Jason Fudin: Where is the Future of Real Estate Headed?  | Episode 7 | STR Data Lab™ by AirDNA

00:00:14:02 - 00:00:31:22

Speaker 1

Hi and welcome to the latest episode of the STR Data Lab. I'm joined here with Jason from Placemakr. Jason, are you ready to sort of dive into the numbers and strategy sort of that's driving growth in the short term rental industry and sort of jump into the STR data lab?

00:00:32:18 - 00:00:38:04

Speaker 2

Yeah, I'm game to talk about whatever whatever's on your mind. Let's have a lot of fun. So.

00:00:38:18 - 00:00:48:27

Speaker 1

Yeah, let's, let's start off just help the listeners understand what is Placemakr and sort of how did it evolve, where to come from, what's the sort of story?

00:00:50:09 - 00:01:10:18

Speaker 2

Yeah. So we're, we're a venture back tech enabled startup my background's institutional real estate development. So I ran a couple of billion dollars, of development for a publicly traded, recalled Vornado Realty and my co-founder, a similar background. He ran about $1,000,000,000 of development for a regional developer in Washington DC. And so it’s probably important context in that world.

00:01:10:18 - 00:01:32:24

Speaker 2

We spent a lot of time looking at how real estate was evolving and changing and there were kind of two camps. The first camp is the incremental stuff that utility management or like, you know, cameras that reduce parking attendants, minor stuff, you know, bring down the expense a little bit or push up revenue a little bit. And then we also looked at how could real estate fundamentally change or how was it fundamentally changing?

00:01:33:09 - 00:01:51:13

Speaker 2

And at the time, there was just a lot of focus on reduce the chunk prices and people pay less and would get higher utilization of the assets. I think a co-living co-working, shared conferencing and we took we took that one step further and said what you should do is you should get a higher utilization, but you should also coming all different kinds of customers.

00:01:51:25 - 00:02:13:11

Speaker 2

So you're able to optimize the real estate through seasons and cycles and fundamentally change the income streams that real estate produces. And so that's what we set out to do, is to blend multifamily and hospitality in an institutional way to optimize real estate in urban or high dense markets. We do that today with two products. One is called a pop-up hotel, which is probably the easiest to understand, but the least powerful of the two.

00:02:13:11 - 00:02:32:16

Speaker 2

And that is, let's say, you know, a major like that. We've worked with AvalonBay Equity, Camden, Brookfield, whoever builds an apartment building, they deliver 300 units all at once, an empty they hand us 100 units. We furnish it with all brand new rented furniture and we run eight basically apartment hotel out of their vacancy as they fill the building up with residents.

00:02:33:10 - 00:02:48:17

Speaker 2

That's about 20% just under 20% of our inventory today. We have we have just over 2000 units. And then the rest of what we do is we take that same 300 unit building for a partner or on our own account. We bought about a quarter billion of real estate last year, and we run it as a blend of furnished and unfurnished, short, long stays.

00:02:48:18 - 00:03:12:26

Speaker 2

We permanently blend hospitality, multifamily in a way that can increase the in-place cash flow by 50, 100, 200%. Business is about five and half years old, we raised just under $70 million in venture and growth money for the OPCO. We're knocking on $100 million on the property buy side of equity. And then the debt that comes with that 260 or so team members across the United States.

00:03:13:22 - 00:03:26:07

Speaker 2

We're remote first on the non property side. So I think we're 40 states today. With team members in 40 states and growing pretty rapidly and enjoying watching real estate finally catch up to where it was headed anyway.

00:03:26:07 - 00:03:32:10

Speaker 1

So yeah, so you mentioned the pop-up hotel in that brand was was WhyHotel, Is that right?

00:03:32:20 - 00:03:51:12

Speaker 2

That brand was and still is WhyHotel. So all of our pop-ups are now WhyHotel, by Placemakr. We have you know, we have one in San Jose right now, a couple in the D.C. area. And we'll be making more announcements about pop-ups coming and at this point in time. You know, we've done maybe 15, 16 of them and there are no brainer for owners and they're a great product for customers.

00:03:51:12 - 00:04:06:02

Speaker 2

They get to stay in brand new luxury apartment buildings in lieu of a hotel or an Airbnb or whatever with a 24/7 onsite, you know, hospitality caliber staff for you know, hotel quality experience. But in brand new apartment space.

00:04:07:02 - 00:04:11:22

Speaker 1

That's great. And so that started, what, in 2018/19’?

00:04:12:13 - 00:04:32:20

Speaker 2

17’ under Vornado, we ran the first pop-up for Trump's inauguration. And so I was an executive at Vornado at the time, and we did it as a pilot and we had, you know, the nasty girl shirt and the MAGA hats. And I think it was at a time when America was maybe a little less, you know, divisive and they're all talking in the lobby.

