London focused City Relay, is a short-term rental operator currently winning by focussing on one of the hardest parts of property management to get right. Operations is the backbone of property management but often causes the most headaches. With City Relay Solutions, the company is removing that pain point for other managers and asset owners as well as offering London’s long-term letting agents a partnership route into the lucrative short-let market. We spoke with Maxime Leufroy-Murat, founder and CEO to discuss the company’s value proposition and how he sees the convergence of short, mid and long lets.
PillowTalk Media: Tell us a little bit about the backstory of City Relay. When did you launch, what attracted you to the short-let market, and what was the initial business model you adopted?
Maxime Leufroy-Murat: I started my career as a trader at Morgan Stanley. After a few years at such a large organisation, I wanted to go out on my own and seek an entrepreneurial career. I launched an online dating business with a Morgan Stanley colleague. Sadly, that business failed within a year and I was broke – I needed to find a new business idea quickly or face a return to work in finance.
I’d always had an interest in property, and would regularly convince friends to let me manage their Airbnb for them. Through this, I discovered how low the barrier to entry was within this short term rental market and I wouldn’t require any capital to set up the business. I grew the business gradually through browsing on asmallworld and other social networks to find properties and convince landlords to let me manage them.
For the first few years, I worked from home with some interns and literally did everything from managing bookings, check-ins, housekeeping, laundry and guest communications. I realised there was no local ‘one-stop-shop’ which I could count on to provide a quality, fully managed service.
So with this learning, City Relay was officially launched in 2015. The initial business model was a short term rental management company targeting private owners with the USP of creating reception spaces around the City where guests could have face-to-face interaction with City Relay team members. Historically, short term rentals operated in the “dark” with homeowners hiding the fact they were short letting their homes and operators being discreet when organising check-ins. We wanted to bring transparency to the business, with branded vans, branded staff uniform and an openness about which properties we were managing.
This model proved to be an immediate success, as local hosts knew they could rely on City Relay to provide a hassle-free short let service. Five years on, City Relay is now a leading property management company in London, growing quickly through the increased demand for short-letting services, as well as expansion of its market leading operations to the competitive long let market. The business has delivered over £40 million in rental income to its network of hosts and landlords.
PTM: City Relay is very focused on the London market and you have a large city presence. Can you tell us a little more about the London market and what’s attractive about it? How do you see things changing as we navigate the current crisis?
Maxime Leufroy-Murat: London is amongst the largest short term rental markets in the world with 50k+ private homes available for short letting. It is also one of the most attractive markets in the world with great average daily rates and occupancy levels, ensuring we can maximise the earning potential for our hosts.
The London market is currently quite broad and fragmented – lots of property managers, with only a few having more than 1% of existing supply. There are only a few players left operating in the market, as the COVID crisis has unfortunately claimed a number of casualties, including Hostmaker.
Post the COVID pandemic, I still expect the market to remain competitive. We will see more short let apartments brands coming to market and many hotel blocks converting to serviced apartments. Recently, we’ve seen investors continuing to invest in master lease and branded operators – Kasa Living, Casai and BoB W for example. I am a shareholder and adviser to BoB W and expect them to become a major player in London in the coming years.
PTM: Operations are the backbone of property management but they are also the hardest part of the business to get right as well as the part that can cause the most headaches. With City Relay Solutions – you’re offering a valuable service to those who would do better to outsource this part of the business (even if they don’t yet know that…). Tell us more about why you’re focused on white labeled operational management and why it works.
Maxime Leufroy-Murat: City Relay started back in 2015 by doing everything in-house – and probably taking on too much! In the early days, we did all the laundry for our linens in the basement of our first reception space. We quickly realised that we were not only spending more money by doing it ourselves, but also delivering sub-par quality to our guests.
Since then, we’ve focussed on delivering high-quality services through scale. Our main services include:
✓ 24/7 guest support & concierge
✓ Professional five star housekeeping
✓ Hotel quality linens & amenities
✓ Property maintenance & compliance
✓ Tech enabled operations platforms, DRIVE
In order to deliver great and cost-effective property management services for short term rentals, you need density. Density is achieved through pooling as many short term rental players together, creating economies of scale. This means our housekeepers spend less time traveling from unit to unit, our drivers do more linen drops per hour, and our maintenance issues are solved quickly. In this context, everybody wins as the service only gets better as we scale.
