Jan 19, 2018
In part 2 of this Q&A, Chris and Jason discuss the market and demand for short term accommodation, hotel futures reports, pricing, chargebacks, handling and preventing bad reviews, meet and greets, serviced and cleaning fees, and scaleability.
Tune in next week for the final part.
Show Notes:
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Transcription:
Hi I’m Chris
Hi I’m Ritchie
And welcome to the serviced accommodation podcast.
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Welcome to part two of my Q and A with Jason Living. Hope you enjoy it.
My only experience of serviced accommodation is a holiday let which when we took it on serviced accommodation didn’t exist. It was a holiday let and it was abroad anyway so kind of irrelevant but in terms of managing something we understand that but we understand it from a holiday point of view so we’re looking at a load of property which we’ve got in different places, flats, houses mainly houses and we’re thinking so what’s the market for this stuff? Because we’re not in York so it’s not exactly the obvious person coming to York to indulge in some history, this will be somewhere a bit rougher or whatever.
Give us a for instance location just out of interest.
A flat in Halifax, on the outskirts of Halifax.
I mean I think the interesting thing is that you know because there are people who say oh it doesn’t work in some areas. I think in most areas there is a demand for short term accommodation and contractors is the obvious one.
I didn’t want to pin it down to one.
To me I think your location very much drives your market and therefore you know you take any location and I think that that will then drive who the guest is. And you know because let’s face it you know we have hotels throughout the country and as I said we’re fishing in the same pond. So if there are hotels in that area there is clearly demand for short stay accommodation and if there’s demand for short stay accommodation there’s this demand for service type accommodation whether you call it holiday let because pretty much there is no other.
But you can’t follow the hotel world or the B&B world.
Yeah and you know you’ve obviously got you’ve got your city centre market which is sort of higher end leisure, higher end corporate, you then get out into the more urban areas you’ve probably got more contractors and then you could go down to rural areas and provide they are nice rural areas you’d start to cross over into the holiday market and I live bottom end of Bedale and we have a cottage not far away which was a former house of ours and we’ve done that as holiday accommodation for the last 18 months and interestingly you know obviously it’s predominantly leisure but we still do get people working in the area whether for a week. We’ve got some people at the moment who are putting up a steel frame barn on a farm down the road you know. So even though if you like, it’s very obvious a holiday cottage, we actually get contractors staying there and we’re not far from Catterick Garrison we had some guys doing an IT project up there for a while.
So it’s it’s interesting. I mean I’m sure you have some great ways that you look at analysing demand and that sort of stuff?
No magic tricks or anything like that. It’s really about understanding the area. It sounds funny but actually a Wikipedia page is a really good place to start because that will give you an overall summary of the area, what kind of demographics is it, what kind of economics is it, a base for the area and then from there you can start to kind of explore and find out a little bit more. Every area is going to have different key drivers in the markets.
I said there’s no magic tricks. Actually there are. So there’s something called a hotel futures report. So this is where basically the council’s will pay these consultants like £40-50k to go and do an absolute comprehensive study on the local market you know supply, demand, what the different segments of the market are, where the potential for growth is, what needs to change in the area and quite often they will actually show these reports publicly then because they’ve paid so much money for it so they might as well. Now that for me is a fantastic way to get real high quality research about an area, get an insight into the competition potentially. They even report you know average occupancy and pricing, seasonality, all the different areas you want to look at and even if they don’t have these hotel future reports for your particular area I think it’s a fantastic thing to go and read one and look at what the experts look at when they’re doing an analysis in an area because you inevitably pick up some tips, advice, oh I haven’t really thought about this I haven’t really thought about that.
Now the one thing I find is that you might look at a city and go does it work here? Yes it works but that’s not really the picture you need to understand what customer segments are predominant in that particular area and therefore for what kind of product, which is what we’re doing with serviced accommodation is actually going to fit their needs better than the existing market. This is why it’s not just you get a property, you stick it on Airbnb and you’re done. You need to be a lot more tactical than that. You need to do the typical entrepreneurial thing which is find a problem and monetize the solution.
