Heather Bayer
In this episode, I'm talking with Lukas Krause, the CEO of SkyRun Vacation Rentals. Lukas grew the largest single family property management company in the US and authored the motivational book The Business of You. Now, as CEO of the franchise company SkyRun Vacation Rentals, he helps property managers overcome market challenges, grow their businesses, and thrive in a competitive landscape. As an alternative to the conventional method of starting up a vacation rental business, this is a fascinating look into the ins and outs of the franchise model.

Heather Bayer
This is the Vacation Rental Success Podcast, keeping you up-to-date with news, views, information and resources on this rapidly changing short-term rental business. I'm your host, Heather Bayer, and with 25 years of experience in this industry, I'm making sure you know what's hot, what's nothing, what's new, and what will help make your business a success.

Heather Bayer
Well, hello and welcome to another episode of the Vacation Rental Success Podcast. This is your host, Heather Bayer, and as ever, I'm super excited to be back with you once again.

Heather Bayer
So I've been out in town this morning, and it always strikes me as I'm driving through my little town of Huntsville, and that's Huntsville, Ontario, not Huntsville, Alabama. It always strikes me how many coffee shops and fast food restaurants there are. And I know from my visits down south that there are way fewer fast food joints here than there are down there. But in England, we just didn't really have them. I mean, I know there's a few around now, but not many. But in my Canadian world, there's a Tim Horton's coffee shop on just about every corner, and I'm always amazed. I'll go out and say, oh, it's another Tim Horton's. And I've always been fascinated by franchising, you know, why people get into it, the benefits they have, and the challenges they undoubtedly face in maintaining a standard set by the franchisor. So I can walk into a Timmy's in any part of the country, ask for a steeped tea with single milk, and know it will be just as good in Newfoundland as it is on Vancouver Island. And if you know my obsession with tea, I do know the difference between a well-steeped or well-stewed cup of tea. And Tim Horton's always produces a well-steeped cuppa. So that aside, today's guest brings a wealth of experience and insights into the world of vacation rental management and franchising.

Heather Bayer
And over the last year or two, we've heard a lot about the concept of franchising as it relates to our business. And there's some really well known and notable companies helping entrepreneurs step into a property management role in this way. Of course we know what this entails. We know the passion that needs to be behind it all and the hard work that it takes. So I'm really interested in what it takes to be a franchisee, because I'm sure when people go into franchising a Tim Horton's or even a McDonald's, they may not be interested, particularly in the product. They're simply out there to create income. But our business to me is so different. So I want to know how much experience is needed before someone decides they want to build a successful business in property management. I mean, do they have to have been a property manager before or have owned homes? Or maybe they don't need any experience whatsoever? I don't know. We're going to find out.

Heather Bayer
Lukas Krause has been the CEO at SkyRun Vacation Rentals since mid-2021. But his journey in property management began long before that. His previous company grew into the largest single family property management firm in the US, overseeing a staggering 65,000 homes. So we're going to talk about the difference between residential and vacation rental management and how his experience of the latter translated into our short-term rental world. Lukas is also an author and educator. His motivational book, The Business of You, has inspired many to take charge of their professional lives. But today, we're diving deep into the fascinating world of franchising within the vacation rental industry. We're going to explore how this model can be a game changer for property managers looking to grow their businesses and navigate the challenges of today's market.

Heather Bayer
Okay, I am super excited to have with me today Lukas Krause of SkyRun Vacation Rentals. We're going to be talking about franchising today, which, as I said in the introduction, is something I'm really, really curious about. You know, I was talking, Lukas, about Tim Horton's here in Canada, which is a massive, massive franchise. And knowing that I can go to Newfoundland and get exactly the same steeped tea as I can on Vancouver Island. And that's the magic of franchising, in that context anyway, so we'll be coming to that. So welcome. Thank you so much for joining me.

Lukas Krause
Hey, thank you. Great to be here.

Heather Bayer
Let's kick off with a little bit about you, where you came from. I know you managed a massive portfolio of single family homes before you moved into vacation rentals, but tell us about that and tell us about that transition into what I think is just such a completely different world.

