Welcome to the show notes of the Boostly Podcast Season 8 Episode 9. This is a recap of my interview with Julian Sage and we talked about how to pivot your business during the coronavirus crisis.
Here's the audio for this episode:
Here's the video for this episode:
Timestamp
02:50 About Julian Sage
05:10 Life in the USA
07:50 Current situation of the hospitality world in the USA
13:20 What AirBnb did
15:10 Recent conversations and potential ramifications in the hospitality world
19:30 More tactics and tips from Julian
31:00 Final Thank Yous
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Transcript from the Episode
Julian Sage runs a blog called shorttermsage.com where they host a couple of podcasts: the Vacation Rental Machine Podcast with his partner Jon Bell. Majority of Jon's portfolio being rental arbitrage properties and then he's also managing properties through the co-host. Julian is an active duty military guy, and he started in Airbnb, like so many others. He was trying to save some money. So he rented out his basement and he quickly found out that it could pay for his mortgage and from there, it's just progressed where it's through the podcasts and through partnering with his mentor Jon Bell.
He learned about these different models rental arbitrage, co-hosting, all the different ways, booking directly, online travel agencies, PMS and all these different tools. That's what they teach through their podcasts. It is the basics, the foundations of how to start a rental arbitrage or co-hosting business and all the way to scaling to multiple properties.
They also have another show called the Short Term Rental Success Stories, which is just interviewing other professional hosts that are in the space, what are they doing to be able to build their companies diversify their portfolios through direct bookings?
Life in the USA
Julian says that in the US, they were behind what everybody else is going through, like in the UK, Italy, China. they saw everything that was happening, and they saw it almost like at a distance but it's not happening to them yet. And then in the span of a couple of days, it really hit hard, where all reservations were completely wiped off of their calendars and there wasn't much to prepare.
And then with the drama that's been happening with Airbnb, basically not giving hosts the option to be able to cancel their reservations, not giving the choice. So for managing for other people, they didn't have the luxury of the ability to be able to say, “Hey, you know, this guest wants to cancel, should we refund them or give a partial refund on Airbnb. ” They felt like it just kind of stripped that away from them. But in the US, they were trailing behind and even today, at the moment, Julian doesn't think hosts really fully understand that they could be going into a full lockdown, because right now it's happening in individual states. So each individual state in the US is saying whether or not, you can travel. Some states are a lot more serious, like in Seattle, they're actually potentially sending people to jail going up past the curfew.
They're not supposed to be traveling to places like the DC area where businesses have to shut down. They're going into about a three-week or month-long quarantine, but they're no actual restrictions on if you leave your house so each state is handling it differently but across the board, all the events are getting canceled. Bookings are cancelled. Airbnb is is even deeming some locations as unsafe and not allowing guests to be able to book in certain locations aside. They didn't tell them that they were going to be doing that or not. So it's all kind of hitting the US out of a storm. And businesses are trying to recover from that.
Current situation of the hospitality world in the USA
Julian says that the situation is changing day by day, state by state. Majority of the bookings are through Airbnb. VRBO and booking.com aren't as popular in the US as compared to Airbnb. Airbnb takes up nearly 80% of the bookings.
Booking.com is below 20%. A lot of hosts look at it as almost like where you get a lot of scams. A lot of people that are coming through booking.com, the inquiries that do come in there, a lot of times are scammy type of things. The cheaper guests are coming from Airbnb, but the majority of them are from Airbnb guests that come from VRBO and homeaway who typically pay more. And they're a different type of quality guests. Typically it's going to be an older demographic, but you're not going to be getting as many from them.
What AirBnb did
Julian believes that it's going to be hard for Airbnb to be able to give a priority over guests or hosts. You know, I believe the way that Airbnb sees it is that because the majority is is coming through Airbnb, if they push on the side of the guests, that'll be a long term favour for them as opposed to if they side with the host and because they all just get our bookings in the US majority coming through Airbnb, so if they start with the guests, the guest will be more likely to come back to Airbnb, if they side with the host. And they push over the guests.
