State of the Industry

How was it? How was that brisket for the VIPs? That brisket was on point, legit. It was good. You don't expect that when you come to a place like this, but that was good food. This is the state of the industry. We did not do this last year. Does anybody know why? Because it didn't matter. Everything was still blazing hot at this time last year. Right. Russia haven't invaded the Ukraine yet. Everything was fine and dandy. Actually, maybe it was slightly after that. All right, well, it didn't work, but it really sucks now. So we're going to give you some insights. Pun intended. I got to give a big shout out to Kenny Bedwell from SDR Insights. We're going to share a tremendous amount of data with you during this session and some of it's actually pretty mind blowing. Would you agree?

Yeah, 100%.

So if you're investing and not leveraging data, you probably should start. And this would be a great point to get started. So you ready?

Yeah. Let's get it. So you gonna go to the next one.

Joey?

So this is pretty interesting, right? We were talking this morning about the whole saturation conversation. So there has been a Saturn 72% increase in listings nationwide.

So that's a huge number. That's.

That's massive.

I mean, from 2022 to 2023. Yeah, look at that. It's not just in Gatlinburg, it's not just in Gulf Shores, it's everywhere. And that's going to affect what we have to do from a tactical implementation standpoint to be able to hit numbers that we did the previous year. So look at this. That is flabbergasting. That is almost 800,000 new short term rentals in 2023 from 2022.

Now, I do want to say this because I feel like a lot of people are using this as an excuse, as the reason why their business is not doing well. Like we talked about this morning, there are ways to combat this, however. We have to start treating this like a business. There are different levels to this game, but the bar has just been raised. I think it was. Avery said it on a podcast a couple months back that the last couple years you could have thrown a porta potty on Airbnb and made money. Probably true. Right now it's time to really get serious. Use this data to your advantage. Because what's going to happen is a lot of people are going to get out, out of the game because they are not treating this like a business. It's that Simple. They're not investing in design, they're not doing their market research. They don't know their numbers. They half ass the whole hospitality approach to this thing and they're going to get pushed out.

Right.

It's just that simple.

So a lot of people think, I'm not going to invest in the Smokies. I'm not going to invest in Orlando. I'm not going to invest in Broken Bow. I'm not going to invest in Gulf Shores or Destin. I'm not going to go into Joshua Tree or Palm Springs because it's saturated. Does Burger King have the same mentality? No. You go to any street in the United States and when you see McDonald's, what comes next? What comes after Burger King? Usually a Wendy's or a Pizza Hut comes next. And then what happens is you end up with Taco Bell. You, you end up with everything in that QSR quick service. You got Chipotle coming in, you got Panera coming in. That's what happens. Because the King, just like the queen of the Smokies, Avery, right. People followed her into the Smokies. They all follow McDonald's because they the best at doing the market research. Burger King doesn't even do market research. They just follow them. Correct. They go into high traffic areas. I built a 32 million dollar glow in the dark miniature golf business in shopping malls. Do you think I went into shopping malls that had no traffic, that were dead, that Sears didn't even operate there anymore? No. I went into Opry Mills. If you live in New York. I was literally in Palisade center in West Nyack. I went to the highest trafficked shopping malls. How come these honky tonks are all on one street? Because that's where the traffic is. You just have to be better. There's good, better and best. The good are the ones that are just listed on Airbnb and VRBO and have no dynamic pricing and no Bria Faith or Kristen Sjogren design. They haven't invested into their properties. They just bought it and they listed it. It's what I call the Ronco. For those of you that are old like I am, you remember Ronco. Set it and forget it. The infomercials back in the early to mid-80s, a lot of professionals are managing their properties that way. They're managing like LTRs versus STRs. That's going to create a tremendous amount of opportunity. I believe as fast as we saw that 72% go in, we're going to see it exit the short Term rental market. Not to that extreme, but I think we will see a 25 to 35% of exit out of that market. The other thing that's interesting is I had conversations with Kenny about this. A lot of these aren't really new short term rentals. They may have been old school property managers that we see in old school markets like western North Carolina, like the Beech Mountain, Banner Elk Market, to where they came off of PMs that only listed those properties on their own websites. They weren't on Verbo, they weren't on Airbnb. So make sense to everybody. Here's the next piece of data that's going to blow you away.

