STR Pulse: Does your tech stack up?

By Richard Vaughton

Ask any short-term rental property manager if they are perfectly satisfied with their tech stack, and then take a step back. Having worked with tech businesses, management companies, and owners, it’s clear that a can of worms remains just that – a can of worms! And let's not even mention the colourful language that follows…

When you add the challenges of guest expectations and the labour market, hospitality sometimes feels more like a hospital ward.

Labour market issues stem from macroeconomic challenges, and the only way to navigate them is by sharing the margin and fostering a rich culture across the company. This means being frugal where it counts and spending on staff retention and guest experience.

Profit margins are the lifeblood of all rental businesses and are even more challenging in seasonal destinations with uneven cash flow and activity. The big question is how to improve the margin and equalise cash flow while keeping guests and owners happy – simple, right?

Technology was supposed to be the panacea for all our woes, but it often stretches mental resilience to its limits. Tech, for the sake of tech, is utterly pointless. So why is the industry still grappling with margins and technological advances?

The answer is quite simple: money. The booking channel has long been considered a cash cow for managers who delight in doing very little, and it has a sufficient buffer to warrant a deep dig-in by tech. Despite what others may say or think, this is a low-margin business, and management is hard. Tech should facilitate hospitality, increase efficiency, and reduce work. 

In addition, OTA booking channels have advanced and introduced friction. In tech-oriented businesses, managers and owners must be aware of industry connectivity, politics, and revenue shares that govern them and nibble away at their margins behind the scenes.

Tech businesses invariably charge per property or a booking percentage, plus upsell and license fees. I have seen quotes with an eye-watering 400% difference per property and astronomical figures for big businesses. The business models presented for investment on pitch decks often need to catch up on their lofty predictions. Software developers are expensive, marketing is a beast, RRPs are seldom met, and no single software model fits millions of independent business models. This is largely why tech is often a poor product and poorly supported.

In an ideal world, a perfect management company would rely solely on OTA bookings, wouldn't need a website, trust imperfect dynamic pricing tools and guest apps, cheerfully accept high credit card fees, embrace free cancellations, and have owners who are remarkably understanding about financial reporting, payments, and occupancy.  

Admittedly, some companies strive to reach ideal tech goals but still have a long journey ahead with 20+ tech-facilitated categories in STRs. As we are in a global market, each tech company must tackle the challenges of data management, currency, reporting, and marketing in each country to succeed at scale. This must also align with a manager’s need for speed, accuracy, and brand development, squeezing the booking pipeline to stay afloat. Otherwise, they will be hyper localised themselves and struggle to develop.

So far, the tech questions remain unresolved, and with AI now being touted as the next big thing, we're looking at a new paradigm. AI is still in its infancy but could address many of these issues in the coming years, reduce workforce, and increase efficiencies.

Build margin

Everyone is seeking extra margin right now to counter the squeeze, so upselling platforms like Mount or Superhog, which provide a service and shared fees, are seeing great traction, or Directo, a Chrome extension, which is nibbling away at OTA control, adding direct booking. Or, if you prefer to avoid marketing departments and are OTA-dependent, we see companies like Otamiser helping to secure bookings ahead of the competition. Payment solutions that offer great rates are also able to leverage tech stacks and add value. Expect more of these.

All need to pay their way, however, and not suck hard-earned margin. The owner commission levels often do not warrant a lifestyle business; hence, we see larger companies with the capacity to amortise costs winning new business. However, they also have other issues in hyper-local markets.

So, build the tools, and they will come – but only if the savings and efficiencies justify the fees; remember (investors, too), it's the commission you are looking at, not the gross booking values, and owners and managers are your lifeblood, so treat them well.

Richard Vaughton from Yes Consulting is a Holiday Cottage Handbook Columnist.

Richard founded rental technology business Rentivo, which was acquired by Situ. He also exited two property management companies with close to 1,000 rentals. Richard currently works as an advisor for a host of businesses in the short-term rentals world, helping them focus on expansion, mergers and acquisitions, and technology efficiencies. 

Now based in the UK, Richard has worked in the Middle East, Italy, and Switzerland during his career, encompassing several industries. He was previously the CEO of a Finnish biotech, service, and diagnostic supply company. 

Contact Richard via email: richard@yes.consulting.