00:04:32:20 - 00:04:49:11

Speaker 2

And actually, one of our our team members had a personal incident, so she wasn't able to be there. So I was manning the front desk. My wife was pregnant with our now five and a half year old, our our dog, which was a puppy that he's six now. We were all there. It was kind of scene and it worked beautifully.

00:04:49:11 - 00:05:00:08

Speaker 2

And so then we spun the concept out of Vornado Realty in 17’ to launch then WhyHotel as a company, and then in 18’ started independently launching pop-ups in the United States.

00:05:01:02 - 00:05:18:19

Speaker 1

Okay. And so that's now led to Placemakr. So what sort of was the impetus was it the success of WhyHotel and sort of blending the use cases within the same buildings? Sort of, what was the progress in sort of in seeing the success there?

00:05:18:28 - 00:05:36:25

Speaker 2

Yes. So we've had the same business plan for all six, five and half, six years. So if you look at our very ugly series, C deck, that was like orange and black. I don't know if I was like in a Halloween theme at the time. It was pretty it's pretty horrendous. We said there's there are two phases to the company, phase one, pop-up hotels.

00:05:37:05 - 00:06:02:03

Speaker 2

And the reason we started with that is it's free money. So if we make Avalon an extra million or $2 million during lease up or any of these rates or big companies, it's free money. So everyone's happy. And that meant we were an additive good. And we figured that was the right sandbox to learn about channel management. Apex margin switching costs, onsite operation, the tech stack stuff that we ran four years ago where we made a partner million and a half dollars, we’d make them three today.

00:06:02:04 - 00:06:05:20

Speaker 2

We would literally make them twice as much money, but we figured a million and a half is better than nothing.

00:06:07:20 - 00:06:26:10

Speaker 2

As we got better at all of the core components. We moved to the second phase of our business, which at the time we called a blended community today we call hospitality living, and that is that permanent model. And really the whole game for us is to financially engineer better real estate while delivering consumer experiences that are just unmatched in traditional product.

00:06:26:24 - 00:06:50:13

Speaker 2

And so my expectation is you'll see and we'll make some announcements, probably will be making some announcements soon about folks that are building ground up building specifically for this use I think a bunch of announcements, actually. And so what you'll see over time is instead of people building traditional apartment buildings or hotels and a lot of these corporate markets or resort markets, what you'll see is them delivering apartment inventory.

00:06:50:25 - 00:07:10:25

Speaker 2

That's from day one, designed to be flexible for a night, a week, a month, a year, furnished or unfurnished. And as that happens, traditional multifamily product will not be the highest and best use in a lot of locations, and neither will traditional hotel. And we're building the full operating company brand and tech stack to support that, either for our own portfolio or for others.

00:07:12:11 - 00:07:29:00

Speaker 1

And you said this is sort of the from the sort of vision from the beginning. So how do you see and how COVID sort of impact the way that we live and work sort of accelerate, sort of delay. Do you feel like it sort of brought that vision more to the forefront?

00:07:29:03 - 00:07:43:06

Speaker 2

So I guess there's two pieces to that piece. One is what happens to a company when it goes through something as traumatic as COVID, I guess is a third piece. What happens to the world through COVID. And like that. Obviously I guess it goes without saying, but like the tragedy of COVID, the loss of life is terrible.

00:07:43:13 - 00:08:03:13

Speaker 2

If you for a second, you know, move on to the business side of there's there's two things that happen. One is what happens to the way people behave, and the other is what happens to companies that go through a traumatic experience. There’s like this like terrible. I think it's it's like a Russian saying or whatever, basically, like, you know, boiling water hardens, eggs and softens potatoes or something, something weird like that.

00:08:03:24 - 00:08:22:04

Speaker 2

And that's true about a company, you know, if you survive these difficult times, which we obviously did and then thrived, you know, we have three times the number of people today we had pre-COVID, we have almost eight times the monthly bookings. But you survive that. It actually makes the company stronger. So that then ended up being a positive thing for our company.

00:08:22:15 - 00:08:52:16

Speaker 2

It also, you know, unfortunate for some of our friends and peers meant that their organizations are no longer here. And then the biggest change, the biggest change that COVID brought is the change in the way people work. And I think what is not talked about enough in real estate is that is the biggest change in real estate you're going to see in our entire generation, is that where people work and the way they work will change where they live and where they stay, which will change everything because real estate is 100% based on where the feet are.

00:08:52:29 - 00:09:08:28

Speaker 2

And so that is changing travel patterns. That's changing living patterns. And we are in like not even the first inning. I mean, you're going to see and there's a question about how much comes to cities, how much doesn't how much moves to South America. You know, because its on the same time zone for the 20 year olds want to go get drunk and have a good time.

00:09:08:28 - 00:09:40:05

Speaker 2

Like we're about to see this amazing shift. Amazing in other words, just tremendous seismic shift in the way people behave. And it has benefited us thus far. So I'm sure that your listeners know this, but furnished homes and apartments have a tremendous tailwind. They're one of the fastest growing segments in hospitality, and we've seen that in the numbers. I'm in our New York property right now, and we look at something called the rate penetration index, which is well you guys you guys are under the same umbrella now.