This one's super important.

It's very important. Average revenue 2022 44,662 bucks. It went up to 43,000 or down to 43,078. How many of you have the slowest? Jan, if you've been in the business longer than Covid, remember this morning I asked who's been in it since before 2019? Earlier, how many of you had the slowest January or February in history? I did. Bless you. I had my biggest property, the $357,000 in revenue last year. I think it was like 43,000 combined between January and February. The year previously I did like 18. This year it was like 17 or 18,000. I don't have the exact numbers in front of me, so it's like a 60%, 65% decline. I can't make that up. What I mean is I can't make up that lost revenue. My pricing can only go so high during peak season. That's revenue that's lost. The real thing that we should be thinking about is time and nightly management. Does that make sense? Because when you lose a day, if you're not booked today, you cannot recapture that. So the days of you hearing me say raise your pricing, raise your pricing, raise your pricing are gone. Now we might even have to lower pricing to gain occupancy so we don't lose that night, today and tomorrow. Does that make sense to everyone? A lot of that has to do with the reality. Just like I was talking about your property this morning that I got to experience in Orlando. It is fucking nails. Him and Kristin nailed all of it. That's why he's crushing it. The average property that some of your members stayed in down the streets. Not crushing it, is it? No.

And I think I don't want people to feel like, because I think a lot of people look at that house in particular that we're talking about. And they're like, well, that's great because you spent all this money to make it look amazing. You can still make your properties look amazing on a shoestring budget. You can. You just have to use your brain and work with a professional designer.

Take a one bedroom apartment right here in downtown Nashville. Go to wallSauce. Go to Society 6. Once you've decided what your theme is, spend 600 bucks on a mural for an 8 by 8 wall. How many of you have murals inside your properties? Raise your hand. Less than a third theme, a bedroom. Just one mural that changes the way that a room looks. Look, my wife and I, we design on a thrifty budget. I don't spend hundreds of thousands of dollars like people do in Disney. We're running out of budget. In our Montana house, she pan painted mountains. Literally just four different shades of paint for like $57. For maybe 100 bucks, for two gallons of paint as opposed to spending. It's like a 20 foot wide wall. If I muraled that, that would be probably around 1200 to 1500 bucks. There's easy ways to increase your property, but you have to do those types of things to stand out. I use the term and it kind of resonates back to the Robinsons this morning. I believe our houses have to be Instagrammable. If our house is not Instagrammable to where somebody's going to actually look at the property. And it could be a boutique motel. I use the term house just in generalization. It can be a one bedroom apartment or condo, or it can be a massive mansion, but it's got to be Instagrammable. So what can you do? I think every one of you should go through the five key features of your properties and look at how Instagrammable that is. Then give it to your kids, give it to a teenager, because they're going to tell you the truth. Oh, that's ugly. You know, you need to change that couch or whatever it is. But you've got to have other feedback because we live in our personal bias and we need to get outside of that if we don't want to decline our revenue like this 100%.

And I'll give a shameless blank plug to my wife and her team up there. They've got like 50 designs that you guys can go take a look at. So there's no excuses anymore. But these are things that you have to pay attention to. You have to pay attention to design, you have to pay attention to pricing. Okay. I was one of Those folks. When I got started the first two years, I threw everything in Price Labs and I was like, it's just gonna do everything for me. And we did okay. Now I meet every single week with my managers and we're reviewing all of our properties and, and we're not just looking at this month, we're looking ahead at our peak season. How, how much is that filling up? Because when you start paying attention to that, we caught it at one of our hotels. I was like, dude, we're 80% booked for some of our peak rooms at one of our properties for our prime dates. And I'm like, we left some money on the table because we weren't paying attention. So it's not just looking at what's happening now. You really need to pay attention to what are your peak daily days and your peak seasons to make sure that you're maximizing those times to protect your profit through the rest of the year. Does that make sense? Is anybody doing that? Yes. That's like 4% of this group.

