With over 14,000 rentals under management, Evolve Vacation Rental is number 6 on our list of the world’s largest property managers.
In the latest episode of the Secret Sauce Podcast, Rentals United CMO Vanessa de Souza Lage spoke with Brian Egan to learn more about:
Brian: Thanks for having me, Vanessa. I grew up in the hospitality industry until I was twenty-five years old. The only money I made was through restaurants. I did every job from washing dishes to serving to everything in the kitchen. And I just fell in love. I was hooked on that feeling of creating experiences for other people.
I also developed a passion for startups, innovation, technology. I pursued that down the wrong path for a little while. I was a lawyer for startups and venture capitalists in the Bay Area. Not that there’s anything wrong with that. We have amazing ones but it wasn’t ultimately what I was meant to be. And that actually brought me to a company in Denver, Colorado, which is where we’re headquartered and where I live right now.
I was one of the first ten employees at a company called Exclusive Resorts, which is one of the early innovators in the luxury destination club concept. I spent about seven and a half years there that really married these passions for hospitality and innovation and startups and growth. I was really proud to be a part of that. After the 2008/9 recession, the growth started to peter out and I got really excited about the next chapter.
That’s when we left to go start Evolve with my co-founder Adam Sherry, also one of the early Exclusive Resorts veterans.
What we want to do at Evolve is become the most trusted hospitality brand in this category. Great to hear that we’re number six on your list – I want to be, of course, number one, both in terms of the size and the scale of our business. But, more importantly, I want to be the most trusted. What does that mean? Well, our mission is to make vacation rental easy for everyone.
We have an amazing portfolio of fourteen thousand properties across primarily the United States for now. We are everywhere from Alaska, to Miami, Florida, Hawaii and Maine. We have one bedrooms and studios. We have seven and eight-bedroom mansions.
So our customer base is an incredibly diverse group of people. It’s couples looking for weekend getaways. It’s large families and groups that are looking to stay for three or four weeks. And everything in between. So what we’re trying to do is find: what are the common denominators? What is it that’s missing in the category or can be further developed? And for us, a lot of that comes down to consistency.
“Ultimately, a brand is an aggregated set of experiences that consumers have. We are as good as the next experience that we deliver.”
It’s our four core property standards. It’s our inclusion and community behaviour policy. It’s having a team that’s available 24/7 that is oriented around the hospitality that we want to deliver. Ultimately, it’s a brand. We are as good as the next experience that we deliver. I can sit here and tell you about the values of the company and everything else that we’ve got in place. But ultimately, a brand is an aggregated set of experiences that consumers have.
It’s important to note that we have another side of our business: owners. We partner with owners to bring their homes onto our platform. We want to deliver the core property standards that define the brand and make sure that we’re aligned on the business terms and the economics. And then we market their homes and provide a guest brand that they get to benefit from as opposed to being an individual owner.
You now have a marketing machine behind you that has fourteen thousand homes on a platform that’s drawing quite a bit of demand in as well. So that’s business in a nutshell.
There’s essentially both. It’s a key innovation of our model and in the category as a whole. But we don’t do what most people think when you say full-stack service. On-site services matter a great deal to our approach, which is two-fold.
One, we have the ability to offer owners flexibility. If you have a vendor that you want to use, housekeeper, light maintenance, snow removal, whatever the case may be in the market that you’re in, so long as we can vet that vendor and so long as the three of us (your vendor, you as the owner of the home and Evolve as the hospitality platform) can align on those core property standards.
This has proven to be a really interesting component of our business and one that a lot of people thought we were crazy for pursuing. It’s allowed us to work with so many owners who simply aren’t comfortable turning over every dimension of their home to another company.
The other option is that we have a network of partners in all of the over five hundred markets that we operate in that can handle any one of those things. They’re not on our payroll but they’re closely partnered. They’re vetted, verified, and aligned with our brand standards. And for owners who don’t have a vendor they prefer to work with, that’s the other avenue. Right now that split is roughly 50-50.
