What makes a short-term rental perform

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Meet the team

1. Introductions
2. Revenue optimisation
3. Finding demand year round
4. Visibility and peak events

Listing and performance

1. What guests actually sort on
2. Images, titles and descriptions
3. Measuring portfolio health
4. Self-managing, or a team
5. Tools, analysts and messaging

Working with owners

1. How the team is built
2. The first ninety days
3. What a busy owner gets back

Introductions

[music] >> I'm Kevin Harrington, an original shark from Shark Tank. I recommend [music] these unique strategies. >> [music] [music] >> Hey everyone, Lance Horton here with Short-Term Rental House and I'm super excited to have our guest today, Mr. Kevin Knight, joining us who is going to talk to us about revenue optimization, which is what I'm super excited about because we all want to maximize that cash flow that comes from these vacation rentals.

So, we're excited to talk about some of these strategies related to pricing, maximizing the management and the revenue that comes from these properties, occupancy, average nightly rate, all the good things to make more money. So, Kevin, thank you for joining us. >> Pleasure being here, Lance. >> So, let's start out.

Introduce yourselves. Tell us Tell everybody a little bit about yourself. >> Yeah, thanks. My name's Kevin Knight.

Um originally from Montana. I currently reside outside of uh Las Vegas, Nevada. Um my background before getting into short-term rentals was actually in the Marine Corps. So, I spent 11 years in the Marine Corps and when I transitioned out, um I was fortunate enough to get hired by a new startup company called uh Vacasa back in 2014 and kind of cut my teeth in uh the property management in that time, learned a lot, and then in 2019, actually went out on my own, started my own management company, um sold that in 2022, and I've just been working uh in the revenue management specifically side since about 2023 with my company Purple Pricing.

>> Nice. Awesome. And we are fortunate enough to have recruited Kevin to work with us on our property management to help optimize that revenue on these properties. So, let's talk about that.

Revenue optimisation

What exactly does that mean to optimize revenue? Don't you just take a house, stick it on Airbnb, and let it run? >> If not too many years ago, you could do that to a degree, but a lot's changed and you know, guests have higher expectations. Um there's more competition, uh more more challenging competition, if you will, on the hospitality side.

And so, revenue maximization or optimization is making sure that your properties are performing as high as they can in the market. Um and you know, constantly looking for ways to improve that, whether it be on the listing side or through dynamic pricing. Keeping an eye on that, measuring the results is probably the most important thing and continuing to look for places to improve. >> So, I never I'll never forget when I first brought you on board and I had you look at one of our properties.

You called me up and you looked at it on Airbnb and you're like, "You're losing about $500 to $800 a day. You >> [laughter] >> You need to fix this right away." So, so is it it would it be true that a lot of people are not doing pricing correctly, which means less revenue? I mean, losing $500 to $800 a night, that's a big deal. You know, I know one of the things everybody always focuses on is, "Oh, if I could get a mortgage that's 3% again instead of 6%." Well, a 3% mortgage versus a 6% mortgage on a million-dollar house is like $1,500 a month.

But, you could make up $1,500 a month pretty easily with just your pricing strategies, it sounds like. >> Yeah, I mean, I think a lot of people will set and kind of forget the rates and the length of stay, which is also important when you're talking about pricing is how long we're allowing guests to stay for certain times of the year. And so, like with your property, I noticed it was three nights across the board and had very limited pricing movement. It was more static pricing.

And so what we want to do is see, you know, what the market's willing to take for length of stay. We don't want to put these restrictions in place if guests aren't looking for that long of a stay. The The goal is to have as many eyes as possible on your book listing and then converting those into actual bookings. So that's a big a big piece of it.

Finding demand year round

>> Okay, so talk to us a little bit about that. So we've got pricing strategies, which means we don't just set one nightly rate and let it run, right? I always think of the Augusta rule in Augusta, Georgia. You know, these hotels don't go for very much a night until the Masters comes to town.

Once the Masters come into town, the price per night of these hotels just skyrockets through the roof. So is it something similar to that? >> Yeah, exactly. So that would be a compression event or, you know, any sort of major event in these markets will drive up demand, which then will drive up pricing.

