How Planting Seeds Turns into ROL (Return on Luck), with Hostaway CEO Marcus Räder

Alex Husner: 0:04

Welcome to Alex and Annie, the real women of vacation rentals. I'm Alex.

Annie Holcombe: 0:08

And I'm Annie.

Alex Husner: 0:09

And we're here today with Marcus Rader, who is the CEO and founder of Hostaway, Marcus, welcome to the show.

Marcus Rader: 0:16

Thank you very much for having me here. It's a pleasure. Yeah, ours

Alex Husner: 0:19

super excited to dive into your history and just all that you've done in the tech space. I know you've been involved with a lot of different projects over the years, but probably hosted way I would imagine is one of your most proud moments and ventures. It's just been it's been great for Andy and I to watch what you guys have done from afar and learning more about it as we've gotten to know you. But before we get started, can you give our audience a little bit of background on who you are and where you've come from?

Marcus Rader: 0:47

Absolutely. So I'm, I'm commonly known in the industry as Marcus from Hostaway. I go around to trade shows, and meet people. I have long blonde hair, which which people usually recognize me from and I wear where strange T shirts host away

Alex Husner: 1:11

with us as the blondies, you know? Gonna check it out.

Marcus Rader: 1:17

Yeah, now the reason I go to a lot of trade shows in industry is that I'm the founder of, of Hostway, property management system and channel manager. And we have the largest marketplace in the industry. So we got over 100 companies that are integrated with us, of course, the big ones, Airbnb, VRBO, Expedia booking.com, and about 15. Other OTAs are included there. But also, also a lot of really groundbreaking technology companies work with us. And we provide the services package to property manager to get to work more effectively, save time, save money and increase their revenues.

Annie Holcombe: 1:57

That's great. And I was looking at your, your kind of your history, your background, you You've a very varied background, you've done a lot of different things. But it looks like a lot of what you had done prior prior to host away was sort of in like, internet marketing optimization. So how do you think that that prepared you to ultimately found host away?

Marcus Rader: 2:18

I think, online advertising, the companies that I worked at, none of them really did anything at I've never worked at an ad agency, I've worked with selling software to ad agencies. But I definitely think having a solid 10 year, software background before starting a software company is an advantage. And it's something that we've seen over and over again, in especially in this industry. Because if you're going to start a software company, you're going to, you're going to want to start it around something that you know something about something that you're interested in, and something that the market is big enough. But then there's also the question of, Do you actually know how to build software or how to run a software company, that's another factor. And for a company to be truly successful, these two things, they need to overlap, you need to have the skills but you also need to have the interest. And, and that's where me and my co founders because of our technical background, we were able to make sure that we actually have the skills to build, build the technology that we're building. And of course, we were interested in this in this industry. So it helped tremendously to work at both successful tech companies and unsuccessful tech companies. Actually, it helps a lot more working at unsuccessful tech companies. Which is something a lot of employees don't don't appreciate. Because working the successful ones, you get promotions, you get more money, you might get rich, but you're gonna have real fun time and everyone's happy. But the truth is, you won't learn much, because the company successful, sometimes out of pure luck can have terrible, terrible product, terrible marketing, terrible management, but they might just be in the right place at the right time. And, and sometimes it's the success you're having in your team is contributed to actually the success of other teams, but you don't know it yet. Because everyone's happy when things are successful. And that's why a lot of successful companies go bankrupt. Because everyone's so happy that nobody has ever seen the sad times. And when the sad times come, everyone just gives up. Yeah, like you're running full speed ahead that suddenly you hit a brick wall. Yeah, well, you're gonna get a bit startled. But if enough people do that at the same time, then then there's nobody stopping them. And that's, that's why I think it's it's a good idea to join a couple of future failures as well, if you want to take career.

Alex Husner: 4:48

Yeah, you made a really good point before we hit play, actually, we were talking about city council meeting that I just got back from and you said, you know, we're talking about how politics come into play so much and, you know, bureaucratic Scituate Seems like that and how it you know, people just don't want to make a decision. And a lot of times things just you just there's no decision and then things just stalemate. But you had a great point that it's better just to make a decision, even if it's the wrong decision, because you will learn from that. And I think that's, that's interesting to see. Your take on expressing that is not always perfect, right? I mean, every venture that you go through, it's super important to have that information and background on what didn't work.

Marcus Rader: 5:28

Exactly. And it's a it's a numbers game. And so it's about No, no company has made the right decisions. Google is very successful. And they, they wasted a lot of money on a bunch of products that didn't work. But around 80% of the money that they invested came out with a very positive return. And that's the same with decision making, whether it's in a big organization or small. If you just make 80% the right decisions, things are going to be just fine. Right?

Alex Husner: 5:58

Yeah, yeah.