Over the last three to four years, the trend line has been increasingly towards accessing our network of partners. And the reason for that we’ve increasingly seen owners coming to Evolve as they enter the category for the first time.
I think we need to start with an important premise here, which is that consistency and conformity are not synonymous. In our category, there’s often this push towards: in order to have a brand and be consistent, one must essentially pursue conformity. The vacuum cleaner has to run across the carpet in the exact same direction in every place.
I believe that people are coming to this category precisely because they love the fact that it’s not commoditised. That every home is different. That no matter what Evolve does, every family room is going to look and feel different. I think that embracing that fact up front is a really key element of this.
From the guest’s point of view, it comes down to the more basic things. For example, has the house been professionally cleaned? That’s why these brand standards are so important. That’s why we vet our partners and go through this very thoroughly with owners in our onboarding funnel to make sure that we’re all aligned. And of course, we have an inspection process as well. We shoot all of our own photography so that we know exactly what’s going to be represented under our brand.
We are able to do this because of the model I just described. We’re not constrained to the core markets where we have fifty to a hundred homes. We have plenty of markets where we have five or seven homes, and we do great. So one thing I would note is we have a true national reach longtail primary, secondary and even tertiary markets.
How do we reach them? Oh, there’s some secret sauce to it that I’m not here to share with everyone. But I would say that it’s a lot of multichannel marketing and cross-pollination of those channels. That’s everything from traditional PPC to social media, paid social, a lot of content marketing. Our blog has some tremendous resources for owners. It’s not always about selling people. Often, it’s just about being helpful.
“We are in the business of earning trust and confidence every day, just like we are with guests.”
The last thing I would point out is our real estate services team. I mentioned earlier that there are a lot of new owners coming to us as first-time renters – some of them don’t even have a home yet. We figured out that as many as 20-22% per cent of the owner leads we were getting were actually prospective buyers. They were researching the industry.
We also have a lot of owners on our platform who have chosen to sell their home or put it on the market. What we’re in the business of doing now is helping to match those people up. It doesn’t have to be buying one of the homes on our platform. We’re not acting as a broker. But we are here to advise and say: here’s what we believe rental income might look like. Here are partners that you can talk to. Here’s a preferred real estate agent that we vetted and verified.
And there’s no obligation. But of course, by the way, we would love it if after buying that home, you would bring it on our platform and we could go partner successfully from there. And then we don’t lose the home. We are in the business of earning trust and confidence every day, just like we are with guests.
It’s a great question. The answer is, from a vision perspective, unequivocally, yes. We have global ambition. And we have a global vision. We think the European market is absolutely fascinating. I think the real question is timing. And of course, how we would go about doing such a thing. But I can tell you this. The 2020 global pandemic quickly took that off the consideration list for the year. But I think that we will be there and I look forward to coming back on the podcast to talk to you about it when we’re ready.
The dynamics of the European market are fundamentally different from the dynamics of the US market. Of course, there are some common denominators. Our vision and mission, they’re universally applicable. I could argue that you could take them outside of vacation rentals to hospitality broadly.
“We have a vision that gets us (to Europe). But I want to emphasise that we would do that with a lot of respect and a lot of focus on getting local expertise because to do otherwise, I think is a fool’s errand.”
What’s interesting about Europe is that the market has been developed for decades longer than it has in the US. You have more of the larger-scale property manager brands that we aspire to be in the US. You said we’re number 6 on your list. I can promise you that at least three of the six are over in Europe or elsewhere in the world. And they’ve been at it for 50 or 60 years, longer than the industry has ever existed here.
I will tell you this as a personal anecdote. At Exclusive Resorts, we launched a European operation or at least kind of a beta. I had a heavy hand in that, although I wasn’t the co-founder and CEO at the time. And I learned a lot from that experience. I think the list of US-based companies who have gone to Europe and tried to run their own playbook and act as if the whole world is going to spin on the same access that the US does is long and filled with failures.
And so, when I say we want to come to Europe, we have a vision that gets us there. But I want to emphasise that we would do that with a lot of respect and a lot of focus on local partnering and getting local expertise because to do otherwise, I think is a fool’s errand.
