Heather Bayer
Going from one property in 2018 to 900 in July '23 while maintaining standards and continuing to surprise and delight guests is a vast leap for a property management company. In today's episode, I talk to Dale Smith from UK-based Host & Stay about the family foundations of his business, meeting changing expectations in a traditional vacation market, and his goals for the company as it continues to grow and much more. This is a great conversation, so let's go.

Heather Bayer
This is the Vacation Rental Success Podcast, keeping you up-to-date with news, views, information, and resources on this rapidly changing short-term rental business. I'm your host, Heather Bayer, and with 25 years of experience in this industry, I'm making sure you know what's hot, what's not, what's new, and what will help make your business a success.

Heather Bayer
Well, hello and welcome to another episode of The Vacation Rental Success Podcast. This is your host, Heather Bayer. And as ever, I'm super delighted to be back with you once again.

Heather Bayer
I always thought we did a really, really great job. In 1998, I brought my first property in Ontario, closely followed by five others, and then started a property management company.  By the time we sold in 2022, we had around 150 cottages and it had provided a great living for our for 20 years.

Heather Bayer
The Ontario market was, and still is, a very traditional one with an established way of doing things. But we came along and disrupted it in many ways. Firstly, by insisting on cleaning being provided as standard - 'Leave as Found' was a thing right up until recent years. Then we replaced the standard damage deposit with a waiver scheme. We were the first agency to ditch the physical welcome book and replace it with a Touch Stay digital guidebook for every property, and to have a minimum standard inventory that we wouldn't compromise on. Those seemed pretty big at the time, but that's not what disruption is. There were so many things I would have loved to have done, and we didn't. I wish we'd had more control of design and decor, and linen supply, and housekeeping, but the stars never really got aligned to get those projects off the ground.

Heather Bayer
When I began to research today's guest and find that he had gone from one property to 900 in just five years and has around 90% control of housekeeping services and intends to double the inventory in the next year, and his properties are pretty widely spaced like ours were.  It was a no-brainer to invite him to share how he's done this.  Dale Smith is a dynamic entrepreneur with the best Yorker accent. I know you're going to love this interview that shows how his business is growing at such a stratospheric rate, and how he has achieved so much in such a short time.

Heather Bayer
I am super delighted to have with me today, Dale Smith from Host & Stay. Dale hails from Yorkshire.... love the accent, Dale. Introduce us. Just say hello. I think everybody's going to love this.

Dale Smith
Hi, Heather. Thank you for having me. Looking forward to it.

Heather Bayer
It's really great to have you on. I've been doing a fair amount of research on your background and my jaw keeps dropping. I'm really interested to hear your story and find out, really, your secrets to success. I want you to share all. Let's start with your backstory. What got you into this business in the first place?

Dale Smith
The starting point for us in the holiday home and vacation rental space was us, and I say us in terms of family. The business is a family business, myself, my mum, my dad, my sister. My dad and I have been invested in what we call in the UK, standard buy-to-let properties, so multi-family stuff I think  the term is in North America, and we've been doing that for probably five years or so.

Dale Smith
After I left university, started working full-time, my dad and I started buying property together. But then in 2017, we bought a holiday home back in our hometown of Saltburn. And there was no grand plan when we purchased it for it to be a holiday home. It was just another speculative purchase, looked like good value, needed significant refurbishment. But it was right by the beach, had lovely sea views, and a lot of the potential. And we thought, right, well, let's actually have a go at the holiday let side of things. Hopefully, it drives us more revenue. Maybe it'll derive more profitability for us. And that was our foray into holiday lets that got us started on that journey.

Dale Smith
So that was March 2017 that we launched that. We spoke to quite a few holiday let agents, the traditional big agents that still exist in the UK.  We were quite underwhelmed at what they gave us in terms of financial forecasts. I was surprised at how much they wanted to charge for what I thought was the easiest part of the service, the booking generation and sending booking comms to guests. But then when the guests got to the property, they wanted us to facilitate the housekeeping or they could put us in touch with a housekeeper and they didn't really want anything to do with maintenance, but they could recommend some local handymen. So we'll do the front end part of the process for you, but when the guest gets there, you're going to have to deliver the guest experience yourself. So we decided at that point, let's get the property on Airbnb and Booking.com and let's see if we can actually do this ourselves, which we did. And that was the start of the journey for us.

Dale Smith
So if we take the Host & Stay business, that was the one property in March 2017, which has now turned into just over 900 properties today.

Heather Bayer
Those are crazy numbers. Let's go back to 2017. You launched this property, it started to do well?

Dale Smith
It did, yes. All the forecasts that we got back from the bigger agencies were forecast to have been between £20,000 and £30,000 a year in terms of the revenue. That property today does just over £80,000 a year, so significantly more. I think in its first year of trading, we did just over £50,000. And that, for us, once we started generating those bookings, that for us felt like, wait a second, there's a gap in the market with what we've been able to create here by using the OTAs.

Dale Smith
We created a specific website for that property. It's in a high football [soccer] area, so we did leaflets, we did some branding on the windows of the property. So again, we'd started to look at ways of generating direct bookings as well. Yes, that property was really successful from the start, and that's what got us hooked ultimately.