Marcus Rader: 6:02

Well, it's really not, but what what can be disastrous for any company that's growing? is, if you're you want to, if you want to make 100% right decisions, what it means is that the time to make the decision gets extended so long that eventually you're either your key people leave, or your customers leave, or you're simply run out of money. Yeah,

Annie Holcombe: 6:25

yeah. Yeah. That lack of lack of decision can you know, what does it they say? It's an analysis, paralysis by analysis, if you just sit around and wonder what you should be doing, instead of trying it and doing and iterating. And, and trying to make things better, you get a little complacent. And by the time you realize that you're complacent behind you're too far behind to catch up. So

Alex Husner: 6:45

I think that's, that's one thing that is sometimes overlooked with as much investment capital and everything that's coming into vacation rentals and vacation rental technology is that, you know, sometimes you don't have to be the biggest company on the block. I mean, sometimes as long as your company is run, that it's that hierarchy is there to make decisions quickly. That's really the most important thing at the end of the day. And I know, just for our business at condo world working, we're a small business, but it's to be able to make decisions quickly that I only have to go talk to a couple people, and or they trust me to make the decision myself. I mean, that really allows you to be so much more flexible than when you do have to go through all that red tape to get anything done. And I do I've seen this, I've seen that happen at other companies that they've gotten this great talent that they've recruited to go work for him, but they just get so frustrated because they came from company like what I'm used to, and then now to have to go through all these different processes. It's like you just you never get anything done. Yeah,

Marcus Rader: 7:41

that's right. I, unfortunately, making decisions and especially making wrong decisions. That's a skill you have to learn. Nobody's born with it. And I, I spoke to a fellow entrepreneur who had just received 1 million in funding for their tech company. And she asked me, okay, well, what, what am I going to do with this now? And I said, Well, then I got good news for you that 1 million will be will be very well invested. You will use it to hire the wrong people. And if you're lucky, you're gonna learn how to hire the right people. Yeah, please don't go out and think you're gonna hire the right people. And everything's gonna be good. Because you never hired the wrong people in the past. You need to learn how to hire the wrong people. Otherwise, you can never hire the right people. Yeah. Perspective she didn't seem happy is that it's a lot less stressful. Anything you do in life, it's a lot less stressful if you accept that the best people who are doing this thing right now. Yeah. They they achieved where they are because of a bunch of failures. They didn't achieve it to great success. Yeah, that goes for guitar playing for golf for skateboarding. Yeah, yeah, those things. You can't learn by doing it right. You have to learn by doing it wrong. And you have to do it wrong a million times to get it right in the first place. It's the same thing with with running your company.

Annie Holcombe: 9:07

Yeah. So on that, what do you think? What do you think for you? What have you done wrong? That helped you get to where you are now?

Marcus Rader: 9:16

I think raising a bunch of capital to hire the wrong people is definitely it's a double edged sword. I mean, when when investors go in, and they put in a lot of money into a company where I mean, to be perfectly honest, if if the if the management and the founders and the owners of the company, if they're fully confident in their ability to move the company forward. They're not going to talk to investors. There's there's not there's a lot of good deals on the table, but there's not going to be a good enough deal for someone who really knows what they're doing. But, of course, investors they don't want deals that they can't get it They're gonna take the deals that are second year, you know, those that will accept funding. Those are the ones we see read about in the press where people raise a lot of money. But they don't, they only do that because because they're not confident enough for. Sometimes rarely, there's a deal that actually makes sense. But it's just extremely rare. We raised a lot of not a lot, we raised actually very little by today's standards. But I think that's the most valuable lesson there. When you put in capital somewhere where it shouldn't be in the first place. Let's say you put it with people who who don't deserve it, because they don't have the experience, there's going to be something magical that happens. And usually what happens is, of course failure, but then you can learn from that and do it again. In our case, it wasn't a complete failure. In fact, that turned out to be a massive success in the end. But that's the most valuable lesson I got that. First of all, money can be a catalyst to make something else because it forces you to think in a certain way and act in a certain way those forces you to make decisions that you really don't want to make at all. And if you don't have the money, if you don't have the capital available, you won't be forced to make uncomfortable decisions, because you can't you can't have the money to make.

Annie Holcombe: 11:25

Money does provide some luxuries both negative and positives. Yeah,

Marcus Rader: 11:29

yeah. Yeah, I just wish I could say here that I wish we'd never raised any capital. But on the other hand, we wouldn't. The money in itself didn't help us get to where we are. But the lessons that we learned by raising capital and and the decisions we were forced to make, because we're extra capital is we couldn't have done it without, wow,

Alex Husner: 11:50

what a great person really good perspective that you're sharing that too. I'm curious, Marcus, can you go back to the early years? How did you start host way? Let's kind of go back to the beginning.

Marcus Rader: 12:01

All right, I was I started by becoming an immigrant. My wife and I decided to move to move to Canada. And we had never been, but we heard that it was great. And we decided to move here. And as we got here, I was looking around thinking what, what I would do, and I thought would would rent out one of our properties on Airbnb. And I started investigating it. Of course, to the listeners who are experts. This is gonna sound quite quite far out. But I was under the impression there was an app who would take care of everything actually. First, I looked into Airbnb, but I find out if I get properties around the globe. I'm not going to be able to use Airbnb for that because Airbnb doesn't clean Airbnb. Right? Yeah, you know, what if? Who's going to pay the bills? Who's gonna who's gonna take care of everything? Yeah. And I thought there's got to be an app for that. Clearly, Airbnb doesn't do it. But there's got to be an app for that. It's amazing. By the way, how even today there's no freedom. I forgot.

