‍Heather Bayer: So I'm delighted and I should say honored to have some of Steve Schwab's time with me today to talk about leadership in this series we're doing on leadership. But of course it is. It is just. Such perfect timing that we are doing this series on leadership at the time that the Casago merger is taking place and Steve is standing tall at the helm of those companies.

So welcome Steve. 

Steve Schwab: Thank you. 

Heather Bayer: So it's so great to see you. We had a bit of time in Austin last week at VRNation and I've just been listening to you talking to David Angotti on his deck, and it's just so inspiring, but also quite unbelievable in ways. Does it still feel unbelievable to you?

Steve Schwab: It does. It feels like a dream and I try and get my head wrapped around all of it. Super excited about the whole thing, but yeah, it feels very surreal, 

Heather Bayer: I bet it does. I cannot imagine how that must feel, you have built to such, a great standard and size, but that’s multiplying now. It must be daunting and we just can't wait to see where this is all going. 

But I want to ask you to take us back to the very beginning, 1996 Rocky Point, Mexico. What inspired you to get into the vacation rental business when you were down there on a break after university and your time in the Army Rangers? Why would you get into vacation rentals?

Steve Schwab: It was an accident. And so I came down there and visited a few times and after my senior year of college headed down for the summer to take a break from everything. And I was just sitting at a bar. There was a gentleman sitting there that was talking about how he couldn't crawl up on a roof. He was a big guy. He was, 6’7”, 300 pounds. Just a massive man. And I was like, I can crawl up on the roof for you. He was talking about fixing a [AC] return duct so next thing I'm driving out to this community.

I've never been to wondering what I've gotten myself into in my Jeep along the beach and. You get a ladder pile up at the top and start taking metal screws and fixing the problems up on there, crawl back down. And he offered to pay me like, no, that's good. I don't need any money from you. I didn't have any money anyways, but I didn't take it.

And I really think that one act of kindness was the beginning of my career. Because, he looked at me and smiled and I shook his hand. And he came and found me at the bar the next day. Same bar, same seat. And asked me to do a little more work and then a little more work.

And then he invited me over for dinner with him and his wife, Cindy. And so I do odd jobs for them and I was continuing to do other work, but helping them out, with maintenance items and I knew he wasn't well. And came to find out he had cancer and it took him pretty quickly. And, maybe about a month or two later after he passed, Cindy calls me. She's talking about, Hey, Bruce has passed…. I know Cindy, I feel terrible. She says, Bruce thought you'd be pretty good at this….. It's, I don't want to be in maintenance full-time for the rest….. 

No dummy, actually owning the business. He thought you'd be really good at this business. I go, gosh, I'm even less qualified for that. So I went over and looked at the numbers. It was all on paper and I went through the entire process, and she'd made $35,000 the year before. That's more money than I ever made my entire life. 

And yeah. January 1st, 2001 was my official date of being actually in the business. So she's had the business since 1996. I've been visiting since 1996, but I took over as the owner of a company as a 28-year-old man in 2001.

Heather Bayer: Wow. I love that story. And I talk to founders of companies all the time on this podcast, and that's always a question I ask, How did you get into this business? But yours is one of the best stories, from fixing an AC unit to where you are now is quite astonishing.

We don't have the time in this short period to go through everything that’s happened over the next 20 odd years, 24 years. But give us a couple of the real turning points that happened over that 20 years. The times that went, Oh my gosh, that has really made a vast difference in the way we do things, or in the way people see us. Give us some of those highlights.

Steve Schwab: Yeah, I mean I think a couple of them started before I got into business being part of the Ranger Battalion and a fraternity. They both had these creeds and I didn't understand how valuable they were at the time. But they were certainly in my head, I memorized them both and was to be part of those groups that fed in.

And then also a moment with a fraternity brother of mine named Tito. We were trying to raise money. We were going to lose our house. We had to raise money to pay it off. And I was organizing one of the fundraisers in college, and I was doing the military thing. We've got to go, we've got to do this. You need to get up. I don't care if you have a hangover. He looked at me, he said Schwabi, make me want to go, don't make me have to go. And that was a big turning point in my leadership coming from the highly disciplined Ranger Regiment where everything is command driven, to now we're talking about how do we motivate somebody?