00:09:40:05 - 00:10:03:22

Speaker 2

So we pull STR reports. Right. And and we look at a set of five hotels in the neighborhood what RevPAR did they achieve. And then we look at what did we achieve on our units, the property I'm in right now. The last time I saw a rate penetration index was 190, which means we did almost twice the revenue per room as the hotels and that and that's a function of a couple of things.

00:10:03:22 - 00:10:19:03

Speaker 2

One, hopefully we're doing a good job at the brand and the experience in our team is on site exceptional and the reviews are great, but two is more structural. We're in New York City. There's not a lot of apartment style product, and so there's tremendous pricing power for it because it's not as commoditized as a hotel and there's real need.

00:10:20:10 - 00:10:35:22

Speaker 2

And so, you know, we're on the right side of that and you're going to see more of that. And a lot of that is driven by the pandemic, where there's more leisure travel, there's more folks that don't live in the city where their company might be headquarters. They're coming to town for a few weeks for training or for onboarding or whatever.

00:10:35:22 - 00:10:41:12

Speaker 2

And that hugely benefits, you know, the institutional product that we run of home style inventory in these core cities.

00:10:42:02 - 00:10:54:18

Speaker 1

So Airbnb talks a lot about the sort of blending of hospitality and living. Do you see yourselves as the sort of vehicle that that's going to sort of happen and transform through?

00:10:54:18 - 00:11:18:17

Speaker 2

I'd say we're one player in it. I think it's it's like a tidal wave. The idea that living and staying are different is bizarre. Kind of like it's it's going to be archaic like we’re, you know, my five year old when he's 20, the idea that you could only live in that building and you could only stay in that building and you can only shop in that building and you can only work in that building.

00:11:18:17 - 00:11:49:03

Speaker 2

It's going to be seen as like asinine, like what a horribly inefficient way to use space and also like what a shitty customer experience in that you only have this one thing at a time in one place. And so yeah, we plan on being a player in that. We plan on, you know, driving a lot of that. But the institutionalization of new asset classes happens by there being a lot of players and liquidity and the equity and the debt markets responding to that after years of, you know, seeing years of experience and financials through cycles.

00:11:49:03 - 00:12:05:21

Speaker 2

And so we'll be a player. I'd love to say we're going to win the whole thing, but you're going to see I mean, Marriott announced yesterday apartments by Marriott, you know, like you're going to see every major hotel brand get into the space. You’re going to see the major apartment operators get into the space and you're going to see different buildings get built for the next generation.

00:12:05:21 - 00:12:08:26

Speaker 2

So, yes, we're going to be part of it, but certainly not the whole thing.

00:12:09:26 - 00:12:30:25

Speaker 1

So maybe stepping back to structure, so what was it and sort of how you guys were built, how you're sort of structuring your deals that allowed you guys to survive COVID and then thrive, assuming you guys are mostly in sort of urban areas that saw pretty big pullbacks in performance during the pandemic. So what was it that sort of made you guys different?

00:12:31:07 - 00:13:03:08

Speaker 2

Yeah, so we have four customers, 12 month unfurnished customers that get hospitality services 12 month furnished customers where it's a turnkey home, interim housing, something like two weeks to two months, your doctor on residency, your training, your reloading, whatever, and transient. What we saw when COVID kicked in in March of 20’ was transient, evaporated. So at that time, our portfolio was running about 88% occupancy, average length of stay between two and five nights.

00:13:03:08 - 00:13:23:11

Speaker 2

Almost immediately, our averaging to stay went from 2 to 5 nights to 2 to 4 months. We still maintained an 85% plus occupancy through the heart of COVID. And that has to do with the fact that we can play to different sets of customers, that flexibility of product type. So while we were running at, I think in Tysons, Virginia, 93%, the hotels were like nine or 11% occupancy.

00:13:24:26 - 00:13:45:26

Speaker 2

And so that's huge. That was that was kind of everything. We actually ended up performing better per unit in income, which is ridiculous to say in our properties. A lot of it had to do with the kind of contracts we did. There was a lot of folks that were displaced that got pulled back from the State Department and from all around the world that needed emergency housing, which we had in spades.

00:13:46:29 - 00:14:05:08

Speaker 2

And then I think you also talked about structure the way we structure our deals is as a management company, we're very asset light business. So there's a lot of venture backed folks that spent their venture dollars that you’re hoping at that point in time to get like a 20 to 40x on. On furniture or on lease payments or on a bunch of non tangible stuff.

00:14:05:08 - 00:14:20:29

Speaker 2

I mean it's one thing to do that to prove a concept, it's another thing for that to be part of your core unit economics. We just didn't do that. So our pop-ups or profit shares or Rev shares. Our permanent stuff are all Rev shares, and that's how the business has been built. And when we buy buildings, it's with a different pool of capital.

