Why Average Airbnb Rentals Are Losing Money in Today’s Short-Term Rental Market

Bri West (00:00)
if you are the standout property in this market, you’re going to get bookings farther out in advance, which is a really healthy sign that you’re able to really like charge a premium and hold on to those rates because you’re getting the bookings far out and you’re not dropping price to really just fill your calendar. So that is like a simple way to explain ⁓ how design really does have an impact in ROI.

Michelle Kesil (01:57)
Hey everybody, welcome to the Real Estate Pros podcast. I’m your host, Michelle Kesil, and today I’m joined by someone I’m looking forward to chatting with, Bri West, who has created Somerled designs, helping investors and short-term rental owners design their rentals, and she is also an investor herself, so really excited to have you here today, Bri.

Bri West (02:26)
Yeah, hi Michelle. Thank you for having me. I’m excited to talk more about design and how it impacts short term rentals and also my experience as an investor in this space.

Michelle Kesil (02:36)
Awesome, let’s dive in. So first off, for those not familiar with your world, can you share how you got started and what your journey to Somerled looked like?

Bri West (02:49)
Yes, so it started back in 2020 when my husband and I started investing in short-term rentals. Before investing, have…

come from the marketing world and we were investing in long-term rentals but we caught on to the short-term rental wave and started getting excited about it and from that marketing perspective I was very interested in switching from long-term rentals to short-term rentals because it acts more as a business and there’s a marketing component to it.

So we got into investing and I came to my husband with a marketing strategy and I believed that you know back in 2020 things weren’t even as competitive as they are now but I saw this vision

of creating more of a hospitality brand for each one of our properties and really diving into the target audience who’s going to be coming here. What are we designing for? I saw design and photography as your two biggest marketing components. So I took those very seriously. And ⁓ actually I’m not a designer. So I came up with the entire strategy for it in the direction what I think would stand out in the markets that we were investing in. And then I brought in a good friend. name is Jordan to come and support me with the design.

She’s an incredible designer. was designing actually short term rentals in Park City, Utah. And luckily she said yes to that because we worked on a few of my properties and then we said, you know what, there’s a concept here. And we believe that there was also a gap in the short term rental space for designers focused on strategy and looking to maximize revenue for investors. so from there, Jordan and I joined forces and we started Somerled where I really stand more on the strategy side

of things and she stands on the design side of things and from that point on so we formalized Somerled in 2022 we’re in year four now we have designed over a thousand properties in every single state we’re nationwide and we’ve touched pretty much every major short-term rental market and we’re excited just to to keep going in this journey.

Michelle Kesil (04:49)
Amazing. And what do you feel have been some of the main keys that have allowed your business to be able to grow and run successfully?

Bri West (05:46)
I mean, think as short-term rentals are getting more saturated, there’s this need to really lean into like what makes your property stand out. Investors are catching on to that and gone are the days of being able just to buy property, put in beds and like minimal design and it’s going to rent. Like that used to work back in 2017 and 2018. Things have dramatically shifted to now it’s this professional era of short-term rental investing where hosts need to really treat it like

business and when you go into business you’re always going to have a marketing strategy and that’s really what design is. Design is the first impression that people have when they’re scrolling on Airbnb and it earns the click and it essentially earns the bookings if you have the great design and experience and then you have the other amenities and the bed count to support a group wanting to book you’re going to earn that opportunity. ⁓ So that’s really how Somerled has been supported. We’ve really grown significantly

in these four years of business. And I think it’s largely attributed to this mindset shift that design is not just, an expense that I have to buy furniture. It’s an investment that with great design is going to stronger returns.

Michelle Kesil (07:02)
Yeah, can you expand more on how design creates a better investment strategy and better returns?