And that has stuck with me my whole life. So as I've gone forward, on the day that Saddam Hussein was captured, my main competitor in town who was not doing a great job left with everybody's money. All of the trust funds, all of the paychecks just gone, and they were actually driving to the border when I crossed the border going south.

And we suddenly quadrupled, I had this small team and suddenly I was in resorts and we were hiring faster than I could meet people, and the company wasn't doing what it was doing the day before. And my ability to lead people and speak to them about what our mission is, how we do things, was not scaling and I was failing. And I sat down, was wondering why I was failing. I could lead in these situations with young men with guns, or young men with beer. And I was failing here. It came down to that we had something that really held us together, that bonded us together.

And it was these credos, it was this ideology and it was these principles. And so I started writing down these ideologies and these principles about how we should be doing business. And it turned into ORANGE Credo. And that has really been foundational to how we scale and how I believe that being able to speak into our teammates and let them speak to each other about that and grow a culture of how they even communicate with each other and have these social norms is so valuable.

So that was a massive turning point for me. You go a few years later and I started to have the opportunities to go to other cities, and I thought I was smarter than I was. And so I was like, Man, I've got this figured out. I'm gonna go to San Carlos and do exactly what I'm doing here in Rocky Point, and I went to rubber stamp what I was doing, and I got punched in the nose, like I was not doing well with it, and I was losing properties. I thought, why is it not working, and then I went and lived in San Carlos for a month and realized the entire social fabric is different. The expectations of the homeowners are completely different.

The guests are coming for different reasons. These properties need to be maintained with a different mindset. And I suddenly understood that this is not a rubber stamp business of widgets. This is a relationship by relationship business. Person by person business. That every single market has a very different expectation. And when you dance with the devil, you dance the devil's dance, they don't dance yours. And so when you show up into a new city, you better understand exactly what's going on. And that's really hard to scale. And I'd done this in a few cities at some point and realized I can't keep up with what everybody wants in these different cities. 

So I'd read an article about this gentleman, this young man who was working for an ink company. He brought all these beautiful colors and all these new designs and the ink company’s old men, shoo’d him off. So he went and started his own ink company and he became so successful that they had to go buy his ink company before he ran them out of business. And I was like, this is the problem I'm gonna have, by building fantastic property managers, anybody who has some ambition will eventually do it themselves. How do I get be a part of that? 

So that was the beginning of finding fantastic people, bringing them in as partners in the other cities. And when they got their own skin in the game, the cities blossomed. And that was the beginning of this franchise model. Understanding that you can really only be a local in one place. To be truly deep, elbows deep, into the mud and the muck. Understanding exactly what you're dealing with. You have to be local, you have to be living local. You have to have a responsibility to your neighbors. And you have to be able to have conversations where you don't think you're learning anything, but suddenly you have context as to how to operate. And so that was a big part of this. That was another big turning point. 

And then I was just at a VRMA Exec [Executive Summit], I was sitting with two guys that were very chatty. And we went outside and we were standing there and I was like, I've got this idea. I was like, I take on other cities and give people equity. What if I could turn it into a franchise model and help you guys with enterprise tools I have and do that at a price that’s equal to or less than what you pay for it, but help you with efficiencies, training processes, give you the type of resources to compete against somebody like that. And they looked at each other, looked at me, and said, Yeah. And over the course of a couple conversations, they both ended up becoming franchisees and are both with the organization today. And it all took off from there. And that's where the franchise model came from.

Heather Bayer: I want to step back into this whole company culture and how this has become the cornerstone of your approach. How do you share that culture with your teams and have them buy into it, because it is, and I heard from a recording you made earlier on when you initially broached this with your team down in Rocky Point, and one of your teammates said, she called it this stupid book that you’re asking everybody to carry around and work from. So in every instance where they had a connection with somebody, they were to use these standards to drive those better relationships with people. Can we just come back to that and how that developed and people bought into it?

