May 24, 2022 • 33 mins
Have you ever fantasized about running your own Airbnb and transforming idle space into a buzzing profit generator? Wayne and I are here to turn that dream into a roadmap, guiding you through the thrilling world of Airbnb entrepreneurship. Our latest exchange is crammed with actionable insights that will help you carve out your niche in a marketplace where the right strategy can turn your property into a sought-after destination. We'll navigate you through the maze of creating an experience that leaps out from the millions of listings, ensuring your space isn't just another option, but the option for travelers.
This episode isn't just about finding any spot on the map; it's about selecting the gold mines of Airbnb locations. We dive into the essential tactics for identifying properties that deliver both the charm of their surroundings and an exceptional guest experience. As we compare Airbnb ventures to other real estate investments, we reveal why short-term rentals can be a game-changer for your portfolio. And for those with an eye on opulence, we shed light on the resilience of luxury resorts, even when economic tides are rough. By the end, you'll understand why cash flow is king and square footage is just a pawn in the grand scheme of property investment. Join us and Wayne for a session that could be the blueprint to your Airbnb empire.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome back to Aston Incorporated guys.
Wayne Aston, here, I am yourhost, and with me is the co-host
, dallin Aston, excited to behere again.
Guys, thanks for joining us.
Excited, she was good.
So you guys have all, I think,been eagerly anticipating
getting into some of the nutsand bolts, educational value
(00:23):
that we've promised for you.
And so today we thought maybe,since Dallin and I both share a
real passion for hospitality, wemight dig into starting an
Airbnb business.
Yeah, and how cool is it thatAirbnb has become so prolific
that it's its own, like noun,like hey, I own an Airbnb, or so
(00:45):
cool, let's Airbnb that.
Speaker 2 (00:47):
Yeah.
Speaker 1 (00:49):
Like, you've reached a certain market status when a
company name becomes a noun or averb or an adjective.
Yeah, yeah, let's Airbnb thatproperty.
Speaker 2 (00:58):
Yeah, when I describe what I do, people don't
understand, unless I say, ohyeah, it's an Airbnb.
And they go oh okay, that'swhat it is.
Yeah, yeah.
Speaker 1 (01:08):
So what is Airbnb?
For the listeners who are newto all of it, what is Airbnb?
Speaker 2 (01:14):
In simple terms, it's taking a property and letting
people stay there overnight.
But what is the company Like?
What is the company of Airbnb.
Speaker 1 (01:23):
We just proved.
Speaker 2 (01:24):
We just proved how powerful that's becomes.
Airbnb is.
Obviously it's a platform.
You can list your property sothat people can come stay, you
know.
And so they went from super,super small run and letting
people come and stay forconferences in their own place
to now having a platform whereyou can go on and say hey, you
(01:46):
know, you can create your ownlisting, you can upload photos.
It's essentially the softwarethat allows you to put your
property in front of millionsand millions of travelers.
Pretty awesome.
You can rent your home, you canrent your basement, you can
freely rent whenever you want.
There's some pretty crazythings on Airbnb.
It's tents trailer.
It's kind of funny.
Speaker 1 (02:06):
There's also resorts you know.
Speaker 2 (02:07):
So I mean you have a wide spectrum.
Speaker 1 (02:09):
So what would cause a traveler to go rent a property
that is marketed on the Airbnbplatform versus just going and
staying at a hotel?
Speaker 2 (02:20):
Oh man.
Well, there's a lot that goesinto it and people are gonna
have different opinions about it, but from you know.
So Airbnb it's not.
You know you're not gonna go inlike a hotel, have a front desk
.
Well, I guess some places couldyou know there's, like I said,
(02:41):
there's a wide variety ofproperties on Airbnb.
But I'd say the biggestdistinction is, you know, in a
hotel, traditionally, you go in,you get the front desk, they
give you your key card, you'll,you know, you'll the bellhopper,
whatever you'll take yourluggage up to your room.
It's a single room and it'spretty standard, Right?
I mean it's hotel, it's a hotelroom, there's hotel rooms.
Speaker 1 (03:00):
It's congruent, it's congruent, it's very congruent
the style, colors, the brandit's congruent to the brand.
Speaker 2 (03:06):
And whatever hotel you're staying in, there's
similarities in the sense thatit is a hotel.
There are nicer hotels andthere are not as nice hotels.
Speaker 1 (03:13):
Right, yeah, absolutely.
Speaker 2 (03:15):
This is just super high level.
But then Airbnb you have super.
I mean you could go, like Isaid, you can go stay in
someone's basement, right, youcan.
On the flip side, you can alsogo stay at our resort level
property.
Now, something interesting withmine is I have done my best to
make them feel like a resort,but they're a town home, so it's
(03:37):
a full.
I mean you're in a full, youhave a full kitchen, you have a
full dining room, full livingroom, you have two bedrooms, I
mean walk-in shower, walk-incloset.
I mean that's what we'retalking about here, right?
That's not a hotel room, that'sa full home You're coming to
stay in while you're vacationing, right.
So you get a group, you getyour family.
It's like you're a home awayfrom home almost is kind of that
(03:59):
, and there's a lot of that, youknow.
And you get some really crazyones.
You have cliffside littleresorts and bubble hotels and
stuff on Airbnb that you see alot.
But when I say Airbnb is so,it's like you know you could go
to a hotel's website and youbook their hotels.
Airbnb, oh man, the sky is thelimit.
There's properties of everynature.
(04:23):
They spend to resorts, to.
Speaker 1 (04:26):
So they don't have quality controls on the class or
their location or anything likethat.
Speaker 2 (04:32):
No, they're an open platform.
That's what's interesting,right, and I think I've
mentioned this before, but youknow you have millions of
properties on Airbnb.
This is a double-edged sword,right?
Because so many people think,oh man, I can just throw my
property up on Airbnb and it'sgonna work.
(04:55):
Sure, I'll get bookings False.
That is false and I can speakfrom experience.
Speaker 1 (05:02):
This is false right, let's qualify this, guys.
You know, if you're takingnotes, vrbo is a competitive
platform to Airbnb.
I think maybe not as wide of anet.
I think Airbnb's the leader.
I think the latest statisticshowed that Airbnb was capturing
like 37% of market bookings forthis type of offering, whereas
(05:24):
VRBO was capturing like 31%, sothey're not far apart, but yeah,
they're close Verbo.
Speaker 2 (05:31):
I think you know HomeAway, whatever you wanna
call it.
It's known by several differentnames, but it's a lot of
long-term stays.
Speaker 1 (05:39):
It's kind of what I've noticed.
Speaker 2 (05:40):
And there are anomalies.
I mean you can get in the weedsabout this, but there are
several platforms.
I mean you can throw stuff upon bookingcom.
I've done that, you know,anyway.
But yeah, primarily Airbnb,vrbo, verbo, homeaway, whatever
you wanna call it.
Airbnb does have a little bitmore of a an influence, I'd say,
(06:01):
in this space right, Okay, sowhat?
Speaker 1 (06:07):
it seems clear that there's an advantage If you had
a unique property in a uniquelocation, putting it on Airbnb
or VRBO.
It's a unique profitopportunity.
A unique opportunity to be moreprofitable than you would just
renting it out to someone on a12 month lease, like over a
month to month lease, Much moreprofitable on a nightly rental
(06:29):
basis.
Speaker 2 (06:30):
Is that fair?
That's totally fair.
I think the one thing to note,though, is you're also assuming
a little bit of risk, you know,I mean for the greater reward.