Julian thought they were pushed between a very hard place. Luckily for them, Airbnb doesn't block out emails, if a guest sends them their email, Julian's team uses tools such as like smart b&b that allows them to be able to collect those emails and then put them into their CRM or mail provider. That way they can drive them to their own direct booking sites but for a lot of hosts, that's not the case. For a lot of hosts, Airbnb makes it so simple. It's just having the diversification having the different options is what's keeping them afloat right now.
Recent conversations and potential ramifications in the hospitality world
Julian thinks that the mindset now is that hosts are angry and upset. Professional managers that have clients that they're dealing with are upset. A lot of these companies like the Casa for one, company that originated in the US, they recently had to cut like nearly half of their staff and they're just a property management co-host model. Julian thinks that in the future with this, it's a realization that they do have to find other ways to be able to diversify portfolios through these online travel agencies, as well as creating direct booking sites.
There are tools out there that are making it easier, there's a tool that makes it very easy to just easily create a direct booking site. Julian thinks that they have to start thinking of this as a legitimate business. People that list on Amazon, when Amazon shuts down your listing, if all of your business was coming from Amazon and you weren't listing on something like Shopify, which is a tool that allows you to be able to sell your products, if you didn't have a way to be able to collect that information from Amazon, and Amazon shuts down your business, that's everything. The majority of all the sales come through Amazon, but professionals that are selling products, these physical products, they have to be able to have these sites where they can list their things.
Shopify is like direct booking. It has bells and whistles to be able to collect and process payments, but it allows you to be able to collect that information and data. Amazon doesn't allow you to collect that data. They make it very difficult. Airbnb, luckily allows us to be able to collect some basic information, Amazon, you can't even collect their email address, but Julian's team have that benefit. So while they still have this option, collect that information from Airbnb, use it as just another leg, but have everything in mind of collecting this information and then driving it to your mail provider and then driving that traffic when you do have that information to your direct bookings.
More tactics and tips from Julian to pivot your business
There's a module that Julian's team have in their program and that they're including in it, but this is a black swan event. In Florida, they have things like red tide even though it's not even necessarily a black swan because we know about it if you're just coming in you don't know about red tide which is basically when all the fish die the beaches smell nobody wants to go to Florida. It halts travel, people don't want to go so they have to be able to make these very quick pivots, things such as like allowing pets, changing your setting for maximum days, lowering your minimum price, lowering your base price to be more conservative. What's your breakeven price? What's the price that you're trying to achieve? What are these dynamic pricing tools such as like wheelhouse price labs, all these other ones, what are they going to be fluctuating off of, setting your minimum nightly stay to one night, listing distance so in your listing description and your title list the distance to the nearest hotel, it's also really good thing because people are thinking a lot of traveling nurses is something that we were talking about. So listing on sites like furnish finders, travelingnurses.com, it's the same site, you can list on those, listing near a hotel, allowing locals
Julian's team is trying very easy things that you can do within the app within Airbnb or within these platforms to be able to try to collect these bookings offering discount for a future date if a guest cancels.
But if you're really just trying to get those bookings and you're willing to lower your minimum nightly price to be able to collect them, then just offer a 40 or 30% discount. People like to see discounts. In the US they have stores like JC Penney, Macy's, basically like they mark up the price. It's like a $50 shirt and they say it's 80% off and now it's a $10 shirt or whatever. It's the same deal. People like seeing discounts so offering a discount in your titles really good thing that you can start doing, offering a quarantine-stay discount, say in the title, quarantine-stay COVID free, anything along those lines where people can look at that and say that you care about the safety and the cleanliness. Just being an aware host and communicating that lets people know that there's a level of safety and that you took that extra step. That's what you want to do.
List on sites like furnishfinders, it's a site that people in the US use for finding travelling nurses. One of the things that Julian teaches on vacation rental machine is everything comes down to your framework. Part of your framework is, in your market research is finding specific locations. So places like near airlines, near airports, if you're listening near a hospital, hospital stays all of your branding, all of your targeting is going to be towards people that are going to be staying in hospitals. So if you have locations that are close to hospital, how close are you to that location for those people that are looking for types of accommodations. Contact hospitals and offer furnish stays, you know, let them know. There's a site here called Help Direct, it's a site that has been floating around online and basically it's a website where you can offer your home for people that are looking for quarantine stays.