Alex Husner: 13:05

Most investors that get into it right now, I think the exact same thing that you did,

Marcus Rader: 13:09

yes, yes, exactly. So I, I felt okay, well, there's no app for that. Maybe there's a valid reason for not having an app for that. But it's certainly worth investigating. And I spent about six months investigating the market. What I found out was that you have to keep in mind the time though this was in 2015, when there was very clear division between what was called Airbnb, which were small units in city centers, and couches, couches and spare bedrooms. And it was an entirely different market from Destin, Florida. There was no Airbnb in Destin, Florida at all, there were vacation rentals, but they were not intertwined in any way like they are today. So I started researching the market then. And I started it was surprisingly easy to find, find property managers that were willing to talk to me. I just reached out I spoke to around 40 property managers in in the city of Toronto, and there were there were 1000s of them back then, yeah. And they all told the same story that this is a great business, but they need the tools to grow their manage their business, um, they specifically need a channel manager. And that's what we started building. Of course, you can't just build back because that requires you to have connections to Airbnb and booking.com and and verbo and Expedia. And those companies. They don't want to deal with you. Not if you're unknown and small. Of course, they want to deal with us today. And in fact, yeah, the lead partner of verbo was just in Vegas for a week celebrating with them with Expedia Explorer, and and we're a preferred partner for Airbnb and Premiere with booking.com. But that's because now we bring them good business. But back then when we were starting out, we weren't. And it's the same today, we want to set up a business in this industry, well, you gotta be someone to have a chance to be someone. But if you're a nobody, you're not going to have a chance to be someone, which was exactly the problem we have to overcome. And eventually, we overcame it. And we just started growing the business from there. Yeah. So that's how we got started.

Alex Husner: 15:31

We talk a lot about finding an anchor partner in a market as we're growing. And that's just a strategy that's worked really well, for us. And that same thing has happened that when we want to go into a new market, or want to build a new integration, if the company doesn't know of us, it's like, Well, who do you work with that wants you to integrate with us? And as long as we bring somebody with us to the table, normally, it works fine. But yeah, I definitely understand those struggles, because it's like, you have to have clout in order to get some of these things done. But you can't have clout until you have the experience, and you have the people that can vouch that they want to work with you. So it can be a tough thing to get started. And I'm sure a lot of companies, that's where they just mistakenly think that raising the capital is going to solve that kind of problem. And it's not I mean, money is not going to get you more partners necessarily. You just you need the experience, and really the relationships is what it comes down to.

Marcus Rader: 16:25

Yeah, yeah, well, I think there's, there's a certain element of luck in that. But it's, it's also about planting seeds. If you if you truly go out on a mission, and you want to accomplish something, you want to build a company and get those connections, it's not gonna end up looking exactly like you thought it would. But if you just keep planting seeds, just talk to everyone you can, even if they're the wrong person, maybe they know someone just keep talking and year after year, you keep talking to new people, just to make sure they know that you're you're on a mission here. Yeah. Then eventually, one of those people or one of those connections they have is going to bring something good in front of you. And when when that happens when you get your lucky break. It's not luck. Yeah, it's, it's, it may look like that. You may think, wow, what are the odds that this person that I spoke to happen to be married to this person who is actually working in this company that I'm trying to approach right now? Yeah, but if you just plant enough seeds, with enough time, and keep at it, don't stop, just keep at it. Eventually, one of those seeds is gonna sprout. Yeah,

Annie Holcombe: 17:38

it's connecting all the dots along the way, we talked about this all the time about how you know, you're building up, even if it's your personal branding, you're building it up over time. And it doesn't seem to make sense as to why you had to take the turns and twist that you did. But then when it all falls into place, it's because it was just meant to fall into place at that exact moment in time. So what you're saying is spot on. And I think along the way, too, you probably that's why you hire some wrong hires, you know, you just don't know what you need to know. And you think you've got somebody who has maybe the skill set, but they don't have the relationships or the connections that are already kind of built into their repertoire to help you grow. So kudos to you because it sounds like you just you had a mission, it got implanted in your brain and that you just drove and drove until you could get it get it out into the marketplace and make it a reality. Yeah,

Marcus Rader: 18:29

it was a long drive. Yes.

Alex Husner: 18:30

Yeah, there's a good phrase, I like to use the ROL, the return on luck. And that's exactly what you just spoke about. I mean, it. Yeah, it comes you finally do see that ROL? Well, when you've looked back, and you realize it was all those seeds that planted that. Exactly like you said, it could be somebody's wife that is connected to someone you're trying to work with. And, you know, somehow in friendships, you end up connecting those dots, but you can't connect the dots until your fraud or not forward to look back and do so.

