Vacasa Director of Integrations Zac Monahan recently presented a webinar with VRMA all about how business owners can manage the process of selling their business, including what questions to ask and how to communicate the change for a seamless transition. Listen to the webinar or read the transcript below.
This is a topic I’m pretty passionate about and looking forward to discussing. As a brief outline, first we’ll go over what we’ll cover and what we won’t; then I’ll give you a brief bio and background of my experience; then we’ll talk about some considerations for before, during, and after a sale; and I'll also go through a couple case studies to give you an idea of how this works in real life.
First, why this topic—and what we’ll cover. The goal of this presentation is to help you prepare for a successful sale, which will be a positive experience for you, your homeowners, your guests, and your community. Now, my experience is that these factors are often underestimated, or come as afterthoughts, but realistically, less than a half-dozen of the vacation rental managers we’ve worked with have exited immediately post-sale, so these community considerations are really increasingly important.
Recently, I read an article on VRMA Intel called ″It’s the Relationship, Stupid″ and it focused on how this is a very people-focused business. You’ve had guests that have been staying with you for years, your owners that you probably meet up with socially when you’re in town, or a community or organizations that you worked with. Those relationships continue to be important, and they continue to matter after you sell your business. I’m not about to tell you that selling your business is not about the money—of course it is—but we really believe that the process is more complicated and dynamic. If you can focus on aspects beyond the money earlier in the process, you will be happier with your next venture, be it retirement, running a restaurant, or still working in the vacation rental industry.
As far as my bio and background, I’ve spent the majority of my career in project management and client services; the first part of that career focused on software implementation and consulting. So, like many of you, I came into the vacation rental management industry from another space. But I really wanted to work in an industry where the product was just great. It made people happy and they just wanted it. Vacations simply are that. So I joined Vacasa a couple of years ago and worked to form this integration function. I manage a team of 20 incredibly talented professionals who focus on onboarding homes, working with owners, bringing on new team members, and helping guests with the transition as well. As Britney mentioned, we’ve executed over 40 successful partnerships over the last few years. That can be small as 10 units in Walla Walla, Washington, or 200 in Key West, or 400 in the Southeast. Those could be in mountain or ski communities—I prefer to be beachfront—they might be urban condos or other resort environments. That’s like 2,000 units, over 200 employees, 10,000 reservations, many planes, and not a whole lot of sleep.
Now we’ll discuss what to do in preparing to sell your company. Preparation really leads to better outcomes. It’s very difficult to plan and execute at the same time, so upfront investment in planning and preparation will pay off during the process and afterward.
We’ll start by considering our stakeholders. So, when planning any project, considering your stakeholders is really the first step to determine what you’re going to accomplish. You’ll need to communicate with them along the way, and get their buy-in and keep them on board. So for a sale of your company, aside from you and your family, we recommend you consider your staff, your guests, your owners, and your community members.
We’ll start with your staff or your employees, because they’ve made your business successful over the years and they will be one of the first groups that you speak with about a change. Their buy-in is really a significant contributor to a successful transition, so understanding how this transition will impact them and having answers to their questions will be important to ensure a smooth transition.
So we start with immediate questions about that—and these are totally fair: Will I still have a job? Will my role change? Will my compensation and benefits change? After they get those basic questions answered, they’ll start to think outward a little bit. They’ll want to know what’s going to happen with you, the owner or their boss, and what’s going to happen with your organization's structure. But you really know that the employees start to buy in when they ask questions related to opportunities in the future rather than the immediate transition period. I know that I’m really starting to build a rapport with team members when they come up to me and say, "I see that you manage several hundred homes in Tahoe. I’ve always wanted to move to Lake Tahoe. Are there opportunities for advancement or relocation?" So these are a few of the first questions that your employees will ask, and being prepared to answer them is important.