00:14:20:29 - 00:14:45:10

Speaker 2

It's with traditional real estate money. And so it's very different return profile looking for, you know, 15 to 25% levered annual returns, not 5,000%. And so that's how we've been structured. That's how we did well during COVID. And actually that set us up to accelerate afterwards. So the what we did a major amount of layoffs, which was which sucked was the worst.

00:14:46:07 - 00:15:06:01

Speaker 2

And we, me or my co-founder personally talked with either every team or every person during that, which also was painful more for them than for us. But just like the whole experience was just terrible. Maybe 10% of it came back as we started rehiring, which was great, actually. More than 10% came back, which was it was just amazing to get to work with people again.

00:15:06:01 - 00:15:28:00

Speaker 2

And we took that time. The only real hires of me were on the tech side. And so we really focused during the heart of COVID on how do we continue to build tools, because now we've run this stuff and now we know how to operate it. Let's make ourselves more efficient at it. Let's improve the consumer experience. At the end of this year, we've done over a million room nights of management and it shows from when we had done 10,000 or 50,000.

00:15:28:00 - 00:15:33:20

Speaker 2

I mean, we're dramatically better at it, and I'd say we're still pretty terrible relative to where I would expect that we stabilize.

00:15:34:19 - 00:15:50:14

Speaker 1

So you mentioned the sort of length of stay. So where are you guys at now and what are the sort of metrics look like? Sort of total rooms under management. What does the pipeline look like and what is the sort of state of things as we as we look today?

00:15:51:22 - 00:16:17:25

Speaker 2

Yeah. So we have just I think it's 2200 or so units that are under management today. And to give you a sense of how dramatic that is, we dropped down to like under 100 at the lowest point in COVID because these pop-ups, they finished right. Like someone finished a lease up. We give them back the units. I think we were down to like in this is crazy in February of 21’, I think we were down to like 70 units or something and 27 team members.

00:16:18:08 - 00:16:51:05

Speaker 2

And today, so 18 months later ish, we're at 260 team members, 2200 units. I think last month we had a north of 100 million run rate on bookings. And so it's been a pretty dramatic swing, as you can imagine, so yeah, so like today where the business sits. We have inventory across the states, 80% of it's the permanent stuff, 20% the pop-ups, all of our stuff is structured in that way that I walk you through.

00:16:51:05 - 00:16:57:10

Speaker 2

And either we buy it with with real estate money and then we run it or we run other people's assets.

00:16:57:10 - 00:17:03:00

Speaker 1

And what sort of the mix between in the sort of short term stays vs. long term stays.

00:17:03:13 - 00:17:38:29

Speaker 2

We're probably about so all the pop up that's maybe 300 or so units are furnished stays and the average length of stay there is probably somewhere between like three and seven nights would be my guess. The permanent stuff which is just under 2000 units, it's probably like maybe 50 or 60% furnished, so maybe 40% unfurnished. And that's moving because there's a bunch that we're furnishing right now as leases roll and probably the same on the furnished side same average length, you know, 3 to 7 nights on the unfurnished average 12 month leases.

00:17:39:17 - 00:18:02:27

Speaker 2

The thing that's interesting though is it's very seasonal. So like in the summers in places like San Jose, we're almost all interns, like ten week interns internship. I think we had I don't have a lot to name the companies that name all the companies in Silicon Valley and they their interns were with us. Right. Like, you know and so which the hotel doesn't do that business and we benefit largely from it.

00:18:03:09 - 00:18:20:01

Speaker 2

But then in the fall it's conferences and and so the average length of stay might be a night and a half and through the winter. Well in New York City the winter’s transient is up in the winter and other and same thing, you know, down in the south. But in the northeast, it's slower. So we got more long stays. So we dip into the right set of business at any time.

00:18:20:01 - 00:18:32:24

Speaker 2

So that 3 to 7 night stay is an average probably over the year, but it goes up in the summers for internships in places like San Jose. It shrinks in the fall like it's a function of the cities we operate in and what's going on in that season.

00:18:33:11 - 00:18:45:29

Speaker 1

So how do you guys choose the markets that you're operating in? Is it sort of supply based like whoever is willing to sort of partner with you guys give you the supply? Are you guys actively going after certain markets where you feel like this will succeed?

00:18:46:19 - 00:19:15:04

Speaker 2

So for the pop up, if we can create $1,000,000 or more of extra income for someone during their lease up and activate their building for residents simultaneously, we can do it anywhere. We can just basically parachute a team in on the permanent side. We expect this to exist in every submarket in the United States where there's hospitality demand. Our focus when we prioritize is generally on the markets where the spread between hotel and multi is the largest, the biggest impact to income.

00:19:15:04 - 00:19:31:08

Speaker 2

But we're also opportunistic. We have partners like, Hey, I want to do this thing in the city. We're like, okay, I guess we're going to that city because we're going to get it eventually anyway, so like if there's a deal in a partner that wants to bring us there, we're happy to be pulled into. Otherwise we focus on where there's the largest, you know, immediate opportunity to produce additional income.

