It's the 1st of the Month! Tune in as we recap the previous month and look ahead to the next, discussing industry trends, pacing, events and more. Simon Lehmann of AJL Consulting joins us each month for "Simon Says", where we discuss the latest hot-button issue facing the vacation rental and short term rental industry.
Simon Says..."The Times They Are a Changin'"
It seems like every day we see an announcement that one of the leading companies in our industry has been acquired. Why are so many legacy operators turning in the keys and selling their businesses?
A properly planned exit strategy is key to attaining the highest valuation when you decide to sell. Whether that time is now, 5 years or 10 years from now - it's never too early to start making the decisions that will set you, your family and stakeholders up for future success.
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Alex Husner - Linkedin
Annie Holcombe - Linkedin
Podcast Sponsored by AJL Atelier
Welcome to Alex and Annie, the real women of vacation rentals. I'm Alex.Annie Holcombe:
And I'm Annie.Alex Husner:
And we are back today for the July 1 first of the month bonus episode brought to you by our great friends at ajl. Atelier. And please stay tuned for the end of the episode because we've got Simon Lehmann here. And as part of our first of the month bonus series, Simon will be on the show, and is going to be talking to us about a topic that is very timely and interesting to many of us. And there's a lot of debates going on about why these companies lately have been deciding to sell. A lot of big brands within the industry have made the decision just recently to give the keys back and go into a different phase of their careers or lives. And we're just very curious to get Simon's take on it. So stay tuned to the end.Annie Holcombe:
That is some great information. I think everybody will be very enlightened by his stance on things.Alex Husner:
Yes, yes, as always. And let's see. So today, Friday, the first of July and the beginning of the holiday weekend. On Wednesday, we have the six P's of preparation with Pete DeMaio. From travel boom marketing. If you didn't catch that episode, make sure to go back. And listen, this was a great episode where Pete talked to us about how to prepare from a marketing and communication standpoint, for disaster, hurricanes, any sort of natural disaster or just event where you're going to really need to have your communications plan down. And, as always, Steve has Pete is extremely just informational and fun to talk to and so knowledgeable on the subject. So make sure to go back and listen to that episode. If you missed it.Annie Holcombe:
Yeah, perfectly, perfectly timed. I think, you know, July kind of starts off hurricanes, I know that we've got two active systems in the golf that they're predicting might turn into something and then there's something out off the coast of Africa that they're looking at. So you know, we're kind of in the thick of it now. And after the holiday weekend, everybody needs to be prepared for regardless of whatever disaster might befall the market. Hopefully nothing but you just never want to be unprepared.Alex Husner:
Yeah, yeah, no, I'm glad that we're doing this. Now. I think it's the perfect time, especially for marketing teams, you know, most for the most part, if you're in a beach destination, like Myrtle Beach, or Panama City Beach for where you are any, you know, marketers, we're, this is kind of our quiet season. To be honest, if there is such a thing, there's really not such a thing. It is quieter now in terms of what we're doing for promotions. So this is the time to be looking at that type of marketing that you don't probably think about in January, February when you're trying to get bookings. And so very timely. And just looking back on the past month, gosh, we've had so many amazing guests as usual. I mean, I'm just always amazed by the content that these guys share with us on a regular basis. But we had Margo Mourik. On the show earlier this month, she had an incredible episode, talking about all the different things that she's gone through as a, what she calls a VC backed mom.Annie Holcombe:
Yeah, she has a really great really great learnings. And I thought just listening to her story and kind of the her my big takeaway from talking with her was just, you know, going again, back to my word for the year, being authentic and being yourself and if you're authentic, and you're true to yourself, and all of those people that are meant to work with you. And for her case meant to fund you and, and be part of your journey, they're going to come along and you don't have to find it. You just have to own your your true self. And that was I really enjoyed talking to her. And I just feel like we have a great friend in her and can't wait to see where she takes the company.Alex Husner:
Yeah, I agree. Another great person that we met at the Women's Conference, so wonderful connection there and just really enjoyed learning more about her and and her company too. So that's a great episode. Also, we had Leo Walton, we love Leo. He's so sweet. Just talking about Super hog and just the issues that we all face right now in screening guests, and what can be done to prevent damage and the technology that they've built that really fixes a lot of these issues and provides a solution.Annie Holcombe:
Yeah. And I think it's really important that people who aren't maybe using a solution like a super hog, that they look into that. And I think it'll help mitigate some of the concerns that are being brought to local municipalities about regulations, you know, how to avoid some of these house parties and avoid some of the problems that have occurred. I think a lot of those companies that are having problems aren't using some of these tools that superhot can provide to Leo had a lot of really great suggestions and information. So again, another great, great episode to find something that really just couldn't appeal to you whether you have one unit or you have 1000 units. It's it's something valid for everybody to try.Alex Husner:
Yeah, absolutely. And just last week, we had Silvia Camerata and Rachel Humphrey from women and travel thrive and also of Expedia group and Rachel formerly have a hola on the show with us. And that was another wonderful conversation and they're just so inspirational and in what great women to have in this space that are just doing something Do great things for other women that are just trying to advance through their careers. So be sure to check out that episode. Coming up this next month in July. We've got some hot hot July episodes, too. We've got Anthony Gannt, who is the CEO and founder of at ease. He's going to be the first episode next week of the month of July. And then we've also got Stuart Butler, who I know we've teased that he's coming on the show for a couple of months now. We've had to do a couple things with the recording of December so he will be on the show in July. Also, big one, Steve, Milo, were super excited to bring that episode.Annie Holcombe:
Yeah, that's gonna be that's gonna be a good one. I know. We've talked about I've got lots and lots of questions for Steve. So I'm really, really interested to talk to him and get that out there. And then following Steve will have Koren okie of breezeway and Koren what a what an absolute personality and delight and someone that I was coaching with me. Yeah, I was fortunate to meet her last year for the first time face to face and, and she was every bit as as engaging in person as you would expect her to be and really good conversation about breezeway and excited to share her and her story.Alex Husner:
Yeah, absolutely. So beyond that, looking back and looking ahead, that's what we always do in these episodes. What's let's talk about what's going on right now to Andy, I know there's a lot of rumblings in the market as booking pace, at least, it's kind of nice to look back over the last few months, I think we've been able to give our thoughts each month on what's changed and what has stayed the same. I know in our market here, we are definitely seeing more just getting closer and closer to those 2019 numbers, which really everybody has to remember that 2018 was a record year to 2021. But we can't expect that it's going to continue. I mean, the the bubble has burst in terms of the demand. So I think if we can end 2022, at the level that 2019 was, we all should have some pretty healthy companies. Yeah, andAnnie Holcombe:
it's interesting, I've been having a lot of conversations on LinkedIn, and having a lot of really, really good engagement with people that are newer to the industry. And they're just, you know, again, they got into it at the height of the market last year when everything was on fire. And it was you know, world again, I keep joking and where the cool kids are, and they wanted to be part of it. And they just I don't think that they were prepared for things to drop off the way they did. But I interestingly enough, I was reading an article that air DNA put out last week, and it kind of had some of the information on you know, what they occupancy plunges is kind of how they started it out. But it was really interesting to me because they had the top 10 growth markets for short term rental listings. And this is a net increase from May 2021 to May 2022. And so again, this is net this is not like, you know, what, we did lose some we got some bat. But I was really fascinated, I've seen what I thought was an increase in Panama City, but Panama City is in the top 10 And we had 26% increase from 2021 to 2022. And so the partners that I work with in the market, you know, they're saying, well, it's slow down, you know, my numbers are we're 2019 was but my numbers are not going where I thought they would be. But you look at some other markets Houston as an example 55% increase. And that, you know, kind of goes along the lines of people saying well is some of this short term rental affecting the availability of long term rentals in a market you know, maybe in some of these urban markets, it probably is. But just looking at the the number of markets that are kind of destination markets that have seen huge growth, Las Vegas, almost 40% Pigeon Forge, Gatlinburg, area 30% growth, Fort Lauderdale 31% growth. So again, these are some traditional, you know, vacation markets that have seen really big growth. So it's not surprising that the numbers, the the occupancy would be seen down because we do have such an increase. But I think what that says to me, and what I've been telling people is now it's time to kind of take stock. And what and look at what you have going on in terms of your marketing, you know, are you diversifying your distribution? Are you making plans for what to do in the fall? Do you have plans in place for when things slow down? Are you thinking like a hotelier and so we had an episode a few months or you know what maybe two months ago with Pete actually heard from travel boom talking about. We were on his show, he was on our show talking about what hoteliers can learn for vacation rentals and vice versa. And there's a lot of learnings that can be shared so that's a it's very timely go back and listen to that episode. And check out travel boom and use some of those tools for planning for the fall and planning for 2023Alex Husner:
Yeah, that was episode 19 If anybody wants to go back to Pete DiMaio episode but yeah, I agree with you. That's a great one to go back and and listen to I'm curious on the air DNA report. Are they just getting those numbers based on Airbnb listings? Or is it business licenses or IAnnie Holcombe:
believe there's comes from listings on Airbnb and VRBO combined? I don't think that they go through business licensing as much I know in Panama City. It's you have to have a license to be listed on those sites. That's why they've they've been They kind of created the regulation, some cities, I don't know that they've kind of buttoned that up. But so for Panama City, that's definitely people that have to have licensing. So it is interesting to see like, again, there's probably more that are out there that aren't being tested, because there's a lotAlex Husner:
of units that are not on those platforms. And so I was just thinking, you're in some markets that you take a few professional managers if they hadn't previously been on Airbnb, which were one of them. We just went live finally on Airbnb this year, you know, that's another 500 units for a market. So I'd be interested to know, Is it is it really net new? I mean, are these listings that were never on there, or they've now moved to a professional platform, or they've been taken off professional platform and to an individual host? A lot of a lot of data to dissect there?Annie Holcombe:
Yeah, there's I think there's there's probably the you know, I would say the truth lies somewhere in the middle. I know for Panama City Beach is as a just said, because I live here, there has been a huge increase. But there's also been an increase in hotels being built. So you think that not only did we get 4000 More supposedly rentals on the market, I think we have another 500 hotel rooms that opened up in the last year. That's a lot of hotel rooms for our market. But thankfully, this destination has a really good CVB and sports destination marketing organization, which is similar to what Myrtle Beach has really strong, very active, but some of these other markets, maybe not so much. So again, goes back to you as a host or as a professional manager. Are you engaged in your market? Are you are you following what your destination organization is doing in marketing? Are you participating in that? Are you really paying attention? Now's the time, you may be busy, but you need to get somebody on it. So that one thing slow down, you're prepared and you have everything in place.Alex Husner:
Yeah, and actually, our episode was Stewart that's coming out. Stuart Butler, who is the CMO for the Myrtle Beach Chamber of Commerce and CVB. Visit Myrtle beach.com. His episode talks a lot about that we also had episode 17 with Jennifer Barbie, who came on and also talks about how you can work with your destination marketing organization. And really right now is it's like you said more critical than ever to make sure that you are diversifying your distribution and your marketing plan right now, because here's the thing, if you're in a market that a lot of individual owners have come on the scene, and are now more competition for you on VRBO. And Airbnb, those individual owners in most cases are not on other channels. And that's really all that they're doing. So when you partner with Lexicon or condo world, for example, shameless plug, you can get way more channels that these individual hosts do not have. And that is a major selling point. And a way to differentiate yourself in the market.Annie Holcombe:
Yeah, and one thing that I see a lot of and I talked to people is that a lot of times they'll use a channel manager and not that another channel manager is separate from lexicon is not any good. But you know, when you choose a channel manager, or you choose a PMS, that you're going to use your distribution, make sure you have somebody that can help you understand the benefits of every channel, because someone can tell you, we have 40 channels, but if they're not the right ones for the product that you have in the market that you have, it's just it's just wasted air and time. So you want somebody that can kind of walk you through the process. So again, a good channel manager will be able to talk you through what the right the right channels are, as well, as you know how to use those channels and those levers at the right time of the year to get the benefit the fullest benefit from using them.Alex Husner:
Yeah, absolutely. Well, without further ado, I think we need to move into our Simon Says segment. Because this is a great conversation. We're so excited to bring it to you. And let's let's do it. Let's do it. Keep them up your comms Simon Leighton. Welcome back to the second time that we've had Simon Lehmann from ajl consulting on the show for Simon Says, Simon, welcome. Great to see you again.Simon Lehmann:
Likewise, good morning, Alex. And Annie, great to see you.Annie Holcombe:
Good morning.Alex Husner:
Morning. Well, we've got a great topic to dive into today that we feel you will certainly know how to give us a great answer to we want to know what's going on in the vacation rental world right now. Why are all the legacy companies some of these really big brands deciding to sell and this is it almost seems like every day you look on LinkedIn. There's a new company that has made this decision and these are companies that have been in the industry for a long time. These are companies that are similar to us like condo world that have been operating for a very, very long time and established markets. There's Tybee vacation rentals, Southern Resorts Carolina Retreats just recently Sarah Bradford's company, Winter Park Lodging tailor made teaming just to name a few 360 Blue. What do you think, Sam? And why is this happening right now?Simon Lehmann:
Yeah, absolutely. Great question. And you know, what's happening out there? I wish I would know. But obviously we would love to share our inputs and how we see the market and mean, at the end of the day, you know, selling and buying businesses is nothing new in any vertical in any industry. That's the nature of, of growth. That's the nature of of several different pieces. And I think, one, so we need to take this conversation a little bit to a higher level to think about, okay, what what are these types of companies? Why did they build these companies? And what is their perspective going out? And obviously, as a seller, you want to sell at the best possible moment. And it seems that a lot of these companies do believe that we're at a peak in getting valuations and the market is very inquizzitive with one of the two large companies in the United States. So timing is definitely right. But I think one thing that also plays into your equation to think about, what are the future opportunities for these types of businesses? You know, we call them belt, well established businesses family run, you know, and it's, it's, for me, it's also a question of succession, you know, what is? What is your alternative? You know, I think, in terms of what's happening in industry, we are doomed in a way to keep growing our business in order to deal with margin compression and create more efficiencies to have profitability. And it's become, you know, it's become challenging and challenging. We've seen a lot of competition. And people also need to think about who is taking over their business in the future? Is there succession? Do we have children who take it over? Do we have a management team take it over? What is in it for us, we've done it for so many years, and we know how strenuing property management really can be, you know, and a lot of these owners are involved on a day to day basis, very, very heavily. And they've worked very hard for many years, and then eventually come to a point say, hey, I want to get my reward, I want to retire. And then you need to think what is my best my best possible option? And I think in a lot of cases, it is to sell for business is a great option if you don't have a management team who can take it over or buy it out, or if I have kids who want to take it over in regards to the succession. So I think, for me, if you look at the ages of these businesses, they're probably very similar in terms of how long they've been in the business. And now it's, it's a good point where the market is a quick acquisitive, that you're taking an exit as a possible route to go ahead with.Annie Holcombe:
What do you think with these, again, legacy companies selling? What do you think the long term impact is on a destination to have someone who was very integral part of the growth of a destination was engaged in the destination to be purchased by an organization that doesn't have really any footing in the destination? Like, what do you think that that's ultimately going to do for that, for that business? Do you think that they can this model of managing from afar can sustain itself?Simon Lehmann:
Yeah, I mean, that really depends on the strategy of the buyer. I think that's fundamental. And I, if I can say, I would think we're seeing two different models, if we want to, quote a Vacasa or a VTrips, and I think that really differs from each other quite substantial. Like how far you go in actually integrating a business that has built a brand over decades in a destination, which is well established as a great network is highly respected, treated customers, its owners, you know, as their own assets, like have great relationship with all the suppliers with all the maintenance and housekeeping staff. And, and you know, being a small family run a business is obviously different than being run by a large corporate. But I think the way I can sense from where I am right now is that there's different strategies, now you can make that. So either you come in and just literally rip the heart out of the business, which means you rebrand, and you integrate it on your tech stack you, you literally just apply all your internal processes, your own DNA, your own company culture, and you potentially lose quite a substantial amount of owners and you potentially lose quite a substantial amount of, of people who have worked very hard for that business, which, for me, in terms