Dale Smith
We've continued to do buy-to-let property. We do a bit of commercial, but holiday homes now is obviously where my passion is. And I just love the fact with holiday homes, vacation rentals, that we can affect performance on a daily basis.  With standard property investment, it's very much set and forget. The rental is what it is. You might change it maybe once a year if you're lucky, but probably every two or three years. Whereas with the vacation rental stuff, it is performance management on a daily basis, really trying to optimize it and continue to drive performance. That's where I get the excitement from.

Heather Bayer
So what was your goal? That one started to work well for you. Where did the goal come from to just get into this stage of growth?

Dale Smith
It took probably another 12... well, just over probably 18 months from that point. Fast forward to December 2018, at that point in time we had two holiday homes of our own, and we built up a small management portfolio, another seven properties that we managed for a couple of clients who found out about what we were doing. I actually went on a podcast back in 2017, after we'd launched Burnside and ended up with a few clients, or a few turned into being clients.... people getting in touch that turned into clients, that wanted us to facilitate a service for them. They were interested in holiday letting, didn't really know what to do, had the capital to do it, but we're not in the right location or didn't know what to do, so we started to do it for them. And then just friends of friends, other people locally that found out that we were doing this, wanted us to manage for them. So, kind of ad hoc, we built a small management portfolio of nine properties, and that's when we said, Right, we need to launch a brand because we think we've got something that's a little bit different to offer.

Dale Smith
In the properties, we offered full management. So we did the booking generation, the vast majority of that through OTA platforms obviously. We did the housekeeping, which is where my mum and my sister came in. My dad and I would do that side as well if we needed to. My dad was very hands-on, so we'd do the maintenance-side things. I would do all of the booking generation, pricing, the marketing. So between the four of us, my wife also got involved - her background's marketing - between the family, we offered that full management solution. So all of those owners, they didn't do any part of the process themselves. It all sat with us.

Dale Smith
And so December 2018, we launched Host & Stay and said, Right, the next year we're going to really push it and try and drive that service. And we set an objective of getting to 100 units by the end of 2019. We didn't quite get there. We got to about just around, I think it was 75/80 units in that first year under management, but good growth for our first year. Then ultimately, the ambition has grown as we've gone forward from there. But we felt like we had something to offer that nobody else was offering in that North Yorkshire market at that point in time.

Heather Bayer
What was it that you were offering that was different?

Dale Smith
The full management piece, Heather, that's the real difference. When I say full management, in-house full management, and that's what we still do today. That's our belief.  From a housekeeping point of view, if I look at the existing portfolio of, I think we're 910 properties right now, over 80% of those are fully managed by us. When I say fully managed, that's our own employed housekeeping staff, our own employed maintenance staff. They run through our processes, our quality, our systems. We're not outsourcing to rely on third-party to deliver on our behalf. It's truly our own internal resource that's delivering that. And that was the same back then, right? It was only the family, but it was us that were out there delivering that service for those owners. But, if something was wrong, it was our issue to deal with. But I also liked the clarity of that in the sense that, yes, if you deliver a great service, that's fantastic, but if it goes wrong, right, then it's with you. It's very clear in terms of those lines. There's no, Oh, well, the housekeeper didn't turn up and we've had to find somebody else.  Or, Well, the maintenance guys didn't turn up. There isn't any of that because it's with us. And that's where we feel like the value is for a property owner. If they're passing their property over to us, they know it's us that's looking after it and they know what quality they're going to get off the back of that, and we ultimately know what we need to deliver.

Heather Bayer
Yes, the Ontario market is not that different from the UK market. Now, I remember going back to the '90s and before when I was taking my kids on vacation and we were going to Cornish cottages. I remember that last day was always spent cleaning, because you had to do the 'leave as found'. In fact I heard from an owner just recently who was being rejected by a property management company and they said, Why won't they manage my property? It's because he would not allow a cleaning service in there. He wanted his guests to still 'leave as found'. We said, This is not what happens these days; things have changed, I know, in the UK, certainly as they have everywhere else.

Heather Bayer
But we still found that.... and I'm going to come on to owner acquisition in a bit, but we still found that owners were reluctant to give up their hands-on.  They had their cleaner or they liked to go up and do their own changeovers.  I used to do my changeovers on my own properties. That's when I came across that idea that you get somebody else in to do it and it was like the world changed on that day.  I say to people, never do your own changeovers. Just get somebody else will do that for you and you don't have to be concerned about it.  But it's interesting how things have changed and guest expectations have changed a lot, of course, over the years.

Heather Bayer
What about the guest expectations changing in your market? What have you seen in five years?

Dale Smith
A big change, obviously, I think COVID has really driven that forward in terms of guest expectations on cleanliness. Expectations are high of 100% from guests in terms of quality of that product. I think when we went into the market in that 2017/2018 period, our philosophy, if we take Whitby in North Yorkshire, which is still our biggest market, and Whitby is always in the top five in terms of domestic travel destinations in the UK. But the stock in Whitby, it was already very good for holiday letting, but the stock was very traditional and very average in terms of what it looked like visually. It wasn't somewhere you necessarily think, I'm going to look at it. It's loads of great modern choice in terms of what the properties look like internally and design-wise. So when we went into the Whitby market, our objective, we said we want to be top 15% of the marketplace in terms of product quality. That was our objective. We've widened that now in terms of the quality of properties we take. We will do up a quartile. So for us, it's four and five star properties. So we say top 25% of the market is what our stock is.