00:19:32:10 - 00:19:37:18

Speaker 1

And are you guys the only one operating this sort of model? Who are your competitors?

00:19:39:02 - 00:19:59:09

Speaker 2

So the only other group that's operating at scale is called Sentral, S-E-N-T-R-A-L They're a couple of years behind us. They have more inventory. It turns out when you have Mark Zuckerberg's money, you can go buy 4000 units. It's not meant as a slight to them. You know, all of our stuff. We had to go find people to buy with us or we had to take over for them.

00:19:59:09 - 00:20:21:02

Speaker 2

And so but they run a very similar model and I wouldn't even say we compete with them because we're also small, like they have 4000 units, we have 2000 something units like yeah, I'm right now in FiDi in New York and there's more than 6000 hotel keys within walking distance of where I am. And that's like one submarket in one city in the United States of America.

00:20:21:16 - 00:20:40:01

Speaker 2

So we don't really compete with anybody. We compete with the hotels for customers, we compete with corporate housing folks for long stays, although we partner with all of them. I'm like, it's just so nascent, you know? It's not like the two gorillas are fighting out. Everyone's, everyone's babies. We're all like barely can eat solid food. Like, it's it's so early.

00:20:40:01 - 00:20:41:04

Speaker 2

It's so, so early.

00:20:41:18 - 00:20:56:09

Speaker 1

Yeah. So it's really more and anyone who's proving out this business model showing apartment owners or real estate owners how much more money there is to be made with sort of the mixed use concept is good for you guys. Is that right?

00:20:56:18 - 00:21:16:29

Speaker 2

Yeah, absolutely. The more the merrier. Adam Neumann just announced Flow a few months ago. They're going into a similar model. Like, Hallelujah, like, well, welcome to the party. You know, like the institutionalization of an asset class happens when you add liquidity and you have a bunch of players in the space. If the only hotel operator was Marriott, that would give a lot of investors a lot of pause to buy hotels.

00:21:17:00 - 00:21:30:07

Speaker 2

That was their only option. And so it is valuable to us for there to be a lot of players in the space. We obviously think we do a better job than all of them and we'd love eventually to just sell them all our tech, which means they would pay us on a forever basis. But we'll see. We'll see how it plays out.

00:21:30:07 - 00:21:31:12

Speaker 2

Like I said, it's early days.

00:21:32:02 - 00:21:44:26

Speaker 1

You've mentioned your tech a few times. So is that something you guys see as a big differentiation for you that you've sort of built out your own tech in? What have you guys all developed? What's proprietary there?

00:21:45:25 - 00:22:10:08

Speaker 2

Well, I guess it's all proprietary. And we have focused predominantly on just the things that just make life a little easier for the customer. Well, not like huge customer build side, but the easier things like, oh, you have a 3 p.m. check in at 2:30 p.m., you get a text, this is your unit number, this is your Wi-Fi password just to make life easier.

00:22:10:08 - 00:22:29:01

Speaker 2

Like you're not having to screw around. So we've done those, those, you know, automated CRM based stuff to make life easier for our customers. The majority of our spend on the software engineering and product side, though, as it relates to execution and unit economics of the building, has been on our it's like the back house stuff.

00:22:29:11 - 00:22:52:22

Speaker 2

It's the how do we put the rooms in and pull them out and list them and put them on channels and push them and change rates and do yield optimization. And it's all of that stuff. We we use a single system to run apartments and hotels, which does not exist in the regular world. As you can imagine. We've spent some time we saw some some buildings on pure play apartment software that were rolling over.

00:22:53:27 - 00:23:20:13

Speaker 2

And some we might keep on that just because they're just so apartment heavy. And we have a we have one assets, 530 units, class A apartments like that's a that's a beast to put on your own system as a single it's actually two towers but like a single asset. But the majority of what we have, we've been rolling over to our back and systems that allow us to have one central place of truth for all things, for accounting, for every interaction with the customer is kept in this data warehouse, data lake.

00:23:20:13 - 00:23:41:03

Speaker 2

And so we're building, you know, customer profiles, the whole the whole way with which we're able to service these buildings. That's where we spend our money in a very pragmatic way. And like I said, you know, everyone's going to need it eventually. So whether it comes from us or somebody else, it is a huge differentiator today for us on the expense side and the experience side because we have the more seamlessly run everything.

00:23:42:11 - 00:24:02:13

Speaker 1

How do you guys think about Brand? So obviously you've created your own brand, you've created multiple brands and do you think brands are going to be a differentiator given that there aren't a lot of sort of well-known or really any well-known brands outside of maybe some of the big booking platforms in the short term rental space. Do you feel like that's going to be important?

00:24:03:17 - 00:24:25:15

Speaker 2

It's going to be very important. I think that when a lot of people hear brand, they just think about like, oh, what is what are the color schemes and what does it look like? And that's not actually what brand is. Brand is the emotional reaction someone has and the trust or fear when they when they see something. So like you, Jamie, have a brand like everyone knows who you are and what you are and they love you.

