Jeff Iloulian on STR Since 2014 and Regulated Markets

Quick Summary

Jeff got started in Los Angeles in 2014, when occupancy in big cities ran past 95% and, as he tells it, it was almost impossible not to make money. His team met every guest at the door through 2017. Then the Los Angeles regulations arrived and he moved a couple hundred properties toward midterm rentals.

So where would he build now? The most heavily regulated markets, permitted and above board, because that's where a rule change can't take the business out from under him. Before you commit anywhere, go check the market data yourself.

Key Points

• Jeff Iloulian started in Los Angeles in 2014, when occupancy sat above 95% and, as he puts it, it was almost impossible not to make money.
• Every check-in was done in person from 2014 to 2017, with a team driving around between 11 and 3 to hand over physical keys and check guest IDs.
• Once the Los Angeles regulations landed, he moved a couple hundred properties into midterm rentals in 2017 and 2018, and built his own direct booking platform to fill them.
• Asked where he'd build a vacation rental company from scratch, he picks the most highly regulated markets, permitted and above board, because that's how he'd build enterprise value he isn't worried about losing to regulation.
• He calls the co-host versus property manager distinction semantics, and says to err on the side of caution and assume you'll be treated as a property manager for legal and insurance purposes.
• About a year after New York's rules took effect, Jeremy cites rent up 4% year over year and hotels charging 13% more, while Jeff calls the regulation overly broad and expects it will swing back.
• His company goes to 30 to 40 conferences a year, though he personally goes to about 10, and he still names VRMA, the Vacation Rental Management Association, as the one every operator should attend once.

Full Transcript

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Jeremy: And with that, we are live with the Short-Term Rental Pros Podcast. Today I have a guest who traveled from extraordinarily far away to get here in Dumbo. When I say far, I mean, what, like five blocks or something?

Jeff: I had to get to Dumbo, so I took a ferry, I took a train, I took a couple of modes to get there. But yeah, not too far.

Jeremy: Wow, we got quite an amphibian here. You're on water, on land.

Jeff: Yeah, but all the way from across Brooklyn. But I made it.

Jeremy: Well, I'm glad you made it. Today has been a very cold August day. I'm surprised you weren't wearing your Canada Goose.

Jeff: Yeah, it was shockingly cold outside, but refreshing, and happy to be here.

Jeremy: Beautiful. I'm glad you made it. A couple of weeks ago, Jeff was also with us on the rooftop of our building.

Jeff: I came at the end of our mastermind.

Jeremy: I like to connect the best. I would say you're like a quasi software entrepreneur, but also you've been in this game for a long time.

Jeff: Yeah, yeah. I've been doing this for about 10 years.

Jeremy: Maybe you've got a few gray hairs, maybe you've seen, you've got your battle scars.

Jeff: My first reservation, it was just jet black. Every insurance claim, just one more gray hair. But here we are.

Jeremy: Hey, well, again, we made it today, but you've seen it all. And yeah, I just thought it was so cool, and I really appreciate you coming out and shooting the sh*t with everybody. Hopefully got maybe some customers.

I think I sent you a screenshot of a message someone had sent me, like on the train ride home, like just signed up, already placing orders and was so excited. And yeah, I was like, d*mn, you must be the best sale in person.

Jeff: It wasn't even me. It was somebody else there that was a HostGPO member that was telling the guy, you have to do this. And he's like, Jeff's over there. He's like, oh, Jeff, I like this guy. All right, I'm down.

Jeremy: It's the best.

Jeff: We love members who refer other people. It's like our main way that we've grown.

Jeremy: Yeah. But I want to talk to you today, because I've picked your head on this. How has the landscape changed in short-term rentals? You started in 2014.

A lot of people I think I talk to, and I even speak from my own experience, started in like 2019, 2020, rode that COVID boom, kind of got into things at a time where they were easy. And then 2023, 2024 came around. I would say for myself personally, I sharpened my tool set. I definitely got better, and each deal and each thing I do now is like the best one I've done yet, because I've gotten a lot better at it.

But I feel like, today I was on a call, or actually the Zoom, sorry, the podcast episode that we released, I assume, before this, Brian, he's doing some new cool sh*t. And he started in 2023. He's Flow Home.

Jeff: Oh, yeah.

Jeremy: I think you guys are connected. Brian Meyer. Brian, I can't remember. Brian from Flow Home.

Jeff: Yeah, exactly.

Jeremy: He furnished his properties with you guys.

Jeff: Yeah, big HostGPO guy.

Jeremy: When I say properties, I mean floating boats. They're technically properties.

Jeff: They're just floating properties.

Jeremy: But yeah, coolest type of properties. They're very beautiful.

Jeff: Those properties are amazing.

Jeremy: But that being said, I rarely see, I would say, folk doing things starting in 2024, doing some absolute out of nowhere, crazy stuff. But you've seen it all. So I want you to take me through the different, if you could break things down into stages, of 2014 to 2018 was this period, and this is what we saw. Walk me through it, starting from the Tyrannosaurus Rex of short-term rentals to what we have today.

Jeff: Yeah, I mean, look, I think a lot of us now, when we're talking about short-term rentals, we really feel like that started in the age of Airbnb. But the truth is that the vacation rental industry has been around for a really long time. And when you go back even further than that, which we don't have to get into, but I go to vacation rental conferences. We go to like 30, 40 conferences a year as a company.