Marcus Rader: 19:02

Exactly, exactly. And then you should still call it luck, because it makes it much more interesting story. Yeah, sure. If you got a terrible idea that nobody believes in, and you go and tell it to 1000 people, yeah. And then one of those people turned out to actually believe in it. And the other 999 didn't. It's not an interesting story, but you go around telling people how you pitch this to 999 people thatdidn't believe in it. It's much more interesting. If you said you know, I mentioned this to Joe. Yeah, and you know what happened just six months later. Yeah. incredible luck.

Annie Holcombe: 19:38

People want that story. They want that that love that. Go there. What is it little four leaf clover to pop up every time? Yeah, yeah,

Marcus Rader: 19:45

exactly. Exactly. But if you're if you're listening and just starting out don't believe for one second that luck is gonna come.

Alex Husner: 19:52

Yeah, not on its own. Definitely.

Annie Holcombe: 19:55

Sure. Yeah. You have to plant the seeds to grow the four leaf clover. So yeah, yeah.

Alex Husner: 20:00

So now with host way, I mean, at this point, what what do you see as what's, what are the main objectives at this point? I mean, you're very well established and you've planted those seeds and you've gotten in pretty good use within the market. But what what are your goals for bringing the company to the next, the next Hostaway?

Marcus Rader: 20:20

I think, at least for me, personally, what really motivates me right now is the way the industry is moving. There's a lot of consolidation going on. There's a lot of investments being made into the industry. There's also on property management level, a lot of changes coming ahead. And that really motivates me because I'm a I'm a wartime CEO, not a peacetime CEO. Yeah. So if everything is stable, and everything is fine, I'm actually bored. But right now I'm terribly excited. Not boring. Yeah, yeah, no, I want I want to see our competitors raise a lot of capital and then come and compete with us. I want to see other competitors raise a lot of capital and fail miserably. I really enjoyed that right now. That's honest. Yeah, yeah, I'm wearing, you know, really good position right now. We really don't need to do much. We're gonna improve everything that we're doing today. We're gonna we're gonna build stronger teams. And take over the world, like every other company is world domination. We reach a stage now where we don't need any any magical tricks to do it. We just need we found our formula. We just need to keep doing it.

Annie Holcombe: 21:42

Yeah. So how do you see as it relates to your competitors? How do you see your differentiators because I think there's a few others that are kind of operating in a similar space in that they are a multi multi solution with in one platform for a PM so they don't have to go. And we've talked to a lot of CEOs from different tech companies and talking about the volatility within the tech stacks, you know, there's consolidation going on, there's too many pieces of a tech stack for a PMC to have to manage becoming cumbersome to manage is becoming expensive. And so there's, there are a lot more solutions that are kind of an all in one. And so how do you see yourself against your competitive set in terms of your differentiators? Or maybe what's going to catapult you to world

Marcus Rader: 22:28

if you will. There's really, really two USBs domination, that we have one is the channel connections. I mean, just objectively speaking, if you if you wanted to take someone who's a premier partner of booking.com, and an elite partner, verbal, and a preferred partner of Airbnb, and has a direct API integration with Expedia, Marriott and Google travel, there's pretty much only one company in entire on this entire planet who has all of that really? Wow. Yes. I dare you to find another one. Yeah, that's

Alex Husner: 23:03

what is the one thing that people don't normally have that you have of those connections?

Marcus Rader: 23:09

Well, I mean, either you have, you have strong VRBO/Expedia connections, maybe you have you have Airbnb. But then then you don't have have the others. So so the benefit of going with a strong channel manager is that when things change, for example, tomorrow is May 11, Airbnb is going to announce some very big changes. Yeah. Now, if you were to be a preferred partner of Airbnb, you were to be prepared for those changes in advance. Now, if you were not the preferred partner, you would not have any time to prepare and you would have to be reactive now, for the clients. That means that whatever is going on in marketing, whatever is the new big thing, they're going to be six months behind a competition unless they using someone who's, who's the preferred or premier partner. Yeah,

Alex Husner: 24:00

that's interesting point. So what with that update that's coming tomorrow? Andy and I were just talking about this yesterday, what what do you think is going to be part of that? Are you probably you might know, I don't know if you can share, but any insights on that?

Marcus Rader: 24:11

I can't really comment on whether I know or not bad, I'm pretty sure considering that good. Good growth. I'm pretty sure they're gonna announce something along the lines of COVID is over and we're gonna dominate will dominate the world, over the world. But we'll know. We'll know. Tomorrow.

Alex Husner: 24:31

Yeah. It's interesting. In Europe, they charged 14%. Right. And so that's been a lot of the talk, I think is that that's going to come to the States to ask him both you and you because you might know better than I do, too. Do you think that that is going to happen in the near term?

Annie Holcombe: 24:50

We're seeing with some of our partners. I don't know I can't speak. I can't speak broadly. Marcus, you might know more.