You're gambling in the sensethat you don't know that you're
gonna have renters, and this iskind of where I get into why
Airbnb is unique.
(06:51):
Because you have so many peoplelisting properties thinking
they can just take a piece ofthat pie.
Excuse me, anne, because ofthat, you get a lot of listings
with no eye for hospitality, youget poor pictures, you get
(07:15):
dirty places, and the majority,I'd say, of properties on Airbnb
are pretty average.
Speaker 1 (07:25):
I agree, I have stayed in a lot of Airbnbs, just
kind of by way of you know,reconnaissance to see what I'm
competing with.
I would agree with that.
I think it's average that itfeels a little more like
somebody's house, yep.
That's the nature of AirbnbLike my uncle let me come stay
in his house.
Speaker 2 (07:44):
Yeah.
Speaker 1 (07:46):
Now I have stayed in some extraordinary Airbnbs that
really understand hospitalitymarketing programming.
They have them furnished,furnished and decorated
amazingly.
Speaker 2 (07:57):
Yeah.
Speaker 1 (07:58):
I think the real opportunity.
Well, one of the manyopportunities here is you've got
a property that exceeds thequality or the enjoyability of
the environments you have athome.
Speaker 2 (08:12):
That's novel.
Speaker 1 (08:13):
Yeah, if it's similar to where you live and you're
going on vacation and it feelslike you're still at home.
That's to me that's not asappealing, Right, it's nice and
people, I think, will pay morein my experience if they have a
nice home, but they go andthey're in this amazing place
Really cool.
They'll pay.
Speaker 2 (08:33):
Yeah, that's of a higher value to a traveler right
Absolutely To be in a nicelyfurnished, nicely programmed,
clean, clean, smell, yep, yep,all these things matter.
These things matter Amenities,yeah.
And another thing that I'venoticed is during their stay, if
they are having you know you'reI've had a couple of guests say
(08:55):
in reviews you know Dallin wasan amazing host.
He checked in on us but hewasn't overbearing, yeah.
Speaker 1 (09:04):
And it's interesting.
Speaker 2 (09:05):
And I've also had people, so I have digital
concierge devices in my unitsand it welcomes them by name.
Yeah, which is cool.
It's like hey, so-and-so, andI've had people comment in
reviews too, hey, the kiosk, orwhatever they call it, is a very
nice touch.
Hey, so-and-so welcome.
And then you know, you have myrecommendations.
(09:25):
Of this, this none.
It's about the property, aboutyour stay.
There's some content there, butwhat I'm talking about is the
overall experience, and this iswhat's going to make your
property stand out.
You know, because, like I said,everyone has an Airbnb and so
we're talking about.
You know people's experience.
(09:45):
If they're going to have abetter experience, then you're
going to do better If you'relisting looks unique, if it
looks beautiful, appealing, ifit looks themed.
Speaker 1 (09:58):
So it might make sense to pay a couple hundred
bucks for a professionalphotographer to get in and set
up the light boxes and act likeit's a nice camera, instead of
using your iPhone to take thepictures of the listing.
Is that what I'm hearing?
Yes, I agree, Well, 100%.
Speaker 2 (10:14):
Look, when I first did mine, I took photos of my
phone, okay, and you know thephone's now, like my iPhone 13
is pretty awesome, the camera isgreat, okay, but I personally
am not a photographer.
Yeah, I can take some okayphotos and everyone is going to
(10:35):
say, you know, in the Airbnbspace or the DIY space, I'll
just take your own photos.
It's super cheap, cheap, simple, and I know people that have
sent.
You know, I'm going to set upmy Airbnb and I'm going to go to
KSL and get some stuff likefridges and get used stuff and
put it in the unit.
These are small things that arethat could be detrimental
because my phone photos Ithought they were so good.
(11:00):
I hired someone to come to themand I was like, oh my gosh, if
I were to sell mine.
Speaker 1 (11:05):
I'm like I'm going to die.
That looks like a dark dungeoncompared to that looks like.
Speaker 2 (11:11):
It's amazing fun.
That looks like I'm going to gothere and get murdered in my
sleep.
Speaker 1 (11:16):
And at the time I don't think they were that bad.
I'm obviously already.
It's a contrast, though.
Speaker 2 (11:21):
But the contrast.
I'm trying to make the pointhere.
Yeah, it was like a diamondagainst a black backdrop.
I was like, why did I not justdo this in the first place?
Yeah, what am I doing?
And I think what happens is, alot of times, people like me,
you sit here and be like man, Ican do this, it's easy.
But I really, really, am anadvocate for bringing in the
(11:43):
right people to make it uniqueand make it stand out, because
if I tried to just do all of itmyself, it probably wouldn't be
that great.
Yeah, yeah, I'll be honest.
Speaker 1 (11:54):
And so talk about that for a second.
Like you, obviously, you own aproperty management company.
You're an operator, so youoperate, you program and manage
your own assets.
You're not hiring a third partyproperty manager.
Now you could do that, yeah,that it might make sense to do
that if you don't live in thesame city.
However, with a little elbowgrease and kind of intuitiveness
(12:20):
and some education, you cankind of staff your own operation
, even if you're out of state,and make it fly right.
So what goes into that?
I mean, how are you doing thiswithout cleaning a unit every
time someone stays?
That could be like three, four,five cleans every month.
Yeah, yeah, so I gotta be afull-time situation if you were
gonna do it yourself, right,right.
Speaker 2 (12:42):
So again, it's about, if I try to do it all myself,
that's it.
I'd be living in Moab, yeah,and then I don't wanna do that.
Yeah, you know I love Moab, butyou find the right people, so I
have an awesome cleaner and shetakes care of everything on
site property management.
Like in the early days, I woulddrive down if something was
(13:05):
amiss and then I'd turn rightback around and go back up, yeah
.
Now she's like, please justdon't come down, like I'll take
care of it.
I'm like, oh okay.
So finding the right person,that can, the right people, I'm
gonna say, actually is superimportant, and I'd say that with
not only the cleaning but alsothe furnishings, you know, I
(13:27):
mean I had a lot of help indesigning, getting the
furnishings looking good, thethemes looking good, yeah, and
then the digital concierge thatwas significant in phones for
others and what they were doing.
I mean I feel like I was reallygood at putting all those
pieces together and making itfunction.
But me personally, I'm not theone that's actually designing
(13:52):
the software.
That's gonna be the digitalconcierge.
I'm not the one actuallycleaning the unit, I'm not the.
I have this kind of standard ofexcellence that I wanted to
achieve.
This is kind of what we'relooking to do Now.
Let me bring in the rightpeople to do this Right, you
know.
And I know a lot of people missthat on Airbnb, specifically
because they go oh I can, it'sso easy.
Listing an Airbnb takes likefive minutes.
Speaker 1 (14:13):
Yeah, it's so easy, and that's why there's so many
of them.
Speaker 2 (14:16):
Right, Right, but it's.
But most of them are justsomeone that's like, yeah,
that's proper.
I'm just gonna list it.
Speaker 1 (14:21):
Yeah, yeah, so you've really covered.
I think we could drill deeperin programming, but maybe we
come back to that.
I think the listeners wouldfind a lot of value in.
How do I find a good deal, howdo I know when I select a
(14:42):
property to be a good Airbnbbusiness?
How do I select the market,like location, what goes into
that process of selecting themarket and selecting the
specific location?
Speaker 2 (14:56):
Yeah, well.
So I actually had a friend theother day.