Lukas Krause
Oh yes. I'd say the last 15 years around real estate, very interesting. Went from very long-term rentals, annual leases, to corporate housing, which was a little bit of mid-term type rentals, to short-term rentals. It's interesting how the time is changing for me here, but no, got into the long-term rental space in the single family in the 2011 timeframe and really led a turnaround for a franchise company and really helped them scale. And we grew it to over 65,000 single family homes under management. And what was really interesting, it was a very fragmented, unsophisticated space at the time. We came in with really high-end service for our homeowners, taking care of their assets and really trying to find those right tenants and fitting what we were trying to do with each of these homes and having great partners there. So I think we had a great formula where we were able to add a lot of value, not the low cost provider, but provide high-value, then spent a little time after that business got sold in the corporate housing space. And if people who aren't familiar with corporate housing, that's really people getting relocated or on assignment, and usually are there for average 60-70 days.

Lukas Krause
And so not the same velocity as a short-term rental as you would see here, with our average stay maybe being four to six days in most markets. But what's really interesting, I took that through COVID, and that was quite challenging, as you can imagine, because all that's tied to business travel, and we were able to get the business through to the other side and really thriving today.

Lukas Krause
Been in the short-term space now about three years. And when I got to SkyRun, it was really similar to what we saw in 2011 in the long-term space. Very fragmented, local kind of competition, but a huge investment in data, technology and this tidal wave. And as you know, post COVID, everyone was jumping in the space. It was very attractive. And so I know we'll dig deeper into maybe what's going on at a macro level, but you can see the byproduct now of all this investment, all these people jumping in, because it's a hot space to play.

Heather Bayer
I know up here in Ontario, I thought we were, come 2021, and everybody's wanting to buy and invest and put what they've bought and invested into the short-term rental market. And I remember that it was a year of at least one owner inquiry every single day, and we'd never seen anything like it. And they were all looking for the same thing. This is real high return because they'd invested right at the high end. I remember going out to see a property with an owner who was seeing his property for the very first time. He'd bought it sight unseen, and he was going to view it for the first time with me in tow. And I remember crossing my fingers thinking, I do hope this is rentable.

Lukas Krause
It's eerily similar to what I saw in the long-term space. After the housing bubble, individuals were upside down on the homes, and so their expectations of what rent was was more about what their obligations were. And we saw the same thing with housing values going up. We have a lot of late investors coming into the short-term space, and they're hoping that the home is going to generate, you know, $100,000-$150,000 to cover their costs. And you're like, it's not going to cover quite that, especially as we've seen a little bit of cooling in the demand, especially in those shoulder seasons. Right? People are now kind of, I'd say, selling back to a norm, even though we're well above where we were in 2019. It's off some of those peaks. And obviously, when people entered here in the last couple of years, they entered at really a high entrance point when it came to price.

Heather Bayer
Yeah, yeah, I know this. My company sold in 2022, which was....

Lukas Krause
...Opportunistic!

Heather Bayer
Yes, maybe..... It was a great time to sell.

Lukas Krause
Kudos to you.

Heather Bayer
But, all right, let's stick with the short-term rental market now. So property managers, I hear a lot from property managers on LinkedIn, on forums, on Facebook groups that they're struggling. There is no doubt there is some downturn at the moment. There's some maybe not so much a downturn, but slowing as we were just talking about, because people are still impacted by what affected them in those 'hyper-years' let's call them. But what do you see as the biggest hurdle for these small property managers right now?

Lukas Krause
I think there's more competition because, as we talked about, there's more inventory that came on. And so if you're not on your game when it comes to pricing, merchandising it on Airbnb and Vrbo and really making sure the home jumps out, it is a little harder to stand out because inventory has gone up. As you mentioned, people were buying homes. This was a space people ran into. Even people converted single family or long-term rentals to short-term rentals. So I think you have more inventory with a slight headwind, and it's just putting more pressure on individuals to have their game together. And as you know, a lot of people entered this space with big hopes, but they were kind of lagging behind everyone else. And so they're just cutting their teeth and learning. So they're struggling if they're not doing a great job on the integrations with most notably Airbnb and Vrbo, on those channels and merchandising well. And then when it comes to sophistication with pricing, if you haven't embraced that, given there's more inventory and that we've been riding the crest down on demand a little bit, it just puts pressure if you're not dialed in, you're feeling it.