Guests are important as well. In some areas of the country, over 50 percent of your guests are return guests—you know, there are places where people come year after year. You’ve built relationships, and those relationships have made your business successful. Guests will be interested in a change as well. They’ll want to know if they will still get to see Diane when they check in, and if that third night free in October and November will still be available. They want to understand how rates and fees will change and if the same services are going to be offered. If you provide connections with ski resorts or other sorts of tours, they want to know if those things will still be available.
Now we get to our owners—owners are a critical audience as well. The first question they’ll ask, and you may not think this, but the first question they’ll ask is about your team and their local contact. They’ll want to know if Dan is still the person inspecting their home and making sure that it's taken care of before they arrive or still in good shape after guests leave. The owners will also want to know if their support will still be local, so they’ll want to know if that contact is still going to be in the community you're operating. Then they’ll ask more detailed questions about their contract and what your new partner is really going to bring to the table for them.
Community partners are important as well. So this would include the chamber of commerce or any tourism boards you’re sitting on, the marathon that you provide lodging for, or the little league team that you support. These organizations will want to understand your new partner's plan for community involvement and investment and (as these sorts of activities really require a budget) a specific budget. I recommend that you bring them up early and make sure you know the answers, because the earlier your partner, or your buyer, understands that continuing these relationships is important to you, the better they will be able to plan for it and make sure that they can take care of it.
What everyone wants to know, though, and what you should probably lead with, is, why are you selling your company, and why did you choose this specific partner? This is what we’ll focus on in the next section. If you can’t explain why you chose a specific buyer or partner, communication and change management will likely be more challenging than it needs to be. So crystallizing this early in the process will help drive all the communication that happens downstream.
So, why? We need to define our final objectives, so as an investor, we develop a value-creation thesis—that’s explaining why a certain company we’re looking at is going to be a good investment. That might look like, “We can generate additional nights booked, and increase ADR through adding booking channels.” So, “We’re going to make more money for owners and our company, and here’s how we going to do it.” Or we might think a given market is underserved, and there is a strong local operation with really good ops, great housekeeping, and solid maintenance, and we can serve additional homes in the area without adding staff. So we can grow revenue without adding overhead—that might be why we look at certain companies.
We recommend that you as a seller really should be doing the same thing. You should be asking how a partner will create value for you, employees, owners, and your community. You might wonder why this matters; the truth is that your employees, owners, and community partners need to see the new company bringing something to the table, adding value. Otherwise there is change taking place where you might be exiting the picture because you are retiring—and that leaves a gap.
So if your partner isn’t bringing something new, if they aren’t able to execute on something that you maybe did not have time to do, the transition will be more challenging. So a thesis for you might look like, “This partner has experience operating in a ski community, so that means they know what our operations should look like and they’ll generate more revenue for my owners through increased marketing.” So that means that partner can bring continuity but also additional value. Or this partner will provide advancement opportunities for my employees and continue to invest in the community. One of the challenges that employees in small companies often have is that there aren’t necessarily advancement powers for them, so a new partner can bring that to the table. We do work with sellers that are very focused on their employees and want to make sure that we keep that solid community presence, because they’re going to continue to be in that community and want to feel good about the transition.
So what to ask? Depending on your motivations, there are different things that you need to know. This is certainly just a subset of those questions, but they are really kind of the mission-critical answers that you need to know that you can set a transition up for success. So if you’re looking to retire or move on to other ventures—if you’re looking to move to Spain, open a French restaurant, or become the newest software provider to vacation rental managers—you want to know that your partner has the experience to run your business on day one. If you’re planning to exit, you need to know that that partner can run it without you, and they aren’t going to come back to you 10 days in and say, "We really need you to stay for the first six months." We’ve definitely heard of that happening, so you want to make sure that you pick a partner who knows how to run the operation.
You also want to know what other markets this partner is in that operate like yours. If it isn’t a local company, do they have similar operations? Do they know how to work in ski markets and deal with weather? Do they understand hurricane season in the Southeast? Can they prepare for the events that are going to occur? Also, does your partner have the staff to support a transition? How will your role in operations be addressed? Are they going to be able to fill that gap and support that as the operation evolves? Those are questions you should really ask if you’re looking to retire or move on and really not be involved.