Alex Husner: 24:56

Are they doing it by partner or is it going to be a blanket appointments and

Annie Holcombe: 25:00

market things. So far as I've seen that Marcus is, again, he's a preferred on Word. Right? No better.

Marcus Rader: 25:07

Yeah, so the fee structure. I'm not, I'm now gonna pretend that I'm not a partner of Airbnb, I'm just gonna speak as an outsider. If you look at other industries, they tend to try different business models and monetization models. For example, if you look at the car industry, how they're selling cars, the way the revenues are divided between the distributor, the factories, the one who owns the brand, and how all of that is, is separated. When one car company finds the formula, the others have it, and then suddenly, it's the industry norm, the industry standard. For OTAs, there already is an industry standard. And Airbnb hasn't been following it. And the industry standard is that you bring them business, and they give you a kickback. Airbnb hasn't been doing that they have been actually owning a part of the value chain. So they say, Look, you don't need to pay us at all. In fact, we're gonna pay you. Yeah, which is the opposite value proposition at some compared to booking.com, who says, You're gonna pay us because we're gonna bring you all the business. But they didn't go out and say we're gonna pay you. That's what Airbnb did. Now, the challenge with that, and this is purely my personal opinion mult as an Airbnb partner, I think the challenge is going to be on the stock market. Because if you've got an industry that's very standardized, where everyone's doing the same thing, it's going to be very hard for any analyst to suddenly work with a different business model. And I think that's why Airbnb just needs to play the game in the same way that everyone else is playing. Yeah,

Annie Holcombe: 26:55

yeah. What do you think it on that note? What do you think about there's a lot of new channels that have kind of come out the last I say a year, but they've been kind of been, I think, in modeling for longer than a year that are going in lower commission or lower fee to the consumer and much lower commission to the partners? Do you think that they're staying power there? And will that ultimately disrupt the way? You know, Expedia, booking and Airbnb are doing business? Or do you think that they'll ultimately get bought by these larger ones? So you know, again, going to the conversation of consolidation, what do you foresee is going to happen on the channel side of things?

Marcus Rader: 27:35

On the channel side, right now, things are pretty, pretty good. But they all face the same challenges that the big ones are facing. And that's lack of inventory. Yeah, people want to book there's nothing available to book. And so there's a lot of reasons for that. But let's say if I was managing an OTA and I wanted to compete with Airbnb, I'd say the easiest way to get inventory and get more inventory on Airbnb is to have more money than Airbnb challenge with that, though, is that Airbnb has a couple billion, so does Expedia and so does booking.com. If I don't have several billion dollars on my bank account, how am I going to be able to compete? How am I going to be able to advertise to get the inventory? Right? Right now, I don't need to spend any money on advertising to consumers? Well, any money is relative, let's say, with 10 million, you can get people to your website, and they will try to book but if you have nothing, sell them, then it's going to be. So I can see from an investor point of view that they want to invest in OTAs. But when I speak to new OTAs, I always say, you, and I speak a lot to them, as we have them integrating with us. You don't need 100 million today. But your business plan needs to have a path to getting 100 million. Because you won't be successful. Unless you have that you won't be able to compete with the marketing budgets of the Airbnbs. And the smaller ones of this world unless you have Yeah, that's very bad. That advice still stands today. It's just today, the marketing needs to be catered towards the property managers and property owners rather than the travelers. Yeah, yeah.

Alex Husner: 29:24

Yeah, they've, they've made it hard for everybody to compete. And I know here in our local market, I mean, we're considered or we consider ourselves I think I'd be able to to a hybrid OTA model that we're property management but we also operate our website as an OTA regionally and in a few other areas for other professionally managed properties. And you know, it's when we first started this venture about seven years ago, the plan was immediately go for world domination, get all the markets but quickly realized that that was not affordable. You know, we're we are not accepting funding and that was not the plan and probably won't be The plan, but we realized we had to grow much more organically than that. And that's, you know, for a company that wants to come in and become the massive OTA it's it would have, our process would be taking way too long for what their goals are. But we've been able to do it in a more curated relationship way that it's worked and is profitable. But it is definitely a challenge. And we can't go out there and just get properties from anywhere and think we can easily advertise them. To the extent that VRBO and Airbnb can. But you know, I think with Airbnb, one of the threats is I mean, if they if they are to raise the commission from 5% to 14%. You know, it's the don't build your house on someone else's land concept. I mean, where does that end? You know, it, they could come back to everybody in any of the channels could come back, but Airbnb

Marcus Rader: 30:49

and VRBO, they're already charging around 15 20% in the US. So if someone someone gets a credit card statement that says you paid 1000, to Airbnb, the amount that the property manager gets, they'll get, they'll get a line that says 900 minus 5%, or minus 4%. Right? Yeah. If if you have the total, the total difference between what the guest pays? Yeah, it's pretty much the same on all the OTAs. So there's, it's between 15 and 20%. The difference with what guest pays and what property manager gets. Yeah, though, it's not about more or less money for Airbnb. I mean, they get the same percentage overall in regardless of the payment model. It's more about the business model,

Annie Holcombe: 31:38

just about who's actually paying the money.