So you need to kind of understand you know take the Southampton market because it’s obviously the one that I know best. You don’t just get a random studio or a one bed in Southampton because quite frankly unless it’s on the high street or within a couple of hundred yards you’re probably not going to make any money on it. But if you start to understand the contractor market then you realise that actually they’re not very location sensitive. So really anywhere within that city will work if you’ve got the right quality accommodation at the right price. You start to understand what they’ll pay extra for. So typically three or four bed properties perform really really well, two beds work as well that’s the bulk of our stock but actually people are willing to pay extra to have a little bit separation, a little bit more privacy, potentially a few more people in the property. You start to understand what their requirements are.
So for instance when we started off we’d have one TV in the living room and we got quite a lot of feedback that actually the properties where we had one TV in each individual room as well was very popular because it gave them a bit more space. If one person wants to watch film and one person wants to watch football then that could go onl. So we started fitting out all the properties with TVs in all of the rooms.
So again it’s look at the area, understand the customer segments but then produce a product which is going to fit their requirements and the closer that is in terms of area, location, property type, finish level, pricing that it is to what they need then the better that property is going to perform.
I think the contractor market is a very interesting one because as Chris said they’re not very location sensitive. I mean we’ve had quite a lot of contractors over the last year who are working on sites that might be up to half an hour plus away from the accommodation and where we’ve won some of that business is because we’ve got a number of apartments in one location. So when they said we’ve got eight people and another five and we could accommodate all of that. One of the things we had to change was we had a number of two bed apartments that were two doubles and they just came to us and said can you provide accommodation? So you know rather than saying well we can only provide it in doubles, they basically said our guys are quite happy to share a room but obviously separate beds so we had to change all the beds and as I said you know they’re very price driven so you’re perhaps only charging you know in those instances you know £17-18 pounds per person per night which you know sounds quite low but then when you build that up and you say okay so in Sunderland that’s a two bed flat and it’s got four people in it, £68 per night, that’s £2000 a month on a property we would normally get £500 a month for.
And okay you;ve got a lot of extra cost to come out of that because these are longer term bookings but you’ve got 100 percent occupancy and actually you know it’s good for them because they’re getting accommodation for say £17/18 a night, we have been down as low as £15 you know which suits them because they are very price driven and these are typically you know sort of Polish German European contractors you know.
So obviously that’s got to come out as a cost from whatever project they’re working on. You know the example I always quote is a guy called Duncan Bolton who’s based on Teeside who’s been doing serviced accommodation for probably for about five or six years now and he has you know three bed semi detached ex council houses that he lets to contractors and he just keeps them on booking.com and AirBnB and he said it can be up and down you can have nothing, it’s empty but you’re making good enough money for two or three months that you’ve got three or four people living there again again it’s making that product appropriate to the market whereby you know it hasn’t got all the you know shiny furniture you know it’s just you know they’re just looking for somewhere clean and comfortable to stay for the period when they’re working whether that’s Monday to Friday or longer. It’s difficult because people say I’ll do test ads on Airbnb which Airbnb don’t like and they have closed accounts down and then that’s caused problems.
But the other thing is I mean I’ve found in Sunderland that we get very very little from Airbnb anyway. So if I’d used Airbnb as the test model because you can’t test on booking.com because it’s got to be a real property and a live booking you know I’d never have done it so it’s actually in my view quite difficult to test market.
Sometimes we use calendars on Airbnb if they are linked to calendars and they’re all synced if you look at the calendars and what the prices are and if the prices are too high, the calendars are empty. It does give you an overview but like you say dummy
Yeah I think they are of limited value.
So in your serviced accommodation units, you said you were kitting them out with TVs and all have you had many times when people have gone in and nicked everything?
That’s what insurance is for.
Would you just use insurance for that then? We do checks now before we release keys, to check passports matching credit cards because that particular one was a stolen credit card, stayed for 6 days and then got a van and took all the furniture and everything out of the flat. So it was £1800 worth of gear gone and when we tried charging the card it was declined and the card company actually charged us back for the stay. If we’d had the ID that matches the passport to match the credit card they wouldn’t have got in. We’ve stopped maybe 3 or 4 since that. If the credit card doesn’t match the ID, you challenge them and they just clamp up
I mean the reality is those instances even without being very rigid about checks those instances are very very few and far between. I think you know you hear about them and I knew that happened to you. I remember again talking to Duncan Belton about this two or three years ago and someone had said to me you know you do an inventory and he said you know at that point he said in three years I’ve had one good microwave go missing he said.
