VRS298 – The Seachange Vacation Rental Blueprint for Successful Property Management

As a property manager, it’s often reassuring to talk to others who are experiencing the same day to day issues looking after our owners’ properties.

From marketing in an ever-changing environment, delivering end-to-end customer service, responding to guest issues during a stay and making sure changeovers are done efficiently and quickly, it’s necessary to have a dozen balls in the air at the same time.

Andy Meddick from Seachange Vacation Rentals in the Delaware Beaches joins me today to talk about how he got into this business and why he is so passionate about it.

In preparing for our interview I gave Andy some sample questions so he’d have an idea of what we’d be exploring in our discussion.

Unfortunately, we ran out of time during the recording so couldn’t include everything so I thought it would be useful to extend the show notes this week to incorporate all his answers.

 

How did you get into the vacation rental business in the first place?

Kind of a similar story to a lot of property managers, but with enough of a kink to make it mine! Back in 2010, we owned two vacation rental properties in the small beach town that we lived in. We had them on VRBO but had worked our way through two vacation rental agencies to manage them and never could find the right fit and we were doing a lot of the booking and management work ourselves.

I had just gotten my real estate license in 2012 and was not happy at the sales brokerage I worked at.

An independently owned real estate company that has been around since the 1950s in our area was hiring for its vacation rental department and my partner suggested I apply for the job.

I did.

I worked at that agency for 6 months and sat in a bullpen with 15 other rental agents and 2 rental managers.

I don’t wish to knock that agency or any other business. However, let’s just say as a (new) employee and as a property owner (we gave the agency our 2 properties to manage), the experience was an eye-opener.

Given that I was new to the industry, I asked a lot of questions. Much of their business model did not make sense to me as a property owner, and as a rental agent responding to Guest inquiries and feedback.

I had my Jerry Maguire moment, wrote my manifesto and pitched the rental managers and owner of the company I worked at with a bold idea to reorganize their rental department.

They said, “Great ideas, Andy, however, we have more than enough business. We don’t need to do this.”

So, in April 2013 I left. I pitched my idea around and landed with Keller Williams Realty at the Delaware Beaches who did not have a resort rental department. I created one that I own, and 6 years later we’re still going strong.

We’ve grown from 5 properties to 50 currently.

 

What drives some owners to use a property manager rather than do it themselves?

I can’t speak for others. I’d have to ask our Property Owners individually and get back to you! Based on what I hear from prospective clients during listing appointments however, the reasons are varied but center around the following themes:

Time – not enough personal time to do the work involved.

Marketing – lacking the skills or technical resources to market effectively.

Money – the feeling that they could be earning more.

Damages – risk management for damages.

Operational – billing and accounting, housekeeping, Guest management, and maintenance.

Why do owners list with you? What are you able to offer that justifies them paying a commission?

 

The big question!

Owners who have the time, resources, and skills to do this job should not list with us. They can save the commission if they can do this themselves!

This job is tough. Very tough. It’s not just the plate spinning, ball juggling, daily challenges of operating a business with two sets of clients to keep happy (Property Owners and Guests), it’s the ability to focus through all the competing needs of running a vacation rental property and figure out what resources are needed, and where to allocate them.

 

Why should someone pay Seachange Vacation Rentals a commission to do this?

I built this business from the ground up as a property owner and a real estate agent. I perceived a very specific niche in the fast-changing vacation rental business that I felt was not being met in our area.

I felt (and still feel) that Property Owners consider vacation rental management companies as commodity businesses with nothing to add choosing one over another other than how high is their fee? I saw the results with our own properties of shifting our perspective from an either-or.

Either we’re in the real estate business, or we’re in the hospitality business.

I saw first-hand the agency challenges of saying one thing to an Owner and another to a Guest because the perception of needs is off track. This business may feel like you’re tapping your head and rubbing your belly at the same time trying to cope with an Owner wanting one thing and a Guest another.

We don’t see it that way though. We earn our commission by demonstrating to our Owners that if you do this – not this – then the guest will deliver this while having as happy a vacation as their personalities or stress level sometimes allows!

Focus. We are the focus and the collection of the required resources and skillset that an individual Owner(s) may not have the time or ability to do themselves. We do all the work. In return we deliver 80 cents on every dollar we earn for our property owners.

That’s the sales pitch.

The candid answer – our niche is that we understand that this business is centered around the Guest. I felt that the legacy approach to vacation rentals in small beach towns was not focused on joining hospitality with real estate. They were two separate businesses. I don’t see it that way. We manage the real estate asset for our property owners for sure, but we operate firmly in the hospitality industry.

 

Successful property owners/managers get that and adapt accordingly.