If you’re looking to grow your career in a larger organization, there are some other questions you should ask. This type of seller is ambitious and probably also tired of doing it all themselves; they’re looking for the support of a larger organization, but also the ability to grow their career. So they’ll need to know that that partner can grow in the area and give them opportunity. Part of that includes developing your staff to take over your role. If you don’t have a successor, it will be hard to transition. You also want to ask what resources you’re going to be provided if you’re taking on a bigger role, and what training and support will be there for you.
Also, this sale is predicated on growth; if you want a bigger opportunity, there need to be more homes and more revenue to manage. So how will your partner differentiate in the market—what’s your plan to keep your existing owners and add new owners? You also want to know how your partner will support the relationships that you have. You will be sticking around and still involved in the organization, so you want to make sure that your values are aligned because you will be continuing to work together very closely.
Other sellers might be looking to focus on their core business, so maybe you diversified into vacation rental management when the real estate market was weak, or opportunistically based on referrals from a service business you were operating. Now you’re tired of the midnight phone calls and you want to focus on your core business, you want to make sure that you’re focusing on what you really enjoy. So in this case, you want to know, how will your businesses work together moving forward? If you’re a real estate agent or a real estate broker, will you be able to refer properties into that program and get revenue that way? Or if you’re operating a housekeeping or maintenance company, will your service teams continue to be used? Will the relationship be exclusive? Will you be required to be exclusive?
Also, you want to know how your partner works with owners and guests and what they charge them for. Do you have the same service philosophies? In this case you’re really tying together the ongoing success of your businesses. So clearly defining that relationship and alignment will be really important early in the process.
So after you’ve asked those critical questions, you really want to know how to verify. How do you know the answers you heard were correct, or that things were interpreted correctly, or that communication is working?
At Vacasa, something that we do is what we call an on-site diligence trip. It’s really secret shopping, and I’ll tell you a story about why. We were working with a company in California, and we understood that a norm in the area was to either bring your own sheets or rent sheets because of water and laundry issues in the area. We talked about this on the phone, and we thought, okay, this doesn’t sound like a big deal. We met with the seller, but we actually didn’t stay in their homes and experience the operation. So after committing to the sale and heading down there to manage the transition, we actually found out that this experience wasn’t that great. We flew all day, drove four hours, and then had to make the bed at 10:30 p.m. That really wasn’t an experience we thought was great for our guests. But it was too late in the process to change it, and we had to go live with an experience that we didn’t think was acceptable for our guests.
Now we do what we call an on-site diligence trip, so we go down and experience the service that the buyer provides. It gives us a better understanding of what we’ve discussed over the phone and really brings it to life. So we’d actually recommend that you do this as well. So if you’re seriously considering a partnership, tell that potential buyer that you would like to meet offsite in a market they’re in outside of yours. If they’re a local company, you might have somebody that you know stay and experience their service.
But what this looks like is booking directly on the website like any other guest might. You don’t want to get a home handpicked for you, and you don’t want to go through a process that a guest doesn’t experience. And then you want to call the support line after, test out their customer service, and understand how they describe their offerings and interact with their guests.
You want to pay very close attention to the communication that you receive before, during, and after your reservation. So those automated emails—what are they telling you? Before you go, look at the website to determine what homes will be available in that area. Ask to visit a few different houses. Again, you want to see a sample of the portfolio and not necessarily something that’s handpicked.
After your trip, discuss the differences between the experience you provide and what was provided by the buyer. Be prepared to explain why you've made your business decisions and listen to why your partner has made theirs. Make a plan for those differences and track those differences in the process. Maintain an active dialogue about whether a change is going to work or whether consistency is more important. So, you know, these are important steps to making sure that you don’t get surprised, and hopefully your partner or your buyer doesn’t get surprised either.