And it's amazing to talk to folks who've been doing this for a really long time, who talk about, and still some of them do, stuff like the guest makes the reservation and then they ask them, hey, do you want linens, or are you bringing your own? That's how it used to be. And then if you said you wanted linens, then they would drop the linens in a bag on the door, and then when the guests arrived, they would make the beds themselves with the linens, because that's just how the vacation rental industry operated for a long, long time.

And so when you really go back and you talk about a lot of these kind of historic big vacation rental companies, and there are some conferences and some associations like the VRMA, the Vacation Rental Management Association, which is the biggest vacation rental group in the U.S., a lot of the folks that have been there have been in the vacation rental industry for 60 years, 50 years. They're family businesses with thousands of properties that they have under management. But the way that they've done things up until kind of this Airbnb stage, which also went through a ton of fluctuation and a ton of changes, shouldn't be discounted. I mean, they were the real, I wouldn't say original part of this industry, but they definitely saw the industry change and evolve over time.

When VRBO came out, which was well before Airbnb, that was a really big deal. Vacation Rental By Owner, right? That's what VRBO stands for. And all of the shifts in the industry that took place with HomeAway and VRBO merging, these are all big moves that happened over time that I think a lot of us now who are getting into the space relatively recently, we really think that it started with Airbnb. That was just one big pivot point on the vacation rental trajectory, an important one. But yeah, just not to discredit the long lineage of the vacation rental industry up until then.

But when I got into it in 2014, it was very new. I mean, it still is new, but it was even more new. And I started working with somebody who had been in it for about two or three years before me. There weren't any of these mastermind groups or educational groups or courses or even like Facebook groups. None of that existed. And so you needed to work with somebody who had done it before so that they could tell you how to do it. Figuring this stuff out on your own is really hard. There's hundreds of moving pieces, and to be able to go to a resource and say, hey, how do you do this? What do you do when this happens? What happens on that? What is a PMS software? How does that work? That was kind of when I got in.

And industry in 2014 was one where it was really hot in very, very major metropolitan markets. It was big cities you're talking about. I was mostly in Los Angeles and Southern California, but there was not enough supply, not even close to enough supply, for the amount of demand that was there. I mean, the occupancy was 95 plus percent all the time. You were barely having to try. There was no dynamic pricing software. There was, but it wasn't...

Jeremy: Just raise your prices. That's how you do it.

Jeff: Yeah. I mean, we used to log in every day and change our pricing, because there were tools, but they were really expensive and they were few and far between, and it wasn't really clear what to use. And Beyond was around, but PriceLabs wasn't really around yet. And so a lot of these things weren't readily available.

And so yeah, 2014, tons of demand, not a lot of supply, super high occupancy, crazy returns on properties. And the industry that I entered into was one where, to your point, you really sharpen your tool set over time. But that industry was one where you didn't need a sharp tool set. You come into 2014, you're going to make money on a vacation rental property. It was almost impossible to not make money. You had to actively do some terrible things to not be profitable on your business.

So that kind of period from 2014 through 2018, 2019 was relatively strong. The biggest change over that period versus now is there's still a lot of regulation that's happening and a lot of regulatory changes and major cities and a lot of lobbying and advocacy work going on. But the beginnings of that was really starting to roll out. So that was when San Francisco went through a big ordinance change, Los Angeles. And still we have like New York and big, big markets going through changes. But that was kind of the beginning of the legislation and that kind of stuff. So that was probably the beginning.

Jeremy: People were going after big cities. Big cities, big returns.

Jeff: 100%. Big cities, big returns. You started to see Airbnb really take hold in big cities, because when you think about it compared to VRBO, which traditionally goes after large homes, large family stays, appeals to a wider European market base, because that's just more ingrained and historically in the way people have traveled before.

And the traditional vacation rental markets really did originate, like, bookings when you, it's so funny, like talking to people who've been in this industry for a long time before property management software was really available to everyone. The vacation rental companies literally, those like the ticker tape for your reservations, which shows the reservation with like the slash on the check-in day and the checkout, and it's like tape [inaudible]. They used to have just boards, and they would have taken the reservation over the phone, go up and put up tape for the days that it was blocked off. I mean, that's how they were managing properties.

And so to think that from that to VRBO was like one big step, and then Airbnb and its ability to rent out individual rooms and have this really good user experience and user interface. Super clean, very intuitive, very trustworthy. That was what, originally, I think a lot of young tech folks out of the gate were the ones who were adopting Airbnb and were the original pilot users. So that kind of process was happening over that time. Up through like 2018, 2019 was the explosion of that.

Jeremy: I remember as a kid going to a soccer tournament, and it was the first time I had stayed at a rental property. It was at the beach. So I guess there was, you know, North Carolina, Outer Banks beaches historically have a big vacation rental dynamic. I remember going to the office, waiting at the office for some lady, I don't know, maybe her name was Betty or something, to come out and hand us the keys. And then that office was 30 minutes. We had to then drive back into the Outer Banks to find the house. And I remember thinking like, oh, this is pretty cool. Like you can rent a house. That's pretty neat. It's a thing.

Jeff: I mean, there were other changes, too. We used to do every single check-in from 2014 to 2017 in person. We refused to not meet the guest in person. We had a whole check-in team that would drive around, and between 11 and 3 they were busy as anything, coordinating like when people wanted to arrive, making sure they would meet them there. They would open the door, show them the house, check their ID and make sure they were who they said they were, because Airbnb back then especially wasn't doing a great job with background and security checks. It just wasn't really built in as robustly as it is now. They do a much better job of catching fraud and stuff like that. And in major cities, it was a big issue.

