CEO Spotlight - Niko Karstikko of Bob W

Niko Karstikko, co-founder and CEO

Karstikko and co-founder Sebastian Emberger set up Bob W in Helsinki in 2018 and have steadily grown the team and the number of city-based rental properties since then.

Bob W acquired Estonia-based Estonishing Stay and Finland-based Koti last year followed by Charly Hospitality in Germany this year. The company announced €21 million in funding in October 2022.

This conversation has been edited for brevity.

Bob W is one of a new breed of tech-driven vacation rental brands, how will you stand out from the competition?

From an ethos perspective, we’ve created this concept to serve the best of both worlds. The best of the hotel experience, the quality standards and the professionalism, the scale and the resources to create the experience of a lifestyle hotel and then the magic and the utility of short stays - the home, washing machine, kitchen, dishwasher. 

The brand on top of it is Bob W, an avatar of the perfect host. He’s well educated, a man of the people, knows the neighborhood better than a local concierge, speaks eight languages and, unlike a normal host, he doesn’t sleep, doesn’t need a lunch break, doesn’t smoke and answers everybody in one minute, 22 seconds on average. 

Anybody who has been an active user of short stays knows that the host really makes or breaks the experience, so Bob is that perfect host times 10. We’re able to create this unique proposition that is the best of both worlds and is the product that the next generation of travelers is looking for. That’s the target demographic - this modern traveler who is mixing business with pleasure.

What’s our differentiator? From a consumer experience we have hands down the best overall guest experience. Our net promoter score in 2022 was 84, which is something that is not heard of.

We’re the most sustainability-focused operator on the market, we publicize numbers to all of our customers because they’re tired of hearing nice adjectives. We’ve got the best technology, we can run a 50-unit property with one full-time employee on site. 

From a business model perspective we’re able to scale the business because it runs on technology. That means from a profitability perspective we’re able to charge lifestyle money and have the cost structure of a budget hotel.

You’ve bought your way into new markets recently with acquisitions including Estonishing Stay, Koti and Charly Hospitality, does this remain the strategy going forward?

We consider ourselves a tech company operating hospitality, and we’re a growth company. Our mission is to create five-star hospitality for every guest while transitioning the hospitality industry into a sustainable one. We have an opportunity to become the brand in this new category of hospitality and really be that player that elevates the bar for the next generation of traveler. 

We’re looking for growth without compromising the product quality. We have our own tech, we have a very capable team that can turn apartments and apart-hotels into Bobs.

We have a two-part strategy. We have the organic growth where we do management deals and leases. That’s a core part of our strategy and that particularly helps us with the mid and long-term growth, because those projects are further down the line. We like to complement that with our M&A strategy. It’s a massively fragmented market, we’re filling a void. We’re doing what the Hiltons and Marriotts did in the 70s and 80s by creating brands that were equivalent to the new standards. They used a 1000-page playbook - we do the same in the short-stay space by using technology. There’s a lot of good players out there, there’s a lot of opportunity for us to grow from an M&A perspective and we’re actively looking at options.

Do you foresee further consolidation in the wider European vacation rental marketplace?

It’s a massive space. With millions of short-stay listings across Europe this is such a fragmented space. There are no big players in this market, there are no standards, there is not even a name for it - short-stays, vacation rentals, extended stays or consumers call it Airbnb but Airbnb doesn’t own or manage the properties.

For us it’s about taking the full-stack operator approach and consolidating and that space is going to keep consolidating. The space is going to have room for the next generation of Marriotts or Hiltons and those are going to be driven by tech. We’re all a very small speck in a large sea of opportunity.

Are there still good deals to be had?

It’s always deal specific but I do think there are good deals. The hospitality industry has taken a real beating over the past three years and while the short term looks very rosy, I think the mid-term might have more challenges. We see our sector, the more flexible sector of travel, we can cater for relocation or corporate apartments as well as we do for the one-night tourist visit. 

The industry is in a very resilient position as proved by the pandemic and that’s why there’s a lot of faith in the market both from a real-estate perspective as well a from the old timers in the industry that this sector is going to fare just fine. Of course there is fatigue in the market of just having gotten out of the pandemic and having uncertainty and that does translate into good deals.

You announced funding of €21 million in October 2022, so what did you have to do to persuade your backers? 

We have proven our growth engine. We can expand to a new country by just hiring two people. We have shown our scalability so, yes it’s a tough time for equity funding but there’s still money out there and the best companies get funded. We’ve been able to repeatedly show that we’re a winning formula for business fundamentals for our shareholders, for real estate players – as in our landlords - as well as for consumers.