As the wonderful Mercedes Brennan at 1 Chic Retreat (big fan!) demonstrates with her business. Properties that are designed with the needs of the vacationing Guest in mind will not only deliver a quality Guest vacation experience but will deliver improved revenue back to reward the property owner on their continued investment in their property.

Seachange puts the focus on the business of hospitality with our property owners.

Not every property owner perceives the value in investing in their properties for contemporary Guest needs. Not every property owner wants the amount of direction we give. That’s OK. We’re a great fit for some and for those clients we deliver value on the commission we charge.

 

What changes have you seen in the business in your location since you started Seachange?

Where do I start? Wow! It’s not industry buzz to say that the vacation rental industry is changing fast.

I had no idea that what I sensed in our area at the outset would become the driving force in our industry. The Guest is firmly in charge and in hospitality, that’s exactly where it should be.

Technology is changing fast for sure.

I think the business, even without major regulatory oversight has become so much more professionally operated in the years since I started. Guests are driving this.

Guests are looking for consistency in the process when choosing a vacation rental.

 

They want the same consistency of the booking process, expectations of set standards in property conditions, maintenance, quality of amenities and so on.

Yes, Guests still seek out the uniqueness of a vacation rental property over multiples of hotel units, but they now want the consistency of quality and professionalism that comes with the more mature hotel industry.

Increased inventory. In our downtown beach areas almost every new property construction or tear down/gut renovation is going into vacation rental use. Part of that is the high cost of real estate at the beach – renting to offset purchase costs, but part is driven by the increasing exposure our industry is getting.

Many property owners see a vacation rental as a quick buck. Or they’re getting into the industry without considering it as the small business it is. We have a lot of inventory in our market. That’s changed for sure.

Each Owner needs to ask themselves if they really want to be in this business and run it as a business. Are they willing to put the investment into the appropriate startup costs and re-invest a portion of revenue back into the property to stay ahead of Guest demand and stand out in a crowded marketplace?

Yes, I’m including tea kettles, decent fry pans, and a sharp knife set in this too!

The industry has matured to the point where Guests are no longer happy with the ‘charm’ of a run-down beach cottage. That type of property may suit the family for their stay two weeks a year, but contemporary Guests want decent beds, well-stocked kitchens, central air conditioning, 24/7 Guest support, flat-screen TVs in each bedroom and so on.

Money. This is a huge, Guest driven industry with its multitude of diverse property inventory and local operational flavors that is attracting big bucks of venture capital and company consolidators. That did not exist 10 years ago.

 

You say ‘guest screening is a priority’ for you – how do you manage that in these days of instant booking?

Instant Booking is giving Guests mostly what they want but it’s not a panacea and will never remove the need for human touchpoints.

There’s a multitude of background technology variables such as savvy property copy and professional photographs that make Guest instant bookings possible. I’m not against the instant booking. From a sales perspective, if it’s 9 pm at night, kids are in bed, Guest is scanning vacation options, a glass of wine in hand, and the property description/photos answer all their questions, why make it difficult for them to book?

Allow that instant booking.

But, once you’ve experienced that tense Guest calling in to ask where my reservation confirmation is – am I being scammed – you realize that technology cannot replace the human entirely.

Hospitality is a human, people-driven business.

We call every Guest regardless of the stage in the booking process. During that telephone call, we run our screening and engage with the Guest to ensure they not only booked the right property for their needs but that we initiate a human relationship in a human-based business.

Our process is:

  • Guest Inquiry.
  • Call Guest directly to answer any booking questions and screen Guest.
  • Book Guest or Guest books themselves.
  • Confirm Guest booking with a reservation confirmation email and emailed payment receipts.
  • Email Guest a lodging agreement (short term rental lease).
  • Guest continues with our booking process steps…

 

For Guest screening, if possible, we have a telephone conversation with the Registered Guest (the ‘Primary’ – or the person making the booking) before the booking is placed and money changes hands.

If the booking platform that the Guest inquiry/booking comes through on does not allow direct contact between Seachange and the registered Guest before a booking is made, then we have to adapt a little and have that telephone conversation immediately after we get the booking alert from the booking platform. This is the same if a Guest has booked on VRBO or booked anonymously on our Seachange website.

We pull the Guest telephone number within24 hours of booking maximum (usually within 2 hours) and call the Guest to screen.

We have a conversational scripted approach to our screening. The result is to scan for red flags that the registered Guest will likely violate one of our rules. If the Guest does violate a rule, then if it’s fixable we work with that Guest to fix. If not fixable, we cancel the reservation and refund the Guest money.

An example of fixable rule violation would be a Guest wanting to bring a pet to a non-pet property.

