Revenue Managing from the Driver's Seat, with Wheelhouse CEO/Founder Andrew Kitchell

Alex Husner: 0:02

Welcome to Alex and Annie, the real women of vacation rentals. I'm Alex. And I'm Annie. And we are joined today with a very, very, very special guest today, Andrew Kitchell, who is the CEO and founder of wheelhouse. Andrew, welcome to the show.

Andrew Kitchell: 0:17

Cant wait to be here be excited to say, say hello to you all this morning, hang out.

Alex Husner: 0:22

I have been doing the podcast now for about 10 months. And we've put a lot of thought into how we would potentially bring sponsors of the show on and knowing that we really want to stand behind any companies that would want to put their name and their brands on our show. And we've come to that point. And we have found the perfect company to partner with and that is Wheelhouse. So we are so excited and grateful to be working with you and to have you on the show today. So we can hear more your story and tell our listeners all the amazing things about what Wheelhouse does.

Andrew Kitchell: 1:07

Well, and likewise, we are honored to sponsor your show, we think what you're doing is amazing, you all are incredible advocates and voices for our space. And we recognize that so extremely excited about this partnership.

Annie Holcombe: 1:20

Well, thank you we as Alex said, we were pretty methodical about who we wanted to talk to. And, and one of the things that we've always liked about you and your team is the authenticity. And if you've listened to any of the podcasts that was my chosen word for this year was just to be authentic and the authenticity. So we're very drawn to people and to organizations that are like that from top to bottom. And so I think kudos go to you as a leader for setting up an authentic group. But we're just thrilled beyond the moon to have Wheelhouse to be our brand sponsor. So welcome. And I think we want to get started and probably a lot of people know Andrew, but maybe they don't so just give us a brief synopsis of your background and how you kind of where you are now and what what wheelhouse is about.

Andrew Kitchell: 2:05

Great. Um, so yes, I'm Andrew, I'm the CEO and founder wheelhouse, I'm probably most relevant for this audience I've been in and around the short term rental space for almost nine years, it's been a very interesting nine years first started with a team that was called Beyond Stays at the time, it was an early operating company trying to say hey, you could put a brand on urban kind of apartments and homes and and really kind of create an elevated form of Airbnb. we pivoted that company, I was brought in to be the CEO there and we pivoted that company to something called people are probably much more familiar with which is called Beyond Pricing. I ran that for a year before taking some of the data science team and ultimately starting two companies at the same time, a little bit of a crazy move. One was Wheelhouse. And the other team was a team, kind of a an hospitality brand we built on top of a software stack that was called Lyric. So the short story we'll talk probably about a few dimensions of these different businesses today, but between Beyond and Lyric other operating codes and Wheelhouse. I've always say I feel very fortunate to have seen the short term rental space from so many different angles.

Alex Husner: 3:14

And hopefully, and I've just gotten to know you and wheelhouse really in the last year. And actually, we are now just a week out from DARM the data and Revenue Management Conference, which that is where you won a major award last year. And I think that's kind of when all of a sudden everybody was like, Whoa, you had been around but then all of a sudden, you know, the cake was lifted and everybody was talking about wheelhouse. So exciting to be there next next week with you guys. Yeah, we're aiming for that repeat. Yeah, so I know. Are you entering in the contest again?

Andrew Kitchell: 3:45

Yes. Definitely. And that that presentation last year? I started two days before this one. I've started two months before because yeah, it's I underestimated how amazing DARM was so excited to be there next week. You'd be all too but it is. It was my favorite conference last year and I'm expecting the same this year.

Alex Husner: 4:04

Yeah, the energy is just so high and obviously Amy Hinote does an amazing job and her events. This is a VRM Intel event. So we're really looking forward to being there and supporting you and your sessions. And but I do want to dive in a little bit. I mean, you've you've been in revenue management for several several years but you know, the industry has changed not just vacation rentals but just the understanding and the technology behind revenue management so much and just curious about you know what from your early days starting with beyond to where you are now you know what, what's the biggest difference that you've seen?

Andrew Kitchell: 4:37

Oh, that is awesome. Um, well the biggest difference in revenue management at holistically when we started at Beyond and even early days that Wheelhouse as well. The initial question from people with experience in the industry so HomeAway, Airbnb and others, Carl Shepherd, for example, we spoke to them. The question was how Can you? Does revenue management even matter for individual assets? Interesting? How can you price a unique property? Hotels made a little more sense you have you say a hotel has got 100 rooms, you can watch a booking pattern on them. And the question was like, could you figure out a formula or an approach that would work for pricing these unique assets. And one of the early things we figured out was that the average person before, before kind of renting the place was looking at 30 homes. And the premise was like, Well, if you look at 30 properties, you're probably becoming a pretty good arbiter of what's a fair price and property. So you know, that a pool, porch, patio, Wi Fi, all those things are worth in the market. So you could translate booking patterns from, you know, people who are becoming informed shoppers into an understanding of how to price a property. So this space eight years ago was really a does this work. And the ironic part about it, I would say eight plus years later is our space is starting to impact how hotels are pricing. And not only does it work, and you can apply revenue management and kind of a bunch of different statistical approaches to figuring out how to price a home based on booking patterns. And the challenges around pricing, short term rentals, which are harder than pricing a hotel are now informing kind of the strategies of a hotel side. So I would say that short term rental pricing, my mind has gone from a is this even possible to Holy smokes. The software in our category is probably the best at looking at future booking patterns, and translating them into how we should price unique properties. Yes,