But it’s one of those things I think you know you think people immediately think of you giving access to somebody that’s who they say they are.
I was just interested to see how often it happens.
Oh it’s very market dependent I think.I mean if I was in London then absolutely I’d be very hot on fraud prevention.
We have had one in London with a television or two televisions. And again you know stolen credit card that whole thing was fraudulent.
I’ve had utensils taken recently, just all utensils.
You know obviously if it’s a major thing then that’s a bit of a hiccup. But I think part of it is regarding some of those costs is just the cost of doing business. You will get you know okay there’s lots of ways you can mitigate it and you can cut it right down but you probably will still get fraudulent credit cards or you will get chargebacks that you try and defend it and you won’t defend and you will get people who do extra damage that you try and charge for and you can’t and to me it is just a cost of doing business.
You know it’s like if you run a hire car fleet I’m sure there’s there’s a certain element of damage that is just you know it’s just very heavy wear and tear you know that you can’t charge for. And so whilst you know you can’t take it completely. I’m not saying you take a laissez faire attitude to it but it is just it’s a cost of doing business.
You can spend your life chasing people for £100 here one you know. And you know most of the time is wasted energy and I’m sure if you speak to people in hotels you know they must get the same of you know people leaving stuff or damaging stuff or whatever and know I’m sure again you know they make an attempt to charge them but if you can’t you’ve just got to move on.
The thing I think about all of that when you compare it to renting out property is it’s a very transient issue. You know we’ve had instances in Sunderland where the cleaners phone up and say oh it was a complete mess. What that actually means is two hours extra cleaning at £12 an hour whereas if you’ve got an idiot in an HMO that’s six to eight months of grief.
Which would you rather have you know take a couple of hours extra cleaning on the chin and you know maybe they’ve broken a lamp you know maybe it’s a couple hundred quid at worst.
I know what I’d rather have you know and I have experienced both and still do. You know I evicted a tenant three weeks ago you know we started that eviction last November and he’s not paid any rent since it’s like five grand of lost rent.
Well where we have a guarantor we will pursue them you know it’s the thing I like about serviced accommodation is that by the time there’s a problem they’ve gone.
It’s very immediate isn’t it?
Yeah it is and I don’t think we’ve ever had a property that we couldn’t turn around within 24 hours in terms of you know because usually it’s just a party there’s you know it’s just a mess. It’s not often worse than that.
I think if we think about chargebacks which is very closely related because there’s two real risks to credit cards is that it was fraudulent you know or they just could do a chargeback anyway. And again every area is going to be different as to how you want to look at it. If I live in London I’ll be taking ID and matching card from every single person in Southampton we don’t have a massive issue with it. But I did the analysis for last year 2016 being about two to two thousand pounds worth of chargebacks out of about £500k. So if you’re talking like 0.4% of your turnover on chargebacks well how much would it have cost us to implement the procedures so that we would have won every single one of those chargebacks that’s probably about £4000 or £5000. So to be doing that every single booking it wasn’t worth it for us but to some extent you’ve got to take a pragmatic view of it.
Now I’ve said exactly the same to people, talking about you know meet and greet obviously can be part of that process but clearly there’s a cost to meet and greet everybody and you’ve got to as you say balance that. We have sort of you know probably similar figures across Sunderland. You know I was a while ago I was looking at it and said look we’ve probably had you know 800 bookings even if it costs you £10 each to administer sort of meet and greet and security checks and all the rest of it. And again simply we’d probably had £1500-2000 of losses whether that chargebacks or damage that we couldn’t charge for. So we’ve you know saved the £8000 we could have spent and it’s cost us £2000 and again it’s not in some ways how you want to operate a business of sort of taking that attitude of well it just happens. But you know you’ve got to look at that sort of a bigger picture I think.
How do you manage reviews? I mean obviously you want good reviews but you’re not necessarily going to get them and sometimes you get mischievous people. Is there a way of managing that and dealing with it?