Timing considerations can really make or break the success as much as choosing the right partner. If you chose the right partner but you do it during a busy part of the year, it is going to be more challenging than it needs to be. So the first thing I’d actually recommend is to start developing your thesis in considering potential partners well before you want to start the process of selling your business.
When we look at a case study later, we’ll look at a successful transition where the owner actually started vetting partners years before he planned to sell. That actually made the process much easier for him and much less condensed.
You also want to avoid transitions during your peak season, on holidays, or when you’re short-staffed. So you don’t want to do it when your GM is going to be out of town for a month because they just got married and are going on a honeymoon.
Also, don’t underestimate the impact of your personal commitments. If you’re building a home, are opening up another business, or have significant travel planned, consider how you manage those responsibilities. In effect, you’re taking up a second job during this transition and adding to the workload of your team, so you need to understand how you’re going to balance that.
Also, understand that schedules might change—you built your business over years, so don’t worry about a few days or weeks in shifting the timeline. That’s going to happen. It might take longer to get the contract finalized, or it might take longer to get certain information. There might be software issues or other operational issues that arise. Timelines can shift, and that’s okay.
The next phase we’ll discuss is executing the transition, so we will talk about communication, planning, and also preparation for that post-sale environment—preparation for your new role and how the operations will work.
More than anything, successful communication will dictate the success of a transition. Really what I mean by that is that the same changes, the same process, can be perceived very differently by stakeholders depending on how you communicate.
I will give you an example: We’re working on a large transition right now and communication to the employees was that very little would change in terms of their compensation and benefits—actually, that nothing would change in terms of their compensation and benefits. But after evaluating the retirement plan that was provided by the previous company, we actually saw that the retirement plan that Vacasa provided was substantially better. So we wanted to provide the employees with that benefit.
So we made that change and provided the employees with the paperwork, and actually we received what I thought what was surprisingly negative feedback. The employees said, "Well, you said nothing was changing."
And when I met with them, I said, I understand that’s true, but we actually decided this would be a great benefit for you. It effectively doubles your retirement plan. We were hoping that people would be excited, but the feedback was, "You said nothing was changing and you didn’t communicate this, so now we are wondering what else is going to change." So this is an example of how even a really positive change can be perceived differently if it’s not communicated effectively.
Next we’ll walk through a sample communication plan, and we’ll go through step by step how you might communicate with different stakeholders.
So, tenured owners. One thing we recommend that a potential seller might do when they’re evaluating sales, before they’re talking to specific buyers, is talk to a few owners you know and trust. Tell them you’re considering selling your business and tell them why—you’re moving on, or that you have different plans—and listen to their feedback. What are their concerns going to be? Use that feedback to evaluate partners and vet them to make sure they’re going to meet the needs of your owners. Then use that information in later communication. Say, "These are the concerns that came up." If you can speak to them directly when you’re communicating an actual sale to your owners, they’ll feel much better. These are conversations that I’d recommend having in person, when your owners are coming into town, if you’re meeting them for a glass of wine; these are conversations that you can have casually.
So, the timing of this is incorrect, I apologize—this should happen immediately after committing to a sale. You want to speak to your staff almost immediately. You want to announce the sale, why you’ve chosen a partner, and the timing for the transition.
Your partners should really be on-site the same day to begin conversations with employees and move them through any sort of administrative or hiring process that needs to take place.
Your employees are actually a critical communication conduit to your owners. Some people don’t realize this, but the owners are going to reach out to your staff very quickly after you communicate with them, and if the staff knows what’s going on and can communicate confidence and comfort with the transition plan, that will go a long way to keeping your owners calm and well-adjusted as well. Then you should, in-person, in a meeting, announce it to the entire team and then arrange for individual conversations as needed.
So after you’ve committed to a sale and you’ve got your transition timeline in place, we really recommend that you begin soft communication regarding the sale 10 to 14 days out. That’s a rough guideline—it could be a month out if you want—but you really want to be confident in the timeline because you don’t want to be managing a lot of questions about the timeline changing. So this would be soft communication, in person or by phone. You want to start with your highest-priority owners, then continue calls as you move toward the transition period.