Lukas Krause
But our system is up. As a group, we've been big advocates of growing our inventory and really staying on top of pricing to make sure we're managing occupancy. We did not want to be a late mover on pulling nightly rates, just because you could see it. And so I think the by-product of that has allowed our system to be up. But we've also stayed on our game to make sure we can stand out and our properties do.

Heather Bayer
So your properties are spread out, your franchises are all the way across the US. Give me some examples.

Lukas Krause
Oh, so, I mean, we have, you know, from Kiawah Island in South Carolina down to Sarasota, Florida, all the way to Orange County, San Diego, California and everything in between.

Heather Bayer
And the companies themselves, how large are they on an average? How many properties, how many employees?

Lukas Krause
So starting out, most people come in because they're usually leaving corporate America to start a business. Start with zero. So our whole model is about helping individuals come into the space, build a short-term rental management company. And, you know, we have individuals, over 200 properties. We have individuals at zero. And it just depends on where they're at in the lifecycle and supporting them. And I know you can appreciate, you know, you, the average in our right, in across the country is most people are in that kind of 15-20 range and have a nice little business. And I think as a group we're well above that average, because we have individuals who are pretty ambitious. But these are, it's a blessing and a curse. You can make a nice business at 15-20 properties and you have to have the ambition to kind of push through, get to 30, 50, 75, and you know, at 100 properties they are very meaningful businesses. But the operational complexity gets a little harder too.

Heather Bayer
I remember a number of years ago I interviewed a couple who ran a small company on the Sussex coast in England. And they had deliberately said, we will never go up more than 50 properties. That was it. That was their ceiling. And they were super, super happy. They knew all their owners, they knew their guests because they came back over and over again and they were comfortable. And then I talked to others who it's just like, I'm heading north of 350 now and going for my first thousand.

Lukas Krause
And the business changes. It's dramatically different at each phase. And that 10, 15, 20, you're in the operation, you're running it likely in a general manager. You have a team. As you get over that 20 market, it really evolved to more almost a departmental model, you have a team. Fifty, that's when you start to hit the inflection point with a lot of velocity and you've got to get your systems and processes dialed in and then you get to that hundred, which is kind of that next pivot point is a pretty material investment when it comes to staff, infrastructure and technology. Because just given the velocity of these businesses, it just puts more and more pressure on having everything dialed in, because you go from a few hundred reservations to a few thousand a year. Those are completely different businesses.

Heather Bayer
So I want to talk about franchising itself in a moment, but help me out on something, because my company was direct book from the very, very beginning. We started in 2003, so there wasn't much else out there but direct booking. And I'd been in the industry since 1998 anyway, so that's really all I knew. There was a comment on my Facebook group a couple of weeks ago from somebody talking about being a property manager, but then when we teased it out, they were actually co-host. So how do you see that Airbnb co-hosting business? Is there a big gap between that and actual property management or is co-hosting property management in itself? I know this industry, we get into these arguments about how we term things like short-term rentals or vacation rentals or Airbnbs. But how do you...

Lukas Krause
...It's all about branding...

Heather Bayer
Yes. So what about co-hosting versus property management?

Lukas Krause
I think co-hosting is kind of property management 'light'. It's almost like a la carte, where certain elements of the property management you're not taking on. I think that can almost be more challenging as, you know, not having some of the control elements to kind of own the process from end to end. And as you know, the farther extreme as you get to co-hosting is kind of some of the least arbitrage. And that can obviously get very complex as you're managing that, and now you have a lot more exposure when you have that lease. We provide, and really our specialty is end-to-end property management. We found that works well. And we try to be really selective, the homes we choose and the homeowners to fit our model. We are not the low-cost provider. We try to provide the best value. We believe we can provide a great experience. Our system averages just under 4.9 stars out of five with over 600,000 previous guests. And we're really thoughtful on our integrations and we believe we can generate more income for homeowners. So we try to be very selectful, selective, you know, thoughtful, just like you're couple in Essex. We do want to grow, but we also want to grow the right way with partners that fit into the model.