Dale Smith
But certainly going to that Whitby market, top 15%, and that was our ambition to deliver that type of quality. Back then in 2017/2018, it was quite easy to do. We've seen over the last five years that other owners have raised the bar to other stock coming into the market has certainly been of better quality than what it would have been, which makes it more competitive, also raises the guest expectation, because anyone looking on Booking.com now for Whitby, you've got quality after quality. Whereas back then, we would have had really good cut-through and stand-out in terms of our Host & Stay properties versus the other competitors in that market. And then we've certainly seen, in terms of cleanliness of properties, guest expectations have changed from that point of view. Expectations on upkeep, because as you all know.... of interest I was on a conversation with someone the other day about guest damage, and we were saying essentially guest damage happens pretty much every single stay in the sense of there's some wear and tear or damage takes place, but sometimes it's so small that you don't really recognize it. The next stay obviously can be much bigger then it becomes a problem.

Dale Smith
But that staying on top of wear and tear has changed from a guest point of view. They expect the property to be almost brand new when they go into it. And we all know to actually do that is difficult to keep on top of. But also from a commercial point of view, from the owner's point of view, there's got to be a balance of what you can stay on top of and what actually you need to let run in cycles, otherwise it isn't actually commercially viable. And I do believe that it's a guest expectation, I think, that's driven a lot of that.

Dale Smith
And we all know how important reviews and review scores are as well from that point of view. So yeah, landscape's changed massively. I think a lot of that is being driven by guests ultimately, and also more people moving to use the holiday homes and vacation rentals. Because again, five years ago, the volume in the market and the occupancy levels would not have been what they are today, so more people are definitely taking that route or the traditional B&Bs, certainly, which the coastal market would have been full of five years ago.

Heather Bayer
Yes. What about.... I was reading recently articles saying that the staycation, the UK staycation is over. This summer has been a different animal right across Europe and certainly North America. People are not seeing what they saw in 2020, 2021, and maybe '22. What are you seeing?

Dale Smith
Our occupancy levels, if I roll back to 2022, our occupancy levels in 2022 pretty much mirrored 2019 month-on-month. We're coastal and rural, so we are very seasonal in terms of peaks and troughs with school holidays. Obviously, we're right smack in the middle of high season at the moment. 2022 was a mirror image for me of 2019. We didn't expect it to be. We expected occupancy to be a little bit higher, because we expected more hangover from that COVID period and people still being unsure about traveling. But for me, as soon as 2022 started, or certainly as we were into February, it was pretty much everyone went abroad. If I look at occupancy this year, we're very similar. Again, we had a bit of a downturn in... I think it was June was a bit of a lower month than what we were forecasting. But if I take our budget forecast year to date, we're right on that. August, we look like we're going to come in slightly over budget. The weather, however, in the UK has been terrible for the last six weeks, literally terrible. Otherwise, I think we would have probably been a little bit ahead.

Dale Smith
We're broadly in line from an occupancy point of view of where we'd actually expect to be in our market. That said, rates are still higher than what they were in 2019, but they're obviously significantly lower than what they were in the second half of 2021, and they'd certainly come down versus last year as well. But I also think that had to happen, Heather. I think anybody that got into the holiday let space in the second half of 2021, in that real boom period, once the doors opened up, I think it was mid-April over here in the UK, we just saw a massive spike in occupancy and rate, but that was unsustainable. And if anybody coming in thinking that was the norm, it was a false economy, ultimately. And I think we've definitely seen that over the last few years. We've seen more stock come into the market. I think more investors come into the market during that COVID period, banking on lots of domestic travel post-COVID, which we got, but we got it in really a real condensed fashion in that second half of 2021. Buyers paying premiums because prices rocketed, interest rates are now obviously catching up with people.

Dale Smith
So I think in terms of what that looks like going forward, I think we will see supply start to drop. I think we'll see people who are not in it for the long-term will start to sell those properties, transfer them back to potentially buy-to-let. So we'll see the stock in the market start to drop back, which I think is a good thing for everybody who is into vacation rental holiday lets for the long-term. And I do think, however, we'll continue to see demand just gradually increase. Because again, if I look at our occupancy rates with the number of properties we've got now and our occupancy rates back in 2019, when the portfolio was probably 25% of the size of it is now, we're still seeing good balance.

Dale Smith
So for me, we're still getting that right balance between occupancy and rates. I think our position will strengthen as we go through the next 12 or 18 months because those individual single operators, who come to realize it's not as easy as what it may seem from the outside will drop out of the market. And I'm still bullish in terms of staycations, and same again, if you look at the UK market, that every time there is a recession period, or a tightening from a financial point of view, domestic travel increases, it's always more cost effective than to go abroad, always has been. I think if we go into next year, it still will be more cost effective or will become more cost effective to stay in the UK again, than what it has been the last couple of years.

Heather Bayer
There's been a couple of posts on Facebook groups that I've come across recently from managers saying, How do we deal with owners who are struggling, who bought, as you said in 2020/2021, they relished in those high rates and it was great. And then, of course, and I know that we were explaining to owners before we sold our company that 2022 was not going to be the same as '20 and '21. We went through exactly the same thing. We were closed down for four months in 2020 and six months in 2021. There was no... It was Boxing Day to June 5th, I think, in 2021 we were shut down. The moment... and you must have experienced this.... the moment that restriction lifted, it was the floodgates opened. For those owners who bought then it was just like, Wow, let's keep putting the prices up. Of course, getting into 2022, it was a challenge for them, and even more so now. But I'm hearing this right across the US and managers saying, How do we explain this [to owners]? It's 2019 rates. We need to roll it back.

