Let me dispel the myth that short-term rentals have to take a lot of time to manage and are harder to manage than other forms of real estate investing. A well-run short-term rental portfolio should take no more time out of you than any other real estate strategy. Because with boutique hotels you have the one thing you need to scale an operation and elevate yourself out of the hands-on management. That thing is the key to your operations, the topic of this post. It’s why I buy boutique hotels. And it’s the most important thing for you to scale your portfolio without your portfolio taking over your life. That thing is revenue. And specifically with this strategy – a lot more of it! The increased revenue allows you to scale your operation and manage your portfolio efficiently.
Setting up your operations the right way is more time and effort upfront, but a lot less on the backend – IF you do what we discuss in this article. That is the dichotomy of STR management – working more (for a time) to work less. I’m going to share with you guys how I have been able to manage a large portfolio of 85 STR units across 3 markets across the country while still having a full-time job being active duty in the military. If I can do that, you can manage your first boutique hotel – from anywhere – maybe while you still have a job that you are trying to get out of. And what we’ll talk about in this article will enable you to get out of that job faster without creating a new job for yourself. I want to share with you the key systems, automation, and how to build your team so that you can scale as big as you want while staying out of the day-to-day operations so you can focus on being the CEO of your business.
Automation
Now the truth is, if you want completely passive STRs – go hire a management company and pay them 20-25% of your topline revenue. But even that might not be as passive as you hope, and your listing performance might slip because no manager is going to care about your listings as much as you do when they have a bunch of other client listings to focus on too. I’ve experienced that with two different property managers because I didn’t want to think about the management and just wanted to focus on growing and getting more properties. It bit me both times, and I’ve heard that same story countless times from others. You end up dishing out 20% or more of your earnings and in return get lower-performing listings, so you get hit twice. In my opinion, the way you have better control and better financial performance is by paying yourself that 20-25% management fee and building your own in-house management company.
The key to that is automating your business with technology, systems, and people. And everything you do should be with the ultimate goal of automating your business with these things to remove yourself. By doing so, you are going to clear the way for other people to step up and drive the growth of the business more than you alone could do. If you find a billionaire who got to be that way by building a business that had no employees, you’ll probably find them sitting in a pot of gold at the end of a rainbow…. on Mars.
Tech Stack
Such a big piece of automating your boutique hotel is your tech stack. And a question I get all the time is what PMS I use. Let’s start there because this is the most important part of your tech stack that enables the automation of your hotel. I use Guesty for Pros and that is the hub of my tech stack. And that PMS allows me to distribute my listings with all the OTAs like Airbnb, automate my messaging and calendar management, and more. And from there, I have key functions that are integrated with my PMS like dynamic pricing, lock management, guidebooks, and everything else I need. These key pieces are how you automate most of your business, and it’s very affordable to do.
Guest-Proofing Your Boutique Hotel
From there, you can put systems in place that make the management pretty easy. What’s cool about this asset class, especially with about 40 units or less on one property, is that you can run lean. And I say under around 40 units because in that range you don’t need the setup and staff of a typical hotel. This is to your advantage because of the technology and systems that you can use to replace labor, and that lowers your labor costs.
One of the surefire ways you can do that is by eliminating the front desk. I’ve converted all of the offices at the hotels I’ve run into either rentable units or workspace and storage for the staff. You could even turn it into a shared common space or lounge for the guests. Whatever you convert the space into depends on your need or the best use for the space, because the point is, you don’t need it due to things that you can put in place to run your hotel without a check-in desk and front desk staff.
The first and most straightforward is your listing descriptions and automated messages. Your goal here is to describe how the hotel is set up and properly set expectations with your guests. If they know what they are getting into before they arrive, and their expectation of that is met, no matter what that is – even with basic hotels- then they are more likely to enjoy their experience and leave you a good review. And over-communicate so guests know what they are getting. The truth is with today’s short-term rental market, and the expectations of guests, they want the ease and efficiency of self-check-in and do their own thing without interacting with staff. So you describe that in your listings and your messaging and picture it in your listing photos, and that is the first part of eliminating the need for a front desk and other typical hotel operations.
The next piece is smart locks to enable guests to check in on their own without coming to the front desk. Instead of coming to the front desk to get their key card and then go to their room, they book their room online and get a door code that is generated for their stay and they can go straight to their room and check-in. I use Schlage Encode smart locks and Remote Lock which is software that connects to our PMS to create a new code for every reservation. The locks are wifi-enabled so they connect to the PMS and each time someone books, a new code is generated. That takes lock and access management off your list of to-dos and makes the check-in process automated for you, your team, and your guests.
Another piece of running your hotel without staff is having a way for guests to get things they need, like extra toilet paper, or more towels, without having anyone there onsite to get it for them. This is where your guest closet comes into play. And it’s super easy to set up. You can convert a storage or housekeeping room at the hotel into a guest closet with its electronic keycode lock and then stock it with all the extra amenities that a guest might ask for. And when they do, you (or your team) give them the code and they can go grab it themselves. This saves you from having to go out and get them these things, or dispatching someone on your team and having to pay them to do so. Again, guests today want convenience and speed, and with this, they can get it on their right when they need it. And this is mainly for after-hours situations because during the day when your team is already there, they can get it for the guest and show some hospitality at the same time. The guest closet covers you for when you don’t have people there and eliminates the need for someone to be there all the time.