So a lot of you complain that your dynamic pricing tool has you priced too high. I imagine a lot of your Price Labs users, they're here today. I'm a Price Labs user, Mike's a Price Labs user. You need to go into the advanced settings and check your aggression level. A lot of people don't know that. They just set the low, the medium and the high pricing. And then you set some rules and you go in and set some seasons. If you don't know how to do it, go to Price Labs booth and literally ask them how to, you know, adjust the aggression level. Because that's something that is really important that most of you don't know about. Because right now, if you look at the occupancy, 59% in 2022, 51% in 2023, that 8% delta is huge. That means we have to pay a lot more attention to our shoulder seasons and our off seasons because we can only do so much in the peak. You should be maxed out adr wise in the peak. But really where the true hosts make money, because there's very few year round markets. You're sitting in a year round market. If you can get into Davidson county, he's in a year round market in Orlando, Florida. Right. But most of the markets are not year round markets. They're, you know, nine, 10 months, 11 month markets. The great hosts are the ones that are profitable in those off months. And I can tell you that house I shared with you, that was down, I'm running Facebook ads, I'm doing email marketing. There was just nobody going to Gulf Shores, Alabama in January and February. And I even lowered pricing. I have a ski in, ski out, sleeps 20 beach mountain house that some of my mastermind members have been to. That's $399 a night right now. It was 2000 during ski season. I hate that. Pains me to say that, but I can't lose those nights. So what does that do to you guys? And me, I own a four bedroom. You have a five bedroom, you got to fucking charge 299 or 199. It sucks. But if you're worried about making your mortgage payment and you're not going to just let the property sit there, you have to be aggressive on your pricing. This in the shoulder season, unfortunately it's not the same as 2021 and 2022.

Let's go to the next one. This is interesting, right? So I feel like since, I don't know, 2019, 2020, there was this massive surge of rental arbitrage. It was like the sexiest thing to do is get into these apartment buildings. And if you start to look at the trends now, it starts starting to come down over the last couple years, more and more people, if they're going to stay at a short term rental, for the most part there are exceptions and certainly traveler profiles that are cool with staying in apartment buildings, but most of them want to stay in a single family home. They want their own space, otherwise they would just stay in a hotel. So it's just interesting to see how you really have to pay attention to trends and look for the long term. Because if you're going to put, put up some money, whether it's an arbitrage deal or purchase a property or even manage. Am I sliding into some type of fad or is this going to work long term? Right. So understanding your guest avatar. We talked a lot about the house in Florida. Let me talk about a property in the suburbs of Boston, Salem, Massachusetts. All right. Our demographic base there is completely different than Florida. We get small amount of business travelers. Every once in a while we'll get a travel nurse. But it's mostly a demographic of 25 to 45 that likes this hip, eccentric community. It's got a lot of history, it's got the witch trials, has a huge art culture. So when we're designing properties for that market, that's who we're catering to, to give them that experience and put in those Instagramable features and those Instagram walls and get a Lot of social media engagement and, and get people to share it. Like, if you're not doing those simple things, you're leaving money on the table when people check into your property. And Mark Simpson is the master of this. I'm gonna show you guys my numbers tomorrow on what our direct booking percentage is. It's ridiculous. Because of our boy Mark. Simple thing you can do that costs you absolutely no money. We like to do a little welcome gift. But even if you just put out a little card that just thanks the guest for staying with you, by the way, here's a QR code to book direct with us next time and save 10% and start to generate repeat business. It's so simple. We think that we have to do all these crazy, complicated things. And yes, it helps, but are you doing the basics? Are you doing the little things to create a good guest experience and just be like, hey, if you're going to come back or you want to refer somebody, here's a code to get our best rates available.

