onefinestay (NYC) turns 5
5 years ago today, from a WeWork in Hudson Square, we pushed live 22 homes in NYC. This established onefinestay in a second city.
I could draw a line from the milestone of launching NYC to where we are today. It was one thing to have a high growth business in a single market. Proving we could exist in multiple markets, in multiple continents, gave investors the confidence to continue to support us. This led to the further establishment of Paris & LA, and all of our newer markets. If we failed, we would all not be here today.
Yet so easily it could have failed, or never been at all.
When the current regulation passed in NYC in June 2010, it effectively outlawed our business model in NYC. We had just launched London. I had joined that month - to launch NYC. I was thinking the dream was over before it even began.
18 months later, with some success in London under our belts, there was intense debate about how we should launch and operate New York.
How do we figure out support for a market 3,500 miles away from the mothership?
How much do we keep the same, vs adapt to local conditions - doormen, coops, 70% of the housing stock in rental buildings, 98% of buildings restricting this type of activity?
Do we treat these local conditions as a fixed constraint, or something malleable through brute force and great people solving problems?
How much do rules and laws matter, if you stay on the right side of the moral issue?
In the end, by necessity, our approach to NYC was basically all first principles invention. Our legal structure, operating model & sales model all needed to be rewritten. The tip of the iceberg stayed the same, but below the water line everything changed.
This reinforced the belief that we are building something new, & we could only hire the best. Thinking about this business as an execution challenge doesn’t work - its about looking at new problems and opportunities, and addressing them in new ways.
And, it worked, in the least hospitable major city for our product in the world. It’s a business that didn’t have to exist, and could easily have not existed. Yet we ultimately built something of scale and sustainability. This is the product of ingenuity, grit, & determination, and has been a true team effort from the beginning and to this day.
Peter Thiel talks about the idea of ‘Zero to One’ - when something new, something that didn’t exist before, is created. onefinestay at its founding was this type of creation, a with a novel approach to an industry that continues to expand and morph in all sorts of interesting ways.
Many companies don’t have ‘Zero to One’ moments of creation, because at their heart they are replicating businesses that already exist, and are instead choosing to compete with incumbents or establish a similar business model in a new geography.
I’m proud to work for a Zero to One business - a truly original company trying to create something new in the world. I am even prouder that we’ve continued to have so many moments of unique creation, and re-creation - Paris is different than NY and London, and LA was different than the three of them. Paris today is also different than the Paris of 3 years ago. Same goes for Rome, Miami, SF and Collections. Creation and re-creation.
5 years on, in the midst of our expansion activities and all of the changes over the past year, the story of NYC is also a useful reminder: it’s never been easy. With the combination of right people and effort, however, anything can be achieved.
Distributors vs operators
Hi team,
I hope everyone is having a great week. I wanted to expand upon a theme discussed at the all hands.
Distributors vs operators
Consolidation in the private rental industry has become a topic in the media over the past few weeks with Airbnb's acquisition of Luxury Retreats, and Accor's intent to acquire Travel Keys.
The hotel industry as we think of it today - chains of different properties associated with a single brand - is approximately 100 years old. Fairmont - our sister company - was one of the first such hotel chains. Hilton is just under 100 years old, Marriott is about 90 years old, Accor and Hyatt are around 50 years old each. Prior to this, there were plenty of places to stay for a night or a week, but they were mostly individual properties without an umbrella brand.
As business and leisure travel proliferated in the 20th century, the need to have a network of trust and standards became important - and the modern hotel operator was born. These companies didn't invent the hotel - they established a common set of standards and gave individual operators access to distribution.
A large shift to the traditional hotel industry as we know it was catalyzed by the establishment of non-hotel owned online distribution businesses - Booking.com and Expedia. Hotels tried to replicate the success of these independent companies, but so far haven't been successful. After 100 years, suddenly hotels found themselves having to hand over 20% of their booking value to a distributor. This business model allowed Booking.com for example to go from 0 -> $85bn in market value in a little over a decade.
As a result of the rise of the distributor, the hotel world is now divided into two main categories: operators & distributors.
Enter private rentals
Private rentals, originally in vacation destinations, have also been happening in some form for the past 50 years without standards or sophistication. This market has largely come online over the past 12 years, when Homeaway first established itself as a destination to search for homes.
I've mentioned that the overall private rental market is very large - as big as $100bn - with 'luxury' as much as 25% of this (see article here ). Like any large and fragmented market that's come online quickly, the rules of engagement have not been set, so there's plenty of confusion about who is doing what.
