Scaling or selecting? Adding inventory at whim or being selective
This super interesting piece came from the mind of our MD Nick Taylor.
Scaling. Scaling or scaling up a business means growing it in such a way that its revenues increasingly outpace its costs.
Selecting. Carefully choose as being the best or most suitable.
Growth. The increase in economic activity or value.
As property managers in the short-term rental industry, we can get very hung up with metrics such as “unit count.” It’s one of the first things one hears at industry events; “How many units do you manage?” It’s probably because it gives some context of the level of substance/expertise/professionalism/reach to the person you’re in conversation with.
Why is it so important to us, though? Does anyone else outside the industry really care? I had a conversation with an Owner we’ve worked with for five years today after he decided to try a “different rental model.” One of the exit interview questions I asked him was, “What is your main reason for leaving Nox?”
His answer: “I feel like a number, and whilst I’m really impressed by the growth of your business, I feel that you’ve lost your essence of being proactive. But, if it doesn’t work out, I’ve been genuinely very happy and would love to come back to you.”
My conclusion: This owner wanted more hand-holding. He wanted more regular checkups, wanted to have a quarterly video chat discussing his revenue, ADR’s and guest feedback. He wanted to know where there were opportunities for operational improvements. He wanted the open dialogue to let us know where we were performing and where we weren’t.
Today was the day that our management of a beautiful 6-bedroom villa, generating in the region of annually $150k GBV (Gross Booking Value) came to an end with an average guest review score of 5. It’s a diamond, and we lost it. We need to learn from this.
So, what is more important?
- Inventory growth at all costs?
- Building a portfolio which scales in unit count and geographically?
- Having units which accentuate your brand?
- Having owners who are cooperative and honest. And loyal?
Our industry is not a production line. We don’t manufacture products, add a bit of value along the conveyor belt and sell at a margin. Our relationships with our owners and our guests are our assets. Relationships take time. They can be sticky. They can be hard to get out of. But, they can be wholesome and fulfilling if selected and handled with respect. And importantly, they produce revenue. They should be at the epicentre of everything we do.
Selling our property management services to an owner is providing them with a solution. At that point, they have options. Them signing onto your rental programme is a show of faith in the relationship. Now the real work starts.
Churn. This is how we monitor the strength of our relationships. It’s the most important metric we have to get a sense of our owner’s general level of satisfaction. So, the question I ask is whether you can you scale a portfolio at a growth rate of 20%, 30% or 40% and maintain strong relationships with owners.
Keep on asking yourself that whilst adding units. How are my owners? How strong is the relationship?
Perhaps it’s better to be selective; to choose the right homes which meet your target GBV and brand standards, and at the same time deliver awesome service which keeps that relationship one which is long and wholesome. It’s also more likely to add strength to your brand and market reputation.
How about we start talking about Gross Booking Value and relationships rather than unit count? Because 100 three-bedroom units makes 300 one-bed units. The bottom line is whether it’s easier to manage 100 relationships or 300 which have the same revenue production.
And ultimately, relationships are our asset.
So.. is it more important to add inventory at a whim, or to add the right inventory (and owners?).
My closing thoughts are; be selective of every property and be respectful of each owner whilst scaling with purpose.
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Great article. This topic is something we discuss often in our company. Ensuring you’re scaling with the right properties and homeowners is key.