So talk about changes in the business operations. We were doing every check-in in person, but a lot of physical keys. We weren't using a lot of door locks. That was the business that we were operating. And that was only eight years ago, nine years ago. So big changes from that through kind of, let's say, 2019, 2020 times.

Jeremy: And would you say those 2019, 2020 times were more kind of a retail, like normal people, W-2, like small entrepreneurs kind of got into the game? Or if before was that big, the traditional property managers. I guess I'm wondering, when did kind of the mainstream retail push happen?

Jeff: So I remember the reason why I started to think about doing this as a business was I read an article in 2013 in New York DealBook about somebody doing lease arbitrage in New York. And I was like, this is what, first of all, what a concept, to do arbitrage on it.

Jeremy: I see it on Instagram. You saw it on a magazine.

Jeff: Yeah, I read an article. I read a news article.

Jeremy: A news article. And actually, don't tell me it was physical.

Jeff: No, no, it was online. It wasn't that long ago.

Jeremy: No, no, it wasn't that long ago.

Jeff: But yeah, I read it and I was like, wow, lease arbitrage, what a concept. And so that was, I think, when individuals were starting to learn about it. And that was really where the entrepreneurs were starting to kind of get in from the operator side of things. The W-2 transitioners, which I was. I mean, I was a lawyer when I was starting this business, my original vacation rental company. Those folks, I think, started to get in, 2019, 2020. I would say 2019 is when it started.

Jeremy: Got it. So, and I like that. And I, a little bit later down the line but similar, got into the game as an operator at first, saw a problem, or saw that there was a lack of a solution, and put some effort, put some time in, and built something out. You did that too.

There is an episode before, Jeff's been on, where we pretty much probably only really talk about what you do in HostGPO. I do want to cover that a little bit today, obviously. But I really kind of want to dive more into just like, what's going on? What have you seen? And what's the future look like?

But yeah, what was that? I guess, what was that point for you when you were like, all right, I'm an operator, things are going well. Or maybe the LA regulations happened, and...

Jeff: LA regulations came in. We made a couple pivots. We moved to midterm rentals in 2017, 2018. We built a midterm rental direct booking platform ourselves, because we were like, we need to rent out, we were operating a couple hundred properties, and so a lot of them were apartment buildings, and we'd already furnished them. So we decided to rent them out month to month, which meant we needed to market and advertise in a different way, and integrate with different software to track bookings. But yeah, that's how we pivoted kind of in mid 2017. Yeah, 2017, 2018.

Jeremy: So you built that out for yourself. Did you then offer that software to third parties?

Jeff: That one we didn't, because it wasn't like, we built a booking website where inquiries could come in. We were also a brokerage. So we were doing, you know, we had...

Jeremy: You were allowed.

Jeff: We were allowed to take leases on behalf of clients.

Jeremy: Exactly.

Jeff: And we had a really streamlined process, pretty much where we had like an agent who was more or less posting and running it like a normal property manager would lease out a property, just on a month to month basis.

Jeremy: So you're a lawyer, and I get asked this question all the time. Maybe I'll give my answer, and you're a lawyer, so you can correct.

Jeff: So I can say it depends.

Jeremy: Yeah, you can add some. He's allowed to say legal things. You don't have your license.

Jeff: I still have my license, but nothing that I will say will be legal advice.

Jeremy: OK, the full disclaimer. Well, I'm going to say, start with, for me even, hashtag not legal advice. But the way I see it, first of all, every state's different. Every state has different, and this is, we're going to specifically talk about co-hosting versus, quote unquote, property management.

Jeff: Sure.

Jeremy: But every state has different rules as to what even a property manager is, and what property managers have to do, what they have to do with money and whatnot. But the biggest similarity is effectively we're taking the money, we're a property manager.

So if you lease for me, you want to sublet my, or you want to rent out an apartment in a building I own, I have a property manager. That property manager is the one who coordinates it. They take the deposit, they take the escrow, they take the rent, and then they hold on to it and then send it to me, the owner. So really they are like acting as a middleman in the transaction, creating documents, creating legal documents.

Whereas Airbnb, when someone books through Airbnb, they're paying Airbnb. They're not paying the property manager. Once the booking has actually happened, they send the money to wherever the bank account on file is. So to me, he's like nodding his head, I'm like, I'm getting nervous here.

Jeff: No, no. I mean, yeah, you're right. In theory, that's how it should work.

Jeremy: Yeah. So to me it's like, well, again, A, sure, every state's different. But as a whole, I don't recommend co-hosts to take money. If you do a direct booking, try to keep things on the platform, so then Airbnb is the one, again, taking the money. If you happen to do a direct booking, they send the money to the owner. You don't want to be a middleman in these transactions. At least the way I see it. And I think a general, again, every state's different, but I see that as like a general best practice, no matter what state you're in.

Jeff: Yeah. I mean, look, I think the bigger question, other than just who's touching the money, and again, I would say from legal perspective and risk perspective, there's all that. But there's also just the general business of, do you want to do the accounting on holding onto the money and paying it out and deducting things or whatnot? I mean, that's a separate question.