His brother was asking himabout Airbnb.
He's like I would love to dothis and again, so many people
say I wanna do this, but I don'trealize, kind of what goes into
it.
Right, yeah, but he was likecan I give him your number and
you chat with him?
(15:16):
And I was like, of course,right.
And so he calls me and he'slike, hey, so what's your advice
for buying Airbnb?
And I was like that's such aloaded question.
Yeah, oh yeah, that's so,there's so much.
Speaker 1 (15:28):
That's a hundred answers that is so I mean what?
Podcast.
Listen to my podcast.
Listen to my podcast.
It's called Ask and Incorporate, and check it out.
You will get everything youneed if you're thinking about it
seriously, absolutely.
Speaker 2 (15:41):
But the answer that I gave him and I'll go in a
little bit more depth than Igave him, but I said there's
just a couple things First andforemost is, like you said, like
location.
What about that location?
Cause, again, airbnb has placeseverywhere In every zip code,
Everywhere.
I mean you, man.
(16:02):
I'd be shocked if you found mea place that doesn't have an
Airbnb.
Speaker 1 (16:05):
Yeah.
Speaker 2 (16:06):
It's crazy.
Speaker 1 (16:07):
I'm just going to test it while you talk.
Speaker 2 (16:09):
Yeah, yeah, find places that don't, and I'd be
curious as to why.
But so then you have placesthat are super saturated Salt
Lake.
Speaker 1 (16:16):
Yeah.
Speaker 2 (16:17):
I would never buy one in Salt Lake, and so this is
where I'm getting into my andmaybe you have some different
thoughts here, but my thought isokay, I'm looking for places
that have some unique experience.
Okay, an attraction, anattraction of sorts.
So Moab has what?
(16:37):
Four million unique visitors ayear on average.
Tourists, tourists, okay,tourists, yeah, and they come,
and they come to these nationalparks.
You've got two national parkswithin 20 minutes of Moab, right
, and so my property sits likeit's seriously 20, 30 minutes
and you're at a national parkWell, even less than that 15
minutes probably.
(16:57):
So it's super close to thesereally cool things and people
are coming for that, right, andso you're.
My focus is how can I help themhave an elevated experience at
these parks while staying in myplace?
You know, that's the biggestthing to me is I want to help
them have this experience andenhance their stay in this
(17:18):
already cool place.
Yeah, you know, and so if aplace has something like that,
I'm more inclined to look intoit, because then you can start
justifying these metrics.
That you're looking forPerformance, you know.
You're looking at debt, youknow debt service coverage, yeah
, and you know.
That essentially means you knowyou have your mortgage, say
it's $1,000.
(17:38):
You know your debt servicecoverage is how many times you
can pay that mortgage with therevenues you know.
And so mine are about three andthat's crazy.
Speaker 1 (17:49):
That's insanely good.
That's crazy, Guys.
Just to underscore the metricwhen you talk to your mortgage
lender to buy a property, a homewhich is a primary residence
you're going to move into,they're going to talk to you
about DTI debt to income.
They'll never talk about debtservice coverage.
Debt service coverage comesinto commercial property.
(18:11):
But just so you're aware, mostcommercial lenders are going to
be looking for a sweet spot ofthe debt service coverage ratio,
meaning the revenue that isgenerated by the property
compared to the payment of themortgage.
They're looking for like a 1.3.
Speaker 2 (18:34):
If you have a 1.3, 1.5,.
Speaker 1 (18:37):
if you can cover the mortgage one and a half times,
that's a good ratio for by, Ithink, most commercial standards
.
If you guys are seeingsomething different, please
chime in and correct me.
But a three times debt servicecoverage, that's magnificent,
that's a good one.
If you can treat it in everyproperty you've got, you're
(18:58):
going to be making a grumble ofmoney.
Speaker 2 (19:01):
Well, and this is why I like Airbnb so much, right, I
guess.
Well, not Airbnb, the company,the nightly rental, I guess, is
what I should say, that class ofreal estate.
I love to go in there and go upto an investor and say, yeah,
this is a three, they're likewhat they're like.
(19:22):
Really, that's kind of cool,right.
And you get that because you'reselecting these markets with
the capability of doing so, andin my head, that means, well,
experience, the experience ofsaid location, or what makes
that place so cool.
And if you have a property thathighlights that, if you have a
(19:42):
unique property, you'll gethigher and higher, I know we
touched on this, guys in thereal estate one of our real
estate specific episodes earlyon.
Speaker 1 (19:52):
I'd like to underscore this because it's
relevant contextually.
When we talk about a debtservice coverage ratio, we
compare a multifamily asset to acommercial, like a hotel or
what I like to do hotels andluxury condo resort Different
programming, similar squarefootage.
Debt service coverage ratio onthat apartment, economically
(20:18):
speaking, looks something likethis the underlying debt or the
underlying mortgage for thatapartment unit, let's say it's
1,800 a month.
That means I'm typicallycharging 2,000 to 2,300 a month,
which means my margin or myspread is $3 to $500 a month.
(20:40):
That's a long-term lease, guys.
So if you're thinking aboutbuilding multifamily or owning
an apartment building, that'swhat you're looking at Now you
times it by 100 and that's goodcash flow, right?
That's great.
The debt service coverage ratiois a smidge over one.
It's like one something.
(21:02):
It's one point something rightMaybe?
Speaker 2 (21:04):
the great one is 1,800.
So yeah, yeah, that's right.
Speaker 1 (21:09):
So debt service coverage ratio does correlate to
profitability.
So a three times debt servicecoverage ratio means if your
mortgage on your unit is 1,800 amonth, it means 18 times 3.
Is what the cash flow is.
So what is that?
Speaker 2 (21:27):
A little over six grand.
Speaker 1 (21:28):
Yeah, so, yeah, so I don't sound stupid.
I'll just get 18 times three.
It's 5,400.
Okay, it's 5,400 a month.
It's 5,400 a month for the same.
It could be the same squarefootage Versus an apartment on a
lot apartment unit with along-term lease.
(21:49):
That's making 2,000 a monthgross right.
So the net over here is Fivetimes greater.
Yeah, so back to that friend ofyours.
I was like, why would you everdo it?
I don't know.
That's what DCS are, guys debtservice coverage ratios a big
part of it.
But profitability, but locationlocations critical to be able
(22:14):
to to be able to achieve that.
Yeah, it's the performance ofthe asset.
Speaker 2 (22:18):
Location drives it so yeah, with location, you're
talking about accessibility,mm-hmm You're talking about you
know, how close are we to act?
those attraction right, becausewhile a specific location, city,
wherever, might have subtraction, throwing one up in
Moab In a place that's hard toget to isn't probably, it's
(22:42):
probably not gonna be your bestidea.
Yeah, you know, and so Really,truly there's.
You know you want to take intoaccount these things, right,
mine, right off the road, easyto find location.
They're, they're close to these, the awesome experiences.
And that plays in the factoryou know locations a big deal,
right, yeah, so then you also,when you're talking about an
(23:04):
Airbnb you want to get, you wantto look at cost, obviously,
right, yeah, you know, it'sreally hard for me to justify
some numbers.
It you know.
For example, if you're, ifyou're, if your property is
bringing in, let's just say fivethousand dollars a month from
Airbnb, or that's.
You know the historical data orwhatever.
(23:24):
Let's just say you have aproperty that produces five
thousand dollars a month, youknow, having you know the more
expensive that property startsto get you have.
There is a point where you justyou can't charge necessarily
more per night, absolutely, youknow, and so the higher that
property costs, the less You'reyou're.
