Graham Donoghue is arguably one of the most interesting CEOs in the current vacation and short-term rental space. With 80% direct bookings (amongst other enviable statistics), Sykes Cottages is a bit of an anomaly in today’s industry. Many a CEO would no doubt give their eyeteeth for such freedom from reliance on the OTAs and under Graham’s tenure, Sykes has grown into being a truly tech-led management and marketing hospitality business with 19,000 properties and counting under its belt. The recent acquisition of Pure Cottages Group has bolstered Sykes’s range of holiday homes even further.
Anyone who follows Graham on LinkedIn will know that his focus on both data (he posts a regular #FridayData insight) as well as the company’s award-winning internal culture and well-being policies – are core to the company’s success.
Sykes also recently changed hands for a reported £375 million with Vitruvian Partners, former backers of both Just Eat and Skyscanner purchasing the company in October 2019. In the press announcement for the sale – Graham stated that his ambition is to host 3.5 million guests each year by 2023 and increase the workforce to more than 1,000 employees.
We sat down with Graham to ask a few questions about Sykes’s current journey and future plans.
PTM – With 85% direct bookings, 47% repeats and a very profitable business model, Sykes Cottages is no doubt the envy of many ambitious property managers, perhaps particularly those in N. America – do you think that what you have achieved is unique to your market conditions, or can Sykes’s business model be replicated?
G.D. – Very kind words and I am very proud of what the team has achieved in a short time frame. I don’t think we are unique, we are disciplined in what we do and no doubt others can replicate. We have many awesome companies across vacation and short-term rentals doing smart innovative things. We are lucky in that the UK market is fierce so it forces you to be on your game across many areas. We drive the business on a few core principles around our economic model. I think in today’s current market you have to do many things well, end-end. For us we think of the business like a fly-wheel building momentum through continuous improvement, leveraging tech, service and operations.
PTM – In three short years, amongst many other changes, you’ve gone from a static brochure pricing to full dynamic pricing and built your own in-house tech stack. What is the impact this has had on the business and is there still room for tech to transform Sykes for your investors, owners and guests?
G.D. – It’s a game changer. At first, owners thought this was all about price reductions but we have proven via data that the more control we have, then owners typically get more income. Around 10% more. The great thing about our pricing tech is the bigger we get, the smarter it gets. We have many new and interesting initiatives in the pipeline. One of my biggest challenges is deciding what to play first. At the moment we have around 100 engineers and it is the fastest growing area of the business. What I also like is you can put an ROI model on the hires especially the conversion rate teams. We will continue to invest to grow.
PTM – You describe yourselves as much a data company as a hospitality company. Without minimising the importance of maintaining an exemplary service to both your owners and guests, how exactly does data play a role in your success?
G.D. – I can’t over play this. We make very little decisions without consulting the data. My Dad used to say measure twice and cut once. Good lesson. Each team across the business has data analysis embedded in it and we empower to trust the data. We have built a large data engineering team and make all the data visible via our tools on a self-serve basis.
PTM – What’s your take on a ‘High Tech, High Touch’ approach to property management?
G.D – If it’s useful and is solving a problem then it’s worth investigating. Often I see tech looking for a problem that does not exist. I learned this the hard way by kitting out my house in tech, I spend more time fixing the tech than using it…parking that, some tech is very useful and can help manage the end-to-end experience like digital welcome tablets, locks, cleaning tablet etc. We still have over 250 people in operations talking to guests and owners so I am also still a fan of good old voice…
PTM – In 2019 you purchased your first overseas property manager, Bachcare in New Zealand with its 2,000 properties, and in the last 18 months you have acquired a further 12 business. What are the elements that make a property manager portfolio attractive to Sykes as a potential asset?
G.D. – Using Bachcare as an example, we had a market leader with over 35% share. A strong management team, a growing market and a big market in Australia plus we knew our ways of working and tech could help. All of these are key. We have to know how we are going to operate and how we can add value. Being Private Equity owned we always have to think about the exit story. We remain interested in acquisitions but we will not just ‘collect’ businesses. We don’t have a desire to be Number 1 without knowing how we are going to make money.
PTM – Without giving too many of your secrets away, if you were to pinpoint a global destination (or two) that you feel is ripe for investing in. Where is it and what makes it attractive?
G.D. – I can give you two areas that are of interest to us. The US because it is large, fragmented and with plenty to go after. Even if you stay in one state like Florida, it is still larger than many European countries. Closer to home it’s Croatia. With over 100,000 properties and again a fragmented market that is also mostly all international.
PTM – You’ve stated that in the last few years you’ve grown faster organically than through M&A, with 22,000 potential property leads on the go at any one time. What factors (if any!) do you see as being limits to your ambitious scale, and is there a natural endpoint to expansion?
G.D. – At the moment we have plenty to go for. We want to get to 34,500 properties over the next 4 years to hit our valuation expectations. We operate in a market of 22m+ properties, so I don’t lose too much sleep on growth. If I was to be drawn on an area I would say people. Maintaining culture as we grow is critical.
PTM – Investing in talent and the wellbeing of your teams has been a key element of your success. What’s your philosophy on company culture and how do you ensure it fosters the development of the company as you continue to grow.
G.D. – It is driven from our values. Grow and learn, communicate honestly, drive innovation and change, achieve together and earn trust. We hire on values, reward on values and ensure teams have all the tools they need to be the best version of themselves. If you don’t live our values, you get found out. We have spent years fostering our culture and it is one of the things I am most proud of. Smart people want to work for smart companies, doing smart things.
PTM – Which factors do you think are going to create the most challenge for the vacation and short-term rental industry in the next 3-5 years and where do you see growth?
G.D. – Guest expectations are going to continue to grow and the way they want to consume information. We do suffer from the paradox of choice and we need to do a better job of helping people choose. So search and voice are going to play a big role in the future.
Regulation will continue to play a role but as an industry we are getting better at working with regulators. I can see growth coming from service and the players that will win out I suspect will play a deeper role end to end including facilitating on holiday experiences, or at best being the curator of this content.
PTM – Now for a fun question…. where would you book your dream vacation rental and who and what would you take with you?
G.D. – Bora Bora. It is said that this is one of the few places you have to visit. I would take my pillow…I travel the world with it…