I think the most interesting thing is just what constitutes a property manager. Because in, for example, California, I think it's a state law, but you cannot be a property man, you cannot get insurance as a property manager, I believe, unless you have a, I think unless you're a real estate agent or you have a real estate license. There's some sort of rule like that, that limits who can be a property manager and who can get insurance, or you have to have insurance or something like that. I can't remember, it was a while ago. But there are regulations around what you're allowed to do as a property manager, and what kinds of, whether you can enter into leases as a property manager yourself or you have to have a real estate agent do it. I mean, if you're in New York, there's different rules. So I think that it's very dependent on not just state, but also city level, what you can and can't do.

But the difference between a co-host and a property manager, it's semantics. I think at the end of the day, you can make an argument that being a co-host is not actually property management, if you had to make a defensible argument. I think you could say that, hey, look, I'm not actually a property manager, I'm just somebody who opens the door and lets people in. But I don't know, if you do things like coordinate the plumber or the electrician to come fix things, or you're responding to guests and going and managing issues that come up, that's stuff that a property manager would do. So where is that line? I think I would just always err on the side of caution and just assume that you're going to be thought of as a property manager for all things legal and insurance purposes, and just go down that road.

Jeremy: Yeah. And one thing we touched on is insurance. I'd say that was one of the cool things, because Airbnb is pushing this co-host ecosystem. I listened to their last earnings call.

Jeff: Yeah, it's a big part, big thing for them.

Jeremy: Yeah. So evidently they're seeing some slowdown in their core markets. Makes sense. We had a massive boom, gave out a lot of stimulus. Things are tightening up for folk, so demand is not picking up like it had been. So they're looking at additional drivers, and they didn't necessarily say how they're going to monetize the co-host ecosystem. But I think it makes sense, it's in their best interest. If Sally owns a home in Maine and she's not doing a good job managing it, she's had it for 10 years but she doesn't really like taking care of it, it makes sense for Airbnb to then want to say, oh, here are some co-hosts in your area who might do a better job than you. Yeah. [inaudible]

Jeff: Yeah, I think it does. I mean, you've been able to have co-hosts and they've legitimized it for years. I mean, for six years you've been able to add a co-host to your listing. Now, making it a marketplace and having this be like a business, yeah, I guess this legitimizes it a little bit. But I think this is just an acknowledgment of the fact that this is how it works.

And there's this push-pull, I think, for Airbnb, where they are, on the one hand, very much geared towards a sharing economy, taking things that are sitting and available for rent but just are sitting there, and making them useful, right? Putting empty units back into the economy, back into the flow of commerce, and having people rent them out. So there's this kind of like sharing vibe of, I'm not using my space, somebody else should use it. And then there's the business aspect of vacation rentals.

And so I think what's been really interesting to watch is, over time, people see that they look at it like two buckets. They look at it like you're either a business that is operating and trying to profit from doing Airbnbs and you're taking housing off the market and all that stuff, or you're like just an individual homeowner who wants to let somebody stay in your place when you're out of town so you can subsidize your rent, right? Those are both parts of this industry. But there is also a huge part of this industry, which is property managers and co-hosts that are businesses that are renting out and managing actual vacation rental homes for people as well. So I think that this is kind of an acknowledgment of the way the industry works. And I think a good step in the right direction, which is just professionalizing the industry.

Jeremy: You touched on earlier the insurance aspect. In California, evidently, unless you're a property manager, you can't get property management insurance. However, Airbnb provides, if someone books through Airbnb, and VRBO does this too, they provide a million dollars of liability protection. They provide damage protection. That process of doing a damage claim seems to get more and more annoying over time. But it is a process that they do actually.

Effectively, they are building this new infrastructure and they're backstopping it, effectively, right? Your concern is insurance as a co-host. And they're saying, well, we provide, whoever's on the account, who's on the listing, is covered under this umbrella. Does that alleviate those concerns?

Jeff: Not really, because I think that there are a lot of limitations around that insurance policy. And those limitations relate to things that happen in the property, physical damage that takes place. But those aren't really the business insurance things. There's a lot of terrible, awful accidents that can happen that aren't and wouldn't be covered.

Jeremy: Well, largely the cleaners.

Jeff: The cleaners, the stairwell outside, the common way. There's a million things that can happen that wouldn't be covered by the Airbnb AirCover policy. And you need to have separate insurance for your business and for the home. And there are a ton of restrictions on general homeowners insurance that explicitly carve out vacation rental use from the policy. And so you really have to be aware of that kind of stuff.

Jeremy: Yeah. Right now, I'm not necessarily talking about, yeah. As a vacation homeowner who does short-term stays, I tell everybody you need, you can't rely on Airbnb's insurance policy. You need your own.

Jeff: Proper is a big one. Steadily.

Jeremy: Yeah. Safely is actually, [inaudible]. They're an interesting model, where they do. So if I'm a property manager and I manage a house on behalf of a client, and there's like 200, 300, 500 dollars worth of damages, Safely just instantaneously pays it out, versus Airbnb, you've got to wait a while. So effectively it's like self insurance for property managers. At least that was my interpretation of it.

But right now I'm really kind of talking on like the co-host who doesn't own the property, just is on their phone a thousand miles away, messaging guests or coordinating with vendors and cleaners. At least while the guest is at the property, it helps cover them, which is a really unique thing that Airbnb created, that business line.

Jeff: Yeah, absolutely. I mean, it's a similar thing. When you get into an Uber, something happens, right? Uber has a policy that covers its drivers to a certain degree, but you also have to have car insurance. So, similar concepts. But yes, it makes it a lot easier to do this.

