Having previously managed 500 urban rentals in the UK, Lavanda has done the ultimate pivot by becoming a SaaS provider to other PMCs as well as other parties interested in the short-term rental space.
Can you tell us more about the journey that has brought Lavanda to where it is now?
When we started out on this journey, our mission was basically “to solve short-term rentals with technology”. We saw a very exciting opportunity to build a radically different technology platform; one that recognised the various stakeholders in the ecosystem, that deeply understood their motivations, and that for the first time aligned their often conflicting interests in order to unlock the huge growth potential that we see across the industry.
Unlike many software vendors, we believed the only sensible way to build a technology solution of that size and scale was to start by understanding the ecosystem from the inside out – so we set out to uncover the challenges and complexities of managing a short-term rental portfolio at scale.
Over the next 3 years we developed a portfolio of ~500 units which we operated across 5 different UK cities. This experience was invaluable, enabling us to build out the technology toolkit that we needed to power our own operational growth and make sense of a business of that scale.
We experienced first hand just how hard it is to build a profitable PMC that consistently delights its customers (hosts and guests), that is hungry for further growth, but which is also operating in a rapidly evolving regulatory context.
In 2018, our technology platform reached sufficient maturity for us to take the decision to focus all of the company’s resources on developing that business, and we relaunched Lavanda as the B2B SaaS business that we now are.
When we talk about convergence in the industry, typically we have been talking about hotels and rentals. However, the convergence of the vertical is much broader than this with developments within the Built-to-Rent (multifamily) sector realising the opportunity of flexible short-leases. What, in your view, are the opportunities here?
I certainly agree that “convergence” is far broader than just hotels and rentals, and critically includes real estate more broadly. Whether it’s Multifamily (build-to-rent) or purpose built student accommodation (PBSA), at Lavanda we work with some of the world’s largest residential portfolios to significantly enhance yield performance through the effective harnessing of short and medium-term rental demand in order to solve inefficiencies in the asset. Some examples are as follows:
Lease up. Occupying newly developed residential blocks from day one with high-yielding short-term guests unlocks important positive cash flow as long-term tenants are phased in and the scheme is stabilised.
Void filling. Efficiently monetising vacant units between long-term tenancies with short-term guests eliminates void periods whilst optimising revenue generated.
Mixed-use schemes. Allocating a percentage of each scheme to dedicated short-term rentals (serviced apartments and guest suites) can enhance its long-term yield potential. This additionally introduces transient, high-spending footfall to the benefit of local businesses.
Resident hosting. Permitting long-term residents to opt into a controlled building programme where they are able to sublet legitimately in exchange for sharing a percentage of the short-term rental income with the landlord. This solves the growing problem of illegitimate and uninsured “Airbnbing” within residential communities whilst driving new revenues.
What are the inherent challenges of this transformation and how do asset owners overcome them?
Greater demand from long-term residents to live more flexibly has meant that most landlords are now somewhere on the journey towards embracing a more diverse rental strategy – either within a single asset, or across an entire portfolio. The typical journey for an asset owner/manager is: 1) what’s the opportunity for my portfolio? 2) What are the potential risks and how can I reduce/manage them? 3) Let’s do this, what happens next?
Unfortunately, there is no short snappy answer here, as the right approach is entirely dependent on the assets and the communities involved. The good news is that Lavanda has developed the playbook, and we are very happy to share our experience across S. America, Europe, Middle East and APAC with asset owners and managers looking to understand and embrace opportunities in this space.
You’ve talked in the past about technology being an enabler to restore trust and to legitimise the professional short-term rental industry. Can you expand on this?
The short-term rental industry, and more specifically the alternative accommodation sector, is essentially built upon trust; trusted hosts offering trusted accommodation and experiences to trusted guests. So far the industry has done a great job of proving that a base level of trust exists, but it is now entering a new stage of maturity, and it requires new tools and technologies to develop and nurture trust on an unprecedented scale in order to fuel its future growth.
You have to remember that this is still an industry that at a global level relies very heavily on outdated analogue processes, which in turn means that there is a notable lack of empirical data that can shine a light on the true challenges and opportunities that the industry faces, and thus inform debate and decision-making. The most notable example of this is the highly anecdotal stories that the media love of negative Airbnb experiences. Never have I seen relevant benchmark data drawn upon so that a suggested incident can be put into a rational context for the reader! That can only be because either the dataset doesn’t exist, or in the unlikely chance that it does exist then it doesn’t support the journalist’s preferred narrative.
I firmly believe that without better data and insight, powered by better technology solutions, our industry will effectively be unable to lead the debate around its future and therefore fail to realise its inherent potential.
In your view, how does property technology lend itself to creating a better choice for both travellers and renters?
Well designed tech platforms that solve meaningful problems for clearly defined audiences within the property sector certainly have been proven to unlock swathes of unique inventory that would otherwise not have been available to renters and travellers. Not only that, but these solutions and platforms have the capacity to radically improve the search/discovery and booking experience so that it better addresses core issues of trust, vetting, payments, insurance, regulatory requirements, etc.
I can’t emphasise this enough, but we really are only at the very tip of the iceberg when it comes to understanding how tech and data can create value within this industry.
I would actually go as far as to say that one of the industry’s greatest challenges is in fact getting key stakeholders to think differently; to put our experience of the industry today to one side, to invest time and energy into understanding the scope and potential for innovation, and to then analyse the benefits of laying down core infrastructure today to enable a more sustainable (and potentially radically different) long-term future.
In 2019, you launched and became Chairman of the Professional Host Alliance. Why does the industry need an organisation like this right now and how can the PHA add value to the industry?
Standardising the experience of guests and hosts is core to winning their trust and confidence, so I fundamentally believe that accelerating the professionalisation of the alternative accommodation sector as it now starts to mature is necessary to drive it forward.
The Professional Host Alliance (PHA) exists to enable more effective collaboration between OTAs and professional hosts – a hugely fragmented global community who, if engaged and harnessed more effectively, can unlock huge value for the global industry.
All over the globe conversations are being had about the potential detriment caused by the shared economy to the fabric of society within our urban centres. This is obviously a very complex topic. What, in your view, is the real issue here and how can it be alleviated if not solved?
As I’ve tried to articulate above, I believe the real issue here is a lack of data. There’s just no reliable and relevant data set that can inform this debate – i.e. quantify opportunities and challenges, and thus enable effective decision-making.
How are residential buildings actually being used today? What is the rate of negative incidence and disruption that occurs through short-term renting? Of these negative incidences, what percentage can be attributed to the activity being conducted by inexperienced, non-professional hosts? To what extent does short-term renting actually benefit the local economy? These are all topics that are typically considered in isolation, however they’re intrinsically linked.
The debate of “what is the actual impact of short-term renting upon our urban centres” has to be a set of pros and cons with numbers attached, that are then considered within the context of a local community’s social and economic agenda. To do anything less is simply to fail to understand the context, and jump to anecdotal conclusions that invariably lead to negative outcomes that slow innovation and progress.