And this goes back to debtcoverage.
(23:45):
Yeah right, debt servicecoverage, it's.
It's a similar principle, sothat the cost of the actual unit
factors into this.
Yeah you know you're gonna havedifferent things that influence
that, but truly, I mean fromfrom my standpoint with you know
, investor relationships andCreating a fund, like all those
things.
I want to be super, supercautious about that, you know,
(24:07):
and you know they're strategyabout being cautious, but you
really, really want to find thatsweet spot and that service, I
think, is a big key.
Speaker 1 (24:17):
Let's go back to location for a second, because
this is really relevant in whatI'm doing with the regional
luxury resorts.
So it's just as if the sameprinciples apply.
It's finding an anomaly in amarket.
When I select a market, whywould I go spend a hundred
million dollars in a market?
I mean, you have to know it'sthe same as if you're gonna go
(24:39):
spend 400 grand on one unit in amarket.
You need to know Six hundredabout that location.
So a couple things that I'mlooking for is the competition.
You talked about saturation,like why why not Salt Lake City?
Well, because there's probablya thousand houses in Salt Lake
City to compete with yeah andyeah, so so the more competition
(25:02):
.
So in the in the regionalluxury resort space, I don't go
to Orlando or Vegas or New York.
I'm not in the major MSAs bydesign Right now.
Historically speaking, guys andI've proven this thesis since
2006 In 2008 we had a crisis,the mortgage crisis.
(25:23):
We call that the GreatRecession.
Again in 2020, we had COVID-19pandemic.
What happened is in hospitality, generally speaking and
globally.
When, when we have therecessionary environment, folks
will stop spending big dollarsto go you know, go to Europe,
asia, hawaii for vacation.
(25:43):
They will, however, pack thewife, kids and dog up and go to
a regional location, somewheredrivable, and so now it's going
to come down to amenities,luxury Pricing, all of these
become a factor.
Right, but.
But when I'm selecting a site, Iwant to be in a spot where
(26:05):
there's not a thousandcompetitors.
Yeah, I want to find a spotthat has a scarcity of available
lodging, coupled with anextreme demand for lodging.
Yeah, now, the effect of thatguys has upward pressure on all
the relevant metrics.
So for the realtors out there,take the price per square foot
and throw it in the garbage,because that's irrelevant To
(26:28):
what we're talking about.
Price per square foot meansnothing.
When we're talking about cashflowing property, we are focused
on an average daily rate and anoccupancy rate.
Okay, now the anomaly I justdescribed, creating the upward
pressure, means that the nightlyrate will be higher and the
occupancy rate will be higheracross the year.
(26:49):
So Moab is a great example ofthat, and I like to use the, the
highest place as a specificexample in Moab.
Moab has an extreme demand,four million plus visitors a
year coming into those nationalparks, and there's a scarcity of
lodging, and it's it's been,it's been really a scarcity of
(27:11):
logic lodging promulgated byLocal authorities, municipal
authorities, who are not prodevelopment.
They want to stifle development, so they've done their best for
decades to keep people frombuilding new hotels and new
condos and new properties thatcould do a nightly rental.
In fact, in 2019 in Moab, theBand a sleeping band to prohibit
(27:32):
any nightly rental.
So you have a billion dollars.
You're not flying your jet intoMoab today, buying 10 acres and
trying to build a condo resortor a hotel Because it's not
prohibited.
But what does that do if youown a condo already with nightly
rental zoning?
What they've done is they'vecreated an environment that
protects you from competition,protects me from competition
(27:54):
coming into that market.
I like that right and so.
So when we talk about thatanomaly in the market Scarcity
of available lodging, extremedemand how do we measure those
things?
I'd recommend you go to airDnAcom, air DNAcom, subscription
(28:15):
based Data provider.
You can also go to Smith TrentSmith travel and get what's
called a star reporter, an strreport.
That'll give you all of thehotel nightly rates and
occupancies.
The air DNA will give you condodata.
It'll give you, like Airbnb,vrbo, data on nightly rates and
(28:36):
occupancies.
These are what you're going topay attention to, because the
higher the oh let's go back to.
Let's go back to the Hyattplace.
I almost space that so but theHyatt place.
Here's the.
Here in real life is the theapplicable.
It's the.
It's the reason.
Finding an anomaly makes sense.
If you go stay in a in the inthe Hyatt place in Houston and
(28:59):
you just go on price linetonight, that Hyatt place is
probably 89 a night For Fridayand Saturday night.
If I go to New York TimesSquare, manhattan, it's probably
around 128 a night, you guysfeel free to get on price line
and verify what I'm saying,because this is the trends over
the last seven years.
(29:21):
The highest competition I'vefound is in downtown San
Francisco.
Downtown San Francisco has aHyatt place they will do 168 a
night.
Yeah, so if I could pick any ofthose three locations, I want
to be in downtown San Francisco.
Well, it's very hard to findproperty to buy in downtown San
(29:41):
Francisco.
It's very developed.
Yeah, the Hyatt place in Moab.
Speaker 2 (29:48):
Guess what it does guys?
Speaker 1 (29:50):
Hiya Place in Moab can average 450 a night, 480 a
night almost three times revenueof every other hiya place on
earth.
That's crazy and that's it.
That's the perfect example offinding a market anomaly and how
I site select for a luxuryresort.
Yeah, my profit potential inthe specific location with
(30:14):
specific attractions andspecific market nomenclature
mean that that profitabilitypotential is really high, and so
that's that's how I select myresort locations.
I would recommend any.
Anyone looking to buy aproperty for an Airbnb business
would go through somethingsimilar and try to understand
cash flow potential, becausecash flow potential is going to
(30:37):
drive value.
Right, what you can pay for aproperty is incumbent on what
you can produce with a property,and it's nothing to do with the
price per square foot.
Right, we're worried aboutprice per square foot when we're
building new stuff.
Yeah, we want to measure thatwhen we're building it to make
sure we got a good value.
Yeah, so we've covered locationin pretty good detail.
Speaker 2 (30:57):
What else is?
Speaker 1 (30:57):
there that you feel like we need to add, and we
could do multiple episodes onAirbnb business guys.
Speaker 2 (31:02):
Yeah, but well, you know, I mean I could touch on a
quite a few things, but I thinkthat scarcity, that that
location, that the experience,those those three things,
honestly I mean, are drivingfactors that trickle and
everything else.
(31:23):
Experience- economy.
Speaker 1 (31:24):
Yeah, that's a term, that's a term.
Speaker 2 (31:26):
Yeah, the experience is so, so important.
You don't care about just headin bed anymore, like I'm.
Oh, I'm gonna go stay in thislittle room, yeah, with nothing.
Yeah, people want an experience, so give them an experience,
then.
Speaker 1 (31:43):
That's an entire episode I don't want to get into
the weeds, obviously, becauselet me just let me just cap this
episode by staying that, youknow, last year down and I had a
really fun opportunity to goand actually via zoom, present
to a specialized class atBrigham Young University on two
different occasions of a to astudent body who are studying a
(32:07):
specific new emerging fieldcalled experience economy.
Very guys, experience economy goget the book, that's the Bible
of what we're talking about.
There's a book calledexperience economy and you must
you must read that book ifyou're gonna get into Airbnb
business.
It's gonna it's gonna go in waydeep into the weeds and what
Downs he's really wanting todive into it.
(32:29):
We will.
Speaker 2 (32:30):
I.