I mean I think the most important thing and it sounds so stupidly obvious but I guarantee 9 out of 10 people aren’t doing is asking every single guest for a review. Because what happens with reviews you think about it. When was the last time you left a good review for someone you know it doesn’t happen that often but if you’ve had a bad experience you go straight on and complaining about it. This is human nature. If we have a bad experience we’re much more likely to leave a review. So the simple process of asking every single guest for a review will mean that those get balanced out and you know even if people leave average reviews and some post amazing reviews, it balances out an awful lot and can have a big impact on what your review rating is. There’s lots of other stuff you can do around that but for me that’s the number one making sure you are asking every single guest for review and personally we combine that with Net Promoter Score and it’s a fantastic combination. Absolutely I’ll take you through exactly how it works it’s actually very very simple. So after every guest has left what it would do is 24 hours later we give them a call and the call simply goes on a scale of 0 to 10 how likely would you be to recommend a property to a friend or family. That’s what Net Promoter Score is, it’s literally asking that question they’re going to give you a number and based on that number you can do something different so if it’s nine or 10 you go well that’s fantastic. Glad you enjoyed your stay.
Would you mind leaving us a review saying you enjoyed it so much and you’ve got the commitment of yes from most of them still won’t go and do it but you’ve actually increased the number who were going to go and write a review by maybe two or three hundred percent.
I had a property a couple of weeks ago and he was, this guy was doing serviced accommodation and in a very short period of time he had a very small place but he won the best reviews on I can’t remember which site it was but because exactly because he did that, obviously if you get someone who’s going to give you a 2 you’re not going to ask them for a review.
Is that automated?
No no we do that telephone call because of course because the thing is when someone’s made a commitment to another person a lot more drawn to actually follow through with that action actually you know basic basic psychology on that. So yeah yes it’s something you know we have the technology and we tested doing it by text message but what we found is that you know although you can make it nice and technical and automate stuff and that kind of thing it just doesn’t have the same impact. So doing the telephones, okay it’s intensive but actually the impact on your business by the higher review score that you get and therefore the higher occupancy and rates which you can charge more than pay for itself. It also gives you a fantastic way of kind of mitigating some of the bad reviews.
And that’s half of it, catching the bad stuff before it gets out.
Exactly and what’s the reason that you leave a bad review generally is because you’re frustrated that nobody’s listening to you so you kind of want to tell the world if you’re giving people an opportunity to cull events and explain the issue you’re going to listen you can apologize and you’re going to tell them how you’re going to rectify it. Generally people won’t leave you a bad review.
I mean the ultimate I think you know one of the things that I think influences reviews quite significantly is that element of human contact and I guess in an ideal world you’d probably ring people before their arrival or at the point of arrival. In terms of nipping anything in the bud the probably the best point to contact them is the morning after they’ve arrived so if somebody’s got in at 6pm then to ring them at 9am/10am the next morning to say I wanted to check everything was okay you know and you know then they’re going to say actually something wasn’t clean or whatever and you’ve got the opportunity to rectify it. Obviously that’s quite labor intensive and you know that because I was saying to Lisa earlier obviously one of the frustrating thing is you have reviews coming through and it’s not uncommon if you haven’t had the contact to get certain for instance on booking.com to take the different elements to get a low staff review not because your staff have done anything wrong but just because there wasn’t any interaction, you know the only interaction they’ve had is via email so they won’t give you a 10 out of 10 for staff just because they’ve got nothing so rather than I think they probably can’t do not applicable. If they could do that but rather than do that they mark you down would choose which is frustrating.
The other thing about review management is it’s very very important as to A) to reply to particularly bad reviews and you get that opportunity on most of the platforms and not only to reply but to reply in the knowledge that actually the reply, of the people you’re speaking to are not actually the person who stayed but the person who’s then reading that review and how you responded to it who might be wanting to book so to see if there is a problem it’s always you know thank you very much for drawing that to attention. You know we’ve ensured, we’ve now put a process in place so that it will never happen again. It shouldn’t take a slightly extreme but obviously it is. You know we’ve made the cleaning team aware of these issues and you know we’re now ensuring that that doesn’t happen or sort of paraphrasing you know so that when somebody somebody sees that bad review they can they can see that you’ve responded in an appropriate way and actually the problem that occurred isn’t going to occur if they come and book in your in your property. But the bottom line is you will get them I mean you just you get some people for whom there is there is just nothing you can do to appease them.
Some people don’t want to be appeased, they just want some money back.
Yeah exactly. Sometimes it’s that and sometimes it’s like they’re just from a different planet.
So for example these days if you’ve got a mobile number for someone that’s stayed with you, you ring the number, I mean I now only answer calls that I know so what do you do.