Heather Bayer
Yeah, okay. Let's talk about franchising then. I mentioned Tim Horton's and that's clearly a franchising model. What is franchising in short-term rentals or vacation rentals? What's it all about? And how does it fit into the mainstream?

Lukas Krause
The way we view it is, we're a training and support organization. We're helping individuals have the dream of business ownership, get into the business of short-term rentals. So our whole goal is to provide an end-to-end solution and turnkey support to launch that business. So that means from basic training at starting out, most of our individuals who come in know nothing about short-term rentals. So we have our boot camp. Then there's, you know, we're training on every aspect of the business of client acquisition, marketing, business development, with a sales trainer, all the way through the operations, using the software behind the scenes to working with data scientists and revenue management. And we take them through this whole learning continuum. And once they get up and launch with homes, then they have business coaches that are working with them and support them. And the nice part of a franchise model is you have part of a national brand that advertises, but you also have 600,000 previous guests that we remarket to. And just as you talked about with your business being direct booking, a third of our bookings come from direct.

Lukas Krause
And that comes because we provide a great experience and we can remarket to them. So really we're there as support. And I'd say the last and most important thing also is you're part of a community, you know, being part of the trade. Associations are great there is a lot of value in there, but it helps when you have peers who are looking out for your success and they care for you and they're not viewing you as competition. And so the idea sharing and the best practice, our network really breeds just great operations and supporting each other.

Heather Bayer
So if somebody's thinking about franchising, where do they actually start? What is the first step?

Lukas Krause
SkyRun.com is probably the easiest place to find us and then our franchise development team will walk them through. It's a ten step process and trying to understand what their business objectives are. And we're really open about what the cost is, what it's really gonna take to launch and succeed. And so we take them through that whole journey and eventually they're meeting with other franchisees to understand it. And so we try to make sure that everyone knows what they're getting into. Well, before launching, and as you and I joked about before, getting into property management, short-term rentals, it's not for the faint of heart. This is a lot of work. And if anyone tells you it's easy, run....

Heather Bayer
Yeah.

Lukas Krause
But it can be rewarding.

Heather Bayer
We've seen so much. I mean, certainly over the COVID period and the little bit beyond,  all the "you can make millions in Airbnb without lifting a finger." This whole issue of it's passive income, passive it is not.

Lukas Krause
I've been around starting businesses and helped 10,000 plus people start businesses and I've not seen one that was easy to me. Like I said, starting a business can be one of the most difficult things you can do, but also can be one of the most rewarding. And that's, I truly do say it, I say it because we have a CEO call with prospective franchisees and I'm like, this is not easy. And if anyone tells you any other franchise or any other business tells you starting a business is easy, just run. They're lying to you because it's just not.

Heather Bayer
You wrote a book called The Business of You. Tell us about that and how that all ties into how you motivate people when they come into this industry.

Lukas Krause
That was a passion project. That was while I was running real property management in the long-term, we had acquired a call center business. Life was crazy. And I have this passion around development where I take most pride and we've been able to help multiple businesses become the largest in their industry. But the pride I really take is the lives we change and the people we help develop, the leaders and people who are promoted through that who are running that company today. That, kind of, climb through the ranks. That's something that is really near and dear to my heart, probably being the product of two teachers. I just love that learning and I had a lot of great mentors that really helped me. And so why I put the book together was really just kind of a roadmap of treating yourself like a business. If you're going to have a job and understand that you are an entrepreneur, you are managing your own career, you're your own CEO, you're your own COO, you're your own CFO. And so it's a model for how to really manage your career and treat yourself like a business.

Lukas Krause
And so it translates quite well to starting a business, because that's if you choose the corporate America path. But it's all the same best practices that you would do if you were starting building your own business. And so we try to really create a learning and kind of growing culture. It's all about getting better and we believe if we develop great talent, everything else kind of falls into place.

