Marcus Rader, Hostaway
Marcus Rader has been steering Hostaway, a specialist in vacation rental property and channel management, since 2016. The company pivoted during the pandemic and has seen strong growth in the past year.
Rader is no stranger to startups: Prior to Hostaway, he developed a peer-to-peer marketplace for boats.
Having been involved with a number of startups in the past, what experiences from those did you bring to Hostaway?
I had a solid 10 years of VC-backed tech startup experience before starting Hostaway. I’ve worked in founder-led cash flow-positive companies and even companies that raised massive amounts of capital without ever having an actual product or revenues. I was specializing in what I thought was a niche market: online marketing. It was only later that I noticed that the biggest tech companies in the world are in that very same field, Alphabet and Meta leading the way.
I met my technical co-founder at one startup and we used it as a baseline on what to do and what not to do. Sometimes you need to get the staff excited and motivated when times are dark - and sometimes you need to stay calm when things go well. It’s a tough balance.
Hostaway pivoted during the pandemic; what were the factors that led up to that decision?
We made a few very important decisions and were able to sell them to both our customers and our staff. In hindsight, many partners, competitors and companies in the industry made the opposite decisions and fell behind or failed.
From an outside perspective, it may look like we got lucky, and maybe we did. But when the cancellations started coming in, and the rug got pulled out from under our feet, I set up a taskforce to get every single customer who had financial worries on a call with me. During the most depressing three months of my life, I was on the phone with failing entrepreneurs all day long.
It was around the 150th call that a pattern started to emerge - while many were desperate, others saw light at the end of the tunnel. And those that were the most hopeful were managing big properties in vacation destinations in the United States - especially in Florida, Texas, Arizona and the Carolinas. So that’s where we went. We had to make a lot of changes to almost every aspect of our business, but it paid off. As Ricky would say, one man’s garbage is another man’s un-garbage. We saw the opportunity and we took it.
What regulatory challenges are putting pressure on alternative accommodation and vacation rentals?
Right now, the industry is talking a lot about this. I’ve been promoting increased regulation for years. If the public and decision-makers have a negative view of the short-term rental industry due to lack of regulation, decisions might be made in a hurry. What’s new right now is that due to remote work, people are moving from the cities out to traditional vacation rental markets. Once they make the move from the Big Apple to the beach, they might realize they live with tourists, which is one reason many small formerly tourist-driven towns are looking at additional restrictions.
Unfortunately, I don’t think regulating the vacation rental market will help much with the main problem - geoarbitrage. People are bringing big-city salaries into small communities and the locals cannot compete against them when it comes to the limited supply of real estate. Adding in large-scale commercial real estate investors, the system is getting ready for the perfect storm. Restricting short-term rentals won’t help much, just like restricting foreign buyers didn’t help in locations such as New Zealand, Australia or Canada. You need to tackle the problem from all angles, not just one.
There is significant consolidation in the marketplace with announcements from Waze, OYO and Vtrips in recent weeks. Will this continue as multiple players circle around the same inventory?
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Right now the main issue is supply. Anyone can set up a website that advertises great properties and get visitors and interest - but delivering the product is more difficult. Even our partners Airbnb, Vrbo and Booking.com are publicly stating they need more supply. If this continues, I’d look closer at how much unique inventory the platform has, rather than the revenues or visitors.
Do you foresee consolidation among the newer alternative tech-driven accommodation providers?
Great question! Two weeks ago I would have given a different answer, but now that tech valuations are crashing on the public market, we’re likely going to enter a state of hibernation in the coming six to 12 months. That would be a perfect chance for large companies such as Hostaway to acquire companies in the space, but not at the price points we saw earlier this year.
What’s the biggest mistake property managers and owners are currently making with their technology?
This isn’t exclusive to property managers but rather businesses in general. If you have a problem related to processes or staff, there’s seldom a technology available to solve that problem. For example, if you’re struggling with finding cleaners that are available, no scheduling tool will help with that. What’s even more interesting is that the property managers often have access to the technology they need, without realizing it - and they are looking around for new solutions while they’re already paying for the solution without realizing it.