So that's mindset, right? A lot of people, but Mike, I have a one bedroom and my average ADR is $127 a night on the weekends and 98 on the weekdays. I can't afford to do a welcome gift. Literally go to any place online and buy those thank you cards and just hand write 50 of them or even just 20 of them. And if you're remote, send them to your cleaner and then say, hey, go to Walmart and just pick up, you know, a spend $50 to buy some prepackaged blue diamond almonds or something like that and literally just put two packs of almonds next to a thank you card that will cost you literally like 375 for every guest that comes in. But there's a difference. If you have them pre printed or handwritten, it's all in the execution. It must be handwritten. You know, I've got Christina over here that does charcuterie platters for her guests. I love that because I love charcuterie. I would be blown away if I walked in. I've never walked into a house and had a charcuterie Airbnb and had a charcuterie platter waiting for me. But that's not that hundred dollar a night ADR. They're probably in the 800, $900,000 range in their ADR. Is that accurate? So you want to make it commiserate your investment to what your return is in the property. Does that make sense? But you have to do something. If you do Nothing right now. Avery talked about the last session about, oh, man, we walk into these properties, they don't have a guidebook, they don't have anything that sucks. That puts you on the level of a Holiday Inn, right? So that's what we've got to level up. And that will dramatically increase your direct.

Bookings, in my opinion. It honestly puts us below a holiday in. Because the advantage that Holiday Inn has over this industry is you know what you are getting into when you book a Holiday Inn. You know exactly what you're getting when you book a Motel 6. You know exactly what you're getting when you book a Four Seasons room. In my opinion, one of the biggest risks to this industry is the inconsistency and experience.

So amen. Can I get an amen on a Monday?

Nobody in this room is pulling us down. And the next slide is interesting because I've been saying this for years on the podcast, when people say, where do you think this industry is going? I've been saying, and Ian, I have been saying this for years. The bar is just going to continue to be raised and the standard experience that guests are going to expect is going to continue to be raised. And it's evident now because people are starting to step up and review. Scores are actually going up because people are catching on that like, hey, this is actually a real business and I can make some real money if I do it the right way.

I just did some reels on that consistency in a hotel. I stayed out in Bozeman, Montana. And why? I'm a Bonvoy guy and I stay at Marriott every time I travel. Unless I'm with my mastermind group in larger properties, I refuse to stay in Airbnb. I own them, but I don't stay in short term rentals because there is nothing that's consistent. And your house that I stayed at versus the other, the exact same house, completely different experience. And that it will be our demise as an industry. Specifically for business travelers, corporate travelers, you know, nurses. It's a little bit different, you know, with the leisure travel family that's traveling, that doesn't truly understand how it works. But when you get those people that are consistent travelers, they're going to end up having problems with that. So people ask me, why did I start doing this? And honestly, it wasn't because of the money. It's because I need all you guys to level up. I need you to be closer to my level because that's going to help me make more money on my investments and it protects the Security of the industry. Mike and I are going to have 9,000 people at a conference one day. The more people we can reach, the more that we can impact. The more that we can level up, the more that it benefits us. Selfishly, it benefits everybody in that room. That's why we give away every single thing. And I will give it away to my neighbor, where a lot of people have this, you know, scarcity mindset of, oh, God, I don't want to teach my neighbor, because then they're going to be as good as I am, and then they'll take my guests. No, they won't. They'll be able to raise their rates, and then I'll be able to raise mine even more. It's like going from coffee bar. How many of you have coffee bars? I'm not going to say I was the founder of the coffee bar, but I think I was the one that probably publicized it, branded it. And then there was a lady to boot camp a year ago that said they did a waffle bar. I said, I'm stealing that. You know, two weeks later, I implemented the waffle bar. But now you guys are doing waffle bars. And you know Mike Clinton, when he went, remember in the Mastermind, he posted and he went to New York or something, and they have the cereal stuff now I've got cereal cups in every one of my properties. And now I'm going to the milkshake bar. I just have to keep leveling up to stay one step ahead of everybody else. But you guys are rising with me. That's where everybody in this room can level up our entire industry. Share what you've learned here. For those, whatever, six or seven hundred people that are on the waiting list that couldn't get tickets, share that with them. Share it on social media. We want everybody to get better. That's a big number. That's almost what's 1%, 3/4 of a percent, right? That's throughout the entire country. We want to see that at over 4.8. We want to get that to 4.9 next year. We can all have play a role in that. I can't say this enough. For those of you that are new, this is 2019. And in no way do I want to scare anybody, because 2019 was pretty good. 2018 was pretty good. It just wasn't 2021 and 2022, we're never going to see it again. If you bought property in 2022 based off of 2021 numbers and you do the same thing that you did in 2022, then you're going to feel the pinch. There's no question. If you bought property in 2022 based off 2021 numbers and you're leveling up, you're going to be okay. That I promise you. And a lot of you need to find those cost efficient things that Mike was talking about to be able to level up. And there's a thing in the marketing world really coined by a gentleman named Russell Brunson called stacking. The more small things that you can stack, the more value you're going to create for your guest. And I brought this up in the session Mark and I did yesterday. I'm going to give you one real quick. Hey, my name is Bill Faith. I'm the owner of Sunset Point down here on Smith Lake. I'm really excited to host you and your family this upcoming summer. This is a family owned property that me, my wife Bria, my two young daughters, Gentry and Oakley own. And we know how challenging it is when we go to vacation rentals sometimes and you don't have everything that you need. So we, we fully stocked the house and we are going to be available for you 24, seven for anything you need. Now you have my personal cell phone number. Please don't hesitate to use it anytime. We look forward to hosting you. That's a legit customized video right there in 24 seconds. I appreciate you clapping, but I will clap for you if you start doing that for your guests. Airbnb and vrbo, we get their cell phone numbers. That's customized. That's not. Do it once and send a generic video to everybody that books with you. That's hey, Justin. Hey, Tom. Hey, Tim. It's literally customizing that and then texting that to them. You know what you're doing? You're starting the personal relationship. It is not fucking scalable by Vacasa or Evolve or your local property management company. That is a competitive advantage that costs you nothing besides 30 seconds of your time. And here's the thing that really sucks. Less than 5% of you are going to start doing that when you walk out of here. Let me say that again. Less than 5% of you are going to do it. This does two things. You start cultivating a personal relationship with your guests and you're earning the opportunity to fail. You will be able to recover from a dirty pool, an unmade bed flies on the window seal that your cleaners missed. Way easier when you start that relationship. And they can put a name with a face. And you notice what I did. I Mentioned my wife and my daughters. That is so important because they all play a part in my business. And then when a family's coming, they can connect with that. Everything in marketing is about positioning. That is the first step.

