Jesse DePinto is the Co-Founder and Chief Product Officer of Frontdesk, a leading urban short-term rental solutions provider for the real estate industry. Founded in 2017 and based in Milwaukee, Wisconsin, the company prides itself on their in-house tech solutions.
With over 600 properties under management, Frontdesk is number 47 on our list of the world’s largest property managers. And, they’re looking to scale to 1500 properties this year.
In the latest episode of the Secret Sauce Podcast, Rentals United CMO Vanessa de Souza Lage spoke with Jesse DePinto to learn more about:
Jesse DePinot: Before Frontdesk, I was building enterprise automation systems, working in travel tech. So starting in aerospace, doing connected cabins and in private jets. Then I went to work in hotels, doing IoT, smart thermostats and building guest room automation systems in major hotel chains across the country. So we were doing keyless entry before it was cool in the hospitality world.
I also worked with one of the first companies to do Alexa voice-controlled smart thermostats. I had a lot of fun working with many intelligent engineers, smarter than myself on the technology, but building cool products.
Then a partner of mine sold the company that I had previously worked at, went for a year-long journey across the world with his wife and came to fall in love with the vacation rental experience.
We thought, between the real pain point that he experienced on his travels and the technology automation experience that I brought; we could marry the two—bringing the industry some fantastic technology.
We, like many people in the space right now, are building a leading next-generation hospitality brand. For starters, we feel the major brands such as the Marriotts and Hiltons (that we all have come to know and love over the past century) were built a century ago.
“We feel that the next big brands in the hospitality space will be born in the coming decade, mainly from the short-term rental space.”
That’s where Frontdesk comes in. We are reinventing the way that today’s consumers live, work and travel.
It’s no doubt that the pandemic of 2020 shifted how people think about where they live, travel and where they work. And now, it has begun to all blend together.
This awful term called ‘bleisure’ – it’s what exists today. The bleisure market is heating up. I don’t know whether guests are staying with us to work or staying with us to live.
So really, who we aim to serve are today’s consumers who are not just travelling two weeks a year, but maybe living a life of adventure while holding down a career from a remote destination across the country. Frontdesk aims to serve that next generation of the travel consumer.
Yes, our niche is urban apartments. We operate the most urban apartments in the United States out of any other operator across 150 different communities giving our travellers the most variety.
Our brand cares a lot about consistency, but also variety. People, of course, in a vacation rental space care about authentic experiences and unique experiences. But they also want to be in control of where they stay, when they stay, and how they get in.
So offering incredible variety, but still with the consistency of a well-recognised and reputable hospitality brand to keep everything together is key to our consumers.
We have subtle visual consistency, but people don’t stay with us because they want to see the same. They want to see splashes of elements that they’ve come to know and love, things like a good bed and a nice couch whether they are staying with us in Iowa, or Atlanta, Georgia.
But people travel with us not to stay in our unit. They travel with us to explore the city. We happen to be where they sleep at night. So they want to soak in the authentic experience of that culture, everything from the neighbourhood that we’re in, not the downtown central business district (although we often are there).
They want to explore the off-the-beaten-path, with the up-and-coming trendy neighbourhoods and the delicious sushi and microbreweries. We aim to connect our consumers with a consistent experience where the Frontdesk brand doesn’t take away from their trip.
We want them to, above all, enjoy being where they are and see us and our units as a safe space to call home base and come back to at night.
We do! Year over year, our repeat business is growing about four times each year. We have hosted over 200,000 guests over the past four years, and most of those guests are coming back to repeat a book with us.
Just looping back to how we maintain consistency, the Frontdesk business model’s vertically integrated nature ensures consistency. And so the design is not consistent. The apartments are not uniform, but the experience is consistent.
“The biggest mistake, I would say, was not pivoting away from the master lease model quickly enough.”
It ended up not working out for us, and it was a challenging year. We had to lay off about 16% of our staff, about 35 employees, back in April. This was a tough business decision we had to make in order to pivot our inventory from master leases to asset-light management agreements. Fortunately, we started to do that pre-pandemic.
Our first asset-light units were signed back in January/February, and that was a big push for us to pivot our inventory even before the pandemic. We saw the writings on the wall with some of the WeWork IPO, and the other failed master leasing companies laying off their employees. We tried to get ahead of it, and, you know, if I had a crystal ball, we would have started that process six months ago and made a much more manageable 2020.
But here we are, and we’re fortunate and very grateful to be here and to be now a management platform and a management operator versus a master leasing company.
I think the master leasing model is important to get your name out there to get to scale. It’s an easy way to scale, especially if you don’t have any proven track record with the property owners that you’re partnering with.
But, leaning on it for too long, once you’ve established that reputation where you can showcase why the owner will get more in the long run through a rev-share payout versus a master lease and convince them of that.
I think that’s where businesses like ours, the urban operators, need to start thinking in terms of pivoting their models.
