it too early when we didn't know what we're doing and really going after and we couldn't set our own terms. We wanted to do it when when everything lined up just right. And maybe that could have happened early in the year, but we didn't do it.

00:35:57:09 - 00:36:01:09

Speaker 2

And so here we are. And I think that that will be part of our story going forward too.

00:36:02:08 - 00:36:09:10

Speaker 1

Well, that sounds like a great headline to me. So for our listeners, where can people find you if they want to connect?

00:36:09:10 - 00:36:20:16

Speaker 2

Yeah. I mean, hey, I'm on LinkedIn and I connect with just about everybody. So, you know, Mickey Kropf on there and you can follow vector travel but it's vectorstays.com is URL, thank you.

00:36:20:16 - 00:36:23:03

Speaker 1

Great. And thanks for joining the STR data lab.

00:36:23:09 - 00:37:08:06

Speaker 2

All right. Thank you, Jamie.