Onefinestay's parent company, Accor, and homesharing juggernaut, Airbnb, aren't the only companies interested in the traditional vacation rental market.
It’s been an eventful year for onefinestay.
The eight-year-old company specializing in high-end home rentals in cities such as London, Paris, New York City, Rome, Miami, and Los Angeles, was purchased last spring by AccorHotels for some $168 million. And just five months after that acquisition, former CEO and co-founder Greg Marsh left the company.
Now, under the leadership of co-founder and CEO Evan Frank, onefinestay is continuing to work on its goal of expanding to 40 cities in four years, as well as making its own formal entrance into the luxury vacation rental market as well, with Collections. The first Collections homes will be available in the Hamptons, with more than 20 listings, and they will rent for up to $2 million later this year. Eventually, onefinestay will have Collections properties available to rent in Southern California, the French Riviera, and Edinburgh, too.
We sat down with Frank in onefinestay’s New York City offices on February 10 to talk to him about growth, expansion, why everyone seems to be interested in the luxury vacation rental space, and what’s ahead for the alternative accommodations space.
Note: This interview has been edited for length and clarity.
Skift: So, a lot has happened in the last year. Onefinestay was purchased by AccorHotels, and it’s been almost a year now since the acquisition. How have things been going just generally?
Evan Frank: Well, look, 2016 was definitely a year of change for onefinestay. A lot changed. When we think about how the year began and how the year ended, it’s really been a transformational time in a bunch of ways. It was a good year.
Of course, the main event over the course of the year was the acquisition by Accor. The rationale behind the acquisition was, first of all, that it’s complementary, not competitive, to the traditional hotel business. They’ve been pretty vocal about the big bet they’re making in private rentals and they saw us as a great brand to add to their portfolio.
For us, getting access to their expertise, around how to build a real hotel business and sales and marketing [has been crucial.] They have operations in, I believe, 95 countries. So, there’s quite a lot of expertise that they bring to bear that, for a company that was privately owned and venture backed, we didn’t really have access to.
So, it’s been quite educational. Certainly, the hope is that with their footprint we will be able to also reduce our time and cost to new market expansion because they really have operations everywhere.
Skift: How has that expansion been going? It seems like onefinestay, in comparison to your peers, like Airbnb, has a more deliberate, very focused, slower, path toward expansion.
Frank: Slow and steady.
Skift: So, how’s that been going, and do you sometimes wish you had a lot more scale? How is Accor helping you boost that expansion?
Frank: Well, I guess one always wishes they had more scale and they don’t have to sacrifice the things that are really fundamental to their brand. And for us, it’s always been about the homes and it’s always been about service.
So, we’re going to talk today about our new Collections product. Historically, I mean, you can see our warehouse right out there, right? This is a pretty intense operation that’s required a lot of first principles, design, and thinking and evolution as to how we actually deliver this kind of distributed, high-end, hotel-style service but across the city, where we don’t actually own or directly manage the home. It’s somebody else’s home and we’re coming in and we’re transforming it from a home in to an accommodation that a guest is going to pay to stay in. That is a very different thing than having just a great website that is excellent in distribution.
So, we’ve certainly been deliberate. I led our expansion to the U.S. in 2012. At the time, we were only in London. And then we launched New York in 2012 and because we are pretty rigorous and selective about our portfolio, that has allowed for a certain pace of scale.
We only really want to work with the best homes that are available for private rental in a particular place and when you top-slice the market and you’re only managing — and by the way, these are exclusive homes, so they’re only available through us — when you do all of that work, it does take the time, but the payoff is a really unique customer experience. We’re both accountable for their experience while they’re here but we’re also accountable for the overall home selection and making sure that it’s a good value and everything else. So, it’s quite a different approach which does resemble, I think, more, a traditional hotel than a website.
But, at the same time, we are putting our foot down on the gas and it’s been covered. The 40 cities in four years has been covered as a goalpost from the acquisition by Accor. Last year, we launched Miami and Rome. They’re both doing very well and taking our products to new markets.
This year, we’re planning on launching, both cities, as well as some vacation destinations, which we’re calling Collections, which are probably more seasonal in nature but not in all cases.
On Entering the Traditional Vacation Destination Market
Skift: The first Collections market is going to be in the Hamptons, yes?
Frank: The first one, we’re going to announce is going to be the Hamptons.