The biggest mistake we’ve made in the business I think was early in our history. This was the business we set out to build when we sat in the basement, pulled the industry apart and tried to devise a way in.
Early on, we had done some good work, but we were not growing very fast. And at the current speed, it was going to take us 120 years to get where we are today. So we were asking ourselves what to do about that and what we ended up doing, in part because the market came to us, was that we started to work with property managers on a non-exclusive basis.
“It felt like we were taking three steps back, but in fact, that’s what accelerated us to where we are today.”
We had property managers coming to us and saying we’d love to use you as a channel essentially, but of course, not on an exclusive basis. And the mistake was we said yes, and we pursued that business for a good 12 to 18 months.
The early testing went really well and the later testing proved to be problematic. The unit economics didn’t work. You know, we weren’t getting the best inventory. We weren’t getting the best calendar dates. We simply were not aligned with that property manager as a partner.
Ultimately the model got bigger, but not better, so we made what felt like a difficult choice at the time to actually unwind that business. It felt like we were taking three steps back, but in fact, that’s what accelerated us to where we are today.
We started on entirely third-party software, and I think that was smart. We were just two people in the basement with a little bit of seed funding and a lot of scrappiness and reinventing the wheel.
We took the booking engine application and sort of sat it on top of some of those existing infrastructures so that we could really take advantage of: where can we make a proprietary difference? Where can we iron out inefficiencies or find footholds that will help the business scale versus where are we simply rebuilding a wheel? It’s hard to pull it all apart, but almost all of the things that are really custom to our business in terms of how we operate are proprietary and custom-built.
The middle ground might be interesting. We have established workflows that run through a Salesforce platform that we’ve customised to the 10th degree. So I would think of it as a Salesforce foundation of a CRM customised beyond recognition. So it looks and acts like Evolve.
In a way, we have guest-facing interfaces. You can work with your reservation, you can request things, and you can change things, etc.
We don’t have a native app, but we have a guest app and a guest account. But it’s not yet a booking app. What you’re going to see from us in the next year or two is a much more robust, especially mobile guest consumer-facing booking presence. At the moment and through our history, that hasn’t been the most needed in the next instance.
That said, our direct channel is growing a lot. We think it is becoming more and more critical to the business and the brand to instil that trust.
To quickly answer your question, smart rates pricing algorithm and all the work we’ve done around revenue and yield management. Especially in 2020, it has been an instrumental navigation system, so to speak, through this pandemic. Our ability to recognise the demand shortfall early and adjust accordingly has been tremendous. But equally to identify the minute that the stay-at-home orders got lifted and the demand surged back.
So for us to recognise that demand and be able to react accordingly was huge. And now we’re into more specific adjustments – we think we’ve got years to run on that. But that foundation has been incredible.
I’d say more than ten and less than twenty. Importantly, it’s not just tech. The tech is a tool and that tool, we believe, is still best operated by experienced revenue managers who are incredible at what they do.
Now, the great news is they’re not resetting five million rates. They’re looking at slicing and dicing of data and understanding where supply and demand may be misaligned. And some of those adjustments are a lot smaller, more automated. Some of them are a lot bigger and are something that our team is reacting to.
There are also things that technology can’t pick up yet. I mean, the instant that a huge music festival, such as Coachella in the United States, shifts their dates, demands shifts overnight. It may not register in all the instrumentation yet, but we have to be on top of it.
We get a lot of inbound interest, and we’ve got fourteen thousand properties. That’s hundreds of millions of dollars of annual gross bookings, and that’s going to be attractive because, you know, a small piece of that pie is potentially a lot, especially for a smaller channel.
Number one: Does this make sense? Is it viable? Is the juice worth the squeeze, so to speak? Number two: Are you aligned with us in the experience and the hospitality we want to deliver to that guest? Finally, number three: Are you the kind of partner that wants to engage with us, work with us over time and improve?
Because this industry is so dynamic. We need a partner who is going to go on that journey with us and has the capabilities of doing so, because otherwise, what are we investing in?
Editor’s note: This interview has been edited for brevity and clarity.
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