Annie Holcombe: 6:38

we were talking to another actually another podcaster in the hospitality space. Her name is Susan Berry, and she has a podcast, it's on the hotel side of things. And we were talking to her recently and she was saying how frustrated she is that the hoteliers still are like, oh vacation rentals They don't they don't impact us. They don't they're not like us. And then my comment living under a rock that that and you know, you just look at any of the big brands, they're all dipping, they're not even dipping their toe in the space. I mean, they dove headfirst into it, and most of them had timeshares which timeshares are vacation rentals at their core. And so it is interesting, but it's also what I love about it is that the vacation rentals is now leapt ahead of the hotels in terms of technology and advancement and adoption, you know, used to be I five, six years ago vacation rentals were like yeah, I don't know about technology. It scares me, I really liked the book, I write everything. And I like to touch it with my pen. Yeah, the technology was very scary. But it was also because of the nature of vacation rentals, there's so many layers of operation, there would just was nothing that was kind of working together. And so it bred a, I think a sense and a need. And it fostered more collaborative relationships between the technology providers were hotel space was very siloed. It's like you operate a PMS, you operate your revenue management system, you operate your channel manager, and a lot of those just weren't, they were just opposed to each other and how they were operating. So I think again, and to what Wheelhouse is doing, and I think what you've done to this to this point is that you understand the need for everybody to collaborate and work together. So something that hotels can learn from our space for sure.

Andrew Kitchell: 8:17

Yeah, I totally agree. And I always say that the the narrative about short term rentals, vacation rentals has been wrong for a long time. Yeah. And yes, we can say that there are some people who are scared of technology and wanted to use our notepad. That's true. Yeah, that's still true. Yeah, it's true. But but the short term rental vacation space is incredibly diverse. And at the opposite end of the spectrum, you have people who said, hey, I want to be an early user of digital access, because I'm not anywhere near my home to let you in. Yeah, and I need to automate guest communications because I have another job. And I do this on the side, or the variety of technology decisions that that small individual decision makers made. And I've tried to sell technology to hotels, not as deeply as I've tried to sell it technology in the short term rentals. But the decision making is a lot harder. You have to go through committees and decision making, frankly, even security protocols that on the short term rental side, you have early people saying, you know, you can find 10 users of almost any product. Yeah, yeah. And that's what entrepreneurs need. They need the first 10 people who will pay them for their product and validate whether there's a real need right, and hopefully evangelists. So the barrier to entry to crane technology is lower in short term rentals, which is why we'll continue to see faster and better innovation in short term rentals.

Alex Husner: 9:37

Yeah, I remember in my early days at Condo-World, our this was how we did revenue management. Basically, it was our property manager would keep herself locked up at her office for about a week around Thanksgiving, and she would set the rates and then she would give me the spreadsheet and I would have to update them on our site. Literally going through the HTML and updating. And then when we would revenue manage and we would figure we could probably make more For a certain week, I'd have to go back and redo them all. And that's the extent of how a lot of managers were, you know, 1015 years ago. So to see where we are now. And it's just, it's just like lightning years ahead, but at the same time, and in markets, like we are in Myrtle Beach area, you can tell the companies that got on board with revenue management are the ones that are still around and the true mom and pops that didn't, they're not around anymore. I mean, they've been sold. And that's not just here, that's anywhere that's to in other markets that they're selling to the Casa and sometimes other companies, because they just they can't keep up with the technology. And just because you're in hospitality does not mean that you're a technologist. And I think a lot of these companies tried to keep running with the same staff that they had. And they would just get a website and they just get some like rudimentary marketing things that they thought would keep them going. But it's we've just been like a rocket ship in terms of innovation, that it's just to push them off the cliff.

Andrew Kitchell: 10:56

Yeah. Yeah. I have a few thoughts about that. But can I share them quickly, too? I will say that, at DARM, we're going to be sharing what what will initially look like a little bit of a return to an older way of doing revenue management. Interesting. Okay.

Alex Husner: 11:14

Yeah, right. Please don't tell me I have to get back on the website.

Andrew Kitchell: 11:24

For so last year, our theme at DARM was transparency, right? We really believed it was time for everyone to publish their research and to show how the models worked. And it really detail what data driven revenue management was doing for customers, because it is intimidating to say, Hey, I'm going to hand over pricing to a machine, it just is. Yes, yeah. And, and plenty of people don't necessarily agree that that it is possible for a machine to understand, you know, in a unique business. So the quote, unquote, setback the theme for this year is putting people in control. And it's going to look a little bit more like a mix of rule based pricing plus data driven pricing when and where you want it. Privacy kind of a more seamless blend than, than we think has been created. And why we're excited about that is because, um, I do think technology can be really valuable for businesses, but I think our our space is probably better at building technology than we were, then we were strong and building designs that made our products really easy to use. Yeah, I don't think I don't think revenue management is an intuitive thing. I think it's really, really hard. So I think the challenge for our space, from a technology perspective, we kind of needed to solve the hard technology problems first. And now I think there's going to be whether it's digital access, revenue management, or other things, I think there's got to be kind of a kind of a time where we spend more time designing more compassionate interfaces, so people can really easily use them however they want. And that's the kind of an important next age of technology, which is the design of it.

Alex Husner: 12:54

And everybody's objectives are different. I think that's probably one of the more complicated parts of your business is that just because we run our business one way, what's important to us might not might not be important to another rental company. So just maximizing occupancy or just maximizing rate. I mean, there's so many different strategies that with hotels, I feel like it's a little bit more baseline, but with how we all operate and different markets and everything. It's a it's a complicated ball of wax.