For us, we want to look for opportunity year-round. So we have a lot of markets that are very slow during what they call the shoulder seasons. Park City, for example, right up the road. April, May, and June much slower than the winter months.

And so our goal is to compete during those months for as many conversions as we can so we can turn those conversions into happy guests and great reviews, which in turn allow us to drive the price up during these compression events. So we will show up first on search results. So that's the overall goal is when there's a lot of people coming, you can charge a little more. When there's not very many, you might need to get more aggressive on some of these levers, whether it's through promotions or through discounting, and try to outpace the market especially during the slower time and capture those guests that they're that are coming.

Visibility and peak events

>> Let's talk a little bit about that because when you have a house that's not being rented, you're not making money. Right? So, it would make sense to discount the price if you need to to get it rented. So, you know, getting it rented of course is beneficial.

We know cuz obviously you got money coming in, but you taught me something that I thought was very valuable, too, which was the algorithm on something like Airbnb. When it sees that that house is being, you know, booked out on a regular basis, how does that benefit? >> The benefit there is that you're making Airbnb money and they want to keep showing that listing to guests because it's converting well. So, that's their big thing is they want they want homes that are converting well and sometimes during the slower time of year, those minimum prices can really hurt the visibility.

And what that will cause is even the visibility during peak events could go down and so you're not able to capture as high of an ADR. So, we call that, you know, the pricing band. We really like when owners will let us go as low as we need to on the low end to get it booked and then we can push it as high as we can on the on the higher end based on the quality and the reviews that come in. >> That's awesome.

So, while we're talking about that, let's talk a little bit more about what it takes to get on that first page of Airbnb. I think about my first business attempt years and years ago. I don't know, it was maybe 30 years ago now. I started a climbing company.

What guests actually sort on

I manufactured climbing holds and my goal was to get my climbingholds.com website to the number one spot on the search engines. And I was so proud one day when you would type in climbingholds and climbingholds.com was number one on the search engines. That's obviously how I got a lot of business. But talk about how that is similar in Airbnb.

What's the benefit of having a a listing on that first page of Airbnb? >> Most people don't book off the second page. I don't know the exact number, but I know that if you're on the first page, the probability of being booked is much higher. And so, the way you get there is by having a high-converting, well-performing unit that gets great scores on cleanliness, on value.

Those are two of the biggest I think cleanliness, value, and the price are three of the biggest factors that go into whether the home gets booked or not. Airbnb knows that those homes on the first page are going to be booked more, and so that's a signal to you as the host that your home's, you know, performing well and continuing to get bookings. Once you start getting reviews that come in, and you want to build those, you can land on the guest favorite list, that sort of thing for Airbnb that will, you know, drive more guests to you. >> Awesome.

So, sometimes people don't realize that even though you might only be getting $300 a night when you wanted to get $1,000 a night, you're getting more reviews, right? Which helps you get more bookings, which keeps you, you know, up on the list, right? And you're, you know, between the reviews, getting that guest favorite, you know, being booked a lot more often, obviously more money, you know, coming in. Talk a little bit more about what else it takes to get onto that first page.

Images, titles and descriptions

I know you'd mentioned, you know, the images and the title and things like that. How important is that? >> Yeah, I think, you know, what's important about it is whether they're measured and if they help the conversion numbers. I think that's the big key is trying out different photos.

I've seen data that says exterior photos can perform well. That might not be true with every home. So, it's important to look at those insights and, you know, keep an eye on when you made changes and what those changes do. But in general, yeah, you want to have a catchy title that kind of lures the guest in or entices them to open the listing.

When you're searching on Airbnb, um you see about the first six words or so of the title. Um so, you know, we recommend front-loading some of the amenities that might stand out, and that sort of thing. Um another piece is then, in the description, uh you know, get to the details that matter for them about the home. It doesn't necessarily need to be a well-structured paragraph or story.

Maybe bullet points convert better for your listing. Uh the important thing is measuring it, making sure you have everything filled out completely. Um some people won't put captions on the photos. I think that's a mistake.

