City Relay grew their revenue by 182%

Vanessa: Can you please tell us who you are and what you were doing before City Relay.

Maxime: I am French, I studied in the US and I started my career in London at Morgan Stanley as an equity trader. I spent about four years there and after that, I launched a dating business with a colleague from Morgan Stanley but that didn’t work out.

Then I moved into properties starting with short lets and “FG Property Management” and within three years I realized that it was difficult to scale. So I came up with the idea of City Relay and the reception space concept.

OUTSOURCING TECHNOLOGY

Vanessa: I saw from a previous interview that you consider City Relay a tech enabled property management company. Is that guest facing tagline or is it for property managers? 

Maxime: We use a lot of tech to service our customers we also use your software, Rentals United to get our bookings. But we also use Lodgify on the website side. We use Outswitch that we recently acquired on the yield management side. We have a whole bunch of tech tools in order to service the customers. We use Wishbox for the guest messaging. We use Breezeway for the cleaning. We use all these tech tools linked together to provide the best possible experience. 

Vanessa: Does that mean you outsource everything and you don’t build anything yourself? 

Maxime: So Outswitch yield tool we own and we build upon. It’s sometimes more cost-efficient to use external software and we think there’s a lot of great tools out there, and obviously we would never go into channel management because we think Rentals United is great at it. 

We wouldn’t go into a whole bunch of things because there’s a lot of good tools out there. Currently we’ve slowed down tech development, we want to build things that make sense financially and bring value to our service.

DELIVERING OPERATIONS FOR OTHER MANAGEMENT COMPANIES

Vanessa: And what is that? Have you found that out yet? 

Maxime: It’s mostly linked towards operations: we’re a big operations company. We operate almost 1000 short let properties for a lot of other property management companies in London. So short let companies in London’s outsource most of their operations to us. All of these companies use their own system and PMS, so I think we need to bring all that information together and give them great reporting.

A lot of the property managers we work with use us for check-in at a property, for cleaning, and we also sell housekeeping packs because we have our own warehouse. So we can we can really deliver housekeeping at scale. Normally, a lot of operators will be hiring housekeepers, hiring linen and hiring yet another company to do maintenance. They will be trying to put hospitality packs inside their flat, such as toiletries and trying to do that with the cleaning company, but they don’t really know how to do it.

So we are a one-stop-shop with the warehouse where we can even white-label the service. They can have their own shelf at the warehouse with all their products. And because we have all those vans and people on the road we can deliver the products at scale with quality and consistency… One Account Manager is your liaison contract, instead of having all these third parties.

So it’s not only cost-efficient for the companies to use us but also, they can reduce the number of staff they have in-house since they can just focus on scaling their business.

Vanessa: Okay, that’s great but you also have an offering for private owners as well, you are a property manager yourself… Is there a clash there? 

Maxime: So obviously, people see sometimes a conflict of interest but ultimately we’re not here to steal their clients. The market is big, there are properties for everyone. Some people will be luxury-focused, some people will be studio-focused… There’re all kinds of managers that have different priorities. We build that operation savviness and with that density, with that scaling, we are able to service everybody so much better, so it makes a lot of business sense to go through us.

Vanessa: I see, so you said the market is big, but you are focusing solely on London right? 

Maxime: Yes, we don’t have any short to mid-term plans to expand anywhere else.

SCALING VIA HIGH STREET RECEPTION SPACES

Vanessa: So how do you plan to scale? 

Maxime: Well I mean, in each neighbourhood there are thousands of properties right? So you got 50,000-70,000 properties in London. I don’t think that Airbnb really reflects what the depth of the market is. A lot of people are shying away from renting their home because there’s a lot of management involved. 

We see this through the reception spaces: we attract a lot of customers who are not Airbnb clients. They will never be Airbnb clients. They are Airbnb clients because we advertise their flat on Airbnb. But they would never go to Airbnb directly. They want a local trusted manager to be there, to answer the questions, to service them in a much more local personable and sustainable way.

Vanessa: So tell me about the offices, so you just opened the second or third reception office?

Maxime: Yes, so we have one in Earl’s Court, it’s been running for 3 years. We’ve just opened one in Shepherds Bush. We have one opening on Warwick Way in Victoria. We’re looking to open one in Paddington. And the idea is to cover London with local reception spaces. 

Reception spaces have several goals. One is to help service the guests. So the guest arrives early, needs to put his bags somewhere and the flat is not ready. If the guest has something he wants to mail, or he/she is going around Europe and wants to leave his luggage… So, we’re servicing guests this way. But it’s also attracting landlords to short-lets, also putting the short let industry on the high streets. 

Short lets live online, they only live online, which does not make any sense right. The truth is, the real business is done on the street. I mean, it’s still the core of the business and and short lets have never lived on the street. So we see that living on the high street gives us great visibility, it really attracts a new kind of host and it also helps us operationally. 

So, suddenly we have staff that are very close to the flat so if a guest is missing anything a team member can just jump in and help them within 5-10 minutes. That proximity has a lot of value and once you build the density around that proximity it has more and more value.

So it’s a unique value proposition we have with the reception space. But we’ve seen it work, we’ve seen the density we achieve around those spaces and to us it makes a lot of sense.

A lot of people will push back thinking it’s very costly to run a reception space but the truth is the high street is struggling right. So some shops are not so expensive, there’s a lot of them and this gives them a good purpose. If you think your cost of check-in is X, how many check-ins do you need to make it viable. You’ll see that it’s not a lot. it’s very little actually, it makes a lot of sense as a servicing tool, but also as a company. It helps us and it is profitable. 