Alex Husner: 31:39

Yeah. So is it gonna? Is it gonna shift then do you think so that, because right now you have the option Airbnb that either the guest or the host can pay the traveler fee, but our use, is it going in the direction that it's going to be the host has to pay it?

Marcus Rader: 31:55

Do you think the host base already pays it today? I think Yeah. Yeah. Yeah. I mean, if you if you're selling a place for 900, and the guest pays the guest fee, the guest doesn't pay, man. They pay 1000. Right. Yeah, it's already been paid today. Yeah. And as a host, you get you get 150. Now, if we were to switch that around and say the host pays the fees, the host would still get 850. The guests would still pay 1000. It's the same outcome. It's the exact same money. Yeah, in one case, Airbnb takes 15%. In the other case, Airbnb takes 15%, or put it in another way to get

Alex Husner: 32:37

it for the property manager, they're making less because right now on Airbnb, specifically, we have it so that the guest is paying the traveler fee. But if that moves over so that we're paying that that definitely becomes a higher higher commission for

Annie Holcombe: 32:50

what are you? Are you marking your rates up to like our partners mark their rate up to cover that

Alex Husner: 32:56

fee? Yeah, yes, the guest

Annie Holcombe: 32:58

theoretically, is paying it. But ultimately, the Pm is losing it off the rate, but they're marking it up. So I think again, it's it's a markup game that and

Marcus Rader: 33:06

then yeah, and then and then also how, I mean, you're, you're managing properties on behalf of others, there's there's money at at least four different stages, one is in the guests pocket, they have 1000, then it is money that comes in to the property manager. So there's a stage in between when it when the money leaves the pocket of guests that comes into the property manager. Now that's relevant, because that's where all the fees, including whatever's being paid to Airbnb, five, or 15 can be paid either by the guests or the property manager or the owner of the property. And that's where you get to decide. And then there's a stage when money is in the property managers pocket, that's when they remove expenses. But then there's also another stage when it moves to the owners pocket. And that's another point where you can put in the extra fees, for example, a credit card processing fee could be removed from that. So in the end, you know, it's it's still 1000 and you get 850 Regardless of of how you divide that 50%. But it's about where do you put the fees? And what does the agreement with the owners say? Right? Yeah. And the money to the owners comes from the consumers. So you want to market it in a way that's attractive to as many consumers as possible and that's exactly what companies like Airbnb they have more data than any property manager they know if you if you have an extra if you have a high cleaning fee, for example, there's going to be less bookings, they know that because they they can look at the data points for that. And and that's where they're really good and that's where I think like Airbnb, I would make the case that if you if you give the person who's booking two options, one with an extra fee for Airbnb and one without an extra fee, you Yeah, higher price, I think that choose to run without extra fee.

Alex Husner: 35:03

Absolutely. Yeah.

Annie Holcombe: 35:05

Makes sense. We could, we could try to dissect Airbnb all day long. I think that's like the hot topic for everybody to discuss, it's going to be interesting to see what they do announce, and we'll come back and get your opinion on that. Marcus, obviously, I think you'll have some, some nice comments and commentary about how it works out and maybe the future of it. But I think, you know, for us, like, what we wanted to do is talk about, you know, host away and what you guys are doing to change the industry. And one of the things that we've been seeing a lot, and I kind of alluded to it a little earlier was there's a lot of consolidation going on, within the industry, and again, kind of to building what you already have in place these technology stacks that are kind of all in one, what are you seeing, and what do you think about consolidation, as it stands now, not only with the property managers, but within the technology side.