Make sure to communicate why you’re selling your business and why you chose the partner you did, so you’re reiterating what you may have communicated in previous conversations. And then you want to arrange for a follow-up conversation between you, the owner, and your new partner.
Having these conversations with all three parties involved will make sure that communication is clear and expectations are effectively managed.
The relationships you have with the Chamber of Commerce or any HOA or other sponsorships that you’re doing, speak to those individuals as well—one to two weeks prior to the transition, but after the owners have been communicated with, and after you’ve spoken with your employees. And bring a representative of your partner. That’s going to make that community partner more relaxed, more calm, when they can make that personal connection and start having a discussion of how their relationship moves forward. That should be an in-person meeting as well.
Now we come back to owners. We’re going to continue communicating with multiple audiences along the way and also continue communicating with the same audience—that’s the theme here. We really can’t overcommunicate what’s going on, so there'll be multiple points of contact for owners, for community partners, for guests, and for your employees. You can’t just communicate once.
At the date of the transition, you really want to send a formal communication notifying owners of the sale and the transition. You want to reemphasize why you made your decision and what they should expect in the change.
So we’re repeating ourselves here. Until your owners and your employees are repeating back to you your reasons and the expectations, you haven’t told them enough. So feel free to repeat yourself frequently—that should be expected. Emphasize the local point of contact. You don’t want your owner calling the phone number for the new company. You want them to continue to call the local contact, so emphasize that and then arrange for conversations with those that you haven’t spoken to yet or to those who want to have additional discussion. Continue to communicate throughout the process. A good partner will have talking points and templates for these communications and, as I mentioned before, you want to involve your partner in additional discussions as needed. Maintaining consistency of that communication is important to really manage expectations.
This should be an email and a written letter, and that will depend on your owners, their communication preferences, and also some regional differences here. We found that when we work with companies in New England, it’s best to send a written letter. It's best to send a formal letter, since people prefer to get something in their hands. Other owners may prefer to get email. So this will vary based on your customers.
We also need to communicate what’s happening to guests. So at the date of the transition, just like you sent an email to your owners, you also you want to send a communication to your future guests about how reservations will be handled. Provide guests with contact numbers and email addresses where they can email questions. Provide them with instructions on how they’ll move forward in confirming their reservations if they haven’t already, and finalizing the payment process. This could be by email and, again, a good partner will have templates for you to use and do this at the transition.
It’s also important to communicate broadly to the industry in the area so that people know what happens. This effectively allows you to control the message. So immediately after the transition, after we’ve communicated with all of our owners, all our community partners, and all our guests, we want to send a press release. That might include working with local outlets, local newspapers. It also might include industry outlets—so VRM Intel, for example, might be someone you’d communicate a sale partnership to.
You probably don’t realize it, but over the course of running your business, your brain has really become a system of record or a supercomputer that runs the business. There are probably hundreds of pieces of mission-critical information that aren’t written down or in your property management system.
Examples might be that Susan Miller owns the cabin, but her brother Dave, who is not identified anywhere in the system, handles all the maintenance. Or that the Davis family uses their home the week after Labor Day every year but never remembers to block the reservation grid.
Your partner isn’t going to know this information, so you really need to help them understand it during the transition so that these items don’t fall through the cracks. Updating your systems is really critical.
You also want to evaluate the activities that you individually undertake to support the business on a daily, weekly, monthly, or yearly basis. You want to think about your activities and whether you will continue to complete that activity. Is it something that will be part of your post-sale role, or are you going to transition that to another staff member or business unit? An example of that would be, we work with a large company in Florida where the owner responded to every single guest review. He was thrilled that, moving forward, he could rely on a guest services group to respond to that review, but he could also have oversight of it. He was pretty excited to not receive an email every time a review came in.