Heather Bayer
Yeah. How do you help your franchisees in terms of regulations and legislation? That to me it was like whack-a-mole. Something would pop up and then the moment you sorted that one out, there'd be something else in another area. It's not going to stop, no question.

Lukas Krause
We're active on a lot of different fronts. Support can be for training on how to engage with local municipalities, things that we have seen work. So we have kind of toolkits, but if we can lend our voice and help and participate in different ways. But you know, we're at 48 locations going on 50 probably by the end of the month. It's a lot of different fronts. So our local franchisees are obviously the tip of the spear and running that. But as you know, it takes the community and so it does take the collective. And we really encourage about if there's not an association in the local market, pulling together your competitors and getting everyone pushing in the same direction and also pulling in tangent and adjacent industries. And, you know, the department of the local network of realtors is very important. They have a lot vested in this and different associations tied to restaurants, other hospitality. They're impacted by this. So we really do think it takes the village and we try to support our franchisees in helping them navigate it and a lot of them have done a great job.

Lukas Krause
As you know, we're in the early stages of this regulatory environment. We're seeing some get pulled back but, you know, it's tough because it's very well intended regulations, but it's a little ill-conceived, because we're trying to address a housing crisis and affordability. And, you know, our industry doesn't even equate to 1% of the inventory and housing stock.

Heather Bayer
Yeah, that's the struggle they've been having in British Columbia, of course, which is.....

Lukas Krause
And that has a whole lot of other elements, again, on the British Columbia side there.

Heather Bayer
Oh, yes. Did you hear of the CanStays Rental Alliance Conference?

Lukas Krause
I did not.

Heather Bayer
It was organized by Catherine Ratcliffe, who is such a leader in this industry, but also Canadian. And it helped that her brother is a leading politician in the Canadian government. And so she actually put together a conference which was different from any other conference I've ever been to, because she pulled in politicians from across the sphere, and there were local politicians, there was a cabinet minister, and the conference was bringing together property managers and the independent hosts that were being impacted by regulations, not just in BC, but across Canada. And it was quite an eye opener, and I think it was an eye opener for the politicians because all they hear is Airbnb, because Airbnb is the one that's out there saying, trust us, we're the only one. But I think for these decision makers to actually sit down at tables with ordinary people who are just running their companies and hear from them, it changed their perspective.

Lukas Krause
That's the key. Yeah, that's such an important. We have found that there's been some amazing groups that our franchisees and that we've been involved with in helping and getting with the lawmakers and helping them understand and just hearing the full picture because they're hearing some of the nuisance issues or affordability concerns, and they don't have quite a full picture. We've found time and time again, once we're able to do that in a very constructive way, of saying, hey, we're not anti regulations. We want thoughtful regulations that are additive to not only the industry, but the community as a whole. Let's figure this out. And they understand that. I think when lawmakers get a fuller picture, there's better outcomes. They truly do understand that this is not just simple like, this is bad, this has to go away. And it's really easy for people to categorize things as black or white, and you're like, no, it's far more complex. And, yeah, we do care about that, you know, housing prices, and we do care about that because that is important for our broader economy. But this industry supports so many other livelihoods when it comes to restaurants, bars, you know, ski resorts, you name it, are tied to this industry. And so it's so important to understand the economic impact and maybe some of the unintended consequences of maybe limited thoughts when it comes to regulation.

Heather Bayer
Yeah. I think more conferences or more events such as the one that Catherine put on across North America would probably be very, very helpful. I came onto that because we always encourage anybody that's in property management to get a seat at the table. Dana Lubner from Rent Responsibly  even has this little chair lapel badge now, which she gives to the people who've got their seat at the table. And I think that is really something great to aim for. You know, I want my seat lapel badge.

Lukas Krause
And they've done an amazing group in helping lead the charge on a lot of fronts for our industry. And so we are grateful for them and their efforts.