These are the main things at the hotel you need to stay hands-off and need less staff for your hotel. But what about everything else? All the questions, inquiries and concerns that guests bring up. Because with all the extra rooms on site, servicing and responding to all your guests is a big part of your operations.
And because I want you guys to be armed with the things you need to go out and find a deal, and be able to operate it. Or maybe what brought you here is you have a deal under contract or already bought one and are trying to figure out how to run it, or run it better. So below is a link to a video series I put together to help you build your operations team and the tools you need to put in place to run your boutique hotel efficiently. My goal is to make my free stuff better than what you’d pay for elsewhere and I want to make this stuff accessible to you guys. So check out the link below if you want that, and reach out to me directly if you need specific help for your situation.
Systems
This is where I want to talk about the systems you put in place for your operations. And probably none is as important as your systems for messaging and responding to guests. Because nothing extrapolates the demand on YOU like the demand of your guests. More guests means more turnovers, and supplies, linens, and even maintenance issues – but all of those things have service providers that are usually happy to take on the extra work and you can get bulk discounts on those things and keep them off of your plate. putting systems in place to manage that increased guest demand is what turns your boutique hotels into a scalable business.
The first, most high-touch, most important aspect is your guest messaging. This is also the first thing you should get off your plate because it takes the most time. I’ve got a little story to bring this to life. At the height of my portfolio once my 5 hotels were renovated and opened, we had 85 units and we would have hundreds of message threads per week, and thousands of incoming and outgoing messages every single week. And I knew at the start before all the hotels were live that it was going to get to that point, and I didn’t want to be the one – couldn’t be the one – messaging all those guests. So I started to look for a way to outsource the guest messaging from the very beginning. That was one of my nonnegotiables as we were planning out and renovating the first hotels. Because I did all my guest messaging up to that point with my 8 units. That was pretty manageable, even with working full time, but I knew going from 8 to 50 units in a few months was going to be unsustainable for me to do all the messaging. And it was – really for any ONE person to do. That led to the development of my eConcierge team, or virtual assistants who are our virtual guest service reps and do all the guest messaging, resolution requests, reservation changes, and so on.
So your eConcierge team, or virtual guest service team – whatever you want to call them – is probably the most important part of your operations from a timesaving AND quality of service perspective. And we decided to go with, and still use, VAs from the Philippines because we hire them between $4-6/hour, which is really good pay in the Philippines. We hire (pretty exclusively) people who have worked in customer service for Airbnb or one of the other travel companies who have been trained by those companies and already understand how to deal with guests. Sometimes the language barrier and how they communicate is not 100% how we’d want it, but that’s a video for another day. Overall they do well – or at least can with good training and quality control checks from you. And that’s where your system for finding, training, and continuous improvement of that team becomes important. It’s a function of your business like sales and marketing that is always going to be improving. The point is, that it gets the most time-consuming part of the business out of your hands and is good enough, and only gets better with time and focus.
Another system in your business that is going to be crucial is your system for getting good reviews. Your reviews are always one of the most important parts of your STR business, but they become even more important with your boutique hotel because you have more units that are all getting reviews for the same property. If you are used to managing reviews for a single STR house and going to a 10-unit boutique hotel, your reviews are essentially 10 times more important. Think about that. Reviews are the lifeblood of your business so a good system in place that earns you more good reviews leads to better listing ranking, more views in search, and more bookings.
What I have in place, with the understanding that guests are 70% more likely to leave you a review if you simply ask, is – we ask. And not just once but we follow up and remind the guest as well. And the great part is, that most of this is automated. We have several review requests that go out to guests through our automated message flows. And for us, it’s not just asking, but how we ask and when we ask. How we do it is a little tact mixed with hospitality. We want to thank the guest, wish them a good stay and safe travels, and say if they had a good stay we’d appreciate a 5-star review (we call out 5 stars to set the expectations) and we say if anything was wrong please let us know here so that we can handle it right away. That way if they experienced anything undesirable they can let us know rather than it show up in the review. And then when we send these is right when they check out. We want to be top of mind at the end of their stay when the experience is fresh in their mind. We also send reminders the next day and then before the end of the review window. And for those who do leave a 5-star review, we also manually message them (our eConcierge team does this) to send our Google review link and ask they also leave a review of their good experience there so we get double reviews from those who are already our brand ambassadors – because they already left us a great review on that platform they booked on. And that helps with the brand of the hotel and the SEO to drive more direct bookings. If you do those things you’ll see a big increase in your business just by focusing intently on your reviews, knowing the impact they have on your business. More systems are important for your business, and that is what the link below dives into. I wanted to give you the biggest most impactful items here because if all you did were these things, you’d be able to run your hotel efficiently and profitably.