Skift: What prompted onefinestay to pursue this type of expansion? Why call it Collections, and how are you going to market it and promote it?
Frank: The reason why we think it’s time now is because we’ve gotten to a level of maturity with our existing city operations that we believe we can offer extensions of these cities in a professional way and maintain a consistent onefinestay experience. So, that’s kind of why the time is now.
In terms of why we’re calling it Collections, the idea is that these are not the same thing as a city portfolio with hundreds of homes and lots of selection and a real breadth. In this case, there are going to be less homes. Probably some of these markets will be seasonal so we’re not going to offer some markets year around. I think it’s a little early to say which will be seasonal and which will be permanent because, actually, it depends on what our customers want. So, we might find that there’s a great winter market in the Hamptons and if we can create value doing that, we’re very open to that. But we’re not expecting to keep it open year around necessarily. You can think of it almost as a pop-up in some cases.
I think that it’s going to be a really welcome evolution to the way that our customers experience onefinestay but have traditionally, again, associated us with being more urban.
Skift: How will you be promoting and selling these new Collections properties?
Frank: We’re going to be talking to journalists. PR [public relations] is going to be part of it in our traditional channels, so we market our homes through HomeAway and channels that this kind of accommodation is bought on.
One of the bets that we’re making actually is that high-end private rental or home product can be — and we’ve proven it because it’s been successful in our business — can be sold through the traditional corporate and travel agent sales channels. That’s going to be one of the ways that we’re going to be selling the collections product.
In terms of the travel agents specifically, we’ve marketed our homes through travel agents for many years now, probably five years.
We really think that agents or any type of consultation that happens as a result of wanting to book this type of accommodation is actually quite helpful in converting because ultimately it is a less-known and less well-established category than a hotel. Education is required, and travel agents have been instrumental in helping us educate prospective customers as to what onefinestay is, why this home versus another home, and why you actually need an accountable partner. We expect that to be really valuable for us over the next few years. One of the big bets we’re making is continuing to invest in that.
Why Everyone Wants a Piece of the Luxury Vacation Rental Market
Skift: Let’s talk about luxury vacation rentals specifically. This week has seen a lot of news in the luxury vacation rental space. First, we had news from your parent company, Accor, announcing its intention to buy Travel Keys, and then, just yesterday, Bloomberg broke the news that Airbnb is looking into acquiring Luxury Retreats.
Frank: Yes. A lot of consolidation.
Skift: Why is everyone so interested in this space all of a sudden? With the Accor acquisition of Travel Keys, do you see that as being competitive or complementary?
Frank: So first of all, we’re really big fans of Travel Keys and Luxury Retreats and Airbnb. I think that they are, ultimately, distribution businesses. They’re sales and marketing platforms. They don’t work for their homes on an exclusive basis. So, it’s just a different approach.
So, the intent to acquire Travel Keys was just announced and we’re excited to find ways to collaborate with them. I can imagine onefinestay certainly distributing homes through Travel Keys but I don’t think it changes our core approach, which is really selecting the best homes that are available on the market and offering our signature onefinestay service which is, again, an accountable experience where we’ve not only been to the home, but we’re vouching for it. We’re also vouching for its price range, its value, as well as accountability for anything that happens over the course of the stay, so you know you’re going to be looked after the way that onefinestay has built its brand, on looking after our guests to quite a high level of customer engagement and satisfaction.
I think we are, today, an urban brand primarily. Although, even markets like Miami and Los Angeles, of course, have quite a mix of vacation type stays as well as urban leisure or urban business stays. I think the future is going to be a mix of cities as well as non-urban because I think it’s ultimately what our customers are asking us to do. So we’re just trying to offer a breadth of vacation or business travel solutions for our customers.
Skift: I also asked Steven Daines [CEO of new businesses for AccorHotels], “If you do wind up acquiring Travel Keys, will it also be allowed to operate autonomously as onefinestay has?” Do you think that AccorHotels will try to apply the same approach to Travel Keys or is it too early to speculate?
Frank: I think it’s probably too early to speculate. I think Accor has been very clear that they’re looking to be the leader in the space and they’re looking to act boldly. How exactly the portfolio pieces together, I think, is something that is too early to say.
Skift: I’m also wondering why is everyone all of a sudden interested in luxury vacation rentals more so than they have been before. Why, all of the sudden, does there seems to be this interest?