Airbnb also just put out a thing right now whether offering to change your settings to allow people that are looking for those quarantine stays unless your property is on other platforms. So if you're doing the rental arbitrage model, so if you're doing the re rent or master lease model, contact your apartments and see if they'll defer payments or delay your rental prices. Also contact your lenders, if you have a mortgage contact your lenders ask if they'll delay payments on your mortgage. So those are small pivots. These are simple things that you can do. It doesn't really take too much effort.
Medium to large pivots
Medium pivots will require a little bit more if you want to go ahead and take a snapshot of this as well. You can do that. But what we're doing here is we're offering long term bookings. So now we've shifted our mindset. Now we're saying instead of short term stays, we want to do long term stays and that's going to be listing your property as a furnished rental at a discount right now is not the time to be thinking how can I get more bookings? How can I get more bookings when nobody can travel and it's progressively getting worse in some locations. Honestly, offering you your place as a furnished rental.
If your mortgage is let's say 2000 and you can only make 1500 that's better than having to pay 2000 completely out of pocket if you can at least profit 1500 you're only out $500 you know. Julian says that we have to change our mindset from just trying to get as many small little bookings as we can because if you have one or two day booking out of your month and now you're not able to book a whole month well, maybe that extra $200 or $400 that you made or whatever it is could potentially prohibit you from being able to book for that full month which could cost you more and contact older guests and offer a voucher revisit or offer a discount so if you have been building that email list contact them. One of the more extreme things that my partner Jon Bell did, he's got over 24 properties that he does this master lease model with.
A lot of people are saying rental arbitrage is dying, it's not safe, it's the end of rental arbitrage. But an example of what he's doing he's actually taking furniture, even out of his properties out of these leased properties, putting them in temporary storage, and then listing them as an empty unit to be able to basically sublease it for longer term stays. It's a little bit more extreme, but this is what you have to do if you have 24 properties that you have to pay rents on. Or if you have 22 properties that you have maybe mortgages on either way, you're not getting bookings there, get rid of the furniture, if you have to, and just list it as a long term rentals, it's something that you have to do, you're either going to go under, and you're going to have to pay the price of 24 units or whatever it is that you have, or you get rid of the furniture, put it in storage, which is maybe like, you know, $100 or $50 a month and then get in long term rental, get a long term tenant in there for however long that is that'll save you that really will save you're going to be a little bit more extreme.
Pulling out a loan like emergency Disaster loan. SBA is also giving out loans in certain states, the SBA in the US it's called the Small Business Administration. Wherever you're listening to, if you don't know who's giving out loans, contact your county or your municipality, whoever's in charge of your area, contact them, they should have a small business division that deals with local businesses, you are a small business. If you're renting out a basement or you have multiple properties, your business contact them, they might be able to give you a loan, you have to go through an application process, but it's something that you can do, it's a little bit more lengthy, but if you have to keep your business alive, that you have to do that, that's what hotels are doing. Hotels are depending on the government to give them loans to be able to stay afloat. Julian's team is lucky to have the luxury of not having so many fixed costs. They don't have so many employees. A lot of this can be automated, they don't have as big of an issue, but they do have mortgages, they do have rents, they do have things that they do have to pay for.
Consider downsizing and get rid of your underperforming units and right now's the time that you should be looking and saying what can I do? What are the places that are underperforming? What are the places that are causing the biggest headache? Right now is the time to start downsizing. That's what all these companies are doing, sell or store your furniture and then listed as a long term rental again, we talked about that in the medium pivot, but if you need to even sell your furniture, do that as well.
And then lastly is selling the business you do have a business. Julian's team created a site called strbroker.com. So for those that have the service accommodation, or the rental arbitrage, even a co host business if you want it to be able to sell your site, they created a website where they're allowing you to be able to advertise for free right now. And if you just have to even break even, breaking even might be your only option. You can sell it for a profit like that. That's the beauty of this business is that it's an income generator and you can sell these.
You can find more about Julian at The Host Nation.
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