In the vibrant world of vacation rentals, Hostaway has carved a niche for itself as a technology-driven, customer-centric company. Recently securing an impressive $175 million investment, Hostaway’s CEO and co-founder, Marcus Räder, sheds light on the company’s journey, vision, and strategies for the future. With a focus on providing value to its customers and an eye on integrating cutting-edge technologies, Hostaway is set to redefine the travel and hospitality industry’s landscape. In this interview, Räder shares insights into the company’s growth trajectory, how it distinguishes itself from competitors, and its unwavering commitment to maintaining a strong company culture. As the vacation rental market evolves, discover what excites Räder the most about Hostaway’s future and the possibilities that lie ahead.
Congratulations on the recent $175 million investment for Hostaway. Can you tell us more about how this funding will impact the future of the company and its products?
Räder: This is a recognition of things that are already there but that a lot of people didn’t know about. Sometimes investments are made in companies that haven’t really done much but have potential in the future. That’s not the case here. In fact, we have been doing great so far. We’re actually going to continue doing exactly what we’ve been doing so far. Our customers always come first, and we deliver them solutions that bring value and grow their business, and that’s exactly what we’re going to continue doing. What will change, however, is that there is a lot of room for acquisitions. There’s a lot of good technology out there that doesn’t have the funding to grow their business, or they don’t have the funding to improve that, and that’s a problem that money can fix. And now that we have money, that’s a problem that we can fix, which is very good for everyone in the vacation rental industry.
As Hostaway makes acquisitions as part of its growth strategy, what criteria do you consider when evaluating potential targets? Are there specific types of companies or technologies that you are particularly interested in integrating into your platform?
Räder: It’s completely up to the customers, but we’re seeing that a lot of customers, for example, they have their specific requirements and needs when it comes to payments, insurance, and guest verification, and there are a lot of solutions available in those spaces. And we have our own solutions as well, but this is something that we’ll be able to invest in further. We’re not going to do any big bets on, for example, vacation rentals on Mars; instead, we’re going to just keep doing what we’ve been doing so far, which is to talk to and listen to our customers.
Hostaway was initially bootstrapped, and some investors were skeptical about the vacation rental market’s potential. How did you overcome these challenges and build trust with investors, leading to the recent successful funding round?
Räder: For this funding round, there was no doubt. We spoke to hundreds of interested parties, and nobody had any doubts about this industry. But that’s from the winner’s perspective. For example, a lot of investors a few years ago invested in various Bitcoin marketplaces and different setups that didn’t turn out to yield much at all. And perhaps, at that point, many saw vacation rentals as a short-term trend that was going to buckle eventually. There were some concerns that have since been completely mitigated. One concern was how hotels will respond to this and how consolidation in the market will shape up. We’re selling to individual property owners and individual property managers, but when I say individuals, some of them might be companies with thousands of properties and hundreds of employees, but they’re still individual property managers. Another concern was regarding regulation. And the final concern was about the trends: Do people really want to stay in a home? But no one has presented that argument in the last five years.
On the topic of regulation, this is largely on non-issue for us and our customers because seven years ago when we started, a lot of activity in short-term rental space was focused around cities, and they have since regulated, but at the same time, the need for people to go into cities—basically it was an argument for business travelers to get something cheaper than a hotel room. At the same time, it was very bad for the locals who lived in cities, even though it brought in tourism money, but we’re very glad that most cities are regulated to the extent they are. But today, that’s not where people want to go. They want to go to the lakes, to the mountains, to the beaches; they want to go to an island; they want to go somewhere away from everything. And those are areas that depend on tourism. If you look at many markets in Florida, you see that their entire history, their entire existence is based on tourism. So why would they go and regulate themselves out of anything?
Regarding consolidation, many industries that are new tend to follow a path where eventually there are only a couple of big players. We saw that path as well, with big companies that were trying to get more market share in very aggressive ways. And since then, their stock prices have crashed. The reason is very simple. It’s the same reason why, for example, the top restaurants in any place you go tend to be locally run. That’s because running a vacation rental property management business requires you to be local because you need to have the contacts that can make the extraordinary happen. I always use the example of trying to find a plumber on a Sunday. If you’ve ever had a plumbing issue on a Sunday, even if you live lived in the same city your whole life, that’s going to be a problem. But if your profession is finding plumbers, which is part of the job description of any property manager, then we’ll be able to find the plumbers. Now, this is where the business doesn’t scale. Because if you’re in 200 cities, you’re simply not going to have the connections to make things happen.