Are you seeing trends such as longer stays and the blending of business and leisure evident in your technology?
When Airbnb came out with their data on stays over 28 days being their fast-growing category, we weren’t surprised. This is exactly what we’re seeing from our own customers. Since pre-COVID, bookings of this type have increased by 106% on our platform. Business travel isn’t going to be the same - but company retreats are exploding in demand right now. Big properties in exotic and accessible locations are going to be in high demand for years to come.
What other macro trends are impacting the rentals space?
We recently released some of our own data on macro trends in vacation rentals. One of our key findings was the strength of the luxury rentals segment. The "revenge travel" trend has seen consumers who were able to save cash during lockdowns splurging on experiences, rather than goods, fueled by the success of niche, luxury OTAs like Homes & Villas by Marriott.
I don’t think regulating the vacation rental market will help much with the main problem - geoarbitrage.
Sustainability has now taken over from COVID as one of the most pressing topics discussed in vacation rentals. This is going to become more of a priority for operators as consumer demand for eco-friendly travel becomes louder - but equally, we collectively need to find a blueprint for tackling this as an industry. We have the edge - a stay at a vacation rental produces less carbon than a stay at a hotel as there are less single-use plastics and the means of transport consumes less - we should utilize that as a selling point!
How do you think Hostaway stands out from other players in the market?
As a team, our background is completely different from other companies in this space that had previous careers in the vacation rental or real estate sectors. We came from tech startups, so it was crucial for us to create a product where the tech and UX were top-notch. I think that’s why, in a short space of time, we are now the only PMS and channel manager to have secured top recognition for our connections to OTAs Airbnb, Booking.com and Vrbo, and have a reputation as one of the most reliable platforms on the market.
Coming from the tech industry, we also knew how powerful integrations with other solutions would be to our customers. Uniquely, we don’t charge a commission to our partners for integrations in our marketplace (that our competitors do this isn’t a widely known fact in the industry) which means our customers can cherry-pick the tools that they need to grow their business.
Ultimately, I believe that our customers come to us because we can offer a powerful and reliable solution, backed by award-winning support, that can help them manage and grow their business. It helps that we charge a slightly lower price than our direct competitors too.
What are the company’s priorities for 2022?
We need to manage our growth. Every successful company has this paradox - on one hand, it’s great to grow. On the other hand, you need to rapidly change the way you’re doing things because the old processes no longer work. It’s common for both staff and customers at tech companies to claim that the company grew too fast for their own good. We need to ensure we change fast enough to sustain the good product and good support that we’re known for, even as we’re quickly taking market share in a growing industry.
What is Hostaway’s strategy for growth?
We have always lived by the value of celebrating our customer’s success as our success. This has proven a great strategy for growth, since helping our customers drive bookings, increase their bottom line and grow their portfolios in turn has boosted our business with them. However, every champion needs a strong team. We are going to focus more on hiring the right people - and treating them well. This has been a good recipe for success so far, and we will not compromise on cultural fit even though our headcount will increase dramatically.
You have an interesting partnership with Dtravel. What’s your take on use cases for decentralized technology in rentals?
We didn’t end up in one of the largest tech hubs in North America by accident. Dtravel is yet another successful Toronto-based startup that we look forward to working with. Decentralized technology is being used in many other industries, and I think it’ll be successful also in ours.
What is one thing you wished you had done in your career that you are disappointed about?
One of my fondest memories and toughest experiences in how to design processes that scale was when I took a job at McDonalds when I was 16. I left after three weeks, but in hindsight, I would have benefited a lot from becoming a manager and joining its management university. But on the other hand, technology got me instead, which I’m eternally grateful for.
What keeps you awake at night?
When a company experiences hyper growth, it’s like sailing a ship during a storm. Things are constantly creaking, sometimes leaking. Things you just assumed would work suddenly stop working, and you need to find workarounds. The uncertainty combined with the adrenaline is unique - it’s exciting but sure makes it hard to sleep at night!
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