Steve Schwab: Yeah, but they didn't buy into it right away. It took some convincing and yeah, people were like, This feels weird. What are we doing? Yeah. I showed up with this box of the original ORANGE Credos and told Erica, who's been with me now for 24 of the 25 years and is like a sister to me and speaks very truthfully to me.

I gave these to Erica, I was like, I want you to use everybody. Everybody needs to carry these around with them, and I want you to have a standup meeting and talk about this with everybody every single day. She looked at it, she read through it. She's, You're gonna make all the employees carry a book with a picture of you in it and talk about it every single day.

She's, this is the dumbest idea I've ever heard in my entire life. She's, people are gonna hate you for this. She's, this is not a cult, this is not a religious cult, you cannot do that. I was like, Just please. And so we bantered back and forth and she was adamantly against this and made sure to let me know that she did it.

She complied. And that's really the beginning of bringing somebody along with leadership first, compliance, right? And you talk 'em into it and they go along with it. And so we started doing it and it did feel awkward at first. It felt awkward. Even for me, it felt awkward. And I would say about six months into it, I was getting a lot of pushback and people, different pockets and people quit over it. We had a couple of employees quit over this and made sure to let me know how stupid they thought it was. 

And about six months in, it's the middle of summer in Sonora and I walk in and I'm just sweating and I sit down on her couch. I'm like, Hey, how's it going? She's, I need to tell you something. And that's how Erica always starts off when there's bad news. I'm like, Oh oh, what is it? She goes, Man I just, I hate to tell you this. I'm like, what is it? And she said, It's working. I’m like, what's working? She's like, That stupid little book. It's working. She's, I was walking down the stairs….  And if you know our headquarters office, like you go down these stairs and to the right of it, it was kind of a blind corner. And there is what we call the bullpen, which is where all the reservationists happen.. And she's, I walked down and I'm about to go round the corner and I hear the two reservationists talking about how do they get into, or how do they start making this decision around how to take care of this guest?

And they pull out the ORANGE book and they start talking about the ORANGE book, and they make a really good decision. And she's, They didn't know I was there. And she's, I was a little bit angry about it because I'm being proven wrong. And then she goes, Just as if you've set it up, Steve. I go down to a meeting, an all hands meeting with all of our housekeeping and we have our meeting. And over in the corner I see a group of the housekeepers talking. And they’ve got the ORANGE books out after the normal ORANGE meeting and they're talking about how to take care of guests and cleaning and stuff like this. And they're reading from it - we have it in Spanish - and they're going through it. And they were talking about how to take care of their guests. It's like it's working. I hate to tell you this, I hate to admit I was wrong, but it's working. 

And that's when she went from compliance to conviction, because she saw that it was working and that stupid little book has been transformational in the way that we make decisions in the absence of leadership, which helps the company's reputation grow. Because the truth is, I think there's 10,000 decisions being made at work every day by every single person, and how many of those decisions do people not know how to decide, whether it's a good decision or a bad decision. And when you put principles in front of people they understand how to measure and frame their decisions as to what is expected and what's not expected. And the truth is, if you read our ORANGE Credo, there's nothing magic about it, there's no sort of special secret sauce about it. It's a collection of how we want to do business, how we think about the different stakeholders, how we're going to treat each other, how we're going to treat our homeowners, how we think about our guests, how we think about the standard in which we believe that we should be operating in, in very plain terms.

But talking about it every single day at standup meetings and their own takes on it, and not just like some ‘Rah Rah’ thing, we talk about where we fail and where we messed up and where we have to do better. And it's a reminder, even to me, it's a reminder to especially me, about what our standards are and how we need to be thinking about items.