Andrew Kitchell: 13:21

It is, it is and that knife edge, though, makes it so the software developed is the best. Yeah,

Alex Husner: 13:27

yeah.

Annie Holcombe: 13:28

And I think that I think that the fascinating thing about it is no two markets operate the same. But then even within a market, you can have two operators that completely have different ways of going about business, but then you dig deeper. And it could be something where a building is different because there's an HOA mandate and how again, you know, your length of stay restrictions, your check in checkout days, I mean, some of the things that you would tell people through a revenue management tool to flex on, they don't have that flexibility. So there's some hard and fast rules that have to be available for them to set that can't be, you know, I guess, disarmed, if you will. And I think that that's what would make the the space so fascinating is because, you know, people from the hotel side always, always joked about in Panama City beaches and examples, people would come in and say, Well, this is how you need to do it. And I said, Well, the one thing about southerners is they don't want people coming in from the big city to tell them how to do stuff, you know, they don't take kindly to strangers. Business. But but to that point, it's like people will are open to listening if you can give them you know, a reason why they should be doing it. But it's just this everybody coming in and saying, Well, I'm from the big city, and this is how it works. And we make all this revenue and not understanding that there's all of these pieces of the equation that they're never they've never seen they've never heard of they don't understand it. And for a vacation rental operator000It's a very complex business and hoteliers like to oversimplify what vacation rentals are they like when people come and they vacation and it's super simple but not comprehending that a hope you know a condo like Alex manages 100 building or 100 units in a building that's 100 general managers that you're dealing, right you know, 100 marketing perspectives, 100 different ways to price 100 different people with different, you know, thoughts about how you should price. And so it's really a very complex business and to so to your point, like, you know, having things that are constantly evolving and moving, and being very complex, is just something that technologists that you wrestle with every day, I can't even imagine what your tech team goes through every week.

Andrew Kitchell: 15:31

Yeah, well, I, you know, who was guilty of that exact mindset that you just detailed for eight and a half years? Me? I honestly, you know, we, we, um, we push for transparency last year, because we think it's an important thing. And we think eventually, it'll be like how Apple said that your privacy and your data are really important. But we think transparency is the same thing for our space. Yeah, almost a foundational piece of it. And we're lucky to have won the award last year. But the truth is, because of that conference, we had a lot of folks come in teach us. What do you actually wanted us to build? Yeah, so the last year has been, has been the year where I think we finally heard the message from a bunch of the on the Vacation Rental Communities and vacation rental operators, and it has forced us to build a way better product. And I, in some ways, embarrassing to say it took us so long to hear truly what was needed. And I obviously will still have tons of work to do after this new launch. But um, I do think we're finally getting it. I think we're finally getting it. And there's a lot too that we could explore. But I think we did have the a little bit of the mentality of okay, we're gonna build this thing, and it's great. So people are gonna love it. Yeah. It's like, well, if it doesn't work for your business, yeah. It doesn't matter how great we think it is. Right? So so I feel lucky to have met so many good people coming out of DARM that taught us we needed to build a different thing. Yeah, we've worked really hard to try to build it. I think

Alex Husner: 16:57

your journey has been really important in this process, too. And I think that's one thing that we would like to hear a little bit more about. Because one, one part of when we started this podcast, something that was very important to us was that we don't just want to tell the good stories of the highs, we want to tell the stories of the lows. And I think there's a lot of value in being able to share some of the things that you've learned, that's gotten you to the point that you're at now you can't connect the dots until you're farther enough ahead to be able to look back. So looking back on that I know you've had a heck of a journey with Lyric and some of the things that happened that led to where Wheelhouse is now. Can you tell our listeners a little bit about that?

Andrew Kitchell: 17:34

Sure. I think you're probably so I'm probably will you want me to focus on lyric or beyond as well, I can tell

Alex Husner: 17:42

however you want to best tell it

Annie Holcombe: 17:44

for your story. Yeah.