Um so, adding captions, making sure the descriptions are filled out completely. All of that kind of ties into making it a trustworthy booking experience for the guest. >> That makes sense. Okay, so there's a lot that goes in, you know, to It's not as easy as I think most people think.

You don't just create an Airbnb account, and just throw your listing out there, and hope the money starts rolling in, right? It's like when I first got my first website years ago, 30 years ago, you know, put it out there, and you just think the orders are going to come in, but nobody knows about it. >> Right. Right.

Measuring portfolio health

So, marketing and sales is such a huge part of getting these, you know, bookings, and getting that money coming in. Talk a little bit about what, you know, they call RevPAR, or RevPAN. >> Revenue per available night. What does that mean?

>> Yeah, I mean, that's really the golden metric that that we like to track. It's taking occupancy and the average daily rate, and combining them. Some people will look just at ADR, and say, "You know, my house, you know, our ADR was a thousand dollars for July." Well, if they only booked the Fourth of July weekend, you know, the revenue per each available night is substantially lower. And so, what we want to do is have healthy occupancy, a solid ADR that will give us uh the RevPAR number.

And that's really the best way to measure the health of a portfolio. And our goal is to drive RevPAR up year-over-year. If we can do that across each property, then we're doing our job. Um and so, yeah, you want to keep an eye on um you know, what will the market bear?

A lot of people think they know what their home is worth. In reality, the only person that knows is the guest that is booking it and actually pays. So, keeping that flexible um and, you know, always keeping an eye on it is very important. For one person that is probably also working a job or, you know, has family, that can be challenging to keep your eye on everything.

Self-managing, or a team

>> That makes sense. So, it all sounds like obviously a lot of work, a lot goes into that. What's the result? Does it really matter?

Like, what give me some examples of what you've kind of seen and and talk about like how many properties you're currently managing. >> Yeah, so we currently manage just over 1,800 properties across about 60 partners. Um and I think we're going to be showing some results as well, and I'll talk about um you know, a portfolio in Sarasota, Florida. She was an individual investor managing all five properties on her own for about five years before she hired us last year, which was the first full year using us.

She did 25 I think now, these numbers might be different when you show them, but I think it was about 25% increase in revenue last year, and so far for this year, we have more revenue on the books than all of last year. Um and so, that's a big a big part of that was uh changing the length of stay requirements. >> Yeah. >> So, historically, she wasn't allowing one-night stays, and we saw a big opportunity to drive more bookings and more reviews.

So, we started allowing certain one-night stays, um and that just really helped the the other nights. 4th of July this year was booked much higher than last year, and she has more reviews across all the properties. >> Nice. Okay, so this obviously makes a difference.

Obviously, you know, a lot of people think they're going to save money by, you know, doing it themselves, and I always talk about opportunity cost. My favorite book that I've talked about a lot, um is Who Not How, and the importance of having somebody else that is the expert on certain topics do things for you while you can focus on your core competency. So, this all sounds like a lot of work. Tell us a little bit about your team.

How is How do you How do you pull this off? >> Yeah, that's a great question. Well, the key is having much smarter people working on my team than than me, um on some of this, because we, you know, we do have a great team. Our director of revenue management, uh Omar Moreno, he's been working with us for over a year, but has about 9 years of revenue management experience, went to the University of Texas in Austin, very bright.

Um he helps manage a team of analysts. Those analysts we have, you know, located stateside, we have some, and we also have a small team in India, um that are all certified CPAs in India, and they keep an eye on a lot of the short-term and long-term quality control, making sure that, you know, if there is one night available, um that we actually have that in place, and really allowing us to keep an eye on all 1,800 units, um and we get eyes on our portfolio 7 days a week, um but the team will touch individual portfolios typically anywhere from 3 to 5 days a week depending on the season, how they're pacing, that sort of thing. We have a process where, you know, we rely on setting the properties up expertly in the technologies that we use like maybe a PriceLabs that you can use to help provide some of the of the work that you're doing. So, we'll, you know, take a look at all those and try to get the best system implemented in there.