of from an investment standpoint, is actually destroying value quite substantially. On the other side, we see integrations where we say, hey, we keep the brand because the brand is important to the owners, what's happening behind the scene that finance is probably centralized and, and certain other things are centralized, the destination and the people who are in touch with the brand, don't feel that that much. So I think I would rather go for a soft piece of integration because at the end of the day, you don't want to lose owners, you want to keep that trust. And then also it depends what you do with the management team, what you do with the owners, in a lot of cases. We know we're in an asset light business, and we're building our businesses on trust and relationships. So we all agreed to that. So that means in order to maintain that value, you need to retain the human capital who owns these relationships with these people. And and this is the this is the key you know, if you lose the person who also in relationship with 100 owners, it's challenging, so your churn rate will definitely go up because that owner doesn't trust necessarily that brand. He trusts that person who has taken care of them for that long to make sure that their house is being looked after the occupancy is the right level. And their return is at the right level. So I think that is absolutely crucial when acquiring a business and also for the seller to think about what is important to me. And we see different types of sellers. Once again, we see certain sellers who couldn't care less once the dollar hit the bank account, right, they just walk out, say, look, we've done this, it's time for us to move on. For us, the maximum dollar on our selling that business is most important to us. That's what we see on one side. On the other side, we see people who say, hey, we have put 20 years of blood and sweat in this business, we have loyal staff who have been with us for from day one, we want them to be taken care of plus, the buyer will be very smart to retain these people over at least a year or two, to make sure these relationships can be passed on the business is understood. And you know, eventually a seller wants to go and, and I would I would definitely see the better way to say hey, we keep you for another two years, depending on the deal structure as well. Because if it's an urn out deal structure, you want them to hang around, obviously, to make sure that the numbers are being met and what they've promised. So I think this is really the better way to maintain also this position within a destination. So if you'd go for the full integration, the equity, the destination will definitely suffer. If you go for a soft integration, where you just take it on board, keep the brand, keep the staff and do some back office centralization to take some further costs that the destination will not be affected by it. Yeah, IAlex Husner:
think you've got a spot on. I mean, at the end of the day, we are 100% in the people business. And it's amazing, you know, as I've been in this industry for a long time, but to see a lot of our homeowners have been in this business for a long time, too. It's such a personal relationship that we have with them. And you know, when that one point of trust or that point of contact leaves, you know, that's that's can be really devastating for business. And, you know, we're seeing in our market. I mean, we've had the Casa bison companies, we've had some companies band together V trips hasn't made it here yet. But I know in the Bokassa situation, you know, we're a market where our CVB DMO is a critical critical part. We're the fifth largest in the country. So it's a it's a, it's a big DMO. And we are all very supportive of it collaborative. And as soon as they bought the companies that they they came in and took, they're not part of it anymore. And that definitely has effects on all of us. So I think Milo's approach is very good. I think that's probably the one that has the longest runway there. Because like you said, keeping those those key leaders in those places, and maybe the key leaders don't, if it's the owners, if they want to leave, that's okay. But if the staff that was maintaining still stays, you know, that's that's got a lot more future to it. But I was talking to another manager here that is about this around the same age as the owners of some of the companies that have recently sold. And I asked him, I said, you know, why do you think that this is happening? He said, because we're damn tired. We've been doing this work for 2530 years. Yeah. And it's really tiring business. And when you're working in the operation side that give, you know, the biggest respect to anybody who is in the operations and the homeowner property management side, it's it is really a lot of work. And marketing is a lot of work too. But it's, it's a different kind of stress. And I see in the summertime, what they go through. And and I can understand why some of these decide to make that decision. What I'm really curious to see is of the ones that have been bought, there's a couple that I think the original owners have stayed on and now work for, like Steve, in this case, to see how that goes. You know, I mean, it'd be interesting to hear from them, what have you, if you've owned the company forever? And now you work for somebody else? I feel like that's very different in person. Yeah,Simon Lehmann:
I can be very challenging without a doubt. And I think you raised a very valid point there, Alex, in relation to your previous question, you know, why do people sell and I think, you know, being tired is definitely one making cash is the other being rewarded for all the hard work they've done over decades is definitely another one. But I think another one I would like to throw into the equation here is it's become them complex, you know, let us remember the vrma executive conference and what are we talking about at this conference? You know, human capital, financial hygiene, technology? I mean, if we ask property managers, Hey, what is your challenges, hates technology it's dealing with, with human capital, and being part of a larger organization can can can help you support some of these challenges, you know, because we're in the hospitality industry, and a lot of people did it because they're hospitable people. Not that because they're the finance people and I think an acquisition can be quite rewarding. like to say they take this massive burden away from me, they give me cash for it. And at the same time, I can still do what I really enjoy doing. And that's the hospitality piece of the business as well.Annie Holcombe:
Do you think, and we talked a little bit about this off camera, but the people are selling the high end of the market as the gear, they're getting really good valuations. And that's great. But for the sustainability of these companies that are buying up large swaths of inventory, especially in oversaturated, markets, I live in a market that grew by 25%, you know, inventory year over year, and that's a lot of growth, we have a really strong DMO CVB, that's going to help it. But some of the valuations that I feel like people are buying at are a little high, and that they're Amy Hinote, and I've kind of talked about this, if there's kind of going to be a bubble, you know, and that there's going to be a lot of inventory, it's going to go back on the market because it's not rentable, or there's just too much and, and you know, of a Vacasa having, you know, they own a good chunk of the panhandle, is it going to be too much for them to sustain? I mean, their stock is certainly indicating,Alex Husner:
especially with next year, not I think, you know, all of us kind of have a big question mark on how next year is going to pan out. So when these companies are buying at this super high multiples, and the next year, if the rentals aren't there, that's surely a problem. And like you Annie, too on just not when they get in there not wanting to keep all the inventory that they bought, you don't have time to go through unit by unit and a sale and decide which ones you want, which ones that's done after. And yeah, there's, there's, it's interesting.Simon Lehmann:
I could be I could be, you know, ironic and say, Who cares, right? I mean, if you're, if you're on the sell side, who cares?Alex Husner:
We might we all the other companies that are still around? Well, I'm not getting that inventory.Simon Lehmann:
But let me shed some more light on that. I think it's, it could be perceived that way. But I think one thing that I've mentioned, also in Palm Beach the other week is that, you know, people have to be realistic in terms of their valuations. And what you hear on the market is not what they're being paid. Number one, right? So, so I think that, you know, they always say, ah, you know, made a squillion. But a, you know, the truth lies somewhere different number one. So I think it's more realistic. And it's interesting to see who is willing to pay more for the businesses right now? Is it? Is it in an industry buyer? Which is of a cost OB trip, for example? Or is it a financial buyer, which is a private equity? Who has bought saris business below 49? Is private equity? And who pays more at the moment? And for what reason? And what how do they look at the business going forward? And what price Am I willing to pay? There's a lot of things that need to be taken into your equation, you know, because you have synergy effects, which take need to be taken into effect when when you value a business, you look at the intent, it depends on the deal structure as well. So let us assume, you know, in a lot of cases, we deal with earnouts earnout means that you sell your business at one point, you get a certain amount of that transaction, you get paid out. And then a certain amount of transaction, mostly minority, about 30% of the valuation is pretty normal, or 20, you get paid out over the next year or two, based on delivering of your business plan. So you still have your skin in the game, you're selling a business plan to a buyer and say, Hey, in 2324, I'm going to these numbers, and and they are taken into the equation when people say at what value they have sold, okay. But the truth of the matter is that it's at the end of 24. It might look different. Unfortunately, I couldn't find an umbrella in this apartment here where I'm staying, I wouldn't have taken it on stage and say, Guys, the market is softening to your point. Right? So So we definitely don't see the same performance for 2324. We already see the market softening of the summer. And and that needs to be taken an equation. So yes, it could very well be that certain transactions are being overpaid. But at the end of the day, if I would be a buyer, hey, I need I wanted the seller to have the skin in the game for at least two years to show me how he can execute that business plan on which I'm prepared to pay maybe a premium value on but you need to deliver that and otherwise I don't have that risk. And I'm not overpaying. Right.Annie Holcombe:
Right? Absolutely. So your your relationship that you recently announced with Raincatcher, are you going to be focused on the buyer or the seller side of things? Or are you doing looking at both sides?Simon Lehmann:
Yeah, great question. I think predominantly we will focus on the seller side, you know, sell side is something that we're, you know, very keen on supporting, I think that's where we can create a lot more value in helping people to get their finances up to scratch, you know, look at their financial hygiene, get their books in order help them to optimize their business before they sell it because the combination of a financial advisor and an industry consultant like AJL is second to none value proposition. So normally you have a financial advisor that doesn't understand the business that much or you have a concern Unlike us who don't do advising on the financial side, or as much as, as we have done in the past, so this means the combination of having a financial advisor with a with an industry consultant together is we can offer far more value to a seller, because we can help him get his business ready, we can get the books in order, we can help optimize the operation, we can help creating more demand optimizing the channel, looking at the tech. So an financial advisor normally comes in says, Okay, I'm selling your business the way it is today. Right. And and I think, for us, that's the reason why we rather focus on the sell side, we have done by side mandates where somebody comes to us and say, you know, we would like to buy property management companies, can you come and help us to identify some targets, and we totally frank here, that's also less lucrative for not for for for sale by side mandate. Because obviously, the buy side is always looking to buy low, right. So you're not incentivized to, to get a high price for the seller, you actually want to you get incentivized by getting a low transaction. And that is a very challenging task on the buy side. So we would definitely rather prefer to do sell side and we can create more value to the to the seller for sure. ComingAlex Husner:
up on both sides of it. Because I mean, you're such a connector. And you know, obviously, if you're representing these companies that want to sell, you've got companies also coming to you that say I want to buy. So you probably have people in mind, I would think but can you represent both sides?Simon Lehmann:
That's an absolute no go. So this is an app, this is this is a Chinese wall? That's a no go. And so yeah, you know, we've had we have private equity companies coming to us and say, Simon, can you can you give us more leads? What about this and this competence in our account? Because we're representing the sell side? So we you know, we call that in our terms, we call that double dipping? There is no, you know, that's something that we definitely don't do. I mean, you can refer for sure, but you can't represent. ImpossibleAlex Husner:
Do you help the companies that come to that want to sell? Do you help them find the buyers though, even though if you're ever not representing the buyers? Do you help in that process?Simon Lehmann:
Yeah. So that's on the sell side? That's what we do. That's our about, right, so. So we will, we will, once we get a sell side man that if somebody comes to us to the side, we want to sell the business? Who do you think our buyer could be? So we spent a lot of time dissecting that looking at the industry, making different groups and who are the potential buyers for that business. And you know, there is also sellers who say, I don't want to sell to this company, I don't want to sell to this company very clearly. But I'm happy to sell to others, this is important to me. So first, you need to understand what is important to them, is it cash only is it the team is the future of the brand is you know, people have different needs. And then once you understand their needs, you then look at okay, who is who makes sense to actually come in to be a buyer for this business. And, you know, we end up with a list of 50-200 companies, and then you run through that. And then you know, these ones are they normally don't pay very much. So you know, let's not waste our time. So we're actually and then you have different phases. So what I we normally urge to our sellers is we don't do the marketing of the company with a shotgun, we do it rather laser focused, which means we identify like 10 to 20 buyers that we really think fit perfectly into the buyer universe for that particular business. And we approach those and then you do pre marketing. So you don't just send out a letter, you actually call these people before you let out the cat out of the bag and show them all the financials and everything else, which is a lot of buyers who just want to see the financials, but they're not interested in buying this company. So this is very, something you need to be very careful about, you know, let's assume you have a nice beautiful business 300 units in a location to be sold. And your largest competitor with 100 units wants to look at it to buy right you don't already has no chance to buy that business. Right? Yeah, just wants to see the financial. So that's all the work we do before we go to marketAnnie Holcombe:
Gosh that's that's a lot to take into consideration. And I listened to Sarah Bradford talk about how the like her thought process and what she went through. And wow, that's just a lot to have to think about. And I had lunch with somebody yesterday who has been going through some some similar, you know, people approaching his business and he was close to doing a deal with someone he told me that they came to him with the due diligence list. And it was like 400 pages, it was just and you said like I don't want to sell it that bad. You know? Yeah, there was just so much stuff and he said some of the stuff they were asking for was just completely ridiculous but they paired the list down and got through it and then ended up not having a deal but I think that you know you to your point. There's a lot of things that people need to take into consideration. It's just not about like you're getting a big fat check and walking away in the sunset. So I think that anybody listening if they're interested in selling their business talking to someone The caliber of Simon Lehmann is certainly something that you should put on your radar and obviously, a call with rain catcher, you know, down the road as well. But I think that there's just a lot of things at play here for our industry that we just don't know where it's gonna go, I guess.Simon Lehmann:
Yeah, absolutely. And I think from my side, on a closing note, this is a very valid point. You know, one thing that we are very conscious about Raincatcher/ AJL, we want to tell the truth, and we want to tell people how strenuous and how challenging and how difficult this processes and we have experience, and it's always goes longer than what you think it's harder that you think it changes during the cause of the of the process, because there may be some changes in the market or whatever, it is not over until the check has landed. And that can be a very tough process. Sometimes it goes longer, a lot longer than what people anticipate. Sometimes it goes faster, depending on what it is. But that's something we are very conscious about when we briefed sellers, what they need to experience in the due diligence, great point you raised, but also in relation to valuation. You know, there's a lot of advisors who are getting deals that they're selling to take to the people, hey, I can sell your business and 10 times. The seller signs with that advisor, and they're going to sell it five to six times. Because because they just want to deal this is real challenge we have. Absolutely. So we want to give the sellers a real realistic view of the market. And one thing that people forget, and I'm closing with that is the market defines valuation, right, the market defines valuation, if there are buyers, great for the valuation if there is not so many buyers not so good for the valuation. So it's not about maths and say, How much do I get for my business? Well, I can give you an assumption. But at the end of the day, the market speaks.Annie Holcombe:
End of the year wrap up is going to be very interesting.Alex Husner:
absolutely. Well, thank you, Simon, so much for coming on for this edition of Simon Says, and we will talk to you next month.Simon Lehmann:
It's been a great pleasure. Thank you so much, and have a great summer.Alex Husner:
Thank you. Well, that was awesome. Thank you so much to Simon Lehman and AJL Atelier for being part of our Simon Says segment and just great information for our audience and listeners. And Annie anything else you want to add?Annie Holcombe:
No I think again, Simon always hits all the right points. I think we're going to have a you know, a year end wrap up with him and kind of see if some of these things kind of panned out if there's more big sales that happen, you know, what else moves in the market, but there's the next six months is going to be really interesting, and I can't wait to kind of see his take on it looking backwards when we get to December?Alex Husner:
Yeah, absolutely. Absolutely. Well, I'm glad that we get to at least catalog these moments in time. We can look back, but if anybody wants to get in touch with us, you can go to Alex and Annie podcast.com. If you're enjoying the show, please leave us a review. Reach out to us. We'd love to hear from you. And if you'd like to get in touch with Simon Of course, you can go to AJLAtelier.com. And we'll include links in our show notes for how to contact both Simon as well as Annie and I so until next time. Thanks everybody. Good luck.
CEO/Co-Founder AJL Atelier
Simon is one of the world’s foremost experts on short-term rental and vacation rental. He leads AJL Atelier, a specialised vacation rental and business consultancy while also advising multiple companies as Board Member and Executive Chairman.
A sough-after speaker, panellist and moderator, Simon loves to broach high-level and technical topics alike, from the future trends of short-term rental to the specifics of online distribution in the top 5 OTAs.
Previously, Simon was the Co-Founder & Chairman of Vacasa Europe, former President of PhocusWright and ex-Board member of HomeAway, to name but a few. He’s also an accomplished operator, having led Interhome as CEO, Hotelplan Group as Deputy CEO and Swissport as EVP.