Welcome to Boostly Podcast Season 8 Episode 30. This is a recap of my interview with Eric Moeller and we talked about the future of AirBnB.
Here's the audio for this episode:
Here's the video for this episode:
Timestamp
02:20 About Eric Moeller
04:00 The advice Eric wished he received when he was starting his business
07:50 The common mistake that hospitality owners are making
09:50 Hospitality and tourism situation in the USA
18:00 How Airbnb handled the COVID-19 crisis
24:00 The future of AirBnb
29:50 Eric on acquiring hotels
33:40 Quickfire questions
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Transcript from the Episode.
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About Eric Moeller
Eric has been in the short term rental world for full time now for five years. And prior to that, he was a real estate developer. He is originally from Jersey and he currently lives in San Diego, California. They have two companies: the Short Term Rental Profit Academy, which is a large, educational and training company for professional, short term rental companies. And then they also have a property business in San Diego.
The advice Eric wished he received when he was starting his business
You've got to be patient, but you have to take action. When Eric first got into real estate and short-term rentals, marketing, he wanted to make money immediately or he wanted to be the biggest bad-ass company in the world. And if it wasn't happening right now, he would feel he was falling behind.
You have to be ready, you have to be willing to get into it for the long haul. But you also have to take fast action because COVID is a perfect example of what we're going through, it just opens up so many opportunities. You have to make a decision, are you going to look at this as a way of like, slowing us down and preventing us from growing? Or do you take action now to try to figure out where the opportunities are, and capitalize on those?
The common mistake that hospitality owners are making
Eric thinks that hospitality owners get emotional behind what they're doing. So they get emotional behind the properties that they take on. Eric and his team train people how to go out and leverage other people's properties, and grow and scale. They focus on people that want to grow multiple units. And if that's five units, or 100, or 300 units, they have the training and the communities and the masterminds for that.
But Eric is always focused on big business, big scale, all that. He sees that people are not patient, they want to get to the point now. And then a common mistake is taking on properties where they're over-leveraged, or they're emotional about it because it's a sexy property, they want to get in the property, or they just want more units. So they're just kind of blindly going ahead, without really understanding why they're taking on properties, or why they're making decisions in their business. They're just taking action. And that's, that's great. But we have to take the right action, we have to know why we're taking those actions.
The results of this are that a lot of people have signed leases, with the master lease model of taking on property management units in their marketplace, just to get units and start building their business, but haven't really focused on the infrastructure of their company, and understand why they're taking those actions. Being impatient and then just taking on the wrong units that will dry them up during a crisis like what we're going through.
Hospitality and tourism situation in the USA
There are three main models, right. The owner model. So you buy the property and you run the management, the short term rental through the property to as you have the rental arbitrage or master lease, it's the same thing. It's essentially when you negotiate a lease on a property with an owner for a guaranteed rent every single month on that property, and then you re-rent it back out to short term stays. And then you make the difference between your cost and what you bring in through the short term stays.
And then the third is, is the property management slash co-hosting model. That's where Eric is going out and they're partnering with homeowners or real estate investors that have vacant properties. They're responsible for the cost of the property and furnishing the property. But then managers, slash co-hosts are responsible for the whole short term rental and marketing process.
California is one of the most restricted states out of all 50 states. It has the most laws and restrictions in place, to begin with. So it's a difficult place to actually run a business, now with COVID it's even more difficult they're considering in most parts of the state they're considering hospitality a non-essential business so short term rentals and hotels are essentially closed.
This is happening throughout the whole state. It's happening throughout the entire country, where cities and states are actually mandatory that you have to shut down your short term rental business.
Airbnb in some areas is actually complying with this where they're restricting bookings in certain marketplaces. So you can't actually use Airbnb to book on other platforms are doing the same. So yeah, there's a massive shutdown in certain areas, their cities and towns around here that actually have their borders shut down so you can't enter into the town unless you live there. So they're shutting down travel completely.
All of us on a global basis if we're in the short term rental world we have to mentally and emotionally be in a position and make that switch that the new avatar for at least for now is necessity travellers and necessity guests, right, we have to move away from the leisure guests and start focusing on midterm guests right to fill our units.
Everybody is switching to midterm stays versus long term. So just to clarify that midterm stays are anywhere between 28 days and 90 days.
There's a big majority of hosts right now that are actually just getting out of the business or just shut down their doors are not marketing, they are just completely stepping away and converting their short term rental properties to long term tenants signing a year-long lease stuff like that.
How Airbnb handled the COVID-19 crisis
What Airbnb has done from the absolute beginning has been inspiring to Eric since 2008. He loves the vision of the company, their services, the culture that they created all of that and to watch them go from where they were at to where they're at now, today, at the level of where they're at is just completely insane to watch a company grow that fast.
Eric thinks AirBnb is kind of shooting from the hip to try to find out what's gonna work and what's not gonna work and Eric thinks he made some really bad decisions on the way that they handled the guest cancellations. AirBnb is continuing to make bad decisions on talking strictly about the online experiences, versus these other avenues that they truly have the ability to kind of disrupt the way that they disrupted short term rentals.
What AirBnb did hurt the industry. It's hurt the perception of Airbnb, the cult following that they've had throughout the last few years.
The future of AirBnb
In the last 30 days, they brought on a billion dollars, but they brought that's with that was in debt. So they're paying 10% on that billion dollars plus they're bringing on another billion dollars and their internal valuation dropped over 50% of the company.
They're having started massive layoffs. They have a ton of cash. The one thing that Airbnb did really well is figured out how to manage their cash. And they just stockpiled cash away. Equity lines, all of that. Airbnb is going to be completely fine. They have a ton of cash, they'll be fine. But the culture of Airbnb is going to disappear, especially in this country. Airbnb created so many different entrepreneurs literally overnight, with their platform of you know, hosts, everyone from the individual host all the way up to these massive companies.
Eric on acquiring hotels
Eric never owned a hotel. He got into real estate when he was 17 years old and bought his first house at 19. He turned that into a development company and all that stuff had apartment buildings sold all of that stuff.
When Eric figured out the whole short term rental model, he travelled the country for six months and built the short term rental business. He was only focused on leveraging other people's properties, right. So in real estate, it's there's something called OPM other people's money, you leverage other people's money to buy real estate. He started focusing on OTP or other people's property, right, so leasing people's property or managing people's property. And really, at the end of the day, just focused on cash flow, right
Eric always wanted to get back into buying real estate and wanted to get back into developing and designing real estate.H e put that off to the end. COVID came and wiped the host community out immediately.
Within 30 to 45 days have nearly shut their doors, right. It made Eric realize that he has to get back into the property-owning business. He has to control the assets to really be able to build true wealth.
Eric loves the real estate industry of owning real estate. So he wants to combine hospitality and real estate and really focus on purchasing and developing a portfolio of boutique hotels. He loves the model of buying small hotels, designing them to attract the modern traveller that is used to staying at a short term rental, right? But have it in a property where we can control the asset, we're legally allowed to run this business.
Quickfire questions
If you could be isolated with a famous figure celebrity dead or alive, who would that be?
If there is one movie or one series that you've had on your to watch list for some time now, but just never got around to it. What would that be?
What has been the one thing that you've missed the most since being on lockdown?
The gym and my social connection
What has been your favourite purchase over the past six to 12 months? Under $100?
Back massager
Do you have any other podcasts that are on your, on your to listen to list or any YouTube channels that you could recommend to people?
Joe Rogan
Know more about Eric on his LinkedIn
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