In fact, there's this really great story. Spencer Farnsworth, who has been with us for 12 or 13 years now. Years ago I was really frustrated with a gentleman who we’d bought his property management company and he had misrepresented some of the trust accounts and had done a few things that were not on the up and up and I was mad. So I spouted off in the office, what I was going to do about it. And, he took me into the back room, into the warehouse and took me ‘to the woodshed’ and said, That's not what you taught us to do. That's not what the ORANGE Credo says. He's, if you start acting like that, you are not acting the way that you've told me to act and I will quit. He's, I expect better from you. And he laid into me good. And I looked at him and I'm like, That is the best thing that could ever happened to me today. The fact is we've been talking about it and expecting this for so long, that he was willing to go to his boss and hold me accountable the way that we all need to be held accountable, because the book is for me too. And it was a real win that day because the team will come and challenge me if they think I am out of line too. And that's what our real culture is, so it was really a good day.

Heather Bayer: How does this scale, Steve, with Vacasa? And you talked about the Rocky Point management crisis where you passed that little convoy of vehicles heading out of Rocky Point as you were heading in and overnight you grew four times overnight. Last week you grew…. eight times, okay?

Steve Schwab: Yeah. Around eight times.

Heather Bayer: My math is not great.

Steve Schwab: No, you're right on.

Heather Bayer: So, I mean I love the culture. I have been known to carry the ORANGE book around with me. It came with me to Austin last week and I do refer to it, even though I'm not a property management company CEO anymore, but it's still relevant. It's almost a book for life as well. 

Steve Schwab: Yeah.

Heather Bayer: But how do you go to this amount of scaling and take this culture? Do you have the time for people to take weeks to figure out that, oh gosh, this works. And what happens in that interim, because you've got a huge amount of owners out there who may be considering now, this is a bit of a turning point for me. I'm at a decision

Steve Schwab: Yes.

Heather Bayer: How do you use this culture to convince them to stay?

Steve Schwab: There's no magic bullet, full stop. And it is my job to do the work to convince all my new teammates that this is the right way to go. To get them to the conviction point and away from the compliance point. And that's gonna take hard work. And I'm going  to have to talk to them. We're going to have to meet them. Some of what we're doing is, we're getting ready to send out the ORANGE books to everybody, but that's not going to change the culture. The booklet itself doesn't change the culture. It's the conversations and the standups. It's them seeing that I'm promoting it, that I'm practicing it.

And they're going to have to see what I'm permitting. And, that's how we have to lead with this. Something that we're doing that's different now as we go into this is we have designed an ORANGE book for our homeowners explaining our ORANGE Credo to them about how we hold ourselves accountable and what they should expect from us, and asking them to hold us accountable to these ORANGE Credo principles. And the best way to keep a culture is to share a culture. Because when you tell everybody else what to expect from you, they're going to turn around and hold you accountable to what you said. Making sure that we're sharing our culture openly and, richly with all the stakeholders is step one.

It goes back to Tito. Convince them that they want to come along. Not that they have to come along with the culture and they're going to have to see, like Erica, that you may comply at first, but when you see it's actually working, you'll start to have conviction over it. And it's going to be a lot of hard work and it's my responsibility goes there.

Heather Bayer: Yeah, because you've built a team known for its loyalty and connection when, I haven't been involved for that long, but every time I see people it's a very cohesive team. So apart from owners, you've got these thousands of people who are involved. And I think going along from what you've just said, how do you scale that across all the teams and they're very different teams in different places. As you said when you went to San Carlos, it was a very different location, in operations, difference in marketing, difference in incoming guest style. With these different markets how do you address that?

Steve Schwab: You know the franchise model helps address a lot of that when you get somebody who's locally owned and operated, who's on the ground with them, who actually has stewardship over the relationship with the homeowners, with the guests, but also stewardship with the teammates. Somebody who actually knows them personally and cares about them and can take the principles we have, apply it to their own wants and needs of that market and make sure to apply it properly in the way that they see fit. That's how you scale this. And the truth is, it is gonna be a lot of hard work.

But when I’ve gone out and met the people who are at Vacasa, there's some really good people there. People who truly love the industry, love their homeowners, and I think they've been caught in a cycle that was built for tech, as a tech play, instead of built as a relationship play, as a relationship business and being able to hand them the tools and put them into an ecosystem that allows them to run a relationship business. And a hospitality business and a service business where they can make decisions on the ground. Where they can take care of their homeowners. Where you don't have to call another city and talk to somebody about a statement who's never ever seen your property or a work order of somebody who doesn't know you or is responsible for your happiness.