Marcus Rader: 35:54

So it's, it's important, keep in mind that anything that happens right now is determined by by the macro and micro economic environment that we have right now. So for example, it's easy to have consolidation going on, when there's a lot of capital flowing in. But what if that capital doesn't flow in suddenly it gets very hard to do consolidations. And that goes both on the tech side and property management side as well. Now, another aspect here is that one argument that I've heard on why consolidation and property management space isn't actually going to help is that when when a bigger company acquires a smaller company, typically what happens is the prices go up and the service level goes down. And that's across any industry. And I'm sure it's true in our industry as well. Any other thing would be just superficial. Sometimes you acquire companies, you keep standard bearer for a few years, so that you earn people's trust, and then you lower standards or raise prices, or both. Now, an argument that some people are making is that, well, if you remove on property management company, the owners are just going to switch to whoever comes in and says we're going to do more work for less money. So it's going to be very easy to enter the market, the moments almost being bought up, and then the value that acquire bought evaporates over time. Now, the reason I said that there's a very specific moment of history right now, is that that whole equation changes when you suddenly get everything turned upside down. We have the industry for the last 20 years have been focusing on how to attract travelers. But for the last 18 months or so, it's been the opposite. You're gonna get owners yes and or how to how to actually get the properties. Suddenly, maybe those acquisitions start making sense when you got a limited amount of properties. Let's say you have a beach with 50 beach houses. Now, if you acquired the property manager who's managing 20 out of 50 houses, then that's 20 out of 50 houses, they can't build more, there's no lots available on that beach, and they get something that nobody else can have, which is those 20 houses, if they can acquire another company that has 30, they'll have 100% market share. And of course, there's other beaches around, but still, whatever decisions are being made today, that will change the moment we go back to how do we attract travelers? Right now, there is a massive economic boom in North America, there's almost no unemployment at all. And and there's, there's, yeah, a lack of work force, basically everyone who had a job, but they have been able to switch to a more well paying job, right. And, and as a result of it, they can afford to take more vacations, and more expensive vacations. And as a result of that companies make more money, they can pay more dividends, so other people can take even more expensive vacations. That's why rates are going up. But at some point that stops unless we're going to see an unprecedented economic boom that lasts the next 10 years, which would be in history quite original because yeah, the economy started going well in 2011. That's 11 years ago, I was going to do another 10 years. Yeah, hard to imagine rocket launch, or are we going to settle down? Are things gonna get a bit worse from now on, people will start losing their jobs, they won't get a race. They won't get a promotion. They might even get laid off? Yeah. That's the question and that's that's when this consolidation, it changes the entire game. Yeah.

Alex Husner: 39:54

Yeah, just watching prices this year has just been like a roller coaster. I mean, we started out Early in the year, and I don't mean we, I mean, just the beach markets, the big vacation markets, so high. And then now, pace has slowed since about mid March. And I was talking to one manager today. And they said, you know, we're slashing prices and we plan to slash and more, I'm like, all the gains that you made earlier in the year now are essentially a wash if you get to that point. And it's really, it's creating two different problems. That one, the people that booked earlier in the year at that freemium price, when they get here is the product couldn't be what they were expecting for the amount that they paid. And then to when you have to drop the prices that low, are you getting the guests that we really want to have, and I think we were all, as an industry are in certain areas, very excited about the potential that COVID gave all of us to be able to raise rates and more than just an incremental hair. I mean, now now, we've actually raised rates to a lot closer to what they should be for as much as value as the destination offers and the product offers, but there's going to be a leveling out, I think, I mean, I think this is still going to be a good year, but it's gonna be more close to 2019. And then next year is just really even more of a question mark to me right now than it was a few months ago, just because of what's happened so far this year. So a lot, a lot of different changes come in, and I think further consolidation on on the vendor side, and tech side and property managers side, and a combined with a lot of new owners coming into the market that they're coming in and short term rental, you know, investors, and they're buying a bunch of properties, and they don't know what they're doing. And they're either trying it on their own, or they're bringing it to a professional company, but is an interesting time to be in the industry.

Marcus Rader: 41:42

Yeah, absolutely. The laws of supply and demand are really being tested, right? Yeah. Good. No, sorry. They're not being tested. But they're put in a very interesting perspective, because you got so many factors right now affecting both supply and demand exactly the opposite direction. So you just mentioned that there's people who are entering the market by investing into short term rentals, but at the same time, there's inventory being taken out. Yeah. If the prices drop, yeah, with the increase in rents, you can make more money on the long term side. Yeah, that's gonna take off supply. Yeah. And then there's people also buying to live in places, but then you have people adding to the supply. So it's, as I say, there's, there's so many factors affecting both the supply and the demand right now that is, is really interesting to see. And, and the price is, of course, the outcome of that equation. But the factors within that equation, they change so dramatically. So the price is basically just a side product. It's an afterthought. It's it's, but of course, that price has to be something that a large amount of people can afford to buy. Yeah, okay. Otherwise, it doesn't make sense. When when you're in a one week big beach vacation cost you half a million. And a lot of people will start thinking on whether they can actually afford

Alex Husner: 42:59

it. Yeah. And then might just vacation now once every two or three years, if it's going to be at that price. I mean, yeah, afford to do that every year now.

Annie Holcombe: 43:07

Yeah. Oh, I'm sorry, Alex, I thought you were gonna ask another question. So I think, kind of to wrap things up, Marcus, would love to get your thoughts on where you think your host away is going to be in a couple of years? Like, what is your direction? Obviously, world domination, we've established that and I think you're well on your way to doing it. But do you see guys getting into maybe more traditional hotel lodging? What is it that is on the horizon for hosts away?

Marcus Rader: 43:38

There, there's a lot of paths to take. And I'm not gonna gonna share anything right now. But I think we're gonna just keep doing what we're doing right now. And the reason I'm saying that is that I think it's a bit too early to start talking about hotels, long term rentals multifamily. There's, there's a lot of industries that are wondering how they get in, because everyone wants into this space, right. But that also means that a lot of big companies are going to invest hundreds of millions to make mistakes that I can learn from which in turn will save me hundreds of millions, which is why I'm not so excited about going and investing into into expanding into other areas right now because I notice people with more experience and more money than me who can do that, but I can learn from their mistakes.