Bri West (07:11)
Yeah, absolutely. it’s all of it is just down to like the marketing principles. And when you’re so you’re a host buying a short term rental, when you’re entering that into a market, you can look at all the comps and there’s average properties. And if an average property will look like beds and some minimal design and the returns are average. And the reason for that is you’re not selling something that is worth

more than just the price of sleeping in a property. When you create an experiential design, you’re now tapping into this audience who is willing to pay a premium rate because they’re staying there for the whole design experience and also the amenities that you provide. So from an ROI standpoint and any business, when you’re looking at like maximizing ROI, it’s like, where are you investing to be able to increase your pricing? And also for short term rentals, occupancy plays a huge

factor in it too.

if you are the standout property in this market, you’re going to get bookings farther out in advance, which is a really healthy sign that you’re able to really like charge a premium and hold on to those rates because you’re getting the bookings far out and you’re not dropping price to really just fill your calendar. So that is like a simple way to explain ⁓ how design really does have an impact in ROI.

It’s all about being the top of your market and

just being able to charge the premium rates because if you’re an average looking property, you will just be competing on price and having to lower it and lower it to get your calendar full.

Michelle Kesil (08:47)
Absolutely. And what are the components of design? Is it just upscale furniture? Do you do specific themes based on the town? How do you come up with the designs?

Bri West (08:47)
Thank

Yeah, so I’ll kind of walk you through the different pieces of our philosophy. So when you start working with us, and this is just what I would teach anybody, even if they’re gonna go do the design on their own, you know, it’s really tempting to jump in and start looking at Pinterest and start shopping, but I would strongly encourage you to not do that. Like take a step back and remember, this is not.

a house for you to stay in. There’s a specific traveler in mind and so you’re designing for that person. So the first step, we call it our data gathering stage. We’re not drawing any conclusions yet. We’re just pulling as much information as we can. So we rely heavily on AirDNA, which is a software company, and also Strike, which is another software company. They both have different strengths, but we’ll look at those platforms to analyze the competition in the area and we’re just taking notes on what are other people doing and we’re specifically

looking at the top performing properties because that is where we want to be to have the best returns.

And we’re going to know what amenities are they offering? What are their bed counts? What type of design do they have in their homes? Then we’re going to look at the market as a whole. Why are people traveling here? What’s the seasonality? What types of groups come here? What events? What is like the feeling of the market itself? It might be an immature short-term rental market where the design isn’t great.

but we can look to the market to tell us, what is the overall feeling and reason people are traveling? Then we’re going to start drawing those conclusions. It starts with our target audience. So when we’re looking at a target audience, we want to discover which group, well, one, where we have a property itself. So sometimes that will determine the audience. If it’s a large home, okay, then we can go into bigger groups and multi-generational families potentially. If it’s a small home, then that’s going to also limit us. We look at the home size, but we’re also looking at which

group will be willing to pay that premium rate. That’s really key because there can be a lot of different reasons for travel, but when we’re looking at, let’s take a market like Kissimmee, Florida, it’s close to Orlando, people are traveling there for work reasons. A lot of school groups travel to Orlando for like competitions and events, but then obviously there’s the Disney goers. So when we look at those different sectors of ⁓ type, you know,

audience is coming to this market, well, who is going to pay the premium for the experience? It’s the Disney goers. Those are the ones that are setting aside funds for their vacation and want the experience and will justify that cost. Whereas if you’re coming in for work, you’re looking for a cheap

You’re not going to really be spending

at the home. So it doesn’t matter if it has all these amenities. You just want a bed to sleep on and then you’re going to go do your work conference. So we’ll narrow down that target audience and we’ll start studying them.

And it’s more about what are they looking to get out of their vacation.

rather than like who they are back at home because I could go on vacations for a lot of different reasons. Like I could go to Nashville with my girlfriends and that’s a different feeling that I’m looking for than when I go to a cabin with my family. And we’re gonna start like writing down all of those feelings because that is key for our next step, which is then formulating the design vision and mood board. So let’s say it is a moody like cabin. Like I want to go to the cabin. What are my, what’s my reason for going there? Well, I want to kind of

escape

my day to day. really want to unplug. Maybe I’m coming going with my family. So I’m going to be spending a lot of time in the property probably playing some games bonding and like if I haven’t seen you know my