Andrew Kitchell: 17:46

So I will say I will say generally, that thematically, there's a narrative that entrepreneurship, at least in California, and entrepreneurship is about leaving some great college early. And you're a genius, and you go sit in a room with a computer and you build a amazing technology and you make a billion dollars. That is not my journey. I don't think that's a lot of entrepreneurs journey. I think there the other side of it is most entrepreneurship is about kind of just really loving something enough that you that you enjoy, you're working on it every every day and every moment of it. And when you find quote, unquote, failure, you don't see it as failure because you look at all the other things, you've learned a way along the way as part of kind of building the foundation for future success. So wheelhouse is probably is definitively my third company in the short term rental space, did work at beyond was a CEO there. And as we were raising capital kind of found out that it just wasn't going to be the right team to build with for me. And there's a ton more of that story that we can explore, but ended up again, leaving that and wondering if I was, you know, this is the first time I started to wonder, Well, should I should I stay in the short term rental space, I've had this kind of interesting thing happened and ended up candidly getting kicked out by Ian and Dave, of the company. And at the time, I had a few teammates that beyond that I really liked I had other people who are going to join beyond at the end of financing. And that group came to me and said, Would you restart a company with us? If we were to come join you? And I said, Yeah, let's let's do it. It wasn't it wasn't a trivial decision. It was like really scary decision, though. Um, and so that group, we built both real house and lyric and we had, it was, you know, we built and built and built and eventually we raise hundreds of millions of dollars around lyric and we built on. lyric was an operating company. We designed properties, we'd go into apartment buildings or multifamily buildings in major US cities. And we ended up on building 25. We launched essentially 25 hotels in three years which is insanity, and I realized how insane it was probably when we crossed about the 20 mark. Um, and we, but we actually ended up I mean, we were lucky to hire a great team. And we created what became the number one rated hotel first in New York City and then in the US, and it was a hotel, but really a short term rental hotel, right competing with sonder. And we, despite you know, working with great investors, having a great brand, having incredible guests loyalty, when COVID hit and March of 2020, we were will February's really when he actually said get bad, but March is when occupancy dropped it. Yeah. We lost everything. And we were not in a cash position to survive what was looking like probably the largest, longest downturn in the history of hospitality. And when you look at the math of a startup, so when when Katrina hit New Orleans, New Orleans has never recovered to pre to pre New Orleans levels. And we said, what is it five years before hospitality recovers? Right? We need to the only way to survive even though we were in a decent cash position, burning a lot of cash was to cut everything. Wow. And we had this nugget of this product wheelhouse, which was out the door live to customers. But we had never gotten sold. And we had never kind of taken all the additional pieces we had built at Lirik on top of wheelhouse and rolled them in and we said the safest path forward is going to be kind of begging a team to stay with us through an incredibly tough time and trying to turn wheelhouse from a b2c product. It is something suited for large operators and large businesses. And so I'm happy to explore any avenue of the losses we've had. But I would say beyond did not go as planned lyrics certainly did not go as planned. And eight and half years later, I feel like I feel extremely fortunate to have learned all those lessons. Yeah. And have we all have seen a position now where on? We we feel like we get to build from a very informed place. Yeah, yeah. So not a good learnings along the way. A lot of good learning needs, and they dig in all because I love good controversy. To ask any tough questions on whatever your audience is gonna value I, I believe that a entrepreneurship can set you free. So I really believe in kind of pushing entrepreneurship. I also believe that it is way harder than it is often told. So I just like to remind folks that like, when those barriers happen, yeah, yeah, that is your opportunity to first ask yourself, do you really love it? Yeah, if you don't go find something else. Right? Right. Right, apply, like you will only build a great business if you're passionate about it. So find something you're passionate about. And then if you're passionate about it, what other people see as failures, see, as just reframe as your learnings and go. But there's a lot of fun kind of lessons.

Annie Holcombe: 22:56

So if you look back at beyond, and then lyric, and now where you're in, what would you say are like the two? I don't even say the regrets, but what are the two biggest learnings that you took maybe from each piece of that journey, or one from

Alex Husner: 23:11

each, at least

Andrew Kitchell: 23:15

beyond was, trust your gut, and I have inherently love people. I love meeting new people. I love hearing people's stories. And I genuinely believe that people are tend towards being great folks. And I think I had some early warning signals that I thought I could smooth it over. And now I'm like, You gotta love the people you work with me? Got a deeply trust him. So my regret is not acting when I could have to do something different there. But honestly, I think I probably needed to learn that lesson. The regret from lyric was, I would say it's a really good reminder that you should build something that you know, really well. And with lyric, Cisco is kind of an amalgamation of both wheelhouse and then this operating and brand company that we built above it. Well, I had never built a luxury hospitality brand. And I had never built an operating CO and I didn't realize some of the risks associated with scaling a business quickly. So again, I probably I probably didn't listen my gut enough but I remember when we were expanding really quickly and we had investors giving us a lot of cash and saying hey, just go build that sounded

Alex Husner: 24:29

pretty exciting, right? Yeah, yeah.

Andrew Kitchell: 24:32

Sounds like the way to build a business. Yeah, I do not think it is how you build a business we are building real house extremely patiently, right? We have 15 full time employees now we're really trying to rehire very patiently and like um, I think that my regrets are my lessons are probably really love when you work with find the best people you can possibly work with and then go build great things with them because that's who you want to fight with through the hard times. Yeah. And that's obvious, but I, you know, less than I need to learn maybe a regret, and a lyric, I think it's, um, it was, I'm much more comfortable now building something I know where I'm not gonna say that I'm an expert at revenue management or even short term rentals, but I have spent a ton of time in them. And I do think about it all the time. And I feel like I'm for lack of a better term operating from my wheelhouse. I can go to

Alex Husner: 25:22

a conference say that all the time.

Andrew Kitchell: 25:24

It's tough, right? Um, it feels great to operate from a place where you feel like you have something to share, as opposed to I remember staying at the stage at a real estate conferences where we're invited to speak and I was thinking, I am I a fraud? These people know so much more about real estate than I do. Yeah. And I was just too far behind the learning curve. Yeah. And that's okay. If you're in a pure technology space, that's fine. Because everyone's behind the curve. Yeah. But you're pushing the edge, the frontier of technology, you can be naive, if you're pushing into a space of incredibly well run companies, which the hotel companies are, yeah, and I didn't understand until I until I got to know them and hear about how detailed they were in their operations. I think I believe the Silicon Valley hubris that you can just build technology that will solve everything, and you're smarter than them. Yeah. So my regrets are naivety on all fronts. And we

Alex Husner: 26:20

lot of money at solving a problem. But when you actually look at how they're trying to solve it, if you don't have operators, and you don't have that insight into what is really needed, it's still not connecting the dots. And I think that was really good to hear you mentioned a little bit ago that since DARM of last year, you know, that kind of that was the unveiling of Wheelhouse. And now you've had so much more input from so many different people within the industry, that now you really feel like I mean, you won last year, but now you feel like this year, you've come so far, because you've been able to really get everybody behind you to build that. And that's, that's not what's happening. And a lot of the technology companies that are out there, they're they haven't won awards, like you guys, they just haven't gotten to that point. And they might have some super users and people that love their product. But the people that love their products only know as much as what their experience is, too. And I mean, you're working with some pretty strong operators within our space, that these aren't just brand new startup type companies. I mean, these are people who know property management, they know revenue management and marketing. So you've got definitely an all star lineup behind you at this point.