HELPING STANDARDISE WITHOUT THE CONTROL

Vanessa: So what about branding? Do all the apartments look similar? Is there something that points to the fact that this is a city relay apartment? How does that work? 

Maxime: All the flats are not the same, we are not “̈Sonder”, we are not “Domio” nor “Stay Alfred”, who you interviewed. We’re not one of these guys because we don’t control our inventory right. So obviously we are selective but we are not “Onefinestay” either, we accept a lot of owners to work with us.

We try to help them standardize the experience. We think that’s key and obviously, that’s why all those master leases, large operators are very successful. Because as you know, standardization is a massive issue and landlords are sometimes difficult to teach. You need to bring a certain level of standards. We are working towards that and we want more and more flats to be of a certain standard. Obviously, as a property manager of private homes they will never all be the same.

Vanessa: What’s your biggest f**k-up so far as a company?

Maxime: I think we tried to do too much when we started: we did laundry, we had washing machines, we had dryers, we had iron rolls, we tried to do everything. And I think that was a mistake and we probably still do too much. I built this business with no resources, just myself alone.

We went from 0 employee to 50 employees without external investors. I was alone and when you’re alone you really try to generate income out of everything and to save everywhere you can. And to try and make it work everywhere possible and sometimes it took me to the wrong places.

ABOUT ACQUIRING A YIELD MANAGEMENT COMPANY

Vanessa: About the acquisition of Outswitch, how did the customers of Outswitch react? Because they had their own customers right? 

Maxime: Outswitch I’ve always been involved with, I own a stake in Outswitch, so City Relay has acquired the rest of the company. I had 40% stake in the business so I was very involved and I built Outswitch with another co-founder called Siad. We built it because we felt the yield management tools out there were not very useful and we really wanted to keep control.

Outswitch users are still fine, they are using the software, there’s no big issue with that. Obviously, we’re still debating if we’re going to build the software mostly focused on City Relay’s growth or if we will want to listen to customer feedback. We’re still trying to figure that out. But at this stage, we support Outswitch clients, we run Outswitch as it was basically.

DICTATING TERMS WITH SMALLER CHANNELS

Vanessa: In terms of distribution, how do you choose the channels that you’re going to advertise the properties on? And do you work with any niche and local channels or just the big OTAs? 

Maxime: Well we’ve had a lot of channel bankruptcies through the years and a lot of payouts that never came… Yeah, so we tend to be more selective. We used to have an approach “the more the merrier”. I got to the point where we’re happy to work with selected few. I mean we still work up to 15-20 channels. So it’s quite a wide distribution, but we use to work even with the tiniest companies.

 And I think that really didn’t make sense, because that drained a lot of resources and required a lot of work and then we needed to be careful on the accounting side as to when the payments are coming and everything. So it’s been quite draining. Today we focus a lot of our energy on the big ones and a lot less on the smaller ones. And we dictate our terms with the smaller ones. We try to dictate the terms so it’s really – take it or leave it kind of approach.

The Airbnb Plus and The Plum Guide, all these initiatives placing premium properties in the right place makes a lot of sense. And we try to do this for our customers. We try to think about the property and where which channels they make sense to be placed on.

THE RELATIONSHIP WITH RENTALS UNITED

Vanessa: Yeah, that’s a lot of work isn’t it.  I hope Rentals United helps you with that.

Maxime: Of course, it does.

Vanessa: So that’s my next question, how is the relationship with Rentals United? Everything okay? 

Maxime: Yeah everything’s great, we’ve been your clients forever. I follow Rentals United I really believe in your product. I think it’s great, you’re doing a good job and the integrations are working better and better.

BIG GUYS ARE NO THREAT TO A LOCAL BUSINESS

Vanessa: Good, good that’s what I wanted to hear. So your thoughts on consolidation, I mean you are trying to consolidate London right? But there’s bigger consolidations happening out there as you know, in the U.S., quite a few companies also in Europe. And in some cases, some even going internationally. So we find these power brands that are looking to take over. So what does that mean for a brand like yours? Is it going to be it harder and harder to be successful when the giants come? 

Maxime: There are not a lot of global estate agents right. Now there’s two ways you can look at short lets. You can look at it as an estate agent business or you can look at it as a hotel business. To me, it remains a local business, a community-based business. You need to be local, you need to understand your market.

I have no fear about the big guys coming in, I don’t even know who they really are… maybe Vacasa I suppose is the big monster out there from the US. But I don’t really see them as a threat. I think we’re locals, people know us and people care about the service. A lot of people are telling us that actually they prefer to work with a smaller guy. So I don’t think it gives you that unique edge to be bigger, I actually think that the more local, the more personal you are, the bigger your business will become.

Ultimately, this is hospitality, this is about people, this is about building the right company culture and I think we’re very well-positioned to do that in London.

Vanessa: Okay so, where do you expect City Relay to be in three years? 

Maxime: Assuming that we’ll have achieved the business plan, which is to open 23 reception spaces, we should cover London and be supporting all the other short let companies in London in delivering the best service to guests.

We’re working on building a very sustainable hospitality package which is very complex and that’s something that smaller property managers wouldn’t be able to do. We’re working on different initiatives to provide special value to them and they’ve been very responsive so far, really enjoying the service.

I mean we have people that you would call competitors that really don’t see us this way. We help smaller providers scale their business much faster than if they didn’t have us. So I think we’re more an enabler, than a competitor.

Vanessa: That’s it, thanks so much, it was super interesting, it was really good to get to know your business. Thanks so much, cheers 

Maxime: Thanks so much.