The private rental market has inversely evolved vs traditional hotel market. The distribution companies established themselves first off of the back of rich media proliferation online - Homeaway, then Airbnb in 09/10. Homeaway and Airbnb are distribution companies, like Booking.com is a distribution company for hotels.
However, despite the clear success of these businesses - they do not represent the entire industry. They're not the operators. The ultimate operators in these businesses are individuals and property management companies - these groups coming online led to the rise of Airbnb.
No one with a broad geographical footprint has established themselves as 'the' operator within the private rental industry. I believe this is our opportunity.
Booking.com -> Hilton / Accor as
Homeaway/Airbnb -> onefinestay
Operating in the home rental industry is not only about service delivery, although this is a critical piece. It's hard to do well, and we're the best at it.
The private rental distributors take all-comers. We do the hard work to find the best supply, available only though us.
The private rental distributors - like Booking.com does for hotels - have endless breadth and choice for the customer. Our business is about personalization and a human touch - doing the work to match the guest with the home that's right for them.
Private rental distributors have no one vouching for value - homes on the same street of the same quality often have widely disparate pricing. We are a clearing house for pricing, ensuring appropriate value to the homeowner as well as guest.
All of these activities build trust with our customers, which will drive loyalty and word of mouth.
We still need to be awesome at distribution, and can continue to capture value if we can crack it. Just like Hilton and Accor need to be great at distribution, even though they are hotel operators. And if we can crack a niche within home distribution ourselves and open it up to the broader industry as Airbnb has done - all the better. But this doesn't take away from the value of being an operator.
We're at the very beginning of a 100 year shift in the accommodation business, and are well positioned to be the global operator of record.
New Year 2016 letter to team
Dear all,
For those of you working the peak, thank you for your continued hard work! Not much longer now, and we’ll have the winter cycle to breathe and regroup.
For those of you able to escape, I hope you’ve managed to disconnect and unwind.
A Christmas gift from Brian Chesky
Over Christmas, Brian Chesky took to Twitter to talk to his customers about what products or services Airbnb should launch in 2017. There were lots of suggestions - from accepting Bitcoin, to Airbnbs on Mars, to flights, to rewards. These guys have big plans for 2017 (some summary coverage of the exchange here - its worth a read)
Airbnb’s existence creates an interesting dynamic for us. Not many companies are in a similar industry to one of most successful startups in recent memory. For us it means that future success will be predicated on charting a different course. This is not to worry - we are already on a different course. But its a useful reminder that our chosen path is probably also a necessary one.
One of the challenges we have as a business is that our customers are not in the same demographic as the vast majority of our employees. This makes experiential empathy for our customers more difficult. (side note - we are working on ways to bring the customer experience closer to employees).
However, most of our employees have probably had Airbnb experiences. So when we think about how to chart our own course, a good starting point is to think about what a marketplace-only model like Airbnb will always find challenging to get right - where does Airbnb not work well? These are things we should be doubling down on.
Here are some of my thoughts on areas that I think we should own heading into 2017:
Home consistency
We need to be the guys that get it right - every time. We need to continue to shape our portfolio towards distinctive homes, and the great customer experiences these homes enable - and be relentless in culling the portfolio if we’re not offering something differentiated or great. Note: for HTMs, this could mean investing instead of cutting depending on availability.
(Side note: a few years ago, we underwent a ‘home standards’ creation process to define the core standards that all of our homes had to have. This was a valuable exercise in some ways, but in other ways its a dated doc that was created during a time with different objectives. I’m not sure that several of our minimum standards are appropriate for great customer experiences - the most notable being wifi speeds in my view. Yet I often hear ‘the home meets our standards’ even if the customer clearly doesn’t agree. When in doubt - we should use judgement and not fall back on a standards document from a prior era)
Home sourcing
Last week we met with a real estate developer who proposed an interesting opportunity for onefinestay in New York - converting an old loft building with commercial zoning into a hotel that onefinestay could furnish & operate. Leaving the merits of this particular deal to the side: it’s an unusual, hard-to-find opportunity. The developer called himself a truffle hunter - he’s the pig in the wild sniffing out deals. I can relate: in NYC, we’ve done the same with our homes since the beginning given the strictness of the regulation.
The most valuable opportunities don’t fall in our laps. Our top 3 performing homes globally in 2016 were all the result of truffle hunting:
- Park Avenue Townhouse 2 ($380,842) - townhouse available for lease for several months before we agreed a deal with the owner. We proactively reached out, furnished the home and guaranteed income to the owner.