I think those sort of movements and changes to the environment. Pushing them towards this, locally owned and operated business is going to be critical to how we do this. And the truth is, Vacasa was moving that direction. This accelerates it dramatically. I think that also when you look at our team, and the truth is we have 86 people who have been with us for more than 10 years, 60 have been with us more than 15. People have been with us from the very beginning. We just released an article of one. The housekeepers have been with us since the very beginning. We've had two housekeepers buried in uniform. You start looking at who we have today on the team, and the new teammates.

The best thing that I think we can do is introduce our new teammates to the teammates already here. And have faith that the culture's going to bleed into the rest of the community, but intentionally, because the truth is, Heather, every single day is a battle for the culture of your business.

There's somebody in the business or outside the business that is looking to put their own culture into it, whether intentionally or unintentionally. A complaining teammate that's spreading poison, or whatever it is, it's a battle between you and them and you're pitted against them every single day.

And you better be intentional. You better stand by what you want to have your culture. You better be practicing it. You better be promoting it. You better understand what you'll permit, what you won't permit, because if you're not doing that intentionally you'll lose that fight and you'll lose that battle.

And you need to be stone cold, dead serious about what you expect, and what you'll permit, and what your expectations are. Understand that your culture is not just warm and fuzzy. We talk about being owner centric. That feels great. It talks about making the best decisions based on the homeowner's needs. It talks about the owners, my personal guest, but this is also an immune system to those who do not fit within the culture. And I will tell you that when I see the people who are our teammates, our new team is coming in. I see a lot of really great people who are going to fit in fantastically and really love this and are excited to be part of this. But it's still my job to convince them, to do the Tito Effect, to want to come, not to have to come along on this culture ride.

Heather Bayer: I think you've put that really well and it's something that we don't often hear when people talk about culture. It is warm and fuzzy and everybody's singing along on same hymn sheet, etc. But I love to hear how intentional you are about those that don't, and that it's not something that would be tolerated. 

Steve Schwab: Yeah.

Heather Bayer: That's the way to lead from within such a strong culture. I'm so looking forward to seeing what's coming ahead. But I want to just pick on this owner centric side of it, because this is what really drives, what has driven Casago is being so owner focused. How would you put this in terms of new franchise owners, people who are coming into the business to run a franchise? How do you share that concept with them that you are so owner centric and the owners are pretty much right unless, of course they aren’t, and you do say as well that there are times when owners aren't right and they just are not right to stay with the company.

Steve Schwab: There are times.

Yeah. If you really think about our homeowners, or the product owners of what we service, they have to fit within the culture too. I had a homeowner who signed up and we talked about owner centric and he was super excited about this owner thing. He has an air conditioner go out, like literally six weeks into our relationship with him, and it's [in] Phoenix.

And so hey, we get through this air conditioner place. He's, No, just let them go somewhere else. 

You have to get this fixed, why would you lose the money? He's, I'm not going to lose the money. 

What do you mean you're not going to lose the money? They're here for two weeks and they're three days into the stay.

He’s, You're not giving the money back. I'm like, Of course I'm giving the rest of the money back. He's, That's not owner centric. We're like, Whoa! Let's have a discussion about what owner centric means. That doesn't mean that we treat other people unfairly. That means that we're making the best decisions, on your behalf and being your advocate and how would we treat this? But the truth is, if I don't treat these guests well on your behalf, then I'm not doing what's right for you. And if you think that cheating people out of their money is a good practice, then we're not a good fit for you.

And we ended up parting ways. And we gave the guests their money back because that's not fair. And I told him the fact that we can't get this air conditioner compressor fixed the same day, because you're holding us back, tells me that we're not a good fit because homeowners need to be aligned with you. Otherwise you’ve got a broken company. The integrity of the business structure is broken when you have homeowners who you're afraid to have honest and good conversations with, and don't align with your values and your principles and your morals and your business practices.