brother and nieces and nephews for a while. Like I want to spend time with them. So then we look at the design and how can we have that feeling? But we’re looking at amenities too. And what can we provide that the Booker will be like, wow, I can see my group in that space. So if it’s a family, pickleball courts are, you know, a huge amenity right now. And because you can just enjoy it with a lot of different age groups, you can play and create those memories, ⁓ theater rooms and game rooms and all of

that our experiences that whoever’s booking typically if it’s a multi-generational family, it’s a female who’s booking either grandma or a mom and they’re thinking about their kids and they want their kids to have a good time. So we’re just gonna be looking at all of that and then creating the strategy at the very end. Then the strategy is done and that supports the design. The design is really just drawing back to the strategy and making it come to life.

Michelle Kesil (14:06)
Yeah, amazing to think about it from that lens.

And so where do you think some investors go wrong or lose out?

Bri West (14:21)
Yeah, I would say your setup phase is so important and will be like your base for the years that you’re gonna hold this investment. And if you design and set it up in a way that isn’t standing out in your market and you’re just kind of blah and people scroll past you, or if you don’t have those amenities that people are looking for or will pay more for, you’re going to feel that on the backend.

that you probably won’t earn what you wanted to earn and you may see diminishing returns as years go on because pretty much every market in the United States is getting more saturated. So you want that set up to be a strong strategy from the beginning.

Michelle Kesil (15:45)
And where do you envision like the short-term rental market moving into?

Bri West (15:52)
I think the gap between where Airbnb’s were when they started.

actually, I’m pretty sure this is true. I’ve heard the story of the naming of Airbnb, that it’s because ⁓ this the founder and CEO, he’s from San Francisco, and he was renting out like an air mattress in his apartment. And so it’s like the Airbnb. So like that was the bare the basic, you know, it was just like renting a space. And I think the gap between that and the hospitality industry and what hotels are doing is shortening. So I think it’s just going to get closer and closer to hospitality. And we’re making

sure we stay ahead of those trends by we offer an add-on service for branding. I think branding your short-term rental is so important. It professionalizes your space. I think the biggest thing is it builds this trust. Like when someone is scrolling and they see your first your beautiful design and your photos but then they see a little brand in the corner it

I think it helps the guests feel like this host is taking it seriously and I have more trust in it. Then there’s opportunity with a brand to go and have a direct booking website and a social media presence and really create content and drive direct bookings. And I think that’s also a direction that short term rentals are going, that the top properties will be these amazing properties that are booked out far in advance because it’s such an experience ⁓ that people know about them and share with their friends and family.

So branding is important. And then the hosting side of things too, when you’re at back on like the back end of property management, really making sure like you’re leveling up your game and creating a great like hospitality experience that I think it’s going away where we’re like asking our guests to, you know, do the laundry and load your dishes in your dishwasher. Like they don’t want to do that. They want to feel like they’re coming in and they’re taking care of and they can leave. And, you know, the host is responsible for coming in and cleaning everything.

Michelle Kesil (17:46)
Yeah, that makes a lot of sense. What have been some obstacles or challenges that you’ve overcome and learned from in this role?

Bri West (17:57)
Well, as a business owner…

This is my first business I’ve owned where we have a workforce. I’ve owned little small businesses where it’s just me. You know, now we have a workforce of over 60 employees and a lot of contractors who work for us too. So that has been a great privilege, but also a challenge to grow a team and like grow the operations of specifically our business. It’s a service business and we start over with projects every time it’s a fresh new strategy, a fresh new design.

So the challenges of the operations have just been…

making sure it’s very clear in all of our standard practices, like when someone’s onboarded, they know exactly what to do, the training is clear, they can jump in. There’s so many tedious details when you’re designing a property, because we have standards for thinking about rugs and making sure that rugs are appropriate in a short-term rental. You don’t want shag rugs or light rugs or sofas. We want to make sure they’re durable. Making sure we don’t just overspend. We don’t use

like brand, high-end brand items, because it’s a short-term rental, down to the way that we decorate. There’s so many details because there’s thousands of decisions when you’re designing. So operationally scaling that, which we’ve taken a lot of pride in and we are growing, but we’ve made sure that as we grow, the quality has to be there. So we’ve taken a lot of measures to like quality check it and have multiple hands on the projects, but.