Speaker 1 (32:32):
I'm committing right now that we'll do an entire
episode on experience economy.
Yeah, okay, so with that.
Speaker 2 (32:37):
I think we need to wrap it.
Speaker 1 (32:39):
This has been a fantastic let's call it the,
let's call it the toe dipping inthe water on Airbnb.
This is kind of the first crashcourse.
The first.
This is the Airbnb 101, andwe'll have a lot more to come
for you guys, so hope you gotsomething out of it today.
Thank you for tuning in with us.
Aston Incorporated and you guyshave a great afternoon.
Welcome back to Aston Incorporated guys.
Wayne Aston, here, I am yourhost, and with me is the co-host
, dallin Aston, excited to behere again.
Guys, thanks for joining us.
Excited, she was good.
So you guys have all, I think,been eagerly anticipating
getting into some of the nutsand bolts, educational value
(00:23):
that we've promised for you.
And so today we thought maybe,since Dallin and I both share a
real passion for hospitality, wemight dig into starting an
Airbnb business.
Yeah, and how cool is it thatAirbnb has become so prolific
that it's its own, like noun,like hey, I own an Airbnb, or so
(00:45):
cool, let's Airbnb that.
Speaker 2 (00:47):
Yeah.
Speaker 1 (00:49):
Like, you've reached a certain market status when a
company name becomes a noun or averb or an adjective.
Yeah, yeah, let's Airbnb thatproperty.
Speaker 2 (00:58):
Yeah, when I describe what I do, people don't
understand, unless I say, ohyeah, it's an Airbnb.
And they go oh okay, that'swhat it is.
Yeah, yeah.
Speaker 1 (01:08):
So what is Airbnb?
For the listeners who are newto all of it, what is Airbnb?
Speaker 2 (01:14):
In simple terms, it's taking a property and letting
people stay there overnight.
But what is the company Like?
What is the company of Airbnb.
Speaker 1 (01:23):
We just proved.
Speaker 2 (01:24):
We just proved how powerful that's becomes.
Airbnb is.
Obviously it's a platform.
You can list your property sothat people can come stay, you
know.
And so they went from super,super small run and letting
people come and stay forconferences in their own place
to now having a platform whereyou can go on and say hey, you
(01:46):
know, you can create your ownlisting, you can upload photos.
It's essentially the softwarethat allows you to put your
property in front of millionsand millions of travelers.
Pretty awesome.
You can rent your home, you canrent your basement, you can
freely rent whenever you want.
There's some pretty crazythings on Airbnb.
It's tents trailer.
It's kind of funny.
Speaker 1 (02:06):
There's also resorts you know.
Speaker 2 (02:07):
So I mean you have a wide spectrum.
Speaker 1 (02:09):
So what would cause a traveler to go rent a property
that is marketed on the Airbnbplatform versus just going and
staying at a hotel?
Speaker 2 (02:20):
Oh man.
Well, there's a lot that goesinto it and people are gonna
have different opinions about it, but from you know.
So Airbnb it's not.
You know you're not gonna go inlike a hotel, have a front desk
.
Well, I guess some places couldyou know there's, like I said,
(02:41):
there's a wide variety ofproperties on Airbnb.
But I'd say the biggestdistinction is, you know, in a
hotel, traditionally, you go in,you get the front desk, they
give you your key card, you'll,you know, you'll the bellhopper,
whatever you'll take yourluggage up to your room.
It's a single room and it'spretty standard, Right?
I mean it's hotel, it's a hotelroom, there's hotel rooms.
Speaker 1 (03:00):
It's congruent, it's congruent, it's very congruent
the style, colors, the brandit's congruent to the brand.
Speaker 2 (03:06):
And whatever hotel you're staying in, there's
similarities in the sense thatit is a hotel.
There are nicer hotels andthere are not as nice hotels.
Speaker 1 (03:13):
Right, yeah, absolutely.
Speaker 2 (03:15):
This is just super high level.
But then Airbnb you have super.
I mean you could go, like Isaid, you can go stay in
someone's basement, right, youcan.
On the flip side, you can alsogo stay at our resort level
property.
Now, something interesting withmine is I have done my best to
make them feel like a resort,but they're a town home, so it's
(03:37):
a full.
I mean you're in a full, youhave a full kitchen, you have a
full dining room, full livingroom, you have two bedrooms, I
mean walk-in shower, walk-incloset.
I mean that's what we'retalking about here, right?
That's not a hotel room, that'sa full home You're coming to
stay in while you're vacationing, right.
So you get a group, you getyour family.
It's like you're a home awayfrom home almost is kind of that
(03:59):
, and there's a lot of that, youknow.
And you get some really crazyones.
You have cliffside littleresorts and bubble hotels and
stuff on Airbnb that you see alot.
But when I say Airbnb is so,it's like you know you could go
to a hotel's website and youbook their hotels.
Airbnb, oh man, the sky is thelimit.
There's properties of everynature.
(04:23):
They spend to resorts, to.
Speaker 1 (04:26):
So they don't have quality controls on the class or
their location or anything likethat.
Speaker 2 (04:32):
No, they're an open platform.
That's what's interesting,right, and I think I've
mentioned this before, but youknow you have millions of
properties on Airbnb.
This is a double-edged sword,right?
Because so many people think,oh man, I can just throw my
property up on Airbnb and it'sgonna work.
(04:55):
Sure, I'll get bookings False.
That is false and I can speakfrom experience.
Speaker 1 (05:02):
This is false right, let's qualify this, guys.
You know, if you're takingnotes, vrbo is a competitive
platform to Airbnb.
I think maybe not as wide of anet.
I think Airbnb's the leader.
I think the latest statisticshowed that Airbnb was capturing
like 37% of market bookings forthis type of offering, whereas
(05:24):
VRBO was capturing like 31%, sothey're not far apart, but yeah,
they're close Verbo.
Speaker 2 (05:31):
I think you know HomeAway, whatever you wanna
call it.
It's known by several differentnames, but it's a lot of
long-term stays.
Speaker 1 (05:39):
It's kind of what I've noticed.
Speaker 2 (05:40):
And there are anomalies.
I mean you can get in the weedsabout this, but there are
several platforms.
I mean you can throw stuff upon bookingcom.
I've done that, you know,anyway.
But yeah, primarily Airbnb,vrbo, verbo, homeaway, whatever
you wanna call it.
Airbnb does have a little bitmore of a an influence, I'd say,
(06:01):
in this space right, Okay, sowhat?
Speaker 1 (06:07):
it seems clear that there's an advantage If you had
a unique property in a uniquelocation, putting it on Airbnb
or VRBO.
It's a unique profitopportunity.
A unique opportunity to be moreprofitable than you would just
renting it out to someone on a12 month lease, like over a
month to month lease, Much moreprofitable on a nightly rental
(06:29):
basis.
Speaker 2 (06:30):
Is that fair?
That's totally fair.
I think the one thing to note,though, is you're also assuming
a little bit of risk, you know,I mean for the greater reward.
You're gambling in the sensethat you don't know that you're
gonna have renters, and this iskind of where I get into why
Airbnb is unique.
(06:51):
Because you have so many peoplelisting properties thinking
they can just take a piece ofthat pie.
Excuse me, anne, because ofthat, you get a lot of listings
with no eye for hospitality, youget poor pictures, you get
(07:15):
dirty places, and the majority,I'd say, of properties on Airbnb
are pretty average.
Speaker 1 (07:25):
I agree, I have stayed in a lot of Airbnbs, just
kind of by way of you know,reconnaissance to see what I'm
competing with.