Heather Bayer
Exactly. So back on franchising, why would somebody choose, if they're thinking about getting into the business, there is probably hefty costs involved in becoming or joining a franchise, whereas they could do it themselves. I mean, I did way back in 2003, I came out from England. I had no clue about the..... I mean, I had a couple of properties that I rented out, but I had no clue about how you managed a property management company. And I started from the ground up and it was tough, but then there was nobody out there that you could ask for help. In those days, everybody kept everything close to the chest and they didn't network and share like they do now. But what would make somebody now decide to go the franchise route rather than the traditional way of starting a company?

Lukas Krause
There are a number of factors when you look at this. First, foremost is managing out risk. You look at the success and the track record of franchises versus starting your own business. It's quite significant, the difference of your likelihood to succeed. I believe it's something like 90% of the businesses that are launched that are just not affiliated to a franchise don't make it through the first year. And so you're looking at trying to manage out that element of risk, because you have a proven model process and system, and then also you have a group behind you that is really vested in your wellbeing.

Lukas Krause
The other is, it actually ends up being probably more cost effective going into it, because you don't have to go through the learning curve. You buy and you pay your franchise fee, but what do you get with it is all of your marketing collateral. You get your website, you get training, you get your business launched. And so that accelerates that learning curve and gets you to a place of viability quicker. You're not going through and touching the hot stove and making those mistakes, of course you're going to make them, but it minimizes those down where it takes less of an impact on that ramp up of viability and it really ends up being more beneficial to your bottom line.

Heather Bayer
So do you have any stories you could share about somebody who did start up from zero and has done really, really well?

Lukas Krause
We have a number of great stories. I've been here now three years and year one was not really about growing. It was kind of really working on the platform, our web infrastructure, new backend technology, we did a brand refresh and so we got a lot of folks who've come in just last two years, but we have individuals who are, you know, less than two years in that have already eclipsed 40 properties. We have one that's not even through training yet in Utah and there are already over 20 properties in their first five months of operating. And so those are, I'm not saying as averages or norms, but we've got people who really hit the ground running and have built some very impressive businesses in short windows. And that doesn't take away from the individuals who predate me, who have over 100, have over 200 and have built some massive businesses. And so, you know, I think the way we look at it is we're trying to support individuals to grow where they want to. And as you again, going back to your Essex examples, we have some individuals who really like having a nice lifestyle-type business.

Lukas Krause
They're maybe not trying to drive it to 100 properties, 150 and beyond. They're looking at, they want a certain segment of the market, they want to have a certain staff size and they kind of continue to top grade their properties while not maybe, maybe growing their top line revenue, but not adding to the portfolio.

Heather Bayer
So I talked this morning, I did an interview with Lorraine Woodward of Becoming rentABLE. So Lorraine is an accessibility advocate and we were talking about accessibility and properties that cater for not just disabled people, but people with cognitive issues, for the baby boomer generation that is getting older. And there's some amazing statistics that came out of that discussion. 26% of the US population has a disability of some sort. That's one in four. And we were talking about how this is a massive opportunity for property owners, property managers to gain some market share. So what is your view on accessible properties? What do you talk to your franchisees about in terms of their properties being accessible?

Lukas Krause
It actually starts even earlier. If you have to go to your website, there's ADA compliance you have to have on just visually. And so obviously you want to be compliant. But what I think is really interesting is I still think that's a segment that is just kind of, I'll say blossoming, but starting to develop. We've seen different niches where people have these wild, I say wild homes, but like entertaining homes with all these games and backyard activities and standing out. And I think as our space is now growing, you're starting to see these lanes and these niches develop. And obviously that's a very important category. And I think part of that will probably come in regulations of having some minimal minimum standards across the board, but not quite regulated yet here in this sharing economy. So I do think there'll be probably opportunity for us as an industry to raise our standards, but I do think that is a great place to stand out. As we were just talking earlier about the inventory has grown immensely. How do you stand out and how do you cater to those different segments? And I say that's a niche, but it's a growing and large niche that needs to be cared for and tended to.

Lukas Krause
And so I think there's probably things to be very opportunistic. Obviously, you have different sets of inventory that might be limited just based off geographic location. You're talking about being in a ski town in Breckenridge, Colorado, that, you know, a lot of stairs. Maybe, you know that those things might not be as accommodating, but that doesn't mean you can't have others in your portfolio that are more accommodating and that you really play that up. How do you merchandise the home?