Heather Bayer: I love that. Steve, what is the toughest part of what's ahead? And, what are you leaning on to meet that challenge? I know you have a ton of personal qualities and certainly experiences, but it's not going to be an easy ride.

Steve Schwab: No it's not. And the truth is we've built a great team of incredibly talented men and women. That's going to be where I lean on. Joseph Riley, who's one of the most brilliant minds I've ever run across. Incredibly tenacious. John Banzac, probably the most sophisticated operations guy in the industry, also brilliant. When you think of Anand, who's our new CFO coming from the Hilton Group and understanding franchises. Luke Brennan who is our chief of finance, he's super-intelligent, able to pivot and have great conversations. Katrina Wakefield, one of the best property managers I've ever met, who's come through our ranks and is now taking a lead role in this. I hate to mention names, because I know I'm leaving people out. Carlos Corzo, CTO, I mean, built Streamline on shoestrings and all the way through made a successful exit, with that business. 

I'm missing names, but there's an incredibly talented group of people who are true believers in what we're doing and making sure that we fulfill the mission of being a good steward of our teammates, of our homeowners, of our guests, of the assets that we need to manage, of our culture. That's going to be where we find our success is through those people.

Heather Bayer: You've been through a lot over the last 24 years, lots of ups and downs and triumphs, tribulations, et cetera.

Steve Schwab: Yeah.

Heather Bayer: Look ahead to five years from now. What are you seeing in that crystal ball?

Steve Schwab: My hope and the plan is that we have built a company of locally owned and operated businesses that has a very diverse portfolio of not just properties, but homeowners, of teammates, of the different types of franchise partners that we have from probably sophisticated to very local mom and pop style loving of people, with the right personalities for the right fits.

They all get to have this community in which they get to share ideas and conversations. And our reputation is that there are people who are true short-term rental nerds who love what they do, love the people they serve, and will do the right thing by you. And even if things go wrong, they're going to take care of you.

And if we focus on that, growth will take care of itself, because people will want to be part of this. And will it be growth? I hope so. But for today, right now, focus on the quality of the relationship, one relationship at a time and the rest isn't nearly as hard.

Heather Bayer: Yeah, I think the focus on relationships began to go out of the business a while ago. and you see it in sort of nuanced ways and across LinkedIn. You think, Oh, people are not focusing on the right things anymore. They're focusing on the pickleball courts and the murals and….

Steve Schwab: Yeah.

Heather Bayer: But you are bringing this back to the relationships that are at the core of this industry, and I thank you for that. I think a lot of people thank you for that. I've seen a lot of messages around on LinkedIn saying that this is almost revolutionary and a long time coming. So thank you for doing what you've done.

You know what, I love to hear….. and I'll put a link in the Show Notes to the conversation that you had with David Angotti, because that really charts the very beginning when you called him and said, what are the chances of this? And he said, I think you’re mad.

Steve Schwab: Yeah. Are you crazy?

 Heather Bayer: And for those of you listening, just go and listen to that as well, because it's a different side of the story. This is Steve sitting down with a very old friend and having a real conversation on where this all started with Vacasa. Go listen to that. Follow anything on Casago/Vacasa on LinkedIn, because you’ll hear the story as it goes, and this is not a story that's stopping I don't think. 

Steve, I thank you for what you're doing for the industry, for all of your team. You've introduced me back to what culture really is and it's been huge for me. I know from sitting down in that room last week and you just talked about STR Nerds, that's the title of the brainstorming….., 

Steve Schwab: We're both having a hard time with that word. A mastermind. There you go.

Heather Bayer: That was the word, I knew it had ‘mind’ in it somewhere.

Steve Schwab: It’s in there somewhere.

Heather Bayer: Yeah, so the Mastermind/Workshop that you did in Austin was absolutely terrific. And I think the more people that come back to this whole business of relationships in this industry, the better. But thank you.

Steve Schwab: Thank you. I hope to do a good job for the whole industry and be a good steward of what I've been given. I'm gonna do my very best.

Heather Bayer: Thank you for joining me.