I would agree with that.
I think it's average that itfeels a little more like
somebody's house, yep.
That's the nature of AirbnbLike my uncle let me come stay
in his house.
Speaker 2 (07:44):
Yeah.
Speaker 1 (07:46):
Now I have stayed in some extraordinary Airbnbs that
really understand hospitalitymarketing programming.
They have them furnished,furnished and decorated
amazingly.
Speaker 2 (07:57):
Yeah.
Speaker 1 (07:58):
I think the real opportunity.
Well, one of the manyopportunities here is you've got
a property that exceeds thequality or the enjoyability of
the environments you have athome.
Speaker 2 (08:12):
That's novel.
Speaker 1 (08:13):
Yeah, if it's similar to where you live and you're
going on vacation and it feelslike you're still at home.
That's to me that's not asappealing, Right, it's nice and
people, I think, will pay morein my experience if they have a
nice home, but they go andthey're in this amazing place
Really cool.
They'll pay.
Speaker 2 (08:33):
Yeah, that's of a higher value to a traveler right
Absolutely To be in a nicelyfurnished, nicely programmed,
clean, clean, smell, yep, yep,all these things matter.
These things matter Amenities,yeah.
And another thing that I'venoticed is during their stay, if
they are having you know you'reI've had a couple of guests say
(08:55):
in reviews you know Dallin wasan amazing host.
He checked in on us but hewasn't overbearing, yeah.
Speaker 1 (09:04):
And it's interesting.
Speaker 2 (09:05):
And I've also had people, so I have digital
concierge devices in my unitsand it welcomes them by name.
Yeah, which is cool.
It's like hey, so-and-so, andI've had people comment in
reviews too, hey, the kiosk, orwhatever they call it, is a very
nice touch.
Hey, so-and-so welcome.
And then you know, you have myrecommendations.
(09:25):
Of this, this none.
It's about the property, aboutyour stay.
There's some content there, butwhat I'm talking about is the
overall experience, and this iswhat's going to make your
property stand out.
You know, because, like I said,everyone has an Airbnb and so
we're talking about.
You know people's experience.
(09:45):
If they're going to have abetter experience, then you're
going to do better If you'relisting looks unique, if it
looks beautiful, appealing, ifit looks themed.
Speaker 1 (09:58):
So it might make sense to pay a couple hundred
bucks for a professionalphotographer to get in and set
up the light boxes and act likeit's a nice camera, instead of
using your iPhone to take thepictures of the listing.
Is that what I'm hearing?
Yes, I agree, Well, 100%.
Speaker 2 (10:14):
Look, when I first did mine, I took photos of my
phone, okay, and you know thephone's now, like my iPhone 13
is pretty awesome, the camera isgreat, okay, but I personally
am not a photographer.
Yeah, I can take some okayphotos and everyone is going to
(10:35):
say, you know, in the Airbnbspace or the DIY space, I'll
just take your own photos.
It's super cheap, cheap, simple, and I know people that have
sent.
You know, I'm going to set upmy Airbnb and I'm going to go to
KSL and get some stuff likefridges and get used stuff and
put it in the unit.
These are small things that arethat could be detrimental
because my phone photos Ithought they were so good.
(11:00):
I hired someone to come to themand I was like, oh my gosh, if
I were to sell mine.
Speaker 1 (11:05):
I'm like I'm going to die.
That looks like a dark dungeoncompared to that looks like.
Speaker 2 (11:11):
It's amazing fun.
That looks like I'm going to gothere and get murdered in my
sleep.
Speaker 1 (11:16):
And at the time I don't think they were that bad.
I'm obviously already.
It's a contrast, though.
Speaker 2 (11:21):
But the contrast.
I'm trying to make the pointhere.
Yeah, it was like a diamondagainst a black backdrop.
I was like, why did I not justdo this in the first place?
Yeah, what am I doing?
And I think what happens is, alot of times, people like me,
you sit here and be like man, Ican do this, it's easy.
But I really, really, am anadvocate for bringing in the
(11:43):
right people to make it uniqueand make it stand out, because
if I tried to just do all of itmyself, it probably wouldn't be
that great.
Yeah, yeah, I'll be honest.
Speaker 1 (11:54):
And so talk about that for a second.
Like you, obviously, you own aproperty management company.
You're an operator, so youoperate, you program and manage
your own assets.
You're not hiring a third partyproperty manager.
Now you could do that, yeah,that it might make sense to do
that if you don't live in thesame city.
However, with a little elbowgrease and kind of intuitiveness
(12:20):
and some education, you cankind of staff your own operation
, even if you're out of state,and make it fly right.
So what goes into that?
I mean, how are you doing thiswithout cleaning a unit every
time someone stays?
That could be like three, four,five cleans every month.
Yeah, yeah, so I gotta be afull-time situation if you were
gonna do it yourself, right,right.
Speaker 2 (12:42):
So again, it's about, if I try to do it all myself,
that's it.
I'd be living in Moab, yeah,and then I don't wanna do that.
Yeah, you know I love Moab, butyou find the right people, so I
have an awesome cleaner and shetakes care of everything on
site property management.
Like in the early days, I woulddrive down if something was
(13:05):
amiss and then I'd turn rightback around and go back up, yeah
.
Now she's like, please justdon't come down, like I'll take
care of it.
I'm like, oh okay.
So finding the right person,that can, the right people, I'm
gonna say, actually is superimportant, and I'd say that with
not only the cleaning but alsothe furnishings, you know, I
(13:27):
mean I had a lot of help indesigning, getting the
furnishings looking good, thethemes looking good, yeah, and
then the digital concierge thatwas significant in phones for
others and what they were doing.
I mean I feel like I was reallygood at putting all those
pieces together and making itfunction.
But me personally, I'm not theone that's actually designing
(13:52):
the software.
That's gonna be the digitalconcierge.
I'm not the one actuallycleaning the unit, I'm not the.
I have this kind of standard ofexcellence that I wanted to
achieve.
This is kind of what we'relooking to do Now.
Let me bring in the rightpeople to do this Right, you
know.
And I know a lot of people missthat on Airbnb, specifically
because they go oh I can, it'sso easy.
Listing an Airbnb takes likefive minutes.
Speaker 1 (14:13):
Yeah, it's so easy, and that's why there's so many
of them.
Speaker 2 (14:16):
Right, Right, but it's.
But most of them are justsomeone that's like, yeah,
that's proper.
I'm just gonna list it.
Speaker 1 (14:21):
Yeah, yeah, so you've really covered.
I think we could drill deeperin programming, but maybe we
come back to that.
I think the listeners wouldfind a lot of value in.
How do I find a good deal, howdo I know when I select a
(14:42):
property to be a good Airbnbbusiness?
How do I select the market,like location, what goes into
that process of selecting themarket and selecting the
specific location?
Speaker 2 (14:56):
Yeah, well.
So I actually had a friend theother day.
His brother was asking himabout Airbnb.
He's like I would love to dothis and again, so many people
say I wanna do this, but I don'trealize, kind of what goes into
it.
Right, yeah, but he was likecan I give him your number and
you chat with him?
(15:16):
And I was like, of course,right.
And so he calls me and he'slike, hey, so what's your advice
for buying Airbnb?
And I was like that's such aloaded question.
Yeah, oh yeah, that's so,there's so much.
Speaker 1 (15:28):
That's a hundred answers that is so I mean what?
Podcast.
Listen to my podcast.
Listen to my podcast.