Andrew Kitchell: 27:30

Yeah, and we're so um, thank you very kind of you say, I think I view last year as all we did was unveil the obvious that you should publish your research. If you're if you're going to, if you're going to automate someone's pricing, you should tell them exactly what you're doing and you should be an auditable pricing edge. That is obvious. This year. I agree. I still think we're doing the way you all knew what great operators have known for a long time, which is obvious, which is put me in control. Yeah. Next year, I feel like we're finally hopefully by the end of this year, we'll have delivered what a lot of folks have asked us for for a long time, and we didn't quite hear. And next year is when I'm actually excited about a different level of innovation. But that but we're we're still I still think we're catching up to all the great things that people have been telling us for a long time that we're finally understanding.

Alex Husner: 28:18

That's awesome. Oh, sorry. Go ahead. I just I've one other questions on that, that you touched on earlier on. If the pandemic hadn't hit where you think lyric would have been now? I wouldn't. Would you be up to 100 Hotels now? Yeah, you're one of the rubber met the road? Absolutely. Anyways, I guess.

Andrew Kitchell: 28:37

Yeah. So I, um, look, I'm an optimist. I was literally what I call my dad at the end of February. And I said, Dad, COVID is real. We just, we just hit our best revenue numbers ever in February. And our brand was so strong, we're seeing all these crazy signals. I called him I said, COVID is going to decimate the industry. But lyric is going to survive, we're going to buy up the entire industry on the other side. And on March 1, one day later, that a huge deal that we were going to sign with a major, a major, the major OTA and we already had Airbnb as an investor, were going to sign a deal with another major OTA, that would have reduced their lease liability and given us a new demand funnel. That deal fell apart on March 1. That said, we'll see you on the other side of COVID. And I thought, we're not going to be on the other side of COVID. So by March 1, end of the day, March 1, I called some board members, I said, I think we're dead. If this team is pulling the pulling the plug on this deal, and they're in the best cash position possible. And we're

Alex Husner: 29:40

Yeah, they're nervous, then we should all be nervous kind of Yeah,

Andrew Kitchell: 29:43

yeah. But like to be real, too. I mean, we literally had not had it figured out before. We didn't have we had already had to do some cutbacks we were spending in some of the wrong places. I had been overly enthusiastic about certain aspects of the business that were not driving value, such as investing in experience design, which is is amazing kind of the guests experience while they stay with us, but probably I think we should have done in three more years as opposed to at the time. So I think I was, I think we had learned what we need to learn to run the business the right way. And I do regret that we didn't get that opportunity because we had gone to our investors and said, Hey, this lease model is absolutely the wrong way to grow. We, I know, we told you yet X number of listings, but we need to focus just on the running the business better. I do think we're still in the cash position, especially if that deal had gone through where we we probably do make it probably do survive. But as a trade off, I'm so much happier building a technology company. Yeah, yeah, it is like my sweet spot. And like, I, so therefore I kind of see lyric as this beautiful, amazing brand. We got to build with a great team. It was terrible to say goodbye to people. On a personal level. I feel like I'm much more in my sweet spot. Now, and I don't know, Alex is a great question whether we would have survived COVID. Because so there was so much insane turmoil during that time. Yeah. But I look at the team we had, I look at the product itself that we delivered. And I think we probably do make it I think it's probably very, very painful. But I think we probably are alive today. But I also don't think I'm speaking to you today about technology.

Alex Husner: 31:25

Yeah, yeah. Yeah.

Annie Holcombe: 31:27

It happens for a reason. Yeah, exactly. Yeah. And

Alex Husner: 31:29

there's a distinction between this is a conversation that we have all the time, and it's being discussed the industry, are you a technology company? Or are you a property management company, and the companies that try and say both really, really struggle? And I don't think that you can, you've got to be at least 75% or, you know, one hand in one hand out, because trying to bridge both gaps is a tough thing to do. And really, you know, there's there's so much that has changed since COVID. That a lot of those models, the I mean, it's essentially like a lease arbitrage model. Right? Is that Yeah, yeah. So a lot of those are coming back now. And that would be the next part of my question. What do you see as the future for those companies and Pandemic aside? Hopefully, we don't have anything like that that would be close to be an issue for them. But do you think that even even outside of Lirik, do you think it's a sustainable business model?

Andrew Kitchell: 32:20

Good question. So I think it is sustainable on a small, extremely local level, but it's risky. And the person who explained this best to me was someone out of Marriott guy named Rick Hoffman, who's really sharp. And it turns out that Marriott and others have actually tried to lease our money at a scale larger than essentially anyone's doing today. And it failed. And the reason it failed was you can maybe do if you know, one market really, really well, like say, you know, Atlanta or destined or something really, really well, you can know a great opportunity. And you can select the best real estate in the best properties and have them perform well, better than they could. And if you, if you shifted a property, from monthly rentals down to short term rentals, you can make much more revenue, you can excetera it's it's really hard to replicate that success in multiple markets. And the reason for that is one real estate markets are so efficient that the local is almost always going to be better than you are. So unless you have a great person on the ground, yeah. And that next market is really hard to pull off the lease arbitrage in a highly effective fashion. And therefore, if it's hard in two markets is really hard and 10. And it's impossible 100. So the lease ARB can work on a on a smaller scale basis. But I would recommend to entrepreneurs pursuing that model, pursue that model to demonstrate an excellent ability to drive top line revenue. So you can take on a different type of so you can move away from the lease our long term and move towards the management model.