Jeremy: But back to your earlier point, you're from Los Angeles. Seems like you have some California scars.

Jeff: Yeah, no, that market was a very, very interesting one going through the regulation. So, learned the Los Angeles stuff the hard way.

Jeremy: California, guys, you're listening to this, we love California. It's beautiful. It's always going to have demand. But there are other aspects. Labor laws. I've heard through some folk who have been on the podcast.

Jeff: Yeah, dealt with those.

Jeremy: Your cleaners in California. Most places they're cleaners, you can make it, you don't have to argue with anybody if they're full time or contractors. But went through that lawsuit in California. Apparently there's a lot more California specific variables. I personally do not have any operations in California and don't intend to.

Jeff: Yeah, I mean, look, it's a double, it's, you could say both ways. I mean, it's harder, requires more digging and research, but at the same time keeps a lot of people out. So somebody asked me a couple of years ago, if I was building a new vacation rental company from the ground up, what markets I would go into.

Jeff: And I literally said the most highly regulated markets. And I would figure out how to operate in an effective way that I could create long term enterprise value that I wasn't worried about getting regulated.

Jeremy: So that's a hot take, to go after the most regulated markets.

Jeff: But that's what I do.

Jeremy: So we've got a shark here. Jeff, Jeff, he runs into the storm. He doesn't run away from it.

Jeff: You got to go through the storm.

Jeremy: You got to go through the storm. That is where all the good stuff is.

And speaking about storms, well, talk about highly regulated places, we're sitting in one right now. To the point where if you put an Airbnb up, or you create a listing and try to allow stays that are less than 30 days, your listing will literally get deleted, I guess. What are your thoughts? I think I was reading, it's been a year since the New York new regulations got imposed. But would you, I guess, based off what you just said, would you try to do anything here?

Jeff: Here might be, I mean, I'm not going to the places where it's not allowed. I'm going to places where it's allowed under very specific circumstances, and getting a permit and doing it above board, and places that I feel comfortable that it's not going to, that the regulations are going to change.

Jeremy: Well, actually, I do have a folk that I work with. I think some folk. I don't know if you talk to them, but they were at the mastermind. They do midterm rental arbitrage in New York, and for one bedroom apartments that are located in the right area, it's actually still very lucrative.

Jeff: Yeah, I believe it.

Jeremy: Because so many people come here for, want to come here for two or three, four or five months out of the year, or need to come here for work. So there's unlimited demand for that market segment.

But I thought it was interesting, I read an article the other day. So when they pass this rule, the whole, the same arguments everywhere, right? Housing crisis, housing crisis. Like, that's in reality, I think the people who care the most, that's not their issue.

Jeff: Yeah, but that's what the governments at least say.

Jeremy: Well, it's an easy scapegoat.

Jeff: Exactly.

Jeremy: But it's been a year. Has rent in New York City, mine hasn't. Yeah, well, rent's up 4% year over year. Hotels are charging 13% higher. And this is at a time when theoretically there's softening travel demand.

Jeff: I mean, the hotel one is the big standout for me, where it's, what a big windfall for the hotel industry in the city.

Jeremy: Yeah. And also this coincided with the fact that I think there's been like a million people have been shipped up here from our southern border and are literally being put into hotels. And I read this, I think it's something like it's a material percentage of hotels are effectively turning into immigration housing in New York. And then of those, majority of them will never be a hotel ever again, because the damage that's been done to them over the last like two or three years, it would cost so much money for them actually to renovate them and turn them into like an actual attractive hospitality option.

So maybe New York, California, New York has California beat on, I don't know.

Jeff: Yeah, I'm not super familiar with it. But like, yeah, I know that the hotel industry has been benefiting a ton from short term rentals.

Jeremy: Well, short term rentals, and then the bad hotels have been benefiting from unlimited demand from the city for medium term housing. And then short term people who had housing in New York, that a lot of the times New York wasn't like, like the big arbitrage operators haven't been here for years, because there's been regulations in New York. So they just stayed away.

It was mom and pop people. And generally it's like, oh, we have a duplex, we own the other one, our parents stay here six months of the year, and the other six months of the year we're going to rent it out. It hasn't became like long term rental housing supply.

Jeff: No. And the markets where the vacation rentals realistically were in the city were not necessarily where a lot of people live, in the main tourist area.

So look, there's a ton of research and reports talking about the fact that this regulation in New York was overly broad. And I think it will swing back. I just think it's going to take some time.

Jeremy: Yeah, it'll go back the other way. I see Airbnb using it as an example of what not to do.

Jeff: What not to do.

Jeremy: And so it's honestly probably been a net positive for short term rentals, because there's such clear evidence.

Jeff: It was clearly a terrible idea.

Jeremy: Yeah. And we'll see how it gets resolved. But let's not talk about bad ideas, and let's talk about good ideas.

So you work with a lot of different companies. A question I asked you a few weeks ago was like, where has your business seen success? If we have this traditional vacation rental manager segment, we have these new investors, who are you working with, and who's doing well?

Jeff: Yeah. I mean, we work with a pretty wide assortment of folks in the industry. So we work with a lot of people who have a couple of vacation rental properties or are growing, setting up new homes. Those people usually come to HostGPO for the furniture and linens and amenities and all that stuff, just because they're spending so much at one time that there is a huge amount of savings to be able to order at one. So I would say smaller operators who are growing benefit a ton.