>> That's cool. So, we're in the world of AI, right? AI is running our world now. And so, talk to us about like I obviously there are tools.

Tools, analysts and messaging

You mentioned PriceLabs is one of the tools, but how important it is it in addition to AI and some of these other tools that are out there, how important it is it to have that expertise and those that human element to it? >> Yeah, I think AI is good at, you know, kind of amplifying information to our team and and letting us get some deeper insights on some things that we might not pick up on. The goal The overall goal is to drive be able to predict demand and know really what is the demand for any given time. Having a human that's in there is quality control and making sure that AI is implementing the strategy correctly with the nuances because each home is a little different.

Each homeowner is a little bit different. And so, that's a big piece is the the quality control and even informing the AI on you know, what to be focused on and how to look at it is key. So, we, you know, we've had people that have tested some AI only pricing and you know, I still definitely think that the human will be involved for for quite a while on that side. Maybe not making every price change, but helping make sure that everything's running smoothly overall.

>> Awesome. Okay, so we've we've had Mary Anne on. You know Mary Anne, she's on our team obviously. We've talked about property management.

The goal today is to talk a little bit more about pricing and and revenue strategies, but you also have a management background as well, right? Talk a little bit about that. >> Yeah, so I had a management company that we managed about 40 units for 3 years and I still co-host as well. So I host 10 properties or so that I help with different homeowners.

So I have a lot of experience with the guest messaging side, working with homeowners, working with vendors, understanding kind of how it all comes together. And then with the pricing side, it's just an extra layer where we can help out. So we when we do pricing, we're not only looking at it from an analyst perspective, which I think is very important. Um you know, a lot of folks that are revenue analysts are you know, just that.

They're analyzing the revenue. A lot of them, you know, may not have ever even stayed in a vacation rental. [laughter] Let alone manage one and deal with all the relationships and all the different um things involved. So I think that's really what sets us apart and what we bring to your team is that background coupled with the deep revenue management experience and the team behind it.

How the team is built

>> Awesome. So speaking of our team, let's talk a little bit about the benefits of working with us and our property management company. We've got Mary Ann on our team who helps us with her extensive management background. We've got you on our team with all of your background.

Um a lot of people might think, well, oh, I've got this one house. I want you to kind of revenue manage the revenue for my house. How does that work? You work with one-on-one?

>> For us as a company, no. We work typically with a 100 unit or above partners. Seems to be kind of our sweet spot and and where we're really focused. Um individuals, yeah, we we typically won't work with them.

Um and it's nothing against them. You know, we wish them well and we'll give them advice, but it's more of like you said, opportunity cost for us. Where can we make the most impact, and it's at scale with larger larger companies. >> Which is what I talk about all the time with working with us as we all buy these houses together, right?

As with Scholarship House, our goal is to help help all of our clients and everybody get these houses as and kind of combine, you know, all of these houses so we can take advantage of people like Kevin and get that professional level management and that professional level revenue optimization. And even though we might only have like our clients might only own one property, but because of our network and by going in, you know, and working with us and getting the property management from us, our property management company can manage all of our clients' houses and then we can benefit from your pricing strategy, which really helps everybody to increase that overall revenue. And so, again, it goes back to that who, not how. You know, most of our clients don't want to be bothered by this.

Most of these clients don't want to learn how you do what you do. I am fascinated by what you do, but I don't want to learn. >> [laughter] >> I don't want to learn everything there is to know about what you do. I just love the fact that I know you do a good job.

The first ninety days

Um I've seen it first hand with our properties, and I'm excited to be able to offer your services to everybody else through our property management company. So, we've got people like Mary Ann who's helping us with those getting those five star reviews. We've got people like you helping us to get that maximum revenue, and they all get that, you know, through our particular program, which is really exciting to be able to offer that cuz we can now offer that to everyone. >> Yeah, no, I think it's great and a huge opportunity for your, you know, clientele to work with a team that has done it for, you know, many years.