An example of a non-fixable violation? Our property owners require a Registered Guest to be 25 or older and to remain in the property for the duration of the trip. If we find, for example, a group of high schoolers have booked a property online, then we either require an adult 25 plus be the Registered Guest, or we cancel and refund.

Most Guest inquiries and bookings are not a problem. Even where an OTA platform does not allow contact with the Guest prior to booking, our screening process still kicks in and fulfils the dual purpose of screening out potential problems and allowing the Guest an opportunity to chat with a live person during the booking process to ensure that they’re booking the right property for their needs so that they have a great vacation.

We adapt to the requirements of the listing platforms we partner with and the technology that Guests want to use for sure, but we do not remove the human component for many reasons.

Let me clarify using VRBO as an example.

Any Guest inquiry that originates on VRBO must be booked and communicated through VRBO. We’re not allowed to take the conversation off their platform. How then to effectively screen a Guest during the booking process when VRBO will not display the Guest contact information until after they’ve booked?

In comparison, if a Guest inquires through our Seachange branded website, we can get their telephone number right away and do our due diligence for screening pre-booking.

You see where I’m going with this! We use an OTA such as VRBO as part of our business model because they’re still a very effective lead generating tool and originator of new, first time Guest bookings for us. We follow the VRBO rules. This means adapting our business processes accordingly and post-screen as required.

 

How do you work with owners to maximize the return on their investment and stand out in a crowded market?

This is the best question! It really gets to the heart of commodity versus value add.

I keep saying this, but this is the heart of my business. Focus. This business is overwhelming! We have the benefit of business systems, technology, several years’ experience, good background of prior jobs and now thankfully a good network of other vacation rental professionals to add perspective, and yet there are times when you still feel as if it’s never-ending! I could not imagine a person busy with jobs, kids, lives in a city/state/country far away from their vacation home trying to juggle all this alone.

Where to start for the best advantage?

Our work started a long time before we spoke to our first client. It continues to evolve in line with our increasing experience and feedback from Guests and Property Owners. We always look for consistency.

Before starting the company, we scanned lots of Guest reviews online looking for consistency in Guest feedback – positive and negative. We’ve refined our new Owner listing appointment dialogue and onboarding as we’ve evolved the business.

The process, however, has not changed since day one. We put our emphasis on the Guest as the driver of the business and that’s how we work with our Owners to maximize their return on their investment and stand out in a crowded market.

One specific example? We believe that property owners put too much of the wrong type of furniture into their vacation rental properties because they’re not thinking from a Guest perspective or from a business perspective. Every purchase decision made or not made affects the bottom line in their vacation rental business. It’s no longer just their second home once they open it to paying Guests.

We help Owners with that focus advising on budget, design, operations, and returns.

We ask lots of questions!

We consult with and advise our owners on the following focus areas:

  • Why did you call us? If you’ve rented before, how did that influence your decision to call us?
  • Why does a property owner want to rent their property out in the first place? What are their financial and personal objectives for renting to vacationers?
  • Startup costs. We walk through a property and produce a feedback report for the owner(s) on what they need to focus on not only to bring the property to the needs of vacationing Guests but also our company standards. This report covers elements of interior and exterior design, how to stock a kitchen, appropriate bedding choices and so on. We cost this out for the Owner.
  • We then produce a report for the Owner that not only advises on startup items they could do to optimize their rates, but we also produce a financial proforma for their first vacation rental year with their optimized rate projections and their startup and carrying costs (mortgage, homeowners association fees, insurance, taxes, etc.). We advise Owners on rate-setting and timing of upgrades so that they do not need to incur all costs at once. We show them incremental increases in their rates and revenue as they incrementally make the upgrades suggested in our report.

For me, it’s second nature. I have a background in business and systems analysis and before vacation rentals, I owned and operated specialty foods retail and catering businesses. I’m used to parsing lots of information to look for consistency, used to thinking on my feet and prioritizing.

 

What are the 3 most important pieces of advice you would give someone wanting to start up a property management business?

  1. Be clear on the business aspect which really connects into your Why?Why this business? Why you? Why now? Why are you providing this service? Why are you not providing that service? It’s not enough to like people, like vacations, like real estate and so on. This is going to be a business. It must fill a non-commodity need for customers. It must make money. Otherwise, it’s just a very expensive unpaid hobby. Know the difference between a hobby and an income-producing business.
  2. Be very clear on where your revenue streams are. Protect them. It’s OK to branch out and test pilot other lines of business, but if your value-add is not there for your clients, or your clients are not providing the business value-add with revenue back in, then contract that service out to someone better resourced or skilled to handle it.
  3. Be organic. Be disciplined. Say no when it doesn’t fit, but have a good reason for no.

 

Seachange Vacation Rentals

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