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    Simon Lehmann Talks Human Capital, the Sustainability of Industry Growth Rates, and More

    vlvgplbm.jpgThe VRMA Executive Summit (June 1-3, 2022) is designed for executive-level leaders focused on business strategy, organizational excellence, sustained growth, and charting a vision for their company’s future. This year, the high-level content and intimate networking will be held in beautiful Palm Beach, Florida.

    The event is facilitated by Simon Lehmann, one of the world’s foremost experts on short-term rentals. He leads AJL Atelier, a specialized vacation rental and business consultancy, and advises multiple companies as board member and executive chairman. We sat down with Lehmann to discuss the upcoming Summit and his thoughts on the big themes in the industry at the moment. 

    Tell me a little about your history as an expert on the vacation rental property industry.

    Simon Lehmann: My time in the vacation rental industry started back in 2005 as the CEO of Interhome, which, at the time, was one of the largest property managers in Europe with over 24,000 units under management. It was then I got hooked on the industry. Fast forward to 2014 when I had the opportunity to acquire Interchalet, our largest competitor, as well as join the board of HomeAway/Vrbo where I was actively involved until it was acquired by Expedia in 2015.

    I had already invested in several companies along the way and was increasingly considered a critical thought leader. It was then in 2016 that AJL Atelier was founded as an advisory firm to the industry.

    I understand your role at the VRMA Executive Summit is to facilitate and guide the discussions on stage. Why do you think it is so important for people in the vacation rental property industry to get together and speak openly in this type of format?

    Simon Lehmann: What I really like about the industry is its inclusiveness. We are willing to share our experiences and learnings and help each other become better at what we are doing.

    Since the industry remains so fragmented, we are not overly worried about our competitors.

    If we can encourage and facilitate such conversations, we are then able to create more value for the audience.

    Some of the hot topics that are likely to be covered at the Summit include strategic planning, financial hygiene, recruitment/retention/engagement, and owner relations. Of these topics, or others that are top-of-mind to the industry at the moment, which stand out to you as especially interesting to discuss, and why?

    Simon Lehmann: All these topics are extremely important but, in my view, it is human capital that stands in the center of what we are doing. Without a highly motivated, well-trained, and loyal workforce, we are not going anywhere.

    Our talents are our assets, and we need them in every aspect of the operation and organization.

    What can we do to tackle all our human resource related issues to be able to deliver great guest/owner experience and have high staff motivation and engagement?

    What, in your eyes, are some of the big themes occurring around the industry?

    Simon Lehmann: Besides human capital, technology and financial capital are the key drivers. We have seen a lot of companies bought, merged, sold, and taken over, or companies that are buying other vacation rental businesses. These transactions include complex processes, which are not easy for all of us to fully understand. We need to do more to educate our industry about what this process entails.

    From the moment someone decides to sell a business or buy a business, to when the transaction is completed, it is an extraordinarily complex process, and it requires a lot of thought and work to have financial hygiene, as well as a huge amount of patience to complete. There is a tendency to be blinded by high valuations, which on smaller deals do not realistically happen, so expectation management is particularly important. It is key to gain a deep understanding of the entire process and learn everything about it before you go ahead.

    What is your opinion on mergers and acquisitions in the industry? Is the increase a good thing?

    Simon Lehmann: As said, it is a normal consequence as the market matures—for more investors to come into the industry. They see opportunities to bring businesses together and achieve higher valuations than just a single company. Therefore, we see more movement in our space, but it does not mean the market will rapidly consolidate, especially when looking at the property managers.

    For the technology provider landscape, the dynamics are slightly different. You can run a small, local property management business that offers an outstanding product, but building a software business only makes sense when you can reach a certain growth level.

    Constantly adding new features, building, and maintaining integrations and providing a high service level is expensive. There is definitely synergy at play, and technology providers can build solutions that work internationally. Many aspects of the property manager’s operations might not be as different, and best practices are emerging for certain customer segments. All this will facilitate the consolidation of certain key technologies.

    What is your perspective on the tremendous growth of this industry in such a short amount of time? Is it sustainable? What does this industry look like in five or 10 years if this boom right now is indeed a bubble?

    Simon Lehmann: To be honest, I do not see these growth rates as sustainable. We will see a softening in ADR and occupancy in 2023. However, as everything levels out and as we experience higher interest rates, it might get incredibly challenging out there as inflation accelerates.

    This might not be true for all markets like LATAM or Asia. It strongly depends on the developments regarding COVID-19 and international travel, but they could see a strong rebound in countries like Thailand or Bali.

    Overall, I do believe that 2022 is going to be another record year, but moving into 2023, if we are not smart about it and choose only to take the quick wins, we will experience a decline in some key markets.

    What is your biggest piece of advice for senior leaders in the vacation rental property industry looking at their budgets for 2023 and beyond?

    Simon Lehmann: The top three are about costs, key performance indicators (KPIs), and distribution.

    Be mindful of your cost, which means understanding your cost allocation in relation to fixed and variable costs, and understanding all your different cost drivers, including property and customer acquisition costs.

    Set up a decent set of KPIs to measure your performance and measure against them.

    Think of potentially building a sustainable direct distribution strategy, which will not materialize overnight but could help with the overall margin compression and the competitiveness of the market.


     

    Register for the VRMA Executive Summit.

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