00:24:25:15 - 00:24:43:23

Speaker 2

And, and so if someone's like, Oh, well, Jamie, let's do a podcast with you immediately in my head, there's a bunch of things I think about, right? Great guy really smart. You know, we mentioned for a while its going to be fun. It's the same thing for a company where if someone's making a decision about where to stay or where to live, it's the same, same set of logic, right?

00:24:43:23 - 00:25:05:09

Speaker 2

Like immediately as humans, we just love shortcuts. You shortcut everything in your head. Oh, that's a place that's going have this kind of experience and this ease or this difficulty. Employees are going to be shitty or nice. You just the whole thing is like instantaneous. What's odd is in traditional multifamily, the unfurnished side, people don't really care about brands today.

00:25:06:10 - 00:25:32:23

Speaker 2

So like you're seeing an Avalon building an Equity Building a Jamie's building, you know, people really care as the level of experience evolves, people will care a little bit more, but it's such a big purchase that they take the time to go find the right location in the right unit in the right and everything else, and hospitality. You make this decision constantly on a rolling basis all the time for smaller amounts of money, and so brand is more valuable.

00:25:32:23 - 00:25:48:22

Speaker 2

So if you think about it, most of the money in a hotel is made in the brands of Marriott Hilton, IHG Hyatt. You know, not as much as made on the real estate. In multifamily, it's the opposite. All the money is made in the real estate, very little in the brand. And so I think that will continue to be the case.

00:25:48:22 - 00:25:58:27

Speaker 2

But as you blend assets, obviously hospitality is a major component and so it's going to be incredibly critical in order to drive revenue and demand.

00:25:58:27 - 00:26:32:28

Speaker 1

That's interesting. So given that you guys are in the hospitality space, in the apartment space, we're now seeing some weakness in sort of apartment vacancies. We're seeing some weakness maybe in some beginning of some weakness on the hospitality side. As you look out over the next year, like, do you have any concern there? Like how are you guys bookings looking like and is there any concern on your end?

00:26:32:28 - 00:26:36:19

Speaker 1

There?

00:26:36:19 - 00:27:00:17

Speaker 2

I don't mean to be like Chicken Little and the sky is falling, but we're about to enter the first major liquidity crisis since the eighties. It's going to get bad just in every way you can imagine. You know, the Fed is probably going to continue to push rates until unemployment climbs from three and a half percent to six, and that's 4 million jobs that are going to go away.

00:27:01:12 - 00:27:18:00

Speaker 2

And that's, you know, budgets tightening and like, yeah, yeah, it's going to get messy and there's going to be real kind of casualty to it. I mean, you would know better than us. We haven't seen softening in hotel rates yet, but one of the reasons they're considered an inflation adjusted hedges, they can move very quickly up or down.

00:27:19:13 - 00:27:40:26

Speaker 2

Multifamily has softened both in terms of rate and demand. I think that's a function of there's a lot of people that just need an apartment. And so the multifamily folks assumed that everyone on the rent well would then move up that 20%, it turns out. No, just just the new guys and gals that are moving. And so you're seeing a softness there.

00:27:41:16 - 00:27:59:26

Speaker 2

And then. Yeah, when people lose jobs, that's going to really hurt lease up. So one of the things that we don't talk about a lot is we say, hey, we produce more income or Hey, we make a better experience while doing that, but those are single points in time. Seeing where the interest rates are or multi demand is outside.

00:27:59:26 - 00:28:18:09

Speaker 2

Demand is the real benefit of the model is it changes with seasons and cycles. It is a built in option. Go back to the COVID example. Where length of stay went from, you know, from two days to two months, right? So I expect a similar set of things our pop-ups. There was this is how you knew the world is going to fall apart.

00:28:19:00 - 00:28:37:11

Speaker 2

We want to do pop-ups. We got a couple deals that were like signature ready and our our potential partners said, hey, look, we don't want move forward because we can sell the building more empty. Wait, you could sell apartment building for more money when there's no one living in it. They're like, Yeah, because you don't have to go mark to market all the rents and so people are willing to pay more.

00:28:37:27 - 00:28:53:07

Speaker 2

That's how you knew something was broken. Someone was willing to pay more for an empty apartment building than a full one. Like something bad is about to happen. It's kind of like there's that saying that, you know, when when your cabdriver is giving you stock tips like it's time to sell. Yeah, that should have been the, like, huge red warnings.

00:28:53:07 - 00:29:14:21

Speaker 2

People pay more for empty buildings than full ones and so so yeah, we think that there's going to be all sorts of things and you know, it's very submarket specific. So certain submarkets might continue to win like an Austin just not as fast as they were or in some markets will lose and but yeah it's about to get crazy but that's the benefit of our models.