Dale Smith
Yes, totally, it is. I think that is the thing we've just seen this peak, I guess, in the cycle where we're now back at probably where we should have been. If 2020 was a normal year, for me, 2022 was getting towards that. And we've lost a couple of years where we've had this crazy period and now we're back to normal operating. The issue that we've got is those owners that came on during that period and have bought at high prices and are also expecting these rates that just weren't sustainable ultimately.

Dale Smith
I spoke at an event recently when we were talking about.... the event was just general property investors across all different sectors. And my view with it, with everything property-related right now is really asking the question of how long you're looking to invest in the property for. And I think unless you're willing to invest in that property, if you're purchasing today, or you've purchased in the last 24 months, unless you're willing to hold that asset for 5-10 years minimum, then it's the wrong game.

Dale Smith
Ultimately, if you're wanting to make quick money, as in a 12 or 24-month return, then you need to be trading property to make money from it.  Whereas if you're investing, ultimately which is what this is, it's got to be that 5 or 10 years. And if we look at it, if you're buying up a holiday home as an investment, it's got to be an investment. It's got to be a 5 to 10-year view on what you're going to make back off that asset, because you've got to ride the ups and downs on capital growth. You've got to ride the challenges from an economic point of view, to look at it over that period and say, Right, was it worth it or not?

Dale Smith
And I think we've all ended up.... certainly with low interest rates, rising house prices, the COVID boom..... actually making money too quickly, almost, and then we've got to get back to actually thinking, Right, if I'm investing in something, we know that that is a medium to long-term objective, not an immediate short-term objective. And I think there's got to be a bit of mentality shift from property owners that.... exactly that. If they want to make money quickly in one or two years, then ultimately, holiday letting on general investment in property or buy and hold investment isn't the strategy.  For me it's a development or refurbishing to sell-type strategy if you want to make a quick buck.

Heather Bayer
Yes. Sadly, we're still seeing the ads on Facebook that says, Make your million with Airbnb overnight.  But hey, I think people need to be savvy enough to see through those.

Heather Bayer
I just want to go back a bit to your scaling and the competitors who are catching up to you now. I remember this is what happened with us. We would disrupt with something and it went great for a couple of years until all our competitors caught onto this. I remember one of them was when we started using Touch Stay and everybody else was using the old welcome books that sat on the coffee table, dog-eared and coffee stained. We went into Touch Stay and, for our guests, it was in every review how amazing this was. It took about three years before all our competitors jumped on the digital guide bandwagon.

Heather Bayer
I know you've always got to take that next step to keep ahead. With the scaling on the level that you're doing, how can you continue with that competitive edge? And also how can you continue at that level of scaling to keep surprising and delighting your guests, so they want to come back to your brand every time?

Dale Smith
I suppose on the scaling front, we've always viewed ourselves as right in the middle between the traditional agents, the 'aways', which is the cottages.com brand in the UK, The Travel Chapter to the Sykes, who have been around for a long time, probably 10 plus years or more, and have really consolidated the market of the smaller players over the last 10 years in the UK. So if you look at the UK market, you've got The Travel Chapter to cottages.com and Sykes who between them are probably about 70-75,000 holiday homes under management. You've then got another few players and then us. So it's really fragmented in terms of how much disparity there is between the different sizes. But we've always viewed ourselves as between those guys and then looking at how do we align with the OTAs? We always view Booking.com, Airbnb, Vrbo, etc, as partners. We've obviously always generated bookings through those guys and continue to do, whereas the traditional operators on this side don't really seem to use them and see them more as competition. I think as an advantage that our ability to use the OTAs effectively has really helped us scale.  It's helped us generate revenue for owners that they couldn't get at their more traditional agents. And we've used that to our advantage.

Dale Smith
I think one of our risks is, if the bigger agents start to use the OTAs better, because I still think they view them as competition rather than partners, I think that's a risk for us if they do start to use them well. But then on the flip side, a lot of our smaller competitors now, our advantage is actually our on-the-ground resource. A lot of our smaller competitors really struggle, as we all still do, on being able to provide those on-the-ground services, the housekeeping, the maintenance services that over the last few years have become really difficult to get hold of. And I think that is causing a barrier for a lot of the smaller agents to actually scale their business because they're not able to get the resource on board to be able to scale it. Whereas we got past that point, probably luckily, in a period where we could still recruit it and we've managed to take it with us and we're still able to recruit that. We've got the resources to be able to recruit that on-the-ground staff.

Dale Smith
So I think we're actually in a nice position from the point of view of being able to continue to scale, because we've got the resources and the capital to do so versus the smaller guys not being able to. But our risk is still whether some of the bigger competitors come back at us.  But they also don't seem to want to do the full management piece, and it's probably quite difficult for them to do that full management piece now, on the scale that they're at. If you've got 25,000 properties under management, to deliver out a full management services is a tough ask. I think those big guys have got obviously different aspirations in terms of what they see their business as.