The one thing that I'll say too, if you are at scale, I am not one that's going to do that. I'm just telling you right now. However, a lot of you in this room are between 0 and 10 properties. If you're telling me that you don't have time to do that, you're full of shit. You are. If you have more properties, a lot of people, they get nervous when you start to scale. We have over 100 units now. People think, oh my quality is going to go down. No, it's not. You just have to set your standards and create that culture for your whole team. Simple example of a welcome gift that was less than $10. I was in Orlando last week. I went out to Walmart and bought in bulk, like 10 picture frames that said Disney 2023 on it, a keychain and a magnet that was less than 10 bucks. And each one of those is going to get a handwritten note so that they document their amazing trip with us and that magnet and that picture is going to go on their fridge so that when they think of that Disney trip, they're going to think of that sick ass house that they stayed in and they're going to refer other people.

To it and it's unbranded but they're.

Still going to remember you 100% and you could take it to the next level and brand it with everything else. But that's less than 10 bucks on a picture frame, a keychain and a little magnet from Walmart.

So for those of you that do sales on my video, and to his point, I don't do that for every single booking. It's literally over $5,000 or higher, which are like 85% of my bookings. So like if it's a $1,100 two night stand at shoulder season, I don't do that. I don't have the time to be able to do. I mean, I think today I've taken like seven bookings. I can't do seven of those today, unfortunately. But if one of those yesterday that came in, if you're in the marketing thing, I got a $14,800 booking. What do you think? The first thing I did when I got out of that workshop, I shot that video and I texted it to that guest. So you think about sales that's very highly qualified. The value gets more attention. This is a big deal for us right here. So we're running out of time. 75 days on market is the average property right now that is up 17% over 2022, but it's still 18% less than 2019. That gives us better negotiating power. All of our agents out there, Right. Do we have more power today than we did a year ago? 100%. So, like, when I was looking at my house in Montana, my most recent purchase, I was only looking at properties that had been on Zillow in. Because I hate realtor.com for longer than 30 days because I wanted to have some negotiating power. It was listed at a million. I paid 975, and I got $40,000 in furnishings with it that were not going to be included. Properties are still selling faster than 2019 right now. That means we can't wait too long. But for me, I want to have the negotiating power.