And then the larger operators, when you really start to think about having 50, 100, some of our members thousands of properties, those people are purchasing linens, amenities, even paper goods and jam, like that kind of stuff. They're buying them in such volume that even being able to save an extra 10%, 20% is a huge, huge difference maker for them.

So it's just different what people focus on and what they buy. But I would say our membership base is with over 300,000 properties that have signed up to be on HostGPO, which is insane. And it really spreads from small operators all the way to the biggest vacation rental companies.

Jeremy: Got it. And I saw on Instagram a video you did with Alex Lieberman, former founder of Morning Brew. I guess I'm curious. So you guys just raised money, right?

Jeff: We just raised money last year.

Jeremy: Yeah, you just raised. Had you raised prior to that?

Jeff: No.

Jeremy: And what is this money? Can you share how much it was and what you are doing with it?

Jeff: Yeah, we raised like six and a half million. And the idea is, so for people who are listening who've been HostGPO members for a long time, the way it works is you log into the HostGPO portal. You have to get approved. And then once you log into the HostGPO portal, you're able to see the brand.

Jeremy: It's a private club. It's like where you were. It's like Dumbo House, your office.

Jeff: 100%. You got a swipe at the door. It beeps red if you haven't been approved yet.

But once you get into the club, you can log in, you see all the different brands that we work with. And then it'll say, West Elm, we get this discount. Helix mattress, we get that discount. Standard Textile linens, we get this discount. And so there's different ordering methods. So sometimes it's like, here's a coupon code and you go onto their site and drop it in. And sometimes it's fill out this form and register an account and then you can buy from them. And we've been unifying all the order history and that kind of stuff already, depending on where you order. And you're able to filter by like, what did I get for this property, and which linens do I use for that property, without having to search your email and all that kind of stuff.

But what we raised money for last year was, one, to keep growing fast and be able to support the amount of demand. We had so many people signing up that it was really hard to keep up with everybody. So there was an aspect of it that was that.

The other aspect was we've been really, really tirelessly building out the ordering portal. And so the new portal, which we have launched, for those of you that are signing up now, you're able to log in, and rather than having to get coupon codes and go to a bunch of sites, now you can actually purchase on the HostGPO portal for most of our brands, like directly from that brand, all in one place. One shopping cart. Your furniture, your linens, your locks, your rugs, your whatever it is, you can add that to one cart. And when you check out, it's ordering it immediately. There's no wait or delay or quoting process. You're ordering from those brands, and you can shop and see the discounted pricing up front without having to jump around or open up 20 tabs or go to their websites to figure out what you want.

Jeremy: So how are you able to grow? I mean, right now we hear, well, honestly, I feel like we hear about it less this year. But a year or two ago there was hashtag Airbnbust, yada, yada. How are you able to grow at a time that is presumptively slower in terms of new supply and whatnot? So, I mean, as HostGPO is a business.

Jeff: Yeah. I think for us, we've been able to do things like find more partnerships that fill different needs. So we just signed a new furniture brand that we work with, which is like a huge deal. And we signed a partnership with Build with Ferguson for discounts. And we'll sign new offerings that, we've been really strategic about who we partner with. We don't partner with everybody. We partner with the curated brands that we think are like the best in the space. We have the best kind of discounts and pricing with each of those companies.

But the thought is, well, you should never have bought a hot tub from HostGPO, because we don't have a hot tub partnership, because we didn't have the best deal on hot tubs. Well, now we're piloting a new hot tub partnership because we think we do have the best deal from a great brand. And we're able to do that. So filling in those gaps has allowed us to grow. And then the other way we've grown is just making it...

Jeremy: How much can you get me a hot tub for?

Jeff: Less. You can log in and see. But that kind of stuff has been good. I mean, that's been a huge part of our value proposition. And the trust that we've built with our members is, if you can buy a Schlage Encode 2 lock on Amazon, you should buy it there unless we can get it for you cheaper.

Jeremy: Can you get me a Schlage Encode cheaper?

Jeff: 100%. We have the best pricing, better than Amazon, all year round on that kind of stuff. So those are the types of partnerships that we do.

Jeremy: I just realized I'm paying $5 per property to Hospitable for device management on my Schlage Encodes.

Jeff: Yeah.

Jeremy: I was like, d*mn, I didn't realize. I thought it was included.

Jeff: Yeah.

Jeremy: Yeah, they got me.

Jeff: So yeah, I mean, that's, I would say, filling out our marketplace. We've signed a ton of new partnerships and kind of value add things for our membership base. That's been a big one. And as we bring on new partnerships, more and more people sign up. And that's our model.

Jeremy: So making your product better...

Jeff: Making your product better, providing the best deals, brings in new people.

Jeremy: Brings in new people. Or people who are already investors who are looking to refurnish or resupply their properties? Or is it generally new inventory being added?

Jeff: It's both. I would say probably the new inventory people are the ones who are like the power users right away, because you need to furnish a home. You're spending $30,000...

Jeremy: And you can turn 30 into 23.

Jeff: Exactly. Yeah. I mean, we're averaging, you're averaging 40% savings through HostGPO on like all our stuff, which is pretty amazing. So that's like probably a big part of it.

And then the other big part is we have a partnership with Staples and Ace Hardware for like, go into an Ace Hardware and get a discount. Or we have a partnership with Instacart where you just get a free Instacart business account for a year, which is amazing. And like all that type of additional value add are things that we've been adding over time that I think have continued to attract people.