It's called Ask and Incorporate, and check it out.
You will get everything youneed if you're thinking about it
seriously, absolutely.
Speaker 2 (15:41):
But the answer that I gave him and I'll go in a
little bit more depth than Igave him, but I said there's
just a couple things First andforemost is, like you said, like
location.
What about that location?
Cause, again, airbnb has placeseverywhere In every zip code,
Everywhere.
I mean you, man.
(16:02):
I'd be shocked if you found mea place that doesn't have an
Airbnb.
Speaker 1 (16:05):
Yeah.
Speaker 2 (16:06):
It's crazy.
Speaker 1 (16:07):
I'm just going to test it while you talk.
Speaker 2 (16:09):
Yeah, yeah, find places that don't, and I'd be
curious as to why.
But so then you have placesthat are super saturated Salt
Lake.
Speaker 1 (16:16):
Yeah.
Speaker 2 (16:17):
I would never buy one in Salt Lake, and so this is
where I'm getting into my andmaybe you have some different
thoughts here, but my thought isokay, I'm looking for places
that have some unique experience.
Okay, an attraction, anattraction of sorts.
So Moab has what?
(16:37):
Four million unique visitors ayear on average.
Tourists, tourists, okay,tourists, yeah, and they come,
and they come to these nationalparks.
You've got two national parkswithin 20 minutes of Moab, right
, and so my property sits likeit's seriously 20, 30 minutes
and you're at a national parkWell, even less than that 15
minutes probably.
(16:57):
So it's super close to thesereally cool things and people
are coming for that, right, andso you're.
My focus is how can I help themhave an elevated experience at
these parks while staying in myplace?
You know, that's the biggestthing to me is I want to help
them have this experience andenhance their stay in this
(17:18):
already cool place.
Yeah, you know, and so if aplace has something like that,
I'm more inclined to look intoit, because then you can start
justifying these metrics.
That you're looking forPerformance, you know.
You're looking at debt, youknow debt service coverage, yeah
, and you know.
That essentially means you knowyou have your mortgage, say
it's $1,000.
(17:38):
You know your debt servicecoverage is how many times you
can pay that mortgage with therevenues you know.
And so mine are about three andthat's crazy.
Speaker 1 (17:49):
That's insanely good.
That's crazy, Guys.
Just to underscore the metricwhen you talk to your mortgage
lender to buy a property, a homewhich is a primary residence
you're going to move into,they're going to talk to you
about DTI debt to income.
They'll never talk about debtservice coverage.
Debt service coverage comesinto commercial property.
(18:11):
But just so you're aware, mostcommercial lenders are going to
be looking for a sweet spot ofthe debt service coverage ratio,
meaning the revenue that isgenerated by the property
compared to the payment of themortgage.
They're looking for like a 1.3.
Speaker 2 (18:34):
If you have a 1.3, 1.5,.
Speaker 1 (18:37):
if you can cover the mortgage one and a half times,
that's a good ratio for by, Ithink, most commercial standards
.
If you guys are seeingsomething different, please
chime in and correct me.
But a three times debt servicecoverage, that's magnificent,
that's a good one.
If you can treat it in everyproperty you've got, you're
(18:58):
going to be making a grumble ofmoney.
Speaker 2 (19:01):
Well, and this is why I like Airbnb so much, right, I
guess.
Well, not Airbnb, the company,the nightly rental, I guess, is
what I should say, that class ofreal estate.
I love to go in there and go upto an investor and say, yeah,
this is a three, they're likewhat they're like.
(19:22):
Really, that's kind of cool,right.
And you get that because you'reselecting these markets with
the capability of doing so, andin my head, that means, well,
experience, the experience ofsaid location, or what makes
that place so cool.
And if you have a property thathighlights that, if you have a
(19:42):
unique property, you'll gethigher and higher, I know we
touched on this, guys in thereal estate one of our real
estate specific episodes earlyon.
Speaker 1 (19:52):
I'd like to underscore this because it's
relevant contextually.
When we talk about a debtservice coverage ratio, we
compare a multifamily asset to acommercial, like a hotel or
what I like to do hotels andluxury condo resort Different
programming, similar squarefootage.
Debt service coverage ratio onthat apartment, economically
(20:18):
speaking, looks something likethis the underlying debt or the
underlying mortgage for thatapartment unit, let's say it's
1,800 a month.
That means I'm typicallycharging 2,000 to 2,300 a month,
which means my margin or myspread is $3 to $500 a month.
(20:40):
That's a long-term lease, guys.
So if you're thinking aboutbuilding multifamily or owning
an apartment building, that'swhat you're looking at Now you
times it by 100 and that's goodcash flow, right?
That's great.
The debt service coverage ratiois a smidge over one.
It's like one something.
(21:02):
It's one point something rightMaybe?
Speaker 2 (21:04):
the great one is 1,800.
So yeah, yeah, that's right.
Speaker 1 (21:09):
So debt service coverage ratio does correlate to
profitability.
So a three times debt servicecoverage ratio means if your
mortgage on your unit is 1,800 amonth, it means 18 times 3.
Is what the cash flow is.
So what is that?
Speaker 2 (21:27):
A little over six grand.
Speaker 1 (21:28):
Yeah, so, yeah, so I don't sound stupid.
I'll just get 18 times three.
It's 5,400.
Okay, it's 5,400 a month.
It's 5,400 a month for the same.
It could be the same squarefootage Versus an apartment on a
lot apartment unit with along-term lease.
(21:49):
That's making 2,000 a monthgross right.
So the net over here is Fivetimes greater.
Yeah, so back to that friend ofyours.
I was like, why would you everdo it?
I don't know.
That's what DCS are, guys debtservice coverage ratios a big
part of it.
But profitability, but locationlocations critical to be able
(22:14):
to to be able to achieve that.
Yeah, it's the performance ofthe asset.
Speaker 2 (22:18):
Location drives it so yeah, with location, you're
talking about accessibility,mm-hmm You're talking about you
know, how close are we to act?
those attraction right, becausewhile a specific location, city,
wherever, might have subtraction, throwing one up in
Moab In a place that's hard toget to isn't probably, it's
(22:42):
probably not gonna be your bestidea.
Yeah, you know, and so Really,truly there's.
You know you want to take intoaccount these things, right,
mine, right off the road, easyto find location.
They're, they're close to these, the awesome experiences.
And that plays in the factoryou know locations a big deal,
right, yeah, so then you also,when you're talking about an
(23:04):
Airbnb you want to get, you wantto look at cost, obviously,
right, yeah, you know, it'sreally hard for me to justify
some numbers.
It you know.
For example, if you're, ifyou're, if your property is
bringing in, let's just say fivethousand dollars a month from
Airbnb, or that's.
You know the historical data orwhatever.
(23:24):
Let's just say you have aproperty that produces five
thousand dollars a month, youknow, having you know the more
expensive that property startsto get you have.
There is a point where you justyou can't charge necessarily
more per night, absolutely, youknow, and so the higher that
property costs, the less You'reyou're.
And this goes back to debtcoverage.
(23:45):
Yeah right, debt servicecoverage, it's.
It's a similar principle, sothat the cost of the actual unit
factors into this.
Yeah you know you're gonna havedifferent things that influence
that, but truly, I mean fromfrom my standpoint with you know
, investor relationships andCreating a fund, like all those
things.
I want to be super, supercautious about that, you know,
(24:07):
and you know they're strategyabout being cautious, but you
really, really want to find thatsweet spot and that service, I
think, is a big key.