Dale Smith
So we're still relatively bullish on being able to scale. We see that as a continued organic growth, and we're also looking to acquire other property management business as well. We see that as another growth area for us. Our objective is, we want to be at 5,000 units under management by the end of 2025, and we see those additional 4,000 units from where we are now is coming pretty much as a 50-50 split between organic growth, which continues across the UK as we continue to scale, and then acquiring the other 2,000 by sweeping up some of the smaller property managers that have got to that 100/150/200 level and ultimately can't or don't want to scale past that point, because we all know how difficult it is at that level and how involved you are at that level in terms of doing the day-to-day stuff as well.

Dale Smith
And then on your other point, Heather, on delight and guests as well.  For us, it's always looking right at what can we add into that guest experience? So if you take a product that we're going to launch imminently actually, we're just about to launch the Host & Stay App, and we've got a technology product baked into the Host & Stay App that will enable our guests to redeem incentives at local independent businesses where they're staying. So we see that as two-pronged. We're really big from an ESG [Environment, Social and Governance] point of view. That's high on our radar. We did a lot of work across 2022 on developing our ESG strategy as a business.

Dale Smith
We are, as we said earlier, a very family-orientated business. We employ a lot of people hyperlocally. We employ just over 375 people just now, and over 55% of those are still in the immediate 60-mile radius of where we created the business. So we want to do a lot of good at local level. So we're trying to get our guests, when they come and stay in a Host & Stay property, not to spend that pound at a Starbucks or a Costa or a big national chain.  We want them spending that pound with local and independent businesses.

Dale Smith
So through our Host & Stay app, we're effectively joining those two together, to give guests fantastic recommendations and warm introductions to those independent retailers where we know they're going to go and get a good experience. So again, we see that scaling across the UK as we do. That's just a flavor of some of the things we're trying to bring into that guest experience that they're not necessarily going to go and get with another holiday brand.

Heather Bayer
Yeah, I love that.

Heather Bayer
How do you communicate with your guests? What are the touch points along the guest's journey from booking to stay where you communicate with them?

Dale Smith
Again, we'll communicate with them directly on the channel that they book. We use Guesty as our PMS. So we've got a lot of integrated and automated workflows that run. When the guest books with us, they'll get an immediate booking confirmation with details of their stay. That will go out via email and via the channel they book from if it's an Airbnb, Booking.com booking, etc. Before they arrive at the property is when.... we use Touch Stay.... so we'll bring the Touch Stay guide into that point. That will be woven into the Host & Stay App going forward, so hopefully another 30 days from now, the Host & Stay App and Touch Stay will be integrated into that Host & Stay app. That will give us a nice new touch point with guests that will actually give us more interaction...., albeit at digital level...., give them more interaction and more bespoke interaction than what they're currently getting in a flat messaging format.

Dale Smith
When guests arrive with us, they'll always get an SMS or a WhatsApp message, depending on the preference, to make sure that they've checked in all right, that everything's okay. We also ask them to give us an initial feedback rating out of five when they check into the property.  If that comes back at less than a four, then our guest service team will reach out to them, make sure everything's okay, see what we can do to rectify any issues. And then once we get into the post-stay section, again, we'll follow up with them 24-hours after they've checked-out. That at the moment again goes out via email or via channel, but we'll also be bringing the Host & Stay App and push notifications into some of this stuff as well. And then we'll try and stay in touch.

Dale Smith
We send out regular email campaigns. We're relatively good at segmenting our database down into different guest profiles, who run on different schedules, different offers, incentives. We have quite a bit of AI running the business, so we'll serve guests that have stayed with us, getting recommendations on future places to stay based on what they've booked previously and what we think they would like to book going forward.  A lot of those touch points are obviously very technology-driven, rather than human interaction, if you like, although we are looking at ways to drive more guest reviews, which is going to have follow-up calls in the loop as well, which is something we're currently putting in place to bring some more of that human interaction back in.

Dale Smith
A lot of that is technology-driven and we're trying to just drive more personalization in that. Whereas in recent years, we've been very regimented of guests going through very similar processes, regardless of whether they're male, female, young, old, pet-lover, brought a dog with them, etc, would have been quite flat, where now we're trying to bring more personalization in with other technology tools we got at our disposal, we're also aware we need to bring some human interaction into it as well, which is always a challenge when you're trying to do things at scale.

Heather Bayer
Yeah, exactly. I was going to ask you the question about AI and what's changed in your business since AI... I know so many companies were using AI prior to December of last year, but it seems like everybody knows about it now. The whole population knows about it now. So how are you incorporating AI into the business?

Dale Smith
So we use it on the Host & Stay website. So all of our recommendations on the site that we push to the user will be based on their behavior, where you're on site and sites they've been visiting. That was the first touch point for us. We brought that in at some point last year, probably about 12 months ago, I think. That was our first foray into AI and trying to drive more personalization for guests that are trying to book on our Host & Stay website. We then develop that into that email journey we were talking about. So when guests are getting emails from us, again, they're personalized based on their preferences, and past bookings, and what we think would suit them.

Dale Smith
This year now we've got AI in our guest relations team. So again, we're trying to auto-generate messages that are effectively reading that guest message using data that we've got within our PMS, auto-generating that guest message. Our guest service advisors will still check that message before sending it currently, but we're hoping we will be able to start and automate some of those where it needs a quick answer, where the guest, for whatever reason, can't locate the key safe code and they need a quick one-sentence reply of what the key safe code is and where the key safe is, those type of things.