Yeah, we have a really, really strong, really sticky membership base that have been with us for a long time through a lot of the bumps in the road. I mean, we used to make people type out the SKUs in an Excel sheet for everything that they wanted to order and then send it to the brands to like place orders. That was like how we started. So to go from that to integrating on the back end with some of these huge, huge publicly traded companies has been a really big, really big step for us.

Jeremy: So funny. So you guys should look at the video Jeff did with Alex Lieberman. I think it's Alex Lieberman's social media account. It was like a two minute elevator pitch.

Jeff: Yeah.

Jeremy: And Jeff gave his pitch. But frankly, it wasn't like he actually wanted money pitch. It was...

Jeff: No, it was like a fake Shark Tank pitch where you go on and you get some free marketing.

Jeremy: And he got rejected. But the reason was, was because he was like, what's your fundraising situation? You said, we just raised money.

Jeff: Yeah, we just raised like enough money that we need.

Jeremy: And then the guy was like, well, I mean, sounds like you don't need more money. It sounds like then you're good.

Jeff: Yeah.

Jeremy: But putting those Shark Tank shoes on. What's the TAM, man? How big is this TAM?

Jeff: Massive. I mean, the TAM in the industry is huge. We're in the US and Canada right now, and I think when you start considering things like the short term rental industry, you're talking about property managers, you're talking about homeowners, you're talking about boutique hotels. And so I think that the TAM is big. And frankly, people, once they have an account, they can use it. They can maybe send something over to my house, my apartment. I mean, look, this is for vacation rental use, but there is definitely a difference between...

So one of our investors is Spencer Rascoff, who founded Zillow and Hotwire and all these other companies. And his favorite, my favorite question that he asked when we were talking is, what's your SAM? It's like, well, I don't know what you mean. SAM.

Jeremy: SAM.

Jeff: What's your serviceable address, like, market? What's not your total addressable market, going to your serviceable addressable market? Which is like an even more interesting question when you start thinking about like who's actually going to use your product versus like the entire industry at large. And I think what's interesting about what we do is you're really looking at, [inaudible] talked about before, huge property managers and huge vacation rental companies. I mean, we work with all the biggest folks in the industry, all the way down to entrepreneurs and people that are just getting started and really want to learn and do things the right way and save money out of the gate.

Jeremy: Got it. So when you said that, what was that answer? How did you answer it, I guess, would you say?

Jeff: Yeah. I mean, the first thing I said was, what's SAM? I'm confused here.

Jeremy: So what's the difference between total addressable? So total addressable is anybody in hospitality, right?

Jeff: I mean, yeah. Anybody in the entire vacation rental industry.

Jeremy: So what's the difference between SAM? What would be added to that? I think it would be less, right?

Jeff: It's who is actually going to use your product. Like who, not just the entire market at large, like if there are people that are not included in that market. If you said, well, your TAM isn't the entire vacation rental industry, your SAM is who in the vacation rental industry actually wants to and will use your product. And the answer is everybody.

Well, the answer for us is it's actually much closer than you would initially think, because it's not like there are huge companies that are too big for HostGPO or companies that are too small. Nobody's negotiating these partnerships. Like it's not worth anybody's time to be negotiating all these partnerships on it. Like there's no Walmart that's that big where they're going to go to the manufacturer and they're going to, no, I mean, that's us. I mean, we are the, we're the Costco of this space, in a lot of ways. So that's kind of how we built it.

Jeremy: Gotcha. So you go to 30 industry events a year, or your company does. How many are you going to nowadays?

Jeff: Oh man, I'm probably going to about maybe 10.

Jeremy: How have you seen these industry events change over the years, and which ones would you recommend folk listening goes to?

Jeff: Yeah, that's a really good question. So I think that there are about three times as many as there used to be. Every year there's been more and more popping up. I think they're actually starting to decline, which is a good thing, because there've been too many for a while. And they're pivoting to smaller, more targeted events where people can actually network and meet like exactly who they want. And I think that that's a natural growth, like a lot of meetups and summits and less conferences, which I think is good.

And I think that what's really interesting is that people don't know about that many of them, usually. And if you really wanted to look around, you could probably find one that was like specifically for what you want. And I think that that's, whether that's a midterm rental conference, whether that's a, I'm looking to connect with investors on a large scale and I want to find institutional capital. There are those conferences where those people who are capital lenders go to find people to lend to. If you're a property manager that's operating at scale, there's conferences for that. If you're an entrepreneur and you want to meet with other entrepreneurs and network, and you're most focused on community, there are multiple communities that fit that need. So I think...

Jeremy: How would you classify mine? And do we have fun? Hey, was it fun?

Jeff: Yeah, one of the more fun things. All the people at yours were like super fun. I mean, I knew a bunch of them already, which is awesome, but that is part celebration and part like masterclass on how to do it, and network. I mean, yours is very much focused on networking and a lot of people connecting with each other on like a more, I don't want to say like intimate way, but in a more real way, because you're spending more time. And there's, what was it, like 40 people, something like that, 50 people. Like it wasn't 500 people. And so you really get to talk to everybody and meet people and have more than just one five minute interaction. And that's very different.

I mean, there are events that I wouldn't even include in the ones that we go to, but there are events where it's like, go stay in a house with 14 other people and like do deep dives where you're showing each other like what you're working on. And that is like a much more hands on thing. Then it breaks out into like entry-level, mid-level, and then like super advanced. There are conferences that we go to where you walk into the room and there's no, this is what dynamic pricing is. You're starting the conversation with, this is our revenue strategy that we deployed over the last two quarters, these are the results we've seen, and it's a variable based on this and these different markets, and this is how it tested across our portfolio.