We focus on providing a white label operation as many of our clients have their own specific requirements to meet. We have capacity in our warehouse to store our clients’ branded products and display them inside their properties. So ultimately, we can deliver the best, 5 star experience for the guests, without the guest ever knowing that City Relay Solutions is working behind the scenes.
PTM: As City Relay has both a B2C, ‘full management’ arm, and the B2B Solutions offering, in effect your ‘customers are also your competitors’. How do you overcome the challenge that this presents?
Maxime Leufroy-Murat: We see having a B2C arm as an advantage for our B2B clients because it has given us an in-depth understanding of their specific challenges. Our white label service is so popular because it has been designed and built by a highly experienced team who know what the B2C pain points are and how to fix them.
We have also developed and built a technology platform in-house, DRIVE, that automates many of the daily tasks and helps create efficiencies – it offers great value to our clients. Therefore, if you are a short term rental operator and you want to scale in a cost effective way, we offer a compelling solution that outweighs any concerns around competition. As Simon Lehmann said rightly, “we advise that companies reduce fixed costs to a minimum and increase flexibility when it comes to third-party services, like cleaning and others”.
Ultimately, our customers lose a competitor by partnering with us. We sign non-compete agreements and inform them immediately if any of their clients contact us directly.
PTM: You’ve said in the past that the short-term rental industry has confused itself by thinking that it is ‘like a hotel business’ where in fact we are in the ‘business of letting’. Can you expand on this and explain what the important differences are?
Maxime Leufroy-Murat: There are two very different types of urban properties: privately-owned properties vs serviced/dedicated properties.
Short term rental management companies tend to focus on the first type of property which are lived-in properties or holiday homes. In those cases, short-term rental is just another lettings business. You deal with private owners and help them generate extra income. This business shouldn’t fall in the hotel category because the experience is non-branded and similar to any other types of lets.
The second type of urban properties are dedicated brands, serviced apartments or master lease operators. These properties are very similar to a hotel business as they deliver a branded proposition to the customer.
A lot of hotel brands have associated themselves with the first type of urban properties – Accor with OFS, Hyatt with Oasis, to name a few. In my opinion, these partnerships didn’t necessarily make sense. I would have seen an acquisition rationale where Knight Frank or Savills acquired OFS or Veeve for example.
PTM: Our industry often talks about ‘convergence’. You are currently right at the cutting edge of convergence between the short-let market, mid-term rentals, and longer-term real estate/lettings. How do you see these sectors working together to better service customer demand and market conditions?
Maxime Leufroy-Murat: We expect more estate agents to get into short term rentals as there are obvious synergies between long, mid and short lets. With the largest estate agencies managing tens of thousands of properties, they are perfectly positioned to take advantage of short lets by offering a new service to all their clients. Short lets perform best during holiday periods and can generate substantial income in periods when finding a long term tenant is most difficult.
Estate Agents can offer their clients a branded short-let service quickly and easily by leveraging our B2B arm – and we can manage the integration with their existing tech stack too. If required, we can provide a 360 solution for short, mid and long lets, including property/block management, compliance, end of tenancy cleans and inventories. All managed effectively and efficiently through our DRIVE platform.
We also expect property developers to offer short let as an amenity inside their blocks for example. The ability to let your property for up to 90 days a year can be an incredible perk for buyers.
In summary, there is definite “convergence” happening within the market and we expect short lets to keep growing aggressively for the years to come and become an essential part of the lettings mix.
PTM: And finally…. if you were to start all over again and pick a different city to focus on – where would that be?
Maxime Leufroy-Murat: Urban markets are proving to be quite complex to crack. It’s a business model that still needs to be proven but London is the ideal city to demonstrate our model. It’s also a dynamic real estate market and we’re active in property investment and development through Leufroy.
Ultimately, if I had to choose a different market, I would most likely choose Paris because it’s my hometown. Real estate is about local knowledge and this is where a lot of companies have gone wrong. Opening international markets for most short term rental companies has been nothing more than a vanity metric.
Maxime Leufroy-Murat is the founder and CEO of City Relay, the leading property management company in London and City Relay Solutions, an outsourced operations partner for recognised brands in the short term rental and serviced accommodation sector.