My question is what about international numbers, is it the same really? Do you send them a text for example to say I’m just going to ring you then ring them or?
Sometimes international numbers are more likely to be answered because yeah they go OK it’s a UK mobile and I have lots of people like that, it’s not going to be a spam number. So yeah generally it would be a phone call, if they don’t answer the text goes out, that is just you know if it’s a text message it’s not the end of the world but you know you maybe do a follow up the next day to see if you can make contact with them.
I think the one crucial element around the reviews and it’s very easy to miss is that this is really about feedback and the feedback is what’s going to drive your business forward, make it more profitable make it sustainable. The thing is, it’s feedback you’re probably not hearing yet because what do reviews tend to be they tend to be really good experiences where people have loved the property yet or they tend to be really bad experiences where something has gone wrong and that’s not the key feedback. They key feedback for your business is in the middle. It’s the things where ah well the microwave was a bit old or you know the boiler makes a noise in the middle of the night or a smoke alarm beeps every 30 seconds. Yes these are things all real stories. These are things which they’re not important enough for them to phone you up and tell them they’re not important enough to leave a bad review but they’re fundamentally affected the guest experience.
Yeah. Thank you very much, what you just said , I’m going put this in place because it is so fundamental. It’s like a lightbulb moment for me.
Those things will come up when people say seven or eight. Yes this is what’s so powerful. The 9s or 10s, they had a great stay. The 6 or below there’s something serious need to sort out, the 7s or 8s it was generally great but there’s some stuff which you can pick up on. Now the reason that NPS is so powerful is because people won’t give you this kind of feedback. You know it bothered them but it’s not important enough that they feel they have to feed it back to you. What you’re doing with NPS is essentially you’re giving them permission and you’re making it very hard for them not to do it because they say oh probably seven and you say well what one thing could we have changed which would have improved your recommendation to a friend. That’s when they are going to give you the key insight into something they wouldn’t think to tell you. Well actually the neighbours were quite noisy, actually it was a bit of a faff getting into the property you know the little issues which affect the customer experience.
As we say, that intervention in a short period after they’ve checked in nips those things in the bud again doesn’t it. Because as you say it’s just not quite right. You know maybe it’s just not quite as clean as they would have expected or you know there’s some some minor issue. You know the chances are they’re not ring you up and tell you, they might still leave a review but if you’ve rung them first.
One of the problems with that is after that they just think oh I’ll just ring him and ask.
You always get customers like that but any business you’re going to have problematic customers. But I think this is one of the real key things around serviced accommodation that maybe people don’t grasp is that review scores, yeah they’re important. And what are they reflection of? They’re a reflection of the guest experience, they’re not a reflection of the property. So you can have really cheap you know not particularly well decorated properties which get 10 out of 10 all the time. Well you can have a lovely high end properties which are beautifully decorated which get quite low scores. So you know it’s not fundamentally about the quality of the property it’s about the guest experience and you know that is so many different things that it’s the initial contact they get from you that are you know the check in procedure. It’s how they feel when they walk into the apartment. The little touches the things that put them off. Yeah it’s a lot more than just the quality of the property so whatever property you have even if it’s in not so nice an area you can always have a great guest experience around it. It’s about small details and you have to pay real good attention to those small details if you want to work. And the great news is that doesn’t have to cost money. You don’t have to go and get you know a £1000 sofa bed or £8000 70” TV to get a great guest experience. It’s about the small things.
It’s like in higher end hotels, if you’ve got a problem you phone up and someone comes to fix it and then they call you after to say is everything ok? There’s always follow ups and they’ve been doing it for years.
And I think what that highlights the whole issue and that is what people need to understand this is a hospitality business it’s not a property rental business you know and I think you know there are examples of people who get on Facebook and rant about this and the other with their guests and all the rest of it. And whilst I’m sure they don’t necessarily rant entirely the same way at their guests, inevitably it must come through in the way they deal with people you know and the bottom line you know it is you know unfortunately sometimes it is one of those industries where up to a certain point the customer probably is always right. You know you’ve got to be seen to be, it is hospitality you know we’ve all stayed in hotels. But you know we’ve all stayed in hotels and had that really great experience and equally had that not so great experience of you know with the receptionist just having an off day and it does it colors you know and as you said it’s got nothing to do with the property but it just colors it so however you’re interacting with guests you know whether that is on the phone or in person or even via emails and those sort of things you know if you’re not careful it can come across as these are the rules you can’t do this you must do that. And that will color people’s whole experience. It’s getting back to that. You know it’s a hospitality business.