Frank: Well, I can speak for us and then I can speculate about the market. I don’t know exactly why Airbnb, for example, is so keen on Luxury Retreats, but, not in a bad way, I just don’t know the rationale.
For onefinestay, it’s a natural time when our cities have grown to a certain level of scale and capability to offer the type of places that surround these cities where we can still offer a onefinestay service without really doing something completely different.
When I think about the Hamptons, or when I think about the south of France, which is another market we will be launching during the course of the year, these are markets that we will be servicing from this asset that we built which is these operations in all of these cities. We have people on the ground doing this already and we have been doing in now for the best part of six-and-a-half years in London, five years in New York, three-and-a-half years in Paris and L.A. So, going to southern California as an extension of the Los Angeles business, or the south of France as an extension of the Paris business, or Edinburgh, which is another place that we’ve announced, as an extension of the London business, just makes good sense because we’ve built this operational know-how and we’re ready to unleash it like before.
Now, that’s not to say that we’re not interested in cities anymore because 2017 will be a year that we expand to other cities as well. But, we already have a footprint in all of these places so it’s really just extending that footprint. And again, we’re responding to what our customers are telling us which is, they’d like to see us in more places. So, we’re just trying to enable that experience however we can.
In terms of the broader industry, I think part of it is that Airbnb has publicly said that they’re interested in going higher-end.
Skift: … Offering that Airbnb Lux product.
Frank: The Airbnb Lux product, yes. So, whether that is Luxury Retreats or something else, I’m not surprised to see them acquisitive. I think there’s a lot of specific know-how around working with property managers and selling this premium villa product which is different, I think, than a mass-market website for distribution of private homes. So, I think that’s probably a knowledge acquisition for them.
I think, quite frankly, the thing that’s so interesting is that distribution channels for homes have not really been built yet. All of a sudden, HomeAway is quoted as saying this is a $100-billion market, the vacation rental market. It’s quite fragmented. There’s no one, real, distribution channel that all of these homes go through and the way these properties are actually sold is still very much being figured out and that story is not yet written.
So, when I see these distribution companies being acquired, I think it’s really about the know-how to really be able to sell this very new accommodation product, which has really only come up over the past five to 10 years.
Skift: Right. Another thing I was thinking about, too, was that maybe by focusing more on the luxury space, or on traditional vacation rental destinations, not cities, this is also less challenging for companies like yourselves, regulation-wise.
The NYC Regulatory Landscape
Skift: I wanted to ask you a little bit about regulations. As we both know, New York is complicated and things are always happening or changing. How is onefinestay confronting regulations specifically here in New York?
Frank: I’m from New York. I was part of the original founding team in London but moved back to New York in 2012. So, we’ve been working within the regulatory environment here since the very beginning. We do think it needs to be updated generally to reflect the practice.
But what we’ve done is, we have only worked with homeowners. We have focused on townhomes which are not part of the regulation and we’ve also focused on an extended stay business. At the same time, I’ve spent a lot of my time personally educating all of the stakeholders. So, everything from the city and the state legislators and the city council and the assembly and the senate, organizations in New York — we’ve really sat down with all of them.
I think the intent behind the [multiple dwelling law] regulation is not to prevent homeowners from doing this on an occasional basis. That’s been said publicly many times. Unfortunately, the law as it’s currently written captures that activity as well.
But, because we don’t focus on landlords at all, we don’t have any rentals unless they have landlord permission. So, we have just a couple of rentals, nothing that’s rent controlled or rent stabilized. We don’t work with multi-listers, no one who’s managing multiple units. We’re pretty compliant with the rules at this point. In fact, I would say we’re 100-percent compliant with the spirit which is, homeowners [who do this] on an occasional basis. They go away seasonally and rent through our service. But by and large, our business at this point is unregulated homes or extended stay.
But I actually think navigating through the regulation and figuring out how we deliver [it] — because the customer ultimately is not that interested, they just want a nice place to stay — so creating a onefinestay experience despite the regulatory environment is an enormous barrier to entry.
For us, we’ve actually figured this stuff out and we figured out how to operate within the confines of the market. I think that’s the approach that we’ve taken everywhere. We’ve gotten really sharp and smart on the local rules and then we’ve built a business around it, and then you see this tip of the iceberg and, ultimately, we’re still providing great guest experiences.