The short-term rental market is competitive, with several players providing similar solutions. What is Hostaway’s main differentiating factor, and how do you plan to maintain your competitive edge in the future?
Räder: We’re focusing on a local property managers that are doing a good job and that have a competitive edge against the competition. If you’re the No. 1 property manager in your location, and a big chain moves in, they have nothing against you because you have the contracts. You have the connections; you have the experience and skills. McDonald’s might be good at training people how to make burgers, but you can’t train people how to deal with guests who have specific needs due to the location because that differs per location. The burger doesn’t. And that’s the difference.
Hostaway’s co-founders came from diverse backgrounds, not directly related to the hospitality industry. How has this diversity of expertise and perspectives contributed to the company’s success and approach to problem-solving?
Räder: That’s one of the main reasons why we started the company in the first place. We’re all from technology backgrounds, and when we started looking into this space, when you build a technology company, there are certain challenges that will come up at different stages when you scale—and those are fairly universal rules. The challenges that Google had at different stages are the same that Facebook had at different stages. And they’re the same as the challenges that Salesforce had a different stages. When we looked into this market, we saw that there were a lot of property management systems before we even got started, but we couldn’t find a single one that had strong technical founders with technical experience. Every single system out there was founded by people who had spent their lives in either real estate, tourism, hospitality, or short-term rentals. We realized that they’re going to hit their limits because they haven’t spent the millions upfront to prevent the problem five years down the road. We knew that was going to happen, that they were going to hit a problem five years down the road. So, we though, if we go and invest and do the same thing that any successful technology company does, then we will eventually beat the competition, which is exactly what happened. A lot of companies imploded.
Hostaway’s growth trajectory has been impressive. How do you maintain a strong company culture and keep your team motivated as the company expands? What are Hostaway’s main strategies for recruiting more talent to the company?
Räder: That’s one reason why we wanted to have this investment: to get more publicity and also get legitimized. We don’t need to have the conversation about whether this is a startup or a reliable or big business anymore, so that helps us a lot with recruitment in itself. It’s a self-fulfilling prophecy. Regarding the culture, so far, we have been able to maintain a 5.0. on Glassdoor. Honestly, I think if anyone out there is looking for a job, and if the company doesn’t have 5.0, then there’s a problem. Especially if you’re good. Of course, not everyone can be good. I mean, if you want to be the top 10% of performers, only 10% of the population can fit in that description, so that’s one challenge. But then the question is, what could a company do to ensure that they only hired the top 10% of performers? That’s exactly what we’re doing. And they’re staying with us. We have an excellent retention rate, and that’s really important for us. I think a large part of that is our obsession with customers. It goes through every team and every decision that has been made. It’s always the customer first. Of course, that benefits the customers, too. If you’re working in a customer-facing job, you can deal with happy customers or angry customers. Which one do you enjoy more? Most people would enjoy working with happy customers. Now, if we just make sure that every decision we make makes our customers happy, we’re going to have happy employees. And the job will be easier.
As the CEO and co-founder of Hostaway, what are your primary goals and vision for the company in the next five years?
Räder: Right now we’re on the track to become the market leader. When it comes to vacation rental software, we’re not the biggest one yet, but we’re looking to stay lean. If you look at the number of staff, we only have 135. There are a couple of companies in the space that have between 200 and 300 employees. We will be bigger than them in terms of the number of customers and revenue, but we won’t be the biggest in terms of stuff, and maybe that’s because we keep our staff happy and very productive. We don’t need to hire a lot of people who are unhappy just to get the same.
With the vacation rental market continuously evolving, what excites you the most about the future of Hostaway and the opportunities it presents in the travel and hospitality industry?
Räder: The opportunities that artificial intelligence presents really excite me. I also think that what’s going on in the real estate market right now is extremely interesting. It also happens to benefit the vacation rental industry. Right now, one-third of all the properties that are being sold in the US are bought using cash, which is the highest in 20 years. This implies that the people making those purchases have a lot of cash available. Individuals or companies that have a lot of cash available will have less time to spend at the properties they’re buying because if you buy a place with cash, it’s probably not your first rodeo. What I’m getting at is that in the past, the family used to have a cabin or cottage, but nowadays, families don’t buy those unless they have the cash. Someone who already has three or four vacation homes might be buying their fifth, but they’ll be spending less time there. Instead, people will be renting those, which is good for our customers, and it’s good overall for the industry.