Or think about whether an activity is no longer necessary and might be stopped entirely. Are you providing materials in the homes that don’t necessarily need to be there? Are guests not using them anymore? Going through that exercise will make sure that things don’t drop through the cracks.
I already mentioned that we need to get information out of your head and into the property management system; specifically, this includes things like owner contact and phone preferences. If addresses aren’t up to date, or email addresses aren’t correct, it’s going to be very difficult to communicate with your owners. That’s going to make the transition challenging—when somebody gets back from a three-month vacation in Europe and hasn’t been informed that someone new is managing their home.
Also, you want to make sure your management agreements, commission and fee amounts, min. rates and min. stay requirements, and any addendums are noted. Your partners are going to need those to manage those relationships. And it might seem administrative, but it’s actually really important because that’s information they don’t have. We also want to make sure that reservations or maintenance tickets that might be on Post-it notes, notebooks, text message, or email get into the systems so that they can either be managed directly under the system or supported in a migration. It’s really challenging when there are things that are on paper, in other systems, that aren’t reflected in the highly automated workflows in the business.
We are going to talk about a couple aspects here—one is staying patient, and the other is adapting to and embracing change. Your business wasn’t built overnight; it evolved over time, and there are a lot of aspects of it that have changed. You need to understand that on day one, your new partner’s business won’t be complete as well. There are aspects of it that may still be in progress, or some things may not have been executed as well as you would have wanted. Be as patient as you can, but also communicate openly with your partner about items that don’t seem complete, or seem incorrect, and help drive those toward completion.
We also need to be prepared to adapt to change. We discussed earlier that you really should be bringing a partner to the table that who’s going to add value, bring something new. Change comes with that, so don’t expect everything to stay the same. Also understand that there are changes you discussed that you probably react to in ways you didn’t expect.
So when your GM now manages the entire business, and is the point of contact for all of the owners, that may be a challenge for you. It may not be something that you really knew you were going to feel differently about, but you do when it happens and that’s okay. When the sign changes outside the business, and a new logo or new branding goes up, you may have discussed it, but you may still feel differently.
A framework you can use is to ask yourself, is the change better? If so, celebrate it, and communicate that. We need to communicate these wins to our guests, to our owners, and to our community during the change, so if the change is better, celebrate. If the change is worse, ask yourself why it is worse, and if that why is important, make sure to communicate and collaborate with your partner. Tell them you think something’s not going as well as it needs to, and help them work on fixing it. Also ask yourself if it’s just different. If there are just administrative differences, sometimes we just have to be prepared to move on and focus on higher-priority items.
Also, we need to be encouraged to adapt and prepare to do so. Sometimes when we are in the middle of a large change we don’t realize that the world around us is continuing to evolve, so we need to be prepared for things in the community that change. Critical suppliers may shut down their business, or move on, or change their relationship.
We’ve also conducted transitions in the middle of massive forest fires; we’ve had teammates get chased out of the Florida Keys by hurricanes. Things are going to change during the process, and we really have to be prepared to adapt. It’s rare that everything goes according to plan; these are regular aspects, so we have to plan for these changes.
In the last section, before I get to some questions, let’s talk about a couple case studies.
So the first case study is a project that really went about as well as it could. As background, the owner had run the business since 2010. He purchased it at 40 units and grew it to over 100, and it really became a dominant player in his market. He had a background in operations and management, and heavy industry and aerospace, so this owner really knew what it was like to run day-to-day operations.
Before the sale, this owner had been considering and planning for this sale since 2014. He knew he was going to retire and move on, so he’d been considering possible buyers, possible partners, and developing his thesis. And it was pretty clear and simple: He wanted an increase in revenue for his owners. He wanted his key staff retained with similar compensation. "Other than that," he said, "it’s your business to run, but here is what I need. Here is what makes it successful for me, my owners, and my employees." He was open to change otherwise.