Skift: Did you see any sort of impact from the most recent amendment to the Multiple Dwelling Law? The addition of the advertising law? Were some of the homeowners that you work with concerned?
Frank: Yes. Absolutely, I think, ultimately, despite the fact that the spirit, or the intent behind the law, is not to target homeowners that are renting on an occasional basis for less than 30 days. That still, as I say, is what the law says.
So, I think a lot of occasional renters through us looked at that law and said, “Well, I’m not sure this is really worth it for me anymore,” which is kind of a shame if you look at how people have described what the intent is behind the laws.
So, back to the original Multiple Dwelling Law, Liz Krueger* [the New York State Senator who spearheaded the 2010 amendments to the Multiple Dwelling Law], etc., has said it’s not about people that are like a condo owner who goes away over Christmas but they’re being wrapped up in this. So, it has affected that segment of our business. The good thing for us is we’ve weatherproofed the business against that quite a lot, but I understand where those homeowners are coming from.
[*Editor’s Note: A spokesperson for Senator Krueger noted Krueger’s views on the Multiple Dwelling Law, pointing to January 2015 testimony she gave before the New York City Council Committee on Housing and Buildings in which she publicly stated the following: “The short-term rental of even a single residential unit in a multiple dwelling for part of the year can have extremely detrimental impacts on all the residents in the building. Even in cases where an apartment has a full-time resident who is only occasionally renting his or her apartment for less than 30 days at a time, the fact remains that unvetted, unsupervised strangers wandering the halls of a residential building create major safety and security concerns, as well as nuisances, for the residents who actually live there.”]
Can Tours and Alternative Accommodations Succeed Together?
Skift: Another topic I wanted to discuss with you is tours and activities. I wanted to ask you for an update about the tours and activities that you are doing with Context Travel, and also what your thoughts are on Airbnb’s Trips.
Frank: Well, you know, first of all, we have taken a view that it’s better to leave tours to professionals which is why we partnered with Context in the first place. I think that as a business that carefully and rigorously vets its portfolio, we would want any add-on service to meet the same quality threshold that we’ve set for our homes. But I think, as I’ve said before, for us, we’ve focused so much around the property, finding the best homes, and having that, in many ways, be the experience in and of itself, that we’ve really only dabbled in ancillary concierge-style services like tour guides and things like that, we can do it and we’re actually pretty good at it.
Skift: How much has the demand been for those tours among the guests that you have?
Frank: I’d have to check. I don’t know off the top of my head.
Skift: There were reports that came out last year that said that onefinestay had lost $21 million in 2015, its final year as an independent company. Did that play into the decision to be acquired by Accor in 2016?
Frank: Well, certainly, we’re not a profitable business yet. Accor has also mentioned that pretty publicly. What we’re trying to do has ambition and scale requirements in order to achieve that scale. We do believe that we need to continue to invest. So, whenever you’re not profitable, you are always speaking to the investor community or, in this case, the buyer community, to see what options there are.
But Accor, quite frankly, was the right deal for both sides. It wasn’t as though we had to sell. That wasn’t a necessity. But it was the right consolidation for us because of the capital that we’ve committed to continuing to support business and help us achieve our goals and our dreams and ambition as well as the expertise. We look at it almost as a strategic investment for both sides, and acquisition for both sides. Whereas, we could’ve raised money from the private capital markets but we wouldn’t necessarily have gotten that same expertise.
The Future of Homesharing
Skift: How do you think short-term rentals will continue to evolve moving forward, especially as players like yourselves and Airbnb and Home Away mature and grow? Where do you see this market going?
Frank: That’s a great question. Villa rentals have been happening for 40, 50 years, but in terms of moving that online, the professionalization of that trend, and business models like ours — which doesn’t exist anywhere else still, being this urban-based hospitality operation — we’re seven years old. So, maybe [this market] is seven years old and it’s the seventh year of a 50-year or 100-year trend [referring to vacation rentals].
I think in many ways, this is going back to the original concept of hospitality. Before the hotel industry evolved as it did, people stayed in homes or they stayed in inns on top of a pub or something like that. So, I think we really view this as certainly here to stay. It is the alternative space but it’s definitely not going anywhere. The genie is out of the bottle and you can’t put it back in.