If all of this sounds overwhelming and you feel like you could benefit from private consulting/training, reach out about my Boutique Hotel Mastermind program, and let’s discuss if it’s right for you. I’m confident my Mastermind is the best product on the market for Boutique Hotel Investing.
Building Your Team
Now building your team as you scale, just like the eConcierge we talked about, is by far and away the most important part of your operations. Because you can’t do everything yourself. Even if you hire someone who does a task 70% as good as you, as you scale up maybe that turns into two people at 70% of your production, but together they are at 140% of your production. And by outsourcing, you free yourself to be the CEO and not your employee.
The structure of your team depends on the size of the hotel you purchase and operate, and the cool thing is you can create an efficient management structure from the start. What you are aiming for is a revenue target, not a unit count. The unit count is just a vanity metric. Even with my 8-unit hotel that only grosses about $220k per year, I’m able to outsource the admin. And with my other short-term rentals close by I’m about to afford to pay a location manager to oversee that hotel. My total revenue from all my STR units in Florida is between $450-500k so that allows me to build in the OpCo structure to be in a management and leadership position, rather than messaging guests, replying to reviews, processing resolutions, and so on. So that’s roughly the revenue where you’re able to build an efficient, lean team. And you can get that with 1 hotel pretty easily. And as you build up your portfolio you can think about scaling in tiers, each level adding more systems and people and elevating yourself up to focus ON the business and not working IN the business.
When you start on the smaller scale at tier 1, around 10 units or less, likely all you can afford is your cleaners and contracted handyman, and your virtual admin and guest service positions. And that’s okay because that’s all you need at this stage. And if this is where you start, you’ll have to be more involved and still do all your pricing, resolving guest issues, and scheduling but again that’s okay – because you’ll learn by doing and get better for when you scale to a bigger property. At this stage, you are the business. You wear all those hats and do all the functions aside from the guest messaging and admin – because that’s your foundational piece that we talked about earlier that you can hire virtually for pretty cheap. And that alone takes a lot of the work off your plate. And if you find a really good cleaner who is responsible and can supplement some on-site presence for guest issues then you’re rocking and rolling. This is the stage that I’d be at if I just had the one 8-unit boutique hotel that I mentioned – able to outsource just enough, but still really involved.
Where it starts to get fun, because it becomes much more efficient, is at the tier 2 scale where you can get 10-40 units because then you can hire out key functions and free yourself up even more. In that size range, you can hire a property manager for that hotel, or group of hotels if it’s 2 or more properties that make up that unit range. What I mean is an in-house property manager, not an outsourced 3rd party manager. And your property manager becomes the filter of guest issues for that group of units and provides another layer between you and your guests. That elevates you out of a lot of the mundaneness so that you can focus on higher leverage activities and deliver more value to your business. And the key is finding someone responsible, training them well, and giving them the power to make decisions. That is what they are there for. If you just have a person in place that comes to you for everything, you don’t get to elevate and you are doing their job for them. So be careful of that. Also at this scale, you can bring on a virtual or in-person operations manager to handle all the higher level admin and backend operations, listing management, processing payroll, and things of that nature – all the things that have to be done, just not by you. This is the stage that I got to once our first two hotels were completed, it was 32 units and just over $1M in revenue. I had the property management, cleaning, and all the backend admin accounted for and was a manager of all the areas of the business. It was a good place to be in, especially after grinding through tier 1, but there was still work to do.
The next tier is where you gain a lot more freedom. Tier 3 is where you begin to hire people for functional responsibility, like a revenue manager, a sales and marketing manager, a head of guest experience, HR, and even a director of operations to replace you as the manager of all those functional heads of the business. This occurs in the 50-80 unit and above range. And this is where you pivot to a leadership position and can focus on the vision, growth, and the things that fire you up as an entrepreneur. Having scaled through all of these stages, I can say this one is the most fun. Because you are no longer the one putting out fires, you hire competent people to do that and you lead them in your pursuit to make the business great. And this is why I like boutique hotels so much because it only takes a few purchases to achieve this level of not just financial freedom, but lifestyle freedom as well. It takes a lot longer to do the same thing with residential short-term rentals. This was the stage I got to once all 5 of my hotels were operational and we had the revenue to outsource the functional responsibility of the business and were tracking to $3M in revenue. At that level, I was leading from the top, providing insight and leadership to the managers and working to push the business forward but only spending a few hours a week in the active management of the hotels. It took me 5 hotels to get there because they were all 15-20 units, but it could likely take you less if you have the right help – and that’s what I’m here for.
Scaling through these tiers you go from being a worker in your business, to being a manager of your business, and on to being the leader of the vision. At each step you learn, you hire, train, and document the process of what you are doing and give those to the people you hire to then be in charge of doing it. In doing so, you’re creating a business at the same time as your boutique hotel empire. That creates value for you, your employees, your investors, and even your guests because they are getting better and more focused attention. All of this is possible because you are investing in a scalable asset class with enough revenue to invest in the technology, systems, and people to create a cool, efficient business that removes you from having to do everything yourself.
Shoot me a DM on Instagram if this brought you value! @BlakeJDailey See you guys in the next article.