Alex Husner: 33:55

Yeah. Interesting. That's great feedback.

Annie Holcombe: 33:58

Yeah, we've talked to so many people that I think there's there's definitely two schools, two schools of thought. And I think that it kind of goes to speaks to the divide between STR and VR. And sort of that definition in that urban is short term rental. That's where the arbitrage falls. I you know, Alex and I are from traditional vacation rental markets. I know that I've worked for management companies where we tried a similar fashion, you know, rent guarantees, basically to the owner, similar situation, but it was a one off in buildings where you like an owner had a penthouse, and you've really wanted it and you were going to guarantee them, you know, the certain amount of revenues, and it never worked. And so to see people try to do it on scale, to your point across multiple markets, when you don't have that boots on the ground influence to your pricing to your management to whatever that you're doing. I just don't understand why it is. But I think that because there's a different mindset in the urban markets versus vacation rental markets. We have this wall between the two sectors. So I like that I kind of wanted to not really ask a question, but just bring it up for discussion, it's what we've talked to a lot of our guests about is that, you know, Alex and I feel very strongly about the need to educate people from the top up or top to the bottom. So first unit in, that's where you need to get your education, you'd have access to it, you need to understand the industry, because those ones that don't have the knowledge base are growing, and they're causing problems for all of us across the country. It's not just in Atlanta, or just in Panama City Beach, or just Myrtle Beach or Miami. It's crossing crossing all state lines, all City Lines, all municipalities, so we need to educate. And so I think, you know, we're seeing more technology companies open up their stack to all sides of the business and really figure out how do we message to this STR guy that has 10 units or one, but how do we also message to this VR company that is enterprise and has 500 units, and kind of getting the two to two to utilize similar technologies adopts similar operational efficiency. So again, there is not this operation and a funnel type scenario going on that's causing friction. So bring that to you. I think wheelhouse is is speaking to those both sides, correct?

Andrew Kitchell: 36:18

Yeah, I think you shared so much there was a long list of interests no is of interest. Right. So like, I think, um, I think the heart one of the hardest part about entrepreneurs is separate separating hype from reality. Yeah. And it is hard for investors to and and when we look at the kind of explosion will the lease arb. model, and so many people pursuing that now? I'm a lot of investors in Silicon Valley and Wall Street, at factories that back very aggressive expansion models predicated on the notion that like, hey, you know, technology companies historically won by buying market share as quickly as possible. What do you have hospitality and operating COEs? I think people applied. And you know, we're still seeing companies that raise hundreds of millions of dollars from investors in Silicon Valley. And teams that IPO or did a SPAC and raise a ton of money from Wall Street, that capital is still in those companies and those companies are still expanding on. But I think 2023 is probably going to be returned to rationality. In the market. It turns out scaling the hospitality company is really, really hard. Management deals are far superior for smaller businesses than leases because you carry a ton of risk with the lease. Yeah, exactly. Risk. Yeah. And you're able to get away with that risk when tons of capital was available. But it wasn't only the short term rental space has happened. WeWork was given permission. Oh, yeah.

Alex Husner: 37:44

Oh, gotcha. Just watch that documentary on Netflix.

Andrew Kitchell: 37:47

Right. So yeah, so there was a little bit of a on the model was tested, it did not work. It did not survive a pandemic, in the case of the short term rental space, it probably wouldn't survive a normal time. But you know, some of the lessons that should have been learned in normal times are, are washed over because the pandemic hit and wiped a bunch of companies out. Yeah. And I

Alex Husner: 38:07

think that's, that's, that's, that's such a huge part of what vacation rentals and what the differences between us and short term rentals. And we had just talked to Sarah and Annette from Thanks for Visiting about this on our show yesterday, about you know, they buy properties, right. And that's, that's one of the things that has been different between vacation rentals we don't own as property managers, we don't own our properties. And that kept us all afloat that we didn't own them in the pandemic. I mean, we're very lat asset light type companies. So, you know, the hotels that could not survive the lease arbitrage models that couldn't survive all of us, you know, we are we were essentially able to keep going. But it's, it's just different between the two. But it

Andrew Kitchell: 38:47

is it is and you have a lot of experience people in the vacation rental space. And in the urban short term rental space, all the teams that rose that, quote, unquote, prominence. They were run by young people who hadn't seen a downturn ever in their lives, their professional lives, and were given a ton of cash and said, Go, yeah, so it's it in retrospect. And Alex, you mentioned you only connect the dots in retrospect, in retrospect, looking back, it's all obvious.

Alex Husner: 39:13

Yeah, yeah.