Dale Smith
We're trying to automate so that, again, we can better utilize our existing resource. We're currently using it as well now in terms of reading guest reviews and extracting out wherever guests are reporting issues in reviews and then pushing that into our maintenance and repair systems so that automatically generates workflows for our maintenance guys to go out and attend to an issue proactively. Again, that would have been a manual response between probably three members of the department, or between departments, sorry, that we're now starting to automate through AI.

Dale Smith
We've got lots of other uses for it on the roadmap. I guess from my perspective, it's looking the same way, where do we have human touch points that have a higher percentage or higher error rate? Because humans are fallible and we can have issues, where can we use AI to automate that and ultimately take away the chance of the ball getting dropped?

Dale Smith
If a guest is talking to a guest service advisor and they then need to talk to the maintenance department and then the maintenance coordinator needs to speak to the technician, is there a way through AI we can just go straight from that guest to the maintenance to the technician to attend with all the information they need. But if we can do that through AI and process automation, I completely negate the opportunity for a team member to drop the ball. It's not that they're going to drop it on purpose, but when they're trying to juggle lots of balls, at some point you're going to drop one. So how can we use it to mitigate risk of missing something that then leads to a bad review from a guest, or leads to an issue being created with the owner.

Dale Smith
We're trying to view it from that point of view of, I suppose, processes and efficiency, but really looking into say, I don't want to replace a human being doing it, but wherever a human could make a mistake, can AI get us to the same result without making a mistake? And if so, then for me, that's a route we should take with it, because we want the human beings focused on the human-to-human interaction. That's where machine learning can't compete with us, but areas that can compete with us on process and reading something, extracting it, and pushing it into another system, well, let's use it for that because that's ultimately where we're going to get real good gains and certainly at scale as well.

Heather Bayer
Yes. You've mentioned a lot of interesting stuff here. One of them that really resonates with me is being able to pull data out of emails and reviews automatically. I've had Evan Dolgow on the podcast about four times now, I think, because I saw him speak in Miami at the Direct Book Summit last October, and he was the first person who ever talked about data that made it clear and simple and said, You're a property manager, you have got so much data at your fingertips, you don't realize it.

Heather Bayer
You're clearly way beyond that now, using that data. Then, of course, it enables you to segment your target audience and target guests. I'd love to see where all this is going.

Dale Smith
Yeah, I know, it's fascinating. In fact, to your point, if we look at it on data, we've got the data to make things more personalized, but then actually, I think if you take a property management business, we're almost overwhelmed with data and information that for a property manager, if I take one of our property managers who oversee X number of properties for owners, they've got so much data coming at them. The challenge is actually what do they prioritize? How do they prioritize? How are they supposed to filter through that? Does it come back to, whoever's shouting loudest is getting the most attention, which probably does, because again, when you've got that human-to-human, that's what happens. And you feel that the property manager who's managing.... we work on ratios of 150 properties.... so if they're overseeing 150 properties, how do they prioritize that? If they've got to look at those guest reviews and extract data from that and do something about it and then communicate to the right team or the right person to then go out and then take that action, it's a really difficult job to get someone to do that.

Dale Smith
And that's, for me, where AI fits in, because literally within half a second, it can read that information, summarize it, and then push it to another system, which we can't do as human beings. So that's where the future is for me in terms of being able to really streamline that. Actually, where the benefit comes for us as property managers is because we should be able to manage properties better for our owners off the back of that, because we're actually taking relevant action more quickly, rather than spending X number of days  actually filtering through the info before we do anything about it.

Heather Bayer
Yeah. When I look back and think, I wish I'd had all this at our fingertips in the past when I was trying to do all this and it was all very manual. Yeah, you're absolutely right. The squeaky wheel is the one that gets the attention. He who shouts loudest.

Dale Smith
Yeah. Completely.

Heather Bayer
Okay, moving on a bit, because time is moving on as ever. I did want to ask about your split of homeowners between investors and family owners. I'm really curious about this because you do so much management of a property and you'll do design and decor and you want to make sure everything meets those standards. Investors, I can understand. Somebody buys a property and says, Here you go, Dale, here's my property. Do with it what you can and give me the best return.

Heather Bayer
What do you do with the family owners who they want their input? They love grandma's old throw and the decor and the old wallpaper. How do you deal with those? Or do you not? Do you just not take them on?

Dale Smith
Some of those wouldn't fit within our brand profile. It's back to that way, we're 4 and 5-star. We would take 3-star stuff as long as they're willing to commit to improvement and we would work with them on that improvement journey. But, if we feel the property doesn't fit our brand profile, then we wouldn't bring it on. And again, as you scale, that's something we're constantly trying to battle with internally in terms of educating our property consultants who bring the properties on, of what those rules are around that.

Dale Smith
So my wife, Rachel, is head of onboarding. So pretty much every property that comes onboard passes through her department. Rachel is the brand police. She will throw the gauntlet down in terms of 'it's not on brand'. Then she's the first one on the phone to me saying, Why is this coming onboard? It shouldn't be.

Dale Smith
So we're relatively protective of that brand and making sure that that property fits the profile, because if it doesn't, we also know that we're not going to deliver the service that we can for owners. And that also plays into those family owners who maybe were used to doing Monday to Friday, Friday to Monday stays, which again, isn't our bag.