Do you anticipate the next round will be harder?

There are massive headwinds in the entire funding space. According to estimates Q1 last year versus Q1 this year, there is an 80% drop in funding. So, no doubt there’s more pressure. We’ve already had some very positive outcomes and as we’re in such a good financial position with such healthy unit economics and such healthy business fundamentals, it’s a no brainer for the savvy investor.

All indications are that the rentals industry is in for a strong summer, but as we look to autumn, recession clouds are looming. How does it look for Bob W?

We’re in the best position now in terms of bookings and general demand than we’ve ever been. We’re partially driven by a very loyal customer base.

We have proven our growth engine. We can expand to a new country by just hiring two people. We have shown our scalability so, yes it’s a tough time for equity funding but there’s still money out there and the best companies get funded.

Niko Karstikko

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No doubt the industry is going to face some headwinds. Historically affordable luxury and accessible products like us have fared well in the hospitality space in the downturn, referred to as down-trading, and because of our cost structure and margin profile, we have the best value for customers. That also allows us, if times get difficult, we do have the flexibility to be a lot more competitive with pricing than where we are at today.

Are you concerned that the digital nomad trend, the blending of leisure and business, is going to get squeezed?

We’re focused on the next generation of traveler and the companies that employ them. Having been in that space both from an investor and a founder perspective, the rules weren’t there even before the pandemic. So, we might see some old school companies coming back to that way [of working] but that mass trend was already on its way before the pandemic, and it is here to stay. 

Historically there were hotels or you rented an apartment for two years and that grey area has been growing massively over the years. Supply hasn’t kept up with demand. 

If you look at the macro trend, younger generations are spending more time on the road. We talk about digital nomads but our target market is not really digital nomads. Why? Because most of us don’t really get a chance to put on a backpack and head to Asia for two years. Most of us have a mortgage to pay or a partner somewhere that we want to see occasionally and have reasons to be semi-permanently in locations. 

It’s exactly that behavior, that you can go for that meeting on Thursday in Paris, work remotely on Friday and stick around for the weekend. It is so solidly squared today in the service economy, in the office working world and in the entrepreneurial world, among independent consultants and the gig economy. That’s the customers that ultimately are the ones that are using us.

There are a lot of column inches being devoted to short-term rental regulation in Europe and further afield. What should the industry be doing to ease the pressure here?

We’re in commercial property and ensure we’re on the right side of legislation in all of our markets so that regulation doesn’t really touch on us in most markets. The majority of our properties are under hotel license.  

Ultimately this sector should start getting organized and work together with the legislators from an EU, country, municipality level to really find the right stride in terms of how to regulate the short-term rentals particularly in these hazy areas. 

There’s other reasons to get organized, for example, how do we become leaders in sustainability, how do we drive better behaviors from us as operators, from real-estate developers as builders and from consumers. Those are things that would make us a responsible, forward-looking industry.

What are Bob W’s priorities for the remainder of the year and what are the greatest challenges to achieving them?

We opened 12 new properties in Q2, which is a heck of a feat from any hospitality company. Growth is in our DNA, and it’s made possible with technology driving the business which makes the duplicability and scalability work a lot better. We will continue to grow sustainably and profitably, and we’re starting to hit group level profitability and will do so in the second half of this year.

We’re opening two properties in Amsterdam. We will have another Mediterranean market opening up which I can’t talk about yet and new properties in the nine countries we already operate in both in existing cities and new cities.

If you could go back to when you first launched Bob W and change one thing, what would it be?

I’d get rid of the pandemic. Apart from that, it took us a few years to really learn the real-estate market because we’re outsiders. I would have employed the capabilities of really well-seasoned colleagues in real estate early on so we wouldn’t have had to tread water so slowly for the first year and a half of operations.

What are your thoughts on generative AI and how it might impact and/or improve the alternative accommodation market?

It’s going to impact in a very big way, the only question is how long it will take. We’ve got our own tech teams. We have a very capable team that can tackle challenges around AI, and we’re very focused on finding solutions for some key areas in the business to stay ahead of the curve. We’re particularly excited about how we can make Bob a better host. The other opportunity with endless untapped potential is revenue management. 

Tell us something that we won’t find on your C.V.

My first job as a 14-year old was as front-desk manager at a bed-and-breakfast. There were only eight rooms, and I landed on the job half by accident but absolutely loved it. It was my most fond summer job memory and clearly, without me figuring it out, taught me that I loved hospitality. The irony is that it took me close to 17 years to make the realization after doing everything from banking to being a tech entrepreneur and founder to finding that love again. There’s a learning in there somewhere.