25% more inventory year over year. But 11% more homes sold than in 2019. Go to the next one. Over 17% of homes sold in the last 30 days had a price reduction. I don't know about you, but that feels pretty freaking good. Because I felt like sellers had us by the you know what for the last couple years, and there was zero negotiating power. Now it's like, wow, I don't have to offer 50 or 100 grand over asking with no inspection like I was seeing some people do. Which was freaking nuts to me.

This is even bigger. 42% had concessions. Where's Tyler Coon from Savvy Realty who sponsored our opening party last night? Is Tyler here? He's like the king of concessions. He's on the third floor. You're up there, Tyler. Somewhere. I can't see you, but thank you for sponsoring the party last night, my friend. Thank you. Investors purchased 46% fewer homes in Q4 of 2022 than 2020, 20, 2021. Why is that? Economy. Who's afraid of the market crashing? The economy going to shit in the next six months? Raise your hand. Not very many people. That's awesome. You know what? We've been going into a recession for a year now. A year. Has anybody ever had a heads up that we're going into a recession before? Never. 2008, no. Stock market crash, no. Sales and loan. No. We don't get warnings. It's all media bullshit. I don't know that it's gonna get any worse than it is right now. When's the Best time to buy real estate, right? No, it's not now. It's right the fuck now. Avery just wouldn't say it. It's right the fuck now is when you should be buying real estate. If it pencils, if it cash flows, if your performance says it's a good investment today, if it. I promise you it'll be a good investment five years from now. What does this mean for you? What's your outlook?

I've been buying real estate, and I've been in this for. Since 2017. So again, going back to 2018, 2019. Like, the numbers worked then, they will work now. But you have to know your numbers. I know I said it earlier, and I'm gonna keep drilling that into your head, because no matter. Like, I bought the biggest deal in my life in December when apparently nobody else was buying deals. Bought a $9 million deal in December. Biggest deal ever. Interest rates are higher than I've ever bought a deal at. But the number is still penciled, and I'll show you guys all the numbers tomorrow. But as long as the numbers pencil, I don't care if it cost me $9 to go make 30. There just has to be the spread, and there has to be enough spread so that even when the market compresses and even demand shrinks, and even if I had to offer concessions and lower rates, I still win. Because I'm patient. I'm patient, but when I find the right deal, I move immediately. Does that make sense so you don't have to buy every deal that you analyze? I analyze a lot of deals, but I know exactly what I'm looking for. And when I find it, I submit the offer right away. Money loves speed. So you have to. When you understand your numbers and you know what you're looking for, you can execute. It's when you dilly, dally, and you wait and you second guess yourself. He and I are coming in to go buy that deal immediately. So when you wait, you lose opportunities. So just know your numbers, get around the right people. There's so many phenomenal people in this room that have a ton of experience. Come find Bill and I. Happy to answer any questions. But you have to execute. You got to move with speed. You got to know your numbers.

Here's what I'm going to tell you about your numbers. You need to have the right Performa, not just any free thing that's out there on the Internet. You better get validation on that. There's too many people that think they know their numbers, but you're not Getting external validation that could be from another investor that you're sitting to next door. You got to put somebody else's eyes on it. There are still 30% cash on cash deals available in the United States right now. They're available in Canada as well. Those are really hard to find. Who's the best person that can find them in this room? 100%. 100%. Took me two and a half years to find my Montana property. Two and a half years. Every single day. I'll bet. I ran 100 performas and I had Kenny look at them. I had John Hodge look at them. I'm having other eyes put on every single deal that I buy. Where you guys will make mistakes is when you go it alone. You can not do that. You need to have validation from somebody that knows what they're doing. You can make money in 2023. You will make money in 2023. It will be a great year. If you have the right mindset that it's going to be a great year. So let's do it. Are you. I don't think they're with us. Are you fucking with me? Let's go. We're gonna fucking crush 2023 because 2024 is gonna be even better. I promise you. There is no better day to buy real estate than today. Think about the ADR and figure out what your expenses are and how much money you're losing every single day by not making an investment. We just have to be super prudent with what we're doing on every single deal.