Dale Smith
Again, the world's moved on from that point of view. We are relatively flexible in terms of guests that stay in the Host & Stay property can check-in any day of the week. It doesn't matter to us because, again, our service level, we do changeovers every single day of the week. We do one-night stays in properties. We do two nights. We do three nights plus, obviously. So again, we want to have a really flexible solution for guests, because we know that's also what can really drive the revenue in the property. So we've got to all be really cautious if we've got a homeowner that wants to transfer from an existing traditional agent who's been used to traditional holiday let methods, they're probably not a good fit for our business. And although a property consultant may bring them on saying that we can fit to that, the reality always comes out that they end up not liking our model because it's not what they've been used to.

Dale Smith
So that really leads on to say that from an investor versus family-owned split, we are heavily investor. Our portfolio is heavy from an investor point of view. The vast majority of our clients, they're purchasing that property as an asset they want a return on over time, hopefully over time of 10 years, as we were talking about before, not just over the next year.  But our portfolio is heavy in that sector. And we've, I guess, in the marketplace, naturally attracted those type of clients as the portfolio is growing. I don't know whether it's through people, when they find us looking at our portfolio and thinking, Okay, well, my property has to be a certain standard to be on that portfolio. So if they don't feel like it is, then maybe they're not coming to us or inquiring with us, or just naturally, we've attracted that client.

Dale Smith
And it's always an interesting one to me because I do look and compare what we know we generate at gross revenue level from a property and the competitor published stats and how much lower those are at gross level, which leads me to think, Well, they can't have an awful lot of investor clients, because there can't be much return at those levels, which is back into that maybe family-owned, want to use it for six months a year themselves, six months a year as a holiday let to cover some costs. Whereas I can definitely say the vast majority of our owners are wanting to drive profitability month in, month out from their properties, which means that ultimately we're accountable for that.  And we've got to drive that hard in terms of driving bookings, being as efficient as we can from a housekeeping point of view, making sure it's well maintained because we're driving footfall through them hard as well.

Dale Smith
But on the flip side, because we deliver multiple different services, that also plays well for us, because we generate revenue at each stage of the process and that's how our business is stacked up. We essentially try to be cost effective all the way through the different processes for an owner, rather than trying to stack our margin on one aspect, which might be that front-end commission fee. We charge 10% plus VAT [UK Sales Tax] as our commission. So we're pretty much the cheapest in the marketplace, but we make margin on housekeeping, we make margin on maintenance, and we make margin on interior design, we make margin on refurbishment. So we try and be cost effective all the way through because we want to essentially manage the full process for the client.

Heather Bayer
Yeah, that is great. What about legislation? There was no legislation years ago. You bought a property, you rented it out, nobody cared. Now they do care and they care at a local level. They care at a county level. They care at a country level. How is this impacting the business?

Dale Smith
Regulation is coming. Inevitably, it's coming, whether we like it or not. My personal view is that I think it's a great thing for the industry, because it will professionalize the industry. I think currently it's too easy for an individual to rent a property on Airbnb with no regard, really, for safety. I always think someone renting the property on Airbnb, a family coming and staying, and there's no guarantee or any level of acknowledgement of what you're going to get when you get there in terms of what safety provisions have been met in that property. So I think we need that Certainly, I'm speaking from a UK point of view here, but if we look at everything a landlord has to hit from a residential renting point of view, EPCs [Energy Performance Certificate], EICRs [Electrical Installation Condition Report], gas certification, insurance levels, etc.  Whereas, from a holiday let point of view, which in my view is higher risk, yet we seem to have a higher tolerance level in terms of a lower threshold for entry in terms of what you need to do.

Dale Smith
For us, from day one, we've always had what we call a 10-point checklist from a compliance point of view.  So we ask for over and above what other agencies would in terms of what we want from the owner to let that property with us. And because our maintenance and compliance teams are in-house, we're able to facilitate those services for owners. We have an approved electrician in group that does all of our EICRs, our PAT testing [Portable Appliance Testing], same on gas. Those services, from a compliance point of view, to get those right certificates, we will deliver that for the owner. So we're in quite a nice position.

Dale Smith
I actually think legislation coming in will be a positive for us and for our owners as well, because we're already in the right place to fit in with that, certainly, if we see England go the way that Scotland has.  I think then, when you take what's happening at local levels, obviously, we all know that short-term rentals have taken the flak for rising house prices. Locals not being able to buy in certain locations because the same investors and holiday homeowners have pushed the prices up. I think that we're just being scapegoated for that. There's so many different factors that play into locals being able to afford housing and house prices, etc.

Dale Smith
I also think that we, or certainly councils and governments, miss the fact... I'm talking from a UK point of view here.... that there are so many empty homes that are not getting used that could be brought back into use. And for me, that's where a lot of the focus actually needs to go. A passion project of mine is, I would love to be able to, at a certain point in time, be able to say for every one holiday home that we put on the Host & Stay portfolio, we help bring an empty home back into use. And that's something I'm trying to push at local level at the moment, but being able to get that data, being able to get councils onside with that is really difficult when you would think they'd be throwing their arms up and saying, Yeah, come on, come and help us...., when we've got these housing issues, and it just isn't the case, unfortunately. So yeah, a roundabout way of saying I think regulation is coming at us.

Dale Smith
I think we've got to embrace it. I think it will professionalize the industry. I think it will raise that barrier to entry that actually for good property managers and good holiday home operators, it's going to make things easier for us.  We're going to be able to take a bit more of the market from individual operators, rogue operators, etc. I do see it as a positive, Heather, I don't see it as being a negative, really. Not for the property management side that's done well, ultimately.