Annie Holcombe: 39:16

We just interviewed Steve Milo recently. And one of the things that he commented on I'm a, I'm a I'm 100%, in this camp is that I feel like the investment groups, the people that are putting all this money behind some of this is they're looking at the number of units and they're not looking at financial stability, you know, it's all about I need a land grab of 1000 units here and 1000 units there and I want to get to 50,000 units and, and you know, maybe it's go public, I don't know but it's just this is this land grab, but you can grab land if you're not able to make it work and make any money is not profitable, profitable. It doesn't matter how many because you can be more profitable with 50 units and you are with 350 units. And I think that some of these, some of the I would be curious So look at some of these, these pitch decks that some of these companies are doing to see how they manipulate the numbers. And I'm not gonna say that they're lying and being dishonest. But I think there's a little bit of disingenuous presentation that has to go on from these people from these large investment banks to go, yeah, we're just gonna throw money out you and go ahead and go out there and buy 10,000 contracts. Because again, 10,000 contracts, just because you've modeled it out doesn't mean that 10,000 economies of

Alex Husner: 40:26

scale is a bad thing and vacation rentals, right? Yeah, you can utilize that. But it really depends on the product too. And there's so many different variables, when we bought one of our largest or our largest competitor for all 35 years, we had been in business at the time condo locks in 2019. And we were able to keep the exact same amount of staff here that we had before. And that was another 250 condos that we brought on because they were all in the same buildings that we were already in. So from a service standpoint, we there was not more that we had to do. But if we had bought a company with 250 homes, you know, now you're really standalone, you're really increasing the operational needs to be able to serve as multiple different locations. So that's something that I don't know that all the investors are really thinking about, too, because just more doors because you really have to factor in the profitability of the operations and marketing.

Andrew Kitchell: 41:17

Yeah. Do we have time for me to fight to respond to that? Sure. Yeah. Any I had built that deck, I will send you the deck.

Annie Holcombe: 41:26

Oh, like, I'm curious.

Andrew Kitchell: 41:28

But here's the thing, like, and I will eat as much as I speak to my naivety of writing lyric on. It was a fascinating business. And like, the promise was that, you know, we didn't have great performance across the whole portfolio at all, we had probably 10% of our portfolio performing exceptionally well. And what what we did, and what you kind of do at an early stage is we go to investors and say, Look, if we can get 10% of our portfolio performing well, we're taking all the lessons from that 10%. And we're going to apply them to both our old properties and every new property we acquire too, right? So investors look at this on, you know, when you fail, it looks like a shiny object. When you succeed, it looks like brilliant insight. Ah. So, an investor's job is discerning, which is which and like, as an entrepreneur, like, you never really want to raise and lose money for people. Like that's not fun. Yeah. Right. So it's like, I think most entrepreneurs skew towards towards good, and they're trying to change the world in a better way that's fun for them, or they think it's an improvement. So like, you do find those things. And you do believe that like, hey, we actually can learn these lessons. We're a young team, we move fast, we're gonna take all these learnings. So like, you build a pitch deck based around that. And that's probably what's happening even on a larger level. And honestly, 100 Investors say no to you, and 10 Say yes. And when you look at the venture system, in particular, venture capital returns expect failure, or they're kind of predicated on failure. Yeah, just to say, but basically, what it means is, they expect some percentage, probably about 80% of companies to actually fail. Right, but 70% No

Annie Holcombe: 43:13

one will be.

Andrew Kitchell: 43:16

So if you discover some maximum, yeah, and if it's repeatable and scalable, you go capture market share, and create a ton of value. And that's how they return their portfolio. Yeah. So they have an incentive to invest in teams knowing that some will not succeed. Yeah, that have maybe found something through and with with probably the reason Picasa says they're a tech company, is because investors value it.

Annie Holcombe: 43:38

Yeah. Well, if you're gonna invest in it, technology is sexy. And that's where all the money is like investing in hospitality. So you can't feel right.

Alex Husner: 43:47

Yeah.

Andrew Kitchell: 43:49

Yeah. And you have to invest in things that change the game meaningfully. So it'd be hubris for me to say I'm gonna go operate better than Marriott. That would you wouldn't, that isn't an investable entrepreneur. Yeah. investable entrepreneurs, you know what, I think Marriott is undervalued technology. And there's a new stay pattern that's emerged where people like to stay in these different rooms. So all this all these old hotels that are selling beds and television with no technology that is now an anchor on their business. Yeah, and there's a chance now there's a strange window of time where technology around digital access, revenue management, how you price this stuff, the entire stack has evolved enough where we can come in and build the best stack and we can provide a lower operational costs we can add we can have lower operating costs, and we're gonna deliver a higher quality product and the spreads can be larger we're gonna be able to compete Marriott

Alex Husner: 44:39

that Yeah, yeah, that's a really good point.

Andrew Kitchell: 44:41

You can you combine brand and technology and say, areas on those old assets. That is the window that an investor would look through where a team like us because like Lyric, could have skirted a massive well run industry. Yeah. On the backs of technology and brand and that's what we tried to do. So I assume Vacasa tries to do the same thing. Yeah, we use technology to lower operating costs and increase. You know, it's one thing

Alex Husner: 45:05

if they were saying they were offering their technology to other companies to, you know, and that's what's going to be interesting to see as Vacasa moves forward is, if something changes in Vacasa is trajectory. What do they do with that tech? You know, and when we've all seen the the downsides of leisure links and everything else over the years that yeah, massively funded company just comes to a screeching halt, because there's eventually no money left. But, of course, we don't wish that on them. But their technology, you know, none of us have really seen it, but I'm sure it's very good. You know, but I think where the, where the disconnect is, is it's just not as much of a hospitality company, but I'm sure a lot of the tech that they've built is is excellent. I mean, with as much money as they put into it. And you know, they've got top notch, top notch technologists behind it, but they're, the investors are looking at it differently. For sure.