That I would say is the biggest challenge, operations and then, you know, managing the people and the training and all that comes with it.

Michelle Kesil (19:40)
Yeah, absolutely. What are you most focused on solving or scaling to next?

Bri West (19:48)
So yeah, with Somerled, we have, is our fourth year in business and we’ve primarily functioned from referral business, which is amazing. Those create very great client relationships because they’re coming from someone who’s vouched for Somerled and referred them our way. So we always will have that like strong arm of our marketing efforts, but we haven’t really opened the door to a lot of.

you know, outbound effort to go out and find the leads and, you know, cold calling or paid ads. So many different marketing efforts that now we’re exploring. So it’s a lot of experimentation that we’re going through actually in this year to open up new marketing channels, which has been fun. And we’ve caught on to some that work well and just when they work well, doubling down on them. And when they don’t work, then closing that door and saying that’s not for us. Yeah, that’s kind of like

what’s next in our growth.

Michelle Kesil (20:47)
Yeah, amazing what an exciting place to be at.

there any advice you would give to an investor that’s getting started with short-term rentals?

Bri West (20:57)
Yeah.

And I’m still scaling my business or sorry, my short term rental portfolio right now. So my husband and I work together on like the short term rental portfolio. He does a lot in the finding the properties and then my team comes in and designs and manage it or sorry, designs and does the project management. And then he has an in-house team for management. And right now we’ve scaled to 35 short term rentals. We have a couple more that are getting implemented right now. So we’re nearing that 40 mark and we’re going to continue to scale that. So from all of my

my

learnings and investing itself, I would say for someone who’s getting started, it can feel very overwhelming. ⁓ I would say find a good coach and a good mentor. We did that early on.

I don’t know if any of your viewers or if you’re familiar with Michael Elefante, but we were Michael’s very first student. He was just barely getting started on social media and we reached out to him and basically we’re like, can you just coach us one on one? He’s like, oh, I don’t really have like that service offering yet, but we’re like, please just like, we’ll pay you. Like we just want to learn what you’re doing and kind of get over the learning curve. And that was a great investment. We’re still very close with Michael today. But yeah, he basically walked us through exactly what he did. And there’s some great pro

out there. Michael does have a formal program now and there’s some other great coaches. I would say just do that. Like go and learn from someone great and then outsource what you’re not good at.

Especially if it has a return on it, like design you get a great return. Revenue management, if you’re just not great at the revenue management side of things, go find a good revenue manager because they can get you better returns than doing it yourself. Or yeah, basically find what you like and good or good at and do that. And then outsource what you’re not good at and what you don’t like.

Michelle Kesil (22:48)
Yeah, that’s amazing. Thank you so much for sharing.

Well, before we wrap up here, if someone wants to reach out, connect, and learn more, where can people find you?

Bri West (23:01)
So we online are somerleddesigns.com. On our website, you can view our portfolio and learn more about what we do. And then from our website, you can schedule a call. So our calls are free. They’re consultations. They’re 45 minutes. If you have a property that you want to talk about, then they’re 45 minutes. And we run you through an investment analysis where we’re breaking down where we see your property falling in your specific market and what type of design investment you’ll need to

into it from the furniture and the contractor standpoint and also our design fee. So that’s how you can get in contact with us for a consultation call. But if you’re just like browsing markets and kind of getting started in the short-term rental space, you can follow our Instagram. It’s @somerled.designs, and hopefully you can draw some inspiration and start kind of getting a feel for what we do.

Michelle Kesil (23:55)
Okay, perfect, well appreciate your time and your story. Thank you for being here.

Bri West (24:00)
Yeah, thanks so much, Michelle, for having me. This was great chatting with you.

Michelle Kesil (24:04)
Yeah, of course. And for the listeners tuning in, you got value, make sure you have subscribed. We have more conversations with operators like Bri who are building real businesses and we’ll see you on the next episode.