Based on that then would you say meet and greets are better or not?
I think overall I think my view has changed and I think initially when I came into this I wanted to do and to be the not meet and greet has worked for us I have to say in Sunderland in the main. I think where we’ve had issues with it is a block we’re managing in Birmingham which is the branding block of 16 and they’ve had real sort of party problems on weekends. And so now they’ve got someone on site Friday and Saturday evenings sort of doing the meet and greet. And to me the issue then is okay that’s fine how do we cover the cost? And I think Chris I’d be interested in your take on this and increasingly I think we’re seeing people adopting the pricing model of charging a service charge on top so you have to have your nightly rate and then per booking there’s service charge. When I was working with a guy in Liverpool and he’s always done this, he charges you know £45 and that covers his meet and greet and his cleaning you know and his nightly rate is then his nightly rate. And I think people have become used to Airbnb you know because Airbnb was very much set up as a room in a house model. You know you pay for that and then there’s charge for cleaning on top and you know booking.com does facilitate that.
You know I started from the point of view of well if you stay in a hotel you don’t get that but also if you had booked through booking.com, by the time you’ve got through and decided that’s the property you want to stay and that’s the reason not separate thing is probably going to say well I’ve decided that’s where I want to stay anyway. Have you charged any additional charges of that nature or do you just have an inclusive nightly rate?
We don’t typically, it’s very interesting because each market seems to operate virtually independently on that and if you’re the only person in your market charging a service fee or a cleaning fee you might find it hard to be competitive. Whereas if for instance you’re in London everyone does it and you would be leaving money on the table if you didn’t because it’s not a fair comparison. You’re looking at the nightly rates but with your property there’s no extra charges, on the other one there might be a £70/£80 cleaning fee.
To kind of look at meet and greets are they better? Well not not to embarrass you I stayed at one of your clients properties in Westminster probably about two months ago now and I found it because I searched all of London for the highest rated properties and actually came up top. You know it had 10 out of 10 after 28 reviews, when I checked into the property of this Colombian guy very proud of the property who showed me all the features in here, showed me the most wonderful Colombian coffee which was the best in the world.
And all these kind of things you know which was a nice touch but in all honesty I like a kind of two or three minute check in you know it was maybe 10-15 minutes, don’t get me wrong it was a really nice property, fantastic location it had views over Westminster Abbey you could see Big Ben in the background, so very nice. Was it a 10 out of 10 property?. Not really. It just had a few little things you know the main bed in there for instance was fold out bed you know which meant it wasn’t massively comfortable it looked a little bit strange there was no bedside tables or bedside lamps which didn’t make it practical. The TV was mounted above the sofa so I presume I’d get a bit of neckache!
It was a nice property but like independently there’s no way I would have left a 10 out of 10 rating but actually you met up with this guy, he’s so proud about what he’s doing. You’re quite aware of the fact actually he’s got a very high rating. There’s no way you could leave anything but a 10. You’d feel like I’ve mortally wounded him!
So yes, meet and greets can have a very positive impact on the review rating.
The bottom line is it’s not scalable unless you’re in a line of business where you’re able to charge a real premium on your nightly rate. It’s not a scalable model you can’t get 20 or 40 or 50 units.
I mean at the moment I think I’m not absolutely sure but I think those guys are just running two and they’re in the same block. All right. Well you know they were very keen to do that because I think they are very hospitality minded and I think his wife who I haven’t met, I think she’s very much the same but you know she wants to be there and schmooze people and all the rest of it.
When I stay somewhere I wouldn’t want someone to be messing about talking to me and that, I just want to get in, do my thing, do you know what I mean? I suppose in a way it could be subjective for each guest.
I’m exactly the same. So in all honesty I would have preferred a remote check in for that property but that’s not the same as what review would I have left it? Because even though my personal preference if you ask me would be to be remote check in I would still have given a higher review rating having had a think which I just think is really fascinating. It’s a kind of psychological impact it has.
That’s it for part two. Make sure you tune into the next episode for the final part.
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