Heather Bayer
Yes, I hear that. I hear that across the board, really, from the professional property managers who are almost embracing what is coming in, because it does raise that barrier to entry.

Heather Bayer
Final question. I've over years tried to network with other agencies, network with other professionals in the industry. Tell me about briefly the UK Short-Term Accommodation Association, the STAA. You're on the board. What are the benefits for people to actually become a member of an association such as this?

Dale Smith
I think it's probably more key now than ever in relation to that last point on regulation coming. I think making sure that individual owners realize what's on the road map for the years ahead in terms of that regulation and licensing is going to come into play. If it does, then what do they need to get ready for and prepare for? Again, speaking from a UK point of view, what's going to happen with planning? There's talk out there that holiday homes are going to become their own planning class and need to apply for planning permission. How is that going to be determined? Are grandfather rights going to apply? If they are, then what's going to be the determining factor?

Dale Smith
From that point of view, our take on it at the moment is, that for grandfather rights to apply to a UK holiday home, it will need to be registered for business rates, and that's going to be the yardstick. So we're working hard with our homeowners at the moment to make sure that they're registered for business rates and operating in that way. But again, that's something we would always advocate on through our onboarding process. But speaking to lots of operators, they don't even get involved in that with their owners.

Dale Smith
They don't recommend that. They're not guiding them on it. That's for me, where the STAA comes in in terms of being able to push out that guidance, push out that knowledge at scale to property managers of a smaller level who might not be up to speed with it, to individual holiday homeowners who are probably quite blind to the fact of what's coming, especially if they're using a management company and therefore not necessarily keeping up to speed with all of these changes. And if their property management company isn't then communicating that down to them, which again, if they're a smaller operator, they may not be. I think really being involved in that just means they're going to get that information and take the action now before it could be too late for them. And that's ultimately what we're preparing for at the moment, is to make sure through our knowledge of being part of the STAA.  Yes, I sit on the board, but Host & Stay the same as Sykes and I think The Travel Chapter is a member now as well.

Dale Smith
We're all trying to come together to actually make sure that holiday homeowners across the UK are getting the information they need to get themselves prepared for changes that are coming.  Because the last thing we all want to see is, all of a sudden, we can't list properties because of X, Y, and Z, and we've got to get licenses in place. We need to be prepared for it. None of us want to see the sector go back over, so we've got to all be up-to-speed to make sure we keep on moving forward together. And I think ultimately that those governing bodies, that's their role to be able to do that, to congregate the masses and make sure that that information is being filtered down. And also that they're working with government to get the right outcomes.

Dale Smith
STAA is working with English government at the moment to get, hopefully, a registration scheme in place first before a license scheme, because as we all saw, Scotland went straight to licensing, which has caused chaos ultimately over the last 12 months. So it's making sure that we've got that voice that can work with government, that can work with local councils to get the best result for the sector.

Heather Bayer
Dale, this has been such a great conversation. We've covered so much, and I think we could probably cover a whole lot more. I'm sorry we didn't actually get to meet. We were in Barcelona at the same time last April. I'm sorry we didn't actually get to meet, but maybe, hopefully, next time.

Dale Smith
Yes.

Heather Bayer
It's been an absolute pleasure having you on the show. I'll make sure that links to Host & Stay are on the Show Notes and any other connections, your social media handle, so that if somebody wants to get in touch with you, then they can do that.

Dale Smith
Perfect.

Heather Bayer
I will be watching you very closely over the next months and years. Really interesting to see how you grow. And one thing I hadn't mentioned, I love the fact that you're a family company. It is great when you have everybody working there with you. My business partner is my son. My husband's upstairs doing my podcast editing, my daughter-in-law manages all the sponsorship. So, yeah, we too are a family business and it is great to have that. But thank you so much. Thank you for giving me the time today and I look forward to meeting you in the future.

Dale Smith
Yeah, lovely. Thanks for having me, Heather. Hopefully, I'll speak to you again soon.

Heather Bayer
Thank you so much, Dale Smith from Host & Stay. What a great conversation.

Heather Bayer
I was just saying to Dale afterwards, having been in the business for 20 years and taking a long time to go from one property to 150, although we had been at 200 at one point and we dropped back to 150 when we started to do what Dale now does from the very beginning, and that was be selective about properties, but still to go from one to 900 in five years. In fact, really it's just been four years since he started to grow out the business and expecting to double that and get to 3,000 by 2025. Amazing. I will be following his progress closely over the next months and years and hopefully have him back on again in a year or so's time.

Heather Bayer
That's it for this week. This was quite a lengthy interview, so I don't want to keep you any longer. I hope you really enjoyed that and you took a lot from it. Make sure you let me know if you've got any questions and make sure if you're not already a member of the Facebook group, The Business of Short- Term Rental and Property Management, that you join up.

Heather Bayer
Don't forget our new podcast series called The Tipping Point is also available; that is published every Monday. These are just little 10-minute episodes, so you can just go along there and get your snippet of business education from there. I'll make sure there is a link to The Tipping Point episodes if you haven't come across them yet, and I'll put that in the Show Notes. Thank you once again for joining me. Always a pleasure.

Heather Bayer
It's been a pleasure as ever being with you. If there's anything you'd like to comment on, then join the conversation on the show notes for the episode at vacationrentalformula.com. We'd love to hear from you and I look forward to being with you again next week.

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