I really think that this will continue to be a high-growth market and a type of solution for various types of travelers, depending on specifically what they’re looking for. I don’t believe that this is really competitive to the traditional hotel industry. Our lengths of stays are much longer. Our property sizes, in terms of how many they sleep, are much larger. I think the CEO of Accor publicly said that, this is complementary, not competitive. The same guests would come and stay in a Sofitel in New York for business travel, would come back with their family for a week and stay in a onefinestay townhouse.
So, I think that this is going to continue to professionalize and be part of the overall travel landscape. It’s definitely here to stay. I think there are many situations where what we do is not necessarily the right solution for a customer for various types of travel, short-stay business or short-stay generally. But I actually think this is a really attractive offer for many types of travel for which the traditional accommodation space isn’t.
And then, where we’re positioned is really about that high -takes purchase, insuring that you know you’re going to be looked after and that you know somebody’s done the looking for you. Because I think being able to trust a brand and being able to trust that somebody has gone through a pretty rigorous process in selecting the home and insuring the home is up and running and operational, the Wi-Fi is working and the closets are cleared out and everything else, and having somebody that you can call locally should anything happen, because things happen in homes all the time. If Wi-Fi goes down, there’s a plumbing issue, or maybe you just need a local recommendation and you want someone to call, I just think that’s a fundamental aspect of travel that’s going to continue to be really valuable for customers who need that assurance and who want that quality.
Skift: Do you think the luxury market, in particular, still has a bright future ahead of it?
Frank: Based on the capital markets activity, it seems like it is. Yeah. Luxury can be sort of misunderstood. I do believe that the four-star equivalent, five-star equivalent market, has been relatively protected and I think that that’s where we’ve chosen to play. I think that this is just really beginning to be viewed as a viable alternative to other types of accommodation options, suites and everything else. So, I think it’s got a lot more to run yet.
Skift: Also, given the current geopolitical climate and everything that’s going on with the current presidential administration, do you have any concerns for the year ahead?
Frank: I don’t believe it’s going to have a big impact on our business. I don’t really have a clear macro-economic view of the implications of, for example, tighter immigration, not immigration, visitor visa policies and things like that.
I do think that, certainly, restricting travel into the U.S. or really into any of our countries is not a good driver for the business. So, depending on where that goes, I could see that being potentially negative but the vast majority of our customers today come from the English speaking world so the U.S., England, Australia, are our top three markets. So, I think we’re pretty insulated from that.
Skift: Do you have any thoughts to share about the current situation with the travel ban? It’s interesting because a lot of CEOs from tech companies such as Airbnb and Expedia have been very vocal about denouncing the ban, but I noticed a relative quiet among the hospitality space. Not many hotel companies or hospitality companies were willing to speak openly about it and I was wondering, do you have a position?
Frank: I’m not an overly political person and we don’t really have a clear political agenda as onefinestay. What I will say is that we employ people from all over the world and we would want that certainly to be able to continue. We are a talent organization so we want to work with the best regardless of race, religion, creed, sexual preference. So, we are certainly believers in the labor market, especially if you think about the U.S. labor market and where value has been created.
There are all these statistics of all these great companies that were founded by immigrants and we certainly rely on that labor and want that to be part of our business as well. So, certainly from that perspective, we would hope the U.S. continues to be an open country from a labor force kind of perspective.
Skift: What’s your biggest focus for the year ahead?
Frank: Well, I think expansion’s a really big theme. So, I think that the challenge for us always is: how do we emerge when we’ve chosen to focus on only the best? We’ve chosen to build the service to match. And we believe that that is our brand so how do we offer our customers enough breadth of choice and give them what they’re asking for while still maintaining, of course, our quality standards and the brand that we’ve built these many years. So, that is a big theme for the year.
We are going to be expanding to some cities as well so that really is the name of the game. I think for us, if you look at our history, we’ve been around for seven years and we’re in six cities so I think we are breaking away from our traditional approach but we’re also not looking to go too quickly.
We’re still really focused on the customer experience, the quality of the portfolio. And I hope, as we continue to release these Collections properties over the course of the year, that we will be delivering to customers what they’re looking for, that they know they can get a New York or a Paris but perhaps haven’t thought of a onefinestay as an option for the Hamptons or Southern California outside of L.A. or the south of France.
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Photo credit: Evan Frank, CEO of onefinestay, is overseeing the company's expansion, as well as its entrance into the traditional vacation rental market with its new Collections product. onefinestay