He admitted, “My housekeeping model really isn’t working; it’s been a headache, so I’d actually recommend a change there.” Timing was also an important consideration. He said, “I want a transition date after the high season and very shortly after the high season. I want to be phased out after 60 to 90 days.” This owner really heavily vetted potential buyers' abilities to run a transition on the timeline requested, and that timing influenced the decision. There were companies that could run a quick transition, and there were companies saying, "We will get to it in five or six months." One of the reasons that we won this partnership was that we could move quickly—that was a high priority.
During the transition, one key to success here was really communication—there was a lot of collaborative communication going on. So, the key operations manager was involved early, and they understood what was going to accomplished and how we were going to go about it. The key operations manager vetted multiple buyers and then also, once we were selected, ensured that the systems were up to date and ready for the transition between property management systems. Owners were also contacted very quickly. We did not have problems getting in touch with the owners, and there was three-way communication between the seller, the buyer, and the owner. So expectations were managed, and everybody knew what was going on and knew who to contact if they had questions.
After the sale, this owner purchased a home in Hawaii and moved there about 90 days out. He was completely out of the picture at this point, basically living the dream, and sent us a postcard occasionally.
We had 95 percent owner retention at one year; this is viewed as highly successful. Over the course of any year in the vacation rental management business, properties are going to sell, and people are going to move into them, so 95 percent of those original owners retained is really highly successful. If you’re talking to a partner or a potential buyer and he tells you that no owners will leave, that is probably not true, just because of the regular course of business. Also, all the key staff were retained, and more importantly the operations manager was promoted to oversee a larger region. So those employees were provided those advancement opportunities and were able to succeed there.
Next we’ll look at a transition that was slightly rockier. As background, this owner and his business partner had been operating the business since 2009. They grew it from one home, a home that they owned, to over 70.
Their background was primarily in financing and accounting, so the back end of the business. Before the sale, the owner and the partner were looking to retire but wanted to remain involved; they had a lot of priorities. They wanted increased revenue for owners and higher retention. They wanted to be able to generate income by referring properties but also wanted to be involved day to day, and they placed a high priority on local and regional relationships.
This isn’t too many priorities, but it is a lot of things to balance. The timing was really quick on this. The transition date was ASAP, so this owner moved quickly toward selling their business, and we see the effects of that a little bit later.
During the transition, this was an owner who ran the business largely independently of line staff and was really the key decision-maker. So the team wasn’t really consulted in many decisions, and conversations with the owners were kept separate—the homeowners and the seller, the homeowners and Vacasa. It was rarely the three parties together. This resulted in some challenges with owner communication. Owners didn’t really understand what was happening and weren’t getting consistent messaging. That’s because we moved so quickly that we were not all equally educated and on the same page.
We had some challenges migrating from one property management system to the other, so not all the information used to manage the business was reflected in that system. There were also some surprises about the buyer and the seller, so we hadn’t taken the time to know each other and understand our operational procedures in the same way. There were some changes to rates and fees, and the way booking worked, and a lot of ongoing education. The homeowner retention remained high, over 90 percent—still very successful—but owners took a lot of conversations to build trust because they were confused in the beginning. So this is an example where if we had built more trust and taken the time to have some conversations earlier, we may have been able to avoid some challenges later.
What are the key takeaways?
That said, Britney, I’m ready for questions if they have come in over the chat.
Britney: Well, thank you for that wonderful presentation, Zac. I do not have any questions at this time, but I want to give a moment to people to think about if there are any follow-up questions or any areas that you’d like Zac to review today. Before we conclude, I just want to note that you can find this recording on the website under the education and webinar archives. Please also note that you will get a survey that comes up after this webinar, and we thank you in advance for your feedback. Now I’d like to hand over the questions—it looks like we do have a few coming through. Our first is in from Steve. He is wondering, Zac, how are valuations determined?
Zac: Steve, thanks for your question. I’ll be honest, valuation is not necessarily my area of expertise; it’s a combination of revenue and profitability. That’s typically what goes into the equation. If you want to follow up after the call, I can point you to other resources in the industry that may be able to help you with that.
