Vacasa may lack the name recognition of Airbnb. But not for long. Founded in 2010, the online vacation rental site ranked as one of Oregon’s fastest-growing companies last year, grossing $26.3 million in 2013; double that in 2014. The company employs 600 nationwide — 100 at its Portland headquarters — and expects to grow to four times its current size by the end of 2015.Co-founder and chief development officer Cliff Johnson, 33, reveals the secret sauce.
Eric, our CEO, was looking to start something in the vacation-rental space. We were thinking about a listing site but decided to go with full-service management. It was more efficient to own the whole experience, rather than rely on owners to update their calendars or make sure housekeepers showed up.
What we offer
Quite a variety. We have yurts; we just signed on a summer camp in Mount Hood, a camp for the blind. They were looking for a way to get more income for the property. We have condos. We have homes that rent for $20,000 a night and homes for $70 a night.
We call it organic growth. We meet with an owner and sign that home. It’s more labor intensive but tends to be more sustainable. We have started to do some acquisitions. When someone is ready to retire or they are tired of doing it 24/7, we’ll offer an option to either be an employee of our company and we’ll pay them for the business, or they can retire.
We are considering taking funding from investors. It would be largely for acquisition opportunities. We don’t need cash.
This industry historically has been behind from a tech standpoint. The ability to book online — which sounds ridiculous that that’s a modern thing. But when we started five years, it was pretty novel. Now it’s the norm.
Rate optimization is a big component of what we do. Our algorithm acts like flights or hotels: adjusting prices based on demand. People are used to rate optimization in other industries. But it’s very complex to do in the vacation rental space because each property is completely unique. The line of code you have to build is ridiculous. So we started experimenting: How high can we go on 4th of July, and how low do we need to go in the middle of the week in January? Over time, we built quite a bit of data.
We have a full team of analysts. We always have the foot fully on the gas pedal: Are there new channels we should discover? And we’re always testing them to make sure they’re not a waste of money.
We did an all-inclusive pricing model. We spent all this time building the software similar to a hotel where the price you see is the total price. But our competitors were advertising without the cleaning fee or the taxes. So we were getting fewer inquiries even though we had a higher conversion rate. What that told me is people would like this but the industry isn’t there. So we have it in our back pocket and probably have to revise it and change the code.
We’re looking for Portland to allow traditional short-term rentals. Say there’s a vacant home in Laurelhurst; the owners use it for the summer and the rest of year it sits vacant because they’re snowbirds. That’s where you get into the sharing economy. Is it the best use of that property to sit vacant for nine months out of the year?
There’s the argument that vacation rentals will take away affordable housing. Our argument is that traditional short-term rentals are not going to be used as long-term rentals, and even if they were, they wouldn’t be categorized as affordable housing. I used to be a lawyer working with legal aid services. We were working on affordable housing; there is a need. The issue in Portland is the desirability of living here and the shortage of housing stock, particularly on that income level.
Difference between you and them
We compare ourselves to Amazon, whereas Airbnb is eBay. Amazon is curated; they own the process, the experience. That’s what we do with vacation rentals.
Very rarely is it a hotel lobby that is fighting against vacation rentals. Usually it’s neighbors who don’t want a vacation rental next to them. It’s based on fear, not evidence: the idea that I want to know who is next to me.
We want to be in every market in every country. It’s one of our internal slogans. We are in Belize and are moving into Panama and Mexico. I got a call from the Berkshire Hathaway office in Chicago; they had expanded internationally and were working with brokers in Latin American countries. They were interested in partnering with a vacation rental company to bring in visitors interested in purchasing property. So we’re working with them.
We like Belize because it’s English speaking and uses the U.S. dollar. Panama and Mexico are also markets targeted for U.S. and Canadian travelers. It’s international lite.
How vacation rental will save the world
One of the things I love about our industry is it keeps the character of the location and reduces demand for all hotels. It’s the Portland green side of me: Why don’t we at least use everything before we start building more? A lot of these small towns like Manzanita are kept that way because when you travel there, you don’t stay a hotel. You stay in a vacation home and are part of the community.
We approach owners with the lost opportunity they have: getting them to realize having a home vacant is a waste of potential income. A lot of people buy those homes so they can spend time with their family. We approach it as: imagine what you could give your family in income if you rented your home for 20 years.
The first hire Eric and I made, we had been in the business for a year and at that point we had been working only with contractors. We both realized neither of us has the knack for design: how a home should look. So our first hire was Kimberly Stapleton, who was in interior design school at the time. She’s now vice president of operations. It’s been nice to build a team where people have moved up from within but understand the job of managing. The biggest thing is developing a comprehensive team.
When we’re hiring, everyone does a culture interview to figure out: Are you a good fit for us? There are great people out there who would hate this environment. It’s very unpredictable; the speed we’re growing, things are going to be completely different six months from now. Someone who doesn’t thrive on change is going to hate that.
What scares me
As we grow, how do we keep that culture? It’s built on creating an environment where people enjoy being here, enjoy their career and don’t want to feel like just a number. Now that we’re at 600, that’s a concern. One of the things we did early on is hire a director of internal communications and planning focused on change management. We place a big priority on communication.
We hate to disappoint anyone. We manage roughly 1,600 homes, which means thousands of guests at any given time. So for all of them to be completely happy is a difficult task. It could be the only vacation they take for several years or a get-together with their family. So we do as much as we can to prevent issues.
My wife and I book a home with friends. I book it under one of my friends’ names, and I get the guest experience. It gives us a lot of insight. The experience is always positive, but there’s always a couple of things to improve upon. That is central to our culture. We’re not afraid to admit when we’re wrong.
Kim Bergstrom Thursday, 09 June 2016 12:47 Comment Link
Interesting article. Vacasa is definitely creating their own niche in the vacation rental market. I notice as competition you mention two coast vacation rental property managers. Therefore, as we also rent Manzanita vacation rentals (where Sunset Vacation Rentals is located and is a large share of their market), I'm able to comment about this.
First, Vacasa, like Airbnb, is a large scale rental site. Where Vacasa differs with the smaller property managers of owner operated vacation rentals is it lacks the local, personal touch others in the area are able to offer. Additionally, their model does not account for each locale - it's more of a one size fits all. Which is great for some, not for others.
While Airbnb is definitely a big part of Oregon coast vacation rentals, VRBO still holds the majority of coastal vacation rental business. Airbnb is still part "shared" economy (sharing the house with the owners), and is still learning the vacation rental market.
The definite benefit of Vacasa, and others like it, is creating a more professional environment within the Vacation Rental market. This definitely benefits all, especially the guest experience.