00:29:14:21 - 00:29:35:17

Speaker 2

Is this built-in option. So as travel moves that, you know, travel gets transient, travel gets cut and people are relowing, then we'll we'll lean into the relow business and is, you know, whatever, like, you know, as apartment rents maybe flat line we'll run pop-ups longer and people's lease ups in order to continue to activate to monetize those buildings.

00:29:35:17 - 00:29:58:12

Speaker 2

And so that's the nature of our businesses we're in that the optimization game and we'll offset I will optimize for the outside factors on the consumer side that exist. But anyone that thinks that we're about to have a, you know, run to the park here in the next 12 months is in for a very rude awakening. I think it's it's going I mean, Meta laid off 11,000 people yesterday or the day before.

00:29:58:27 - 00:30:15:16

Speaker 1

Yeah but, we’re still adding 260,000 net new jobs. You know, you don't think the Fed can sort of navigate a soft landing or you think it sort of the writing's on the wall. We're heading into recession and the Fed's going to overcorrect like it.

00:30:15:24 - 00:30:27:02

Speaker 2

It's not even necessarily an overcorrection. More damage is caused by the economy ending in an inflation spin. Yeah than four million people losing their jobs and so.

00:30:27:19 - 00:30:29:02

Speaker 1

You know the Fed that.

00:30:29:29 - 00:30:56:14

Speaker 2

Yeah the guy that runs the Fed and look this I'm not an economist so you know like who should I who am I to give this advice? But basically, you know, the head of the Fed is a huge Volcker supporter. I think he's the best civil servant that ever existed in the United States. And so and that he saved us in 08’ from the crisis by you know, it's like these dudes see their job as protecting the US economy, not as favoring any one space or any one set of people.

00:30:57:18 - 00:31:13:29

Speaker 2

Okay. And I guess the last thing I'll say about the economy is, is that I'm not an expert in it. Right? Like I'm reading what everyone else is reading and seeing what everyone's seeing. I just think what I found is that a lot of people are focused on like the two inches in front of them, their day job, their thing, and it's important to get a bunch of views.

00:31:15:00 - 00:31:37:07

Speaker 2

And that is the general sentiment of economists is that this is what's coming, this is what the Fed's going to do. And there's just a question of how quickly we snap out of it. But if you think back to the last 100 years, none of this stuff really lasts more than two or three years. So the question is, is this a nine or 12 month thing or is it a 2 to 3 year thing or something in the middle?

00:31:37:26 - 00:31:53:06

Speaker 2

So as a business, you just have to be prepared for that. And so we have three business plans. Things go, great things go like we think they’re going to go things go poorly and on a regular basis, every eight weeks we get together as an executive team, we talk about what we're seeing, how we're going to adjust and continue to move forward.

00:31:53:06 - 00:32:18:00

Speaker 2

And I you know, when I said before about the boiling water, the Russian, whatever hard eggs and soft potatoes, those are lessons learned from a volatile time. We've learned that predictability, things are unpredictable. And so we looked to plan for a bunch of different situations so that we can build an enduring business and thrive when times are good and, you know, batten down the hatches when they're tough and, you know, we're able to thrive and grow in both those environments.

00:32:19:10 - 00:32:31:07

Speaker 1

So what are the sort of stats you're looking at that sort of give you that real time view, either in the economy or within your own data set to sort of let you know how things are progressing.

00:32:31:07 - 00:32:49:17

Speaker 2

We see it in real time in our bookings and our leasing, right? So we have a forward booking curve on every unit and every property that we would expect to look like a specific thing. We actually we price differently than a hotel, a lot of hotels price in a regression based model like same store. It's very commodity.

00:32:49:17 - 00:33:06:04

Speaker 2

Exactly what did we do last year? What are our comp sets doing? We're going to price relative to them, you know, and so there's a bunch of companies that help you do that, like in ideas. And we don't do it that way. We what we do is we look at what we'd expect the booking curve to be for any one unit, and then we price against ourselves.

00:33:06:15 - 00:33:23:24

Speaker 2

And so if we’re falling off that booking curve, that means we need to lower rate. And if we're above that booking curve, it means we need to raise rate. And then we also something called a displacement function where we say, okay, well, if I take on this these 10-90 day stays and I shrink the pool of inventory I have, what does that do for my booking curves and everything else?

00:33:23:24 - 00:33:39:03

Speaker 2

And so that's the way we look at it and we'll see in the numbers, right? That's hotels inflation hedge. We'll see the numbers in real time. Our booking window in 90 days is, you know, most stuff gets booked within 90 days of arrival. So even the longer say stuff, a lot of it's like, you know, a couple of weeks before arrival.

00:33:39:28 - 00:34:00:12

Speaker 2

So we'll see it in the real time and we'll see in the leasing. We'll see what people want to pay not and you know, same thing there we’ll adjust and right now we are seeing a little bit of a softening on multi we're seeing no softening on hospitality, but we will on a regular basis being I mean every day our revenue team we're paying attention to every single day.

00:34:00:12 - 00:34:05:16

Speaker 2

And you know, when things go great, we cheer, when things go poor, we adjust.