You know, we bring about 12 years of property management experience. I know Mary Ann has an extensive background with, like you said, working with guests, ensuring the five star experience, which is a huge part of it. >> Mhm. >> And that's how you stand out in these markets and really land in the top 10%.

>> Yeah. >> Is go in with a good plan, have a strong 90-day ramp-up period, getting reviews, getting guests in, and then really push that that listing to the top of the market. >> Yeah. >> And seeing your designs and everything, I have no doubt that, you know, that will happen.

>> Yeah, we've got a great design team to be able to get these properties in that top percentage of the market. Talk about time frame, like, you know, how fast does all this happen if you if you know what you're doing and we can get all this professional guidance and we can get these houses professionally designed cuz we do have an amazing design process to get these houses designed and up and running. How fast can we be making money on these houses? >> I mean, you can get Airbnb is very incentivized to get homes booked, you know, right away.

And of course, there's other platforms, but, you know, that's a huge platform that, you know, we'd love to work with them and try to bring in as many of their guests as can. Their goal [clears throat] and they're incentivized to get homes booked right away, especially new listings. So, I mean, if you're if you roll out properly with the photos and the listing, you don't rush it, you can get bookings within 24 to 48 hours pretty easily. >> That's all.

>> And that happens regularly. >> Yeah. >> In fact, if a new unit isn't booked within like probably four or five days, you might want to start looking a little bit at what the issues might be. Is it the listing or which usually it's the listing or the pricing because the visibility is there with the new listing tag.

Um so, that's the feedback loop you start getting right away. Um and then get guests in there, get reviews, understand that you won't get a maximum rate immediately, but building that over time with good reviews is very important. >> That's cool. And what I like about the fact that somebody at your level only works with these, you know, big, you know, groups like ours that have, you know, hundreds of houses to work with.

Like, we are in a market in a crowded market. You know, we've got lots of houses in the Orlando area, in the, in the Smoky Mountains area. Some of these areas where they're really popular areas for Airbnbs, but the benefit is is that not everyone is running at the professional level, right? So, it's almost like unfair competition, you know, it's like we're competing against some of these mom-and-pop shops, these smaller organizations, people who are doing a lot of the self-managing.

What a busy owner gets back

You know, we even talked to a lot of clients of ours that think at first, you know, that they want to do it all themselves because they've got a little extra time on their hands, you know, and they think they can save a buck. But, by using professional property management with professional pricing strategies, um speak to the fact that does that overall increase revenue? Obviously. >> Yeah, that'll definitely increase revenue.

And even though you're paying a little bit of a fee, you have to look at not only the time it would take you to be able to do all of these different aspects of management well, also the financial that you'll pay, um just with Yeah, with your time is a big piece, and learning the learning curve. So, even though you're paying a commission of 25% or whatever it might be, um you have to look at the value you're getting from that and the return on that. >> For sure. >> So, definitely important.

>> Yeah. And time is money. Most of our clients, of course, make good income, you know, they do a good job being an engineer, being a doctor, attorney, whatever the case may be. If they focus on what they do, let professionals like yourself focus on what you do, everyone wins.

>> Yeah, definitely. And the most important thing is having eyes on it consistently. On the 4th of July, I celebrated, but I also did pricing adjustments for the following week for some of our partners, you know? I mean, we're We were in the hospitality industry.

We understand that our clients' busiest times are vacations, right? You know, short-term rentals, vacation rentals. And so we, you know, we get that. So having that team always there is very important.

>> That's really cool. Very helpful. Well, thank you. Thank you for joining us.

>> Yeah, no, definitely for coming on. Thanks for for joining us. Yeah, I want to give you a hat before we leave. >> Oh, nice.

>> You can cut [laughter] this out, but but yeah, I want to give you a purple pricing hat, too. >> This is great. >> about 10 of those, so [laughter] >> All right. Love it.

But yeah. >> Perfect. Perfect. I love it.

I love it. >> We'll go to scholarshiphouse.com, learn more about using a scholarship house to pay for your kids' college and retirement, and go to scholarshipvacations.com, and learn more about our amazing property management company that can manage your next vacation rental. We'll talk to you soon.