Alex Husner: 44:37

Sure. Yeah. Perspective Well, Marcus, we we normally send you or we send our guests a couple questions to ask at the end. We sent them to you and you said that you would be open to answering any of them. So Annie, you get to pick from the list because I don't have in front of me.

Annie Holcombe: 44:57

Okay, okay. What would Marcus of today tell Marcus when he was 21. About your journey to where you are now?

Marcus Rader: 45:08

Good, good question. I think..,

Annie Holcombe: 45:13

hire the wrong people.

Marcus Rader: 45:16

No, first of all, go get a job. I mean, really get and get get a lot of work experience. Yeah. Because without that you won't have the perspective to manage other people. For example, when you're, if you just start a company as a 21 year old and you start hiring people, those people are going to have expectations on what a workplace is supposed to be like what a career looks like, Now, have you never seen that firsthand? You're going to see, to be very detached from reality. And you because you are because you haven't done a career yourself. So my first advice would be to do exactly that. But then, I think that the only advice that I would give us the one that I wouldn't even listen to. But it's it's ironically, to actually listen to the advice. My wife told me when I was starting host away. Hey, you should read this book. It's called the hard thing about hard things

Alex Husner: 46:14

I've heard about but I haven't read it. But

Marcus Rader: 46:18

yeah, there were a couple points in history when I was almost breaking down. And and it's 111 of those points. I picked up that book. And it really saved my life. And it saved my my company that I just wish I had read it when my wife said I should read it. I was too busy starting a company I think it would have saved saved me from a lot of heartache.

Annie Holcombe: 46:40

Oh, you listen to your wife more now.

Alex Husner: 46:42

Yeah, that's a great, yes,

Marcus Rader: 46:44

absolutely, absolutely. But one thing about advice that I didn't, I wish someone would have told me, maybe myself would have told me do keep in mind that the the background of the people that are giving the advice, for example, there's a lot of a lot of successful business people who go out and say, You need to focus on the culture. Or they go on to say, hire the right surround yourself with the right people. Now, this is the type of advice that is 100% Correct, because that is the only way of doing things and being successful. However, it's not the it's the type of advice that has a survivorship bias. If you put 100 people in a race with only one winner, that's the advice the winner would say. But the other 99 If you tell them the same advice, they still can't win. Because there's only one winner in that race. And and that's something that was very confusing for me when I started out was all the advice that was available. It didn't help me at all, because I was one of those 99 I needed the basically, if it's a race to run the advices run faster. Yeah. Maybe the advice is, hey, you're low on, on, on. Yeah, you need you need to drink more water. No simple advice, like simple advice. Yeah. To come and say, you know, just have a goal and aim for it. Yeah, that's great for that one person who actually won the race. Right? Yeah.

Annie Holcombe: 48:22

Maybe people are too focused on having their advice be more profound,

Alex Husner: 48:26

right. Yeah, it's more, you know, sometimes you just need the basic advice that could really change somebody's complete trajectory. Yeah.

Marcus Rader: 48:36

Well, the sad thing when you go and look at trade shows, and you go and look at when you listen to podcasters. Everyone wants to interview the successful people. But they have that survivor bias, they have the bias of success. Yeah. But actually, you don't learn much from that. Someone says, build a good company culture. What most companies need is money. Yeah, it's really that simple. You have expenses and you have income. And when you start a company or income is zero, and your expenses are. Well, at bare minimum. Because it's hard to survive without food and water and shelter, you need that that bare minimum, but nobody on stage is ever going to go and say that. Yeah. Because those that are successful. They are they have forgot about that.

Alex Husner: 49:27

Yeah. Well, I think your perspective on everything is just super interesting and insightful. And we appreciate all the learnings that I mean, I know I've learned a lot today and I think just really interesting to hear what you've told us and really appreciate you being so candid about it. I think, you know, planting seeds. I think that's the most important takeaway and it's just so true. I mean, the importance of planting seeds and knowing that you have to just keep doing it and that you are going to get that return on luck and that it is going to I only come back and you're gonna realize why all those connections were there in the first place. And that's really it's been a theme of why Annie and I started this podcast actually so happy to hear somebody of your stature and success. say the same thing that

Annie Holcombe: 50:15

Marcus, if people would like to get in touch with you, what's the best way for them to reach you?

Marcus Rader: 50:19

I would recommend LinkedIn just open up your browser and type in Marcus host away LinkedIn or even just Marcus host away, and you'll find me.

Alex Husner: 50:28

Yeah, include in the show notes, how to get in touch with you and link to your LinkedIn as well as to host away if anybody wants more information about the amazing suite of products that they have. And in the meantime, if you want to contact me and I you can go to AlexandAnniepodcast.com Or if you're enjoying the show, please go on our site or to Apple or wherever you listen to podcasts. Leave us a review, and we will see everybody next time.

Marcus Rader: 50:57

Thanks everyone.