Jeremy: Yeah, exactly.

Jeff: Like, and then you're talking about that and then you're asking other people how they're doing it and you're comparing notes. And again, that's not for everybody. Some people don't have 300 properties that they can split test and really conduct that level of detailed advanced. I mean, a lot of these big, really big vacation rental companies, they're using tools like Beyond and PriceLabs in a very different way. They have full-time revenue managers that are optimizing on top of those as an input on what they're doing.

Jeremy: Yeah. I talked to Wheelhouse's founder and he was showing me their new like software update. And I was like, holy crap, this is crazy. It was literally like showing the topography, 3D topography of Vail. And it was like, you can literally look at the mountain in a 3D view and pick the exact like comp set you want to use. And then do an A/B test, like this comp set over here versus this comp set, and see what happens over time. I was like, d*mn, that's... And I was like, who are your users? Like, yeah, people with like hundreds of properties, because those are the ones who need it.

Jeff: And also test five different things at the same time and see what happens.

Jeremy: Yeah, it's a real deal. So where do you think, which one should I go to? Which ones are, I mean, I've heard VRMA, VRMA, VRMA. I know you were the VRMA person of the year award. You were up on the VRMA magazine page.

Jeff: Yeah. Yeah, VRMA is great. It's the biggest one, and I personally think that everybody should go to VRMA at some point, because you don't understand this industry and like the scope and size and scale until you see these 40 unit, 50 unit, 500 unit, 5,000 unit, 10,000 unit operators at scale. And you understand the differences in all the different business models, and you understand how people are doing franchises. You understand why people do raise venture capital. You understand what those businesses are going after, who's building, who's doing construction, who's doing development. Those are all different parts of this industry. And I think that the biggest, widest umbrella for conferences in the space is...

Jeremy: Got it. So personally, and also BNBCalc wise, what do you think? VRMA is the best?

Jeff: I mean, I don't know how many, what's your average unit count for a BNBCalc user?

Jeremy: Yeah, so that's a good question. I would say we initially thought it was going to be more like individual investors, smaller, but over 50% of our users have like multiple properties already. And definitely our power users are property managers, because if you think about it, who needs to be creating reports like all the time for clients? That's property managers. Or realtors would also be another big use case that we have.

Jeff: I'll tell you that you will learn a lot if you go there, for sure, about the market and about like who your potential users are, and who you can help, and what else is out there, and like whatever else you want to understand, like what's built in, what people are using, what they have on their own. Like that's something that you can't tell unless you go. But a lot of the 200, 300, 400 unit people have built a lot of their own solutions. So it's like understanding what they're using and how you can help them. And it's a big, big part of it.

Jeremy: All right, cool. You're going. You're coming. Should we get on the same flight?

Jeff: I'm going to be there. Yeah, you better be there.

Jeremy: You're an amphibious, but you're also a...

Jeff: Yeah, I also fly.

Jeremy: You also fly.

Jeff: Yeah.

Jeremy: Man of many.

Jeff: Yeah. There's not a train I can't traverse.

Jeremy: But there is a, it's in the desert, right? Isn't it Phoenix?

Jeff: It's in Phoenix this year. It moves around.

Jeremy: It looks like we're going on camel.

Jeff: You got to come. And we're hosting, for anybody that's coming, we're hosting a pickleball tournament where we're raising money for the Arizona advocacy group for legislation in Phoenix, and also the VRMA advocacy fund. So it's a pickleball tournament to raise money for the advocacy associations.

Jeremy: Awesome. And I know I asked you this before. What is your biggest pro tip to succeed with short term rentals in 2024?

Jeff: First, sign up for a free three month HostGPO trial. There's no reason not to try it out. If you haven't logged in for a while, come back, check it out. See what it's like. See what the new portal's like. After that, which is clearly the number one secret to success. After that, I would say the secret to success is finding, by, making this up on the spot. But I think the one secret to success is finding the narrow in between being intentional with what it is that you want to build and being open-minded to the opportunities that are in front of you.

And that's something that's pretty unique to the space, because if you're an opportunistic minded business person and you're out there and somebody brings a deal to you, it might not look exactly like the structure of what your intention of what you're trying to go out to build is, but you kind of have to navigate being willing to be flexible and pivot when it makes sense with this serious intention of, you can't take anything and you have to know why you're doing this and what you're building. So I would say balancing those two things in the short term rental industry is a unique challenge.

Jeremy: Well, that was a very intentional answer. Maybe the first time you've given that one.

Jeff: First time, first time.

Jeremy: Well, you guys heard it here first. How can folk, other than go to HostGPO, but I want to stay in tune with your journey, everything you've got going on?

Jeff: Yeah, I'm a big LinkedIn guy. So check me out, Jeffrey Iloulian, or you can just find me on HostGPO, through HostGPO Instagram, or HostGPO at everything. So HostGPO on LinkedIn, HostGPO on Instagram, HostGPO on Facebook, et cetera. So, or feel free to shoot me a message on LinkedIn too.

Jeremy: Beautiful. Well, Jeff, thank you so much for getting over here today.

Jeff: Of course.

Jeremy: And everybody stay tuned to the next episode of the Short-Term Rental Pros Podcast.