Britney: We have another question in. Are any geographic areas hotter for acquisitions than others?
Zac: Yes. At Vacasa, we are interested in working with companies broadly, but there are areas where we like to focus,. Year-round markets are something that’s very interesting to us, because the cashflow and the revenues are good year-round, so you don’t have the seasonal dips to manage and periods where your staff aren’t necessarily busy. I think year-round markets are of special interest because of the good year-round cashflow they provide.
Britney: We have a question from David. He is wondering: How do you transition owners from the original contract to the new contract?
Zac: Thanks, David, that’s a great question. When we evaluate contracts, we look at them on a few different terms. One is legal terms—do they have the appropriate risk navigation in terms of insurance and things like that? Also, we look at operational concerns—is this contract written in a way that will allow us to execute operations? And third is the financial aspect, so the management commission or any fees that are included. So, we look at that contract and there may not be a need for a change. If the contract is assignable, and it has good protections in terms of requiring the owners to have insurance, and is operationally similar to the way a potential buyer would want to operate, there probably would be an assumption of contracts, as opposed to requiring owners to sign a new contract.
The third aspect of that, which I didn’t mention, is, is the management fee competitive for the area? If there are deficiencies in that, either from an operational, legal, or financial perspective, there are few ways to go about it. One is, a partner may work with you to identify potential updates to your management agreement to make it assumable, so no contract conversion process will be required after the sale. Or, there is a process that we use to convert owners to new contracts. We can communicate to them the differences between the contract they’re currently on and what they’re being asked to sign, and also communicate to them the benefits.
At Vacasa, typically when we are asking owners to sign for an increased management fee, we’ll want to look at different options for graduating in that fee or providing owners with net income guarantees so that they know that, yes, I may be going from 25 to 30 percent, but I’m also going to be making so much additional revenue that I will still remain positive there. So we have an entire team that is dedicated to that communication and transition process. Usually that happens over 30 to 90 days, depending on the degree of difference between the contract the owner is being asked to sign and what they’re currently at.
Britney: Thank you, Zac! Steve wanted to follow up on an earlier question. He is wondering, by "year-round," are you referring to a more urban versus resort type of property?
Zac: Sure, so a year-round market could be an urban market people are visiting for business travel or other sorts of vacations. But, we are also looking at places like Florida, Hawaii, and California, where people are visiting consistently throughout the year, as opposed to a ski market, for example. So, if we look at Sun Valley, Idaho, it’s going to be very busy in ski season, and it’s going to be very busy in summer, but there’s going to be those shoulder seasons in spring and fall, basically two seasons, where there is going to be less activity.
Britney: He is also wondering if you’ve seen a category difference between vacation rentals and short-term private accommodations. I don’t know if we’ve made any clarifications on that before.
Zac: Not necessarily. I’m not entirely sure what Steve is getting at in terms of the difference there.
Britney: We have another question, and it’s from Ally. She is wondering, do owners of companies that you acquire get special pricing on rental units in your own inventory across the world, as a benefit to owners?
Zac: So are we talking about homeowners or people selling their companies?
Britney: She said homeowners.
Zac: There are programs that allow for homeowners to get discounts. It kind of varies based on the region.
Britney: Hopefully this helps answer some of your questions, everyone. I don’t see any more questions at this time, but we did have one question asked about the topic of the presentation. We have included this in the webinar toolbar, but I can also send the PDF and a follow-up email as well. If any other additional questions come through, please refer to the email email@example.com. Myself and the education team will make sure that you can get help for your questions. But thank you all for the time and your questions, and for coming online to attend the event. I will also give a big thank you to our presenter Zac for sharing his knowledge and expertise with our community. Thank you all for attending the event today. Please don’t forget to fill out that survey that comes up after this webinar, and I hope you all have a great day.
Zac: Thanks, Britney! Thanks, everyone.