00:34:05:16 - 00:34:27:23

Speaker 1

Yeah, not to get on a tangent here, but it's sort of like how how are you guys distributing is is it and are you seeing a lot of sort of direct do you rely on the OTAs like and how do you guys think about distributing and and sort of pulling together both the sort of short, mid long term stays into one sort of strategy?

00:34:28:11 - 00:34:55:00

Speaker 2

Yes. So there are actually disparate strategies that have an interplay between each other. The long unfurnished, the long furnished and then the transient. So on the unfurnished we lease like a regular company leases. We're not like some kind of some magical potion. On the furnace side. We run between 50 and 60% of all the business direct. A large chunk of that comes from a hospitality sales team, and a decent chunk of that comes brand.com Placemakr.com.

00:34:55:15 - 00:35:14:12

Speaker 2

And then the balance of that comes from the OTAs. So Expedia booking, Airbnb, then you know, we're on GDS and we connect around all concur for people, whatever we do, all of those things and that's the balance of the business and we price accordingly. So that stuff has a higher take rate and also generally results in shorter stays.

00:35:14:23 - 00:35:36:19

Speaker 2

And so we our pricing length of stay is a really big factor in the way we price because unlike a lot of hotels that are RevPAR focused where free cash flow focused. So I don't care if I'm charging 130 a night for a ten week stay that's going to have a 10% expense ratio on it. Or I pay, you know, I'm charging 190 a night for something

00:35:36:19 - 00:35:52:23

Speaker 2

That’s going to have a 50% expense ratio on it and have more vacancy like we are. We optimize the income not the not the revenue. And that is the right way to think about real estate driving business that on its income not it's revenue it's not a tech company its on multiple on revenue so that's how we think about it.

00:35:54:25 - 00:36:08:05

Speaker 1

Final question. So if we came back sort of a year from now and what do you think the headline is going to be for Placemakr, for Jason? And what are we talking about.

00:36:10:27 - 00:36:31:12

Speaker 2

A year from now? I think, you know, the company's probably 70% to 100% bigger in terms of humans. Hopefully, we continue we will have continued investing in our culture and our team and we'll be a stronger organization for it. My guess is there's a bumpy year ahead in terms of the markets, and so we've probably had to make some decisions about what we do about certain areas.

00:36:31:26 - 00:36:49:22

Speaker 2

Also I think that you'll see an acceleration in a bunch of our pop ups based on our third party stuff where people see negative leverage or they see slowing lease ups. And I think that, you know, yesterday's announcement of Marriot entering the space is one of a bunch you're going to see over the next year from their competitors.

00:36:49:22 - 00:37:19:07

Speaker 2

And for me, and hopefully I have the same amount of excitement and energy I have today, I'm really, really just it's been a, like I said at the beginning, a very fast pace, 18 months. I expect the next 12 to 15 to be equally fast paced. But I and this isn't talked about a lot, but me and I have a co-founder whose name is Bao like that's what makes the grind doable, is not doing it alone.

00:37:19:07 - 00:37:39:15

Speaker 2

And I have an executive team of, you know, a dozen folks and like everyone owns their stuff. And so I think what you'll see, you'll see a stronger leadership team from us a year from now and you'll hopefully see a smiling me because, you know, surrounded by people that let you have a life outside of work. I got two kids, you know, I enjoyed doing things that aren't just this, although I love this.

00:37:40:13 - 00:37:56:14

Speaker 2

And so, yeah, so I think that's what you’ll see a year from now you'll see our footprint, expand our team, expand our culture, improve more third party deals because the market's going to cause some issues for existing owners and developers and I think more Marriott like announcements in the space.

00:37:57:24 - 00:38:19:22

Speaker 1

Well that's why I love talking with you sort of the energy you bring. I feel like you've got a vision and always had a vision and you guys are executing on that vision and it's and it's great for our listeners to be able to see that and, and sort of internalize it and how they can sort of create their own vision for their own business and then execute in a lot of the ways that you have and your team has.

00:38:19:29 - 00:38:30:16

Speaker 1

So really appreciate you joining. And if people want to reach out, they want to find you. How can they connect?

00:38:30:16 - 00:38:45:16

Speaker 2

Best is LinkedIn, shoot me a note on LinkedIn. I check my messages, I'll get back to people. I might be a little slow, but I love to get back to people. And then if they have questions about the properties, reach out to the teams, there's a phone number for every building. There's someone that's ready to answer your call. They want to stay with us and book with us.

00:38:46:04 - 00:38:56:25

Speaker 2

You want to partner with us. There's a dozen people on the real estate side or more now. Their names are on the websites too. So anyway, when I get a hold of us, there's there's a million of us that are happy to talk to you.

00:38:57:28 - 00:38:59:12

Speaker 1

Awesome. Well, thanks, Jason.

00:38:59:21 - 00:39:00:12

Speaker 2

Thanks for having me, Jamie.