- East 72nd Street ($367,819) - townhouse owned by a real estate developer where we negotiated a revenue share deal directly with the developer.
- Jane Street Townhouse 2 ($294,575) - this homeowner reached out after we launched ‘Home Support’ (managed services for townhouses) and PRed it in the NYT.
Home presentation
When we launched the business in 2010, standardized professional photography was unusual. Nowadays, it's hard for the untrained eye to differentiate between many of our listings and others available on the market.
Earlier this year we started experimenting with Matterport 3D maps:
https://my.matterport.com/models/R9J9QxV3jbG
If our homes are better, lets show not tell.
Sales support & curation
We need to be expert at delivering the customer what they’re asking for. The discovery process on marketplaces like Airbnb is arduous & pricing is all over the place - there’s no central governing body vouching for quality or relative value.
This means efficiently and professionally guiding customers through our sales process. It also means starting with what the customer is asking for, not what we necessarily have to sell.
Wifi
Wifi is hard to get right. It doesn’t mean we shouldn’t try.
Earlier this week I heard an anecdote from another rental agency about a customer who had a non-working toilet for a full week, but through service recovery had a great experience and left a promoter. Another customer’s wifi fell over for a few hours, and was inconsolable.
Our home standards wifi requirements are 2mbps. The average US download speeds in 2016 are 50mbps.
We are a long way off from being able to guarantee: all onefinestay homes come with high speed Internet above xxmbps throughout the homes. But it would be a powerful thing to say if we can say it. With a human sized portfolio focused on a narrower set of homes we can do a better job - and start shouting about it to our customers.
2016: a year of change
2016 was a year of change at onefinestay.
We have a new leadership team with new reporting lines, a new owner, and a refined strategy.
It was the end of the world as we knew it. And I feel fine & I hope you do too!
In November, I believe we began to see signs the tides turning. ABVs, net revenue & market profitability were all up, & distribution costs were down.
Thank you for all of your service over the past year.
I’m deeply committed to making all of this change create a transformational opportunity for all who are continuing on the ride.
Happy holidays and here’s to a great 2017.
Evan
Gratitude and Setting The Stage
Dear team,
From 33,000 feet.
It was great spending time with many of you this past week in Paris & London.
A few months ago, I started writing in a gratitude journal. For those unfamiliar, the basic idea is that every day I write three things I am grateful for - from the simple (e.g. a warm cup of coffee on a cold day) to the more profound.
On this difficult day in the story of onefinestay, I wanted to express my gratitude to all of you. We’ve come in to this company from various backgrounds and with various experiences, and chosen onefinestay as a stop on a journey through a career and a life. Deciding how to spend time is the most valuable decision anyone can make, and its an honor that you've chosen to spend your time here.
Everyone who passes through our doors leaves their mark on onefinestay - influencing the way the company approaches problems and opportunities, and providing perspective and learning for our people & ecosystem. The shape of the company continues to change as a result. Whether you’ve been here for a few months or several years, I believe the same truth applies.
So thank you for the choice you made and the great work that you’ve done. Every day we set the stage for the company’s future, and its my hope that the company continues to help setting the stage for you.
Those of you moving on are now part of a legacy of onefinestay alumni. You’re in good company. The onefinestay 'stamp' is as valuable as any elite university degree - we're known as hiring the best, and providing great professional experience for our team. onefinestay alumni have gone on to do some amazing things - some are working for the best startup and growth companies, some orienting careers towards creative pursuits and passions, some starting disruptive companies themselves. Others have gone off to the best graduate schools in the world. So many different flavors of life and profession in just a few years. Our old NYC GM even became a used car salesman.
And as onefinestay succeeds over time, the stamp and the community only becomes more valuable. On a personal level: I’ll be here - evan@onefinestay.com, if I can be helpful in any way with any transition.
Yesterday I was having breakfast at Caravan on Exmouth market, and ran into two onefinestay alumni. About 18 months after their respective journeys ended, they met back up and decided to start a new company together. They’ve taken up office space at Bowling Green Lane - the location of the first onefinestay office - and are even in discussions with an early onefinestay investor about raising a round of capital.
Regeneration and regrowth. The community thrives.
I hope everyone in 300 SJS enjoys tonight’s celebration. On Monday, we’ll be having our all hands where we’ll be digging in on strategy.