“You never know when the next “black swan” event is going to come. It is so important to build an antifragile business that can thrive in both downturns and upturns.”
We know travel is not short of turbulence, so building a conducive business model to turbulences is core to sustainability.
When starting, it is harder to scale without doing master leases. For us, we’re confident that we’re already starting to turn back on the growth engine.
We’re preparing for what many people are calling the “great travel rebound 2021”. We’re starting to see bookings pour in for the summer, and more good news is coming every day with the vaccine rollout. We have a pretty positive outlook for the future of travel.
So for us, scaling looks like more cities, more units, more properties. But first, we need more talented employees. 2021, in a lot of senses, is going to look like 2019 for Frontdesk.
Currently, we have 600 units, but we’re planning to close out the year with 1500 units. It’s starting to look like it’s getting back to normal, which for us means very aggressive growth!
Tech has been in our DNA since day one. Every problem we see is an opportunity to automate. There’s a quote that says “Systemise the predictable so you can humanise the exceptional”.
For Frontdesk, that looks a lot like continuous learning and continuously improving our tech stack. Our PMS is at the core of that, and we call it Frontdesk Flex. We are offering it for third party property managers – but what makes us unique is our bolt-ons.
Within our PMS, we have a guest portal, revenue management and pricing tools. To ensure we are at the top of our game, we regularly test against the competition out there, and we are over-performing by 10 to 15%.
This is because other pricing and revenue management tools are trying to serve the broader population of thousands of countries and cities. We at Frontdesk only have thirty-two cities to target. So revenue management, guest portals, data analytics and reporting tools are much more targeted to our specific geographies.
Trust and safety is also a big thing for us. Working with apartment communities means we have a different way of operating. Not only do we share communities with our neighbours, but we also share walls and communal spaces. We don’t take out units in entire buildings like some of our competitors; instead, we have four or five units on average per building to provide variety to our guests.
Being a good neighbour is a core value and something that is key to our business’s success. Safety tech, in my opinion, is far more critical than the average vacation rental beach home type of tech platform. We have to make sure guests are vetted to the same standard as long-term rentals adhere to. This involves fraud prevention, ID verification and criminal background screening but in a matter of minutes to make sure guests are with full compliance and full assurance that it’s not a bad actor.
Noise monitoring and access control are also critical. We need to ensure we are providing the right codes to the correct guests. As well as making sure our guest follows the rules; otherwise, we need to take immediate action and ensure that those guests are never booking in our units again.
Everything related to trust and safety is vital for us and unique to our property management system compared to the market’s average systems.
“The most important part of our tech stack is revenue management, channel distribution and data analytics. “
The combination of listing on the right channels, optimising the correct pricing, offering suitable discounts on the right channels and having a holistic view of how all of those different channels interact is core to what allows us to over-perform the market by 15 to 20% in the same type of properties.
So one business we’re not in is the channel management business, and I don’t know if we ever have an intention to get in it. Other than that, we pride ourselves on vertically integrating just about every aspect of our business.
We feel that technology is key for the overall guest experience. Our net promoter score is seventy-two – highest in the industry as far as we’re aware. To do that, we need to keep control of every touchpoint that guests, neighbours, and property managers in the community interact with.
So channel management and laundry are the only two pieces of our business that we outsource. We also don’t own any of our properties, so I guess you could say real estate as well. But beyond that, we take just about everything else on in that supply chain.
For us, less if more. Currently, we are focusing on using the top five channels: Airbnb, Vrbo, Booking.com, etc. We’re also getting more exposure to traditional media sites, Facebook, Instagram, Google.
But right now, a promising channel is the inbound channel where some of the world’s top hotel chains have reached out. They love the guest experience we offer with our vertically integrated management platform and want to list our inventory.
So within the next six months, we should have some exciting news regarding two new traditional hotel channels that we can’t wait to report on.
I am optimistic about the future of travel. I believe that hospitality is in the middle of a major seismic shift between the work-from-home movement, the flock away from hotels, and towards short-term rentals amid the pandemic. Which I believe will likely be sticky after.
You also have Airbnb user rights, IPO, and their brand recognition propelling this industry forwards, which is incredible tailwinds for creating that space in that vacuum in the hospitality world for the next generation brands to rise.
The cause for the most optimism that we have is not just the pent-up demand; obviously, there’s a ton of pent-up demand out there right now, and everybody is starting to look at their summer holiday.
But more importantly, we think this work-from-home shift is underestimated for the kind of impact it will have on travel. It could be the next biggest boom travel has ever seen in the past century. Just think of the ability to travel not just two weeks a year but as often as you want throughout the year.
We believe there’s going to be a massive convergence between how we live and how we travel. Travellers will have the ability to hop and travel like a nomad, and there is just a ton of opportunity for subscription-based travel like that.
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