Speaker 1 (24:17):
Let's go back to location for a second, because
this is really relevant in whatI'm doing with the regional
luxury resorts.
So it's just as if the sameprinciples apply.
It's finding an anomaly in amarket.
When I select a market, whywould I go spend a hundred
million dollars in a market?
I mean, you have to know it'sthe same as if you're gonna go
(24:39):
spend 400 grand on one unit in amarket.
You need to know Six hundredabout that location.
So a couple things that I'mlooking for is the competition.
You talked about saturation,like why why not Salt Lake City?
Well, because there's probablya thousand houses in Salt Lake
City to compete with yeah andyeah, so so the more competition
(25:02):
.
So in the in the regionalluxury resort space, I don't go
to Orlando or Vegas or New York.
I'm not in the major MSAs bydesign Right now.
Historically speaking, guys andI've proven this thesis since
2006 In 2008 we had a crisis,the mortgage crisis.
(25:23):
We call that the GreatRecession.
Again in 2020, we had COVID-19pandemic.
What happened is in hospitality, generally speaking and
globally.
When, when we have therecessionary environment, folks
will stop spending big dollarsto go you know, go to Europe,
asia, hawaii for vacation.
(25:43):
They will, however, pack thewife, kids and dog up and go to
a regional location, somewheredrivable, and so now it's going
to come down to amenities,luxury Pricing, all of these
become a factor.
Right, but.
But when I'm selecting a site, Iwant to be in a spot where
(26:05):
there's not a thousandcompetitors.
Yeah, I want to find a spotthat has a scarcity of available
lodging, coupled with anextreme demand for lodging.
Yeah, now, the effect of thatguys has upward pressure on all
the relevant metrics.
So for the realtors out there,take the price per square foot
and throw it in the garbage,because that's irrelevant To
(26:28):
what we're talking about.
Price per square foot meansnothing.
When we're talking about cashflowing property, we are focused
on an average daily rate and anoccupancy rate.
Okay, now the anomaly I justdescribed, creating the upward
pressure, means that the nightlyrate will be higher and the
occupancy rate will be higheracross the year.
(26:49):
So Moab is a great example ofthat, and I like to use the, the
highest place as a specificexample in Moab.
Moab has an extreme demand,four million plus visitors a
year coming into those nationalparks, and there's a scarcity of
lodging, and it's it's been,it's been really a scarcity of
(27:11):
logic lodging promulgated byLocal authorities, municipal
authorities, who are not prodevelopment.
They want to stifle development, so they've done their best for
decades to keep people frombuilding new hotels and new
condos and new properties thatcould do a nightly rental.
In fact, in 2019 in Moab, theBand a sleeping band to prohibit
(27:32):
any nightly rental.
So you have a billion dollars.
You're not flying your jet intoMoab today, buying 10 acres and
trying to build a condo resortor a hotel Because it's not
prohibited.
But what does that do if youown a condo already with nightly
rental zoning?
What they've done is they'vecreated an environment that
protects you from competition,protects me from competition
(27:54):
coming into that market.
I like that right and so.
So when we talk about thatanomaly in the market Scarcity
of available lodging, extremedemand how do we measure those
things?
I'd recommend you go to airDnAcom, air DNAcom, subscription
(28:15):
based Data provider.
You can also go to Smith TrentSmith travel and get what's
called a star reporter, an strreport.
That'll give you all of thehotel nightly rates and
occupancies.
The air DNA will give you condodata.
It'll give you, like Airbnb,vrbo, data on nightly rates and
(28:36):
occupancies.
These are what you're going topay attention to, because the
higher the oh let's go back to.
Let's go back to the Hyattplace.
I almost space that so but theHyatt place.
Here's the.
Here in real life is the theapplicable.
It's the.
It's the reason.
Finding an anomaly makes sense.
If you go stay in a in the inthe Hyatt place in Houston and
(28:59):
you just go on price linetonight, that Hyatt place is
probably 89 a night For Fridayand Saturday night.
If I go to New York TimesSquare, manhattan, it's probably
around 128 a night, you guysfeel free to get on price line
and verify what I'm saying,because this is the trends over
the last seven years.
(29:21):
The highest competition I'vefound is in downtown San
Francisco.
Downtown San Francisco has aHyatt place they will do 168 a
night.
Yeah, so if I could pick any ofthose three locations, I want
to be in downtown San Francisco.
Well, it's very hard to findproperty to buy in downtown San
(29:41):
Francisco.
It's very developed.
Yeah, the Hyatt place in Moab.
Speaker 2 (29:48):
Guess what it does guys?
Speaker 1 (29:50):
Hiya Place in Moab can average 450 a night, 480 a
night almost three times revenueof every other hiya place on
earth.
That's crazy and that's it.
That's the perfect example offinding a market anomaly and how
I site select for a luxuryresort.
Yeah, my profit potential inthe specific location with
(30:14):
specific attractions andspecific market nomenclature
mean that that profitabilitypotential is really high, and so
that's that's how I select myresort locations.
I would recommend any.
Anyone looking to buy aproperty for an Airbnb business
would go through somethingsimilar and try to understand
cash flow potential, becausecash flow potential is going to
(30:37):
drive value.
Right, what you can pay for aproperty is incumbent on what
you can produce with a property,and it's nothing to do with the
price per square foot.
Right, we're worried aboutprice per square foot when we're
building new stuff.
Yeah, we want to measure thatwhen we're building it to make
sure we got a good value.
Yeah, so we've covered locationin pretty good detail.
Speaker 2 (30:57):
What else is?
Speaker 1 (30:57):
there that you feel like we need to add, and we
could do multiple episodes onAirbnb business guys.
Speaker 2 (31:02):
Yeah, but well, you know, I mean I could touch on a
quite a few things, but I thinkthat scarcity, that that
location, that the experience,those those three things,
honestly I mean, are drivingfactors that trickle and
everything else.
(31:23):
Experience- economy.
Speaker 1 (31:24):
Yeah, that's a term, that's a term.
Speaker 2 (31:26):
Yeah, the experience is so, so important.
You don't care about just headin bed anymore, like I'm.
Oh, I'm gonna go stay in thislittle room, yeah, with nothing.
Yeah, people want an experience, so give them an experience,
then.
Speaker 1 (31:43):
That's an entire episode I don't want to get into
the weeds, obviously, becauselet me just let me just cap this
episode by staying that, youknow, last year down and I had a
really fun opportunity to goand actually via zoom, present
to a specialized class atBrigham Young University on two
different occasions of a to astudent body who are studying a
(32:07):
specific new emerging fieldcalled experience economy.
Very guys, experience economy goget the book, that's the Bible
of what we're talking about.
There's a book calledexperience economy and you must
you must read that book ifyou're gonna get into Airbnb
business.
It's gonna it's gonna go in waydeep into the weeds and what
Downs he's really wanting todive into it.
(32:29):
We will.
Speaker 2 (32:30):
I.
Speaker 1 (32:32):
I'm committing right now that we'll do an entire
episode on experience economy.
Yeah, okay, so with that.
Speaker 2 (32:37):
I think we need to wrap it.
Speaker 1 (32:39):
This has been a fantastic let's call it the,
let's call it the toe dipping inthe water on Airbnb.
This is kind of the first crashcourse.
The first.
This is the Airbnb 101, andwe'll have a lot more to come
for you guys, so hope you gotsomething out of it today.
Thank you for tuning in with us.
Aston Incorporated and you guyshave a great afternoon.
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