Andrew Kitchell: 45:53

Yeah. I just I don't agree with Steve 100%. I think Steve is the Steve runs a great business at Vtrips, no doubt about it, but because it could make it definitely, I still think they're I think they're an interesting company. I know, this is not easy, I think. I think Alex, you kind of said it right earlier, in my opinion, which was building in a technology company and operating company at the same time is incredibly difficult. And it's not because it's not only because each problem is really, really hard. If you are building technology at the Vacasa, you build it for your guests, you build for your operating team, you build for your revenue management team, you build for every team, yours, your customer service team, you might build for property managers, or property owners, like you have to build technology for so many different folks. So you spread your resources. And guess who gets the money when someone says, Hey, um, you know, our cleaning scores have have dipped? Do you think it's easy to say like, oh, well, we're gonna we don't care. We're not gonna invest any more in improving our cleaning, we're gonna go invest in this new technology that won't be at market or won't

Alex Husner: 47:02

be. Unfortunately, there's still people that have to. Yeah, it's really hard knowledge. You can't cover up everything, especially in hospitality.

Andrew Kitchell: 47:10

Yeah. So maybe there's enough money to allow you to focus on each individual domain. But it's I know, the tension that that team or I have lived through some of the tension that that teams face on trying to figure out where resourcing goes, and they are better managers than we ever were. But like, it is hard. Yeah.

Alex Husner: 47:26

I can imagine. Absolutely.

Annie Holcombe: 47:28

Well, Andrew, we say this to every literally everybody. We can talk for hours, because we could just talk for hours. But we're kind of getting close to time. And we know we'll have you back. And we're super excited to see what you announce next week at DARM. It's going to be amazing. I have no doubt. But wanted to throw a question or two at you. You've been gracious enough to learn at night and choose one for us. So I wanted to know what would you tell Andrew today? What would you tell 21 year old Andrew? About maybe what to look out for what to you know what read the reality of I guess, you know, 21 year old and or would have been in college at Duke maybe doing things that one would history? Yeah, there you go.

Andrew Kitchell: 48:16

Um, I, I feel like 23 year old Andrew got an incredible lesson I was I was a kayak guide at the time, oh, biking, biking kayak guide. And I had some guests who had who stay with me and I spent a week with them. And they had built their own business. And they told 23 year old Andrew to go, that he appeared to have an entrepreneurial drive, and to go try to build a business because it was the best thing that ever happened to them. And about five months later, I hopped on a bike and bike to San Francisco and never looked back, join the technology scene and learn to build businesses. So I think I'm I think for, for some, what would I told that person, I would have told them to pursue what you really, really love. And I feel lucky that about 80 to 90% of my days have probably genuinely been in pursuit of that. I know, that's an extremely fortunate thing to say. So I don't mean I don't take that lightly. But I would say the people who are happiest that I've seen regardless of any successful careers or otherwise, they're just like people who've done what they love. Yeah. So find something you love, you're probably going to be the best at it if you love it and go for it. Yeah,

Alex Husner: 49:25

So many passionate in our industry, and you're certainly one of them. And you can just tell whenever you're talking about wheelhouse and everything guys have going on, you're just so excited about it. So it's it's fun to see it's fun to now be a part of that journey with you on the show. I've got one more question for you. What does the work that you do say about your life and your journey?

Andrew Kitchell: 49:46

Um, oh, that's an awesome question. I would hope I would hope what the work says so the reason we put transparency as our as the key word last year I was I really believe in giving everyone the opportunity to kind of do what they want, whether it's with their own business or as an entrepreneur, I think being transparent is a really fair way to live. I have loved the fact that I believe Airbnb slash vacation, vacation rental slash short term rentals. I think it's the greatest democratizing force for our category ever. And very broadly speaking, people now with a phone and a personality can start a business, you can take 24 photos of a place and set up a business. So I believe is I believe the category we work in is an incredibly democratizing force, as a potential to be. I believe that technology can empower people to do amazing things. And I believe that technology should be as freely available as transparent and honest as possible, to let people know exactly what they want to do. But I would, I would hope that my work speaks to give you as many people as as many people as possible chance to build their own business, as in as many people as possible a chance to find success on leading from hopefully a very honest, transparent, authentic position.

Alex Husner: 51:11

That's an incredible answer. Yeah, very good. I'm pretty good, too. Because we didn't You didn't get any prep on what questions we were going to ask. Yeah.

Andrew Kitchell: 51:20

I wish I had answered it more succinctly. Oh, no, I do. I do think, yeah, I feel so fortunate to have been stumbled into such broad into our category. Yeah, I've met so many amazing people. And I do think that the work that you all do, and that rent responsibly does and that so many other teams do to advocate for the opportunity to build these businesses is really cool. And I can't wait for more people to experience that.

Alex Husner: 51:48

We are so excited to see you next week at DARM. And the meantime, if anybody wants to get in touch with you, what's the best way for them to contact you?

Andrew Kitchell: 51:56

Either at US wheel house.com message me on LinkedIn, text me at No, just kidding. Very easy to reach. We'd love to hear from anyone let me know I can help if you have any questions about your business.

Alex Husner: 52:08

Wonderful. We'll include that all in our show notes. And in the meantime, if anybody wants to get in touch with me and I can go to Alex and Annie podcast.com Catch up on past episodes. Leave us a reviews and this note. Love to hear from you. And we will see everybody next week at DARM we're so excited. Thanks everybody. Bye