Heather Bayer
Yeah, it was a really interesting discussion. I'm creating some spin off podcasts at the moment. One of them is going to be about finding your niche, and accessibility is in there, as is sustainability. You know, I've talked to some amazing people who are building businesses that are marketed as sustainable, and that's yet another area. I mean, I love the whole ideas. You absolutely hit the nail on the head where you said, we're into the sort of niche lanes right now because people need to be differentiating. Another one. And you talked about outside amenities. Pickleball is now massive. Talking here as a pickleball enthusiast, when I get off this interview, I'm heading straight out to play pickleball, but it is, you know, so not just for those of my generation, but the average age of a pickleball player is actually 36. So it's growing massively. And I heard somebody say the other day, you know, don't put a swimming pool in. Put a pickleball court in the. Because firstly, it's less money and secondly, there's more people that want to play pickleball on vacation than want to swim in a pool. So, sorry, kids.

Lukas Krause
A lot less liability. Well, there's some liability. As you know, there's a lot of small pickleball injuries.

Heather Bayer
There are some quite major pickleball injuries. I have a friend that I play pickleball with, her daughter is an emergency room doctor and says the amount of pickleball injuries that comes in has just risen dramatically over the last couple of years. So, yes, there are some liabilities. If you got to have a pickleball court, you make sure it is top notch.

Heather Bayer
Let's tip back to franchising a bit. There are some myths, I'm sure, some misunderstandings about franchising. What are they? What do people come to you with objections about franchising and how do you deal with them?

Lukas Krause
We don't run into too much when it comes to misconception. And again, most people who are coming to us are looking to start a business and are familiar kind of the concept of franchising, but often it's trying to understand, like, what does that really mean? What do you provide? And it's defining those lanes where we provide all the tools, training, support, but it's your business to run. And so maybe a common misconception we'll hear is like, well, you're not going to generate all, you know, bring me all the leads. You're not going to close, you're just not handing me business. Well, no, that's kind of not the model. It is like anything, this is real estate, this is very local. And having that, you're going to have the tools, you're going to have the training, you're going to have the support, but it really does become part of being the part of the local community and the local network to really grow. So I'd say that's usually an area of clarity or where we have to add some clarity to help people understand really where the lanes are, because it is their business, it is franchise, it is your business.

Lukas Krause
We have just a shared interest and you're using systems, branding and support of the franchise. But it's yours to run and yours to really grow and prosper. I love where we're at in this space. I think you can appreciate it. You've got a great perspective of our industry and given how much it's grown, it requires a level of sophistication and one of the advantages of some of the larger players. They have access to data, a database of previous guests and access to pricing tools. But if they try to centralize activities, they're missing the heart of the business. The local operators can outflank every day because that's what it is. It is a people business. It's high touch franchise. That perfect cross section of having access to bigger systems and data while having that local touch and that local ownership, and so that's where it ties in very well of we really push because I think that allows us to be the best of both worlds where we are. You know, we have that local touch, but we also have access to that data, that customer base, and are able to, I think, provide better outcomes not only for the guests, but for our homeowners who bought these homes and want to still use them a little bit.

Heather Bayer
So what about constraints? You know, I talked at the beginning about Tim Horton's, you know, and I can buy my steeped tea in Newfoundland and it'll be exactly the same as when I buy it on Vancouver Island. So do your franchisees.... I'm not going to say..., yes, I am going to say...., do they feel constrained by the standards that you lay on them? Are there things that they cannot do and things that they must do and how do you address those or how do they address them?

Lukas Krause
Lay a little context for you and the audience is probably helpful. So food concepts are very rigid. In general, they're going to have the most regulated. You have food safety, they're going to be everything and required where those vendors, because you want that consistent and you go the other extreme. Almost like real estate brokerage, like a RE/MAX Century 21, they're providing very loose systems and marketing materials. They do more than that, but it's just they're the other end of the spectrum. Service brands kind of fall in the middle in property management. We have recommended systems, processes, recommended vendors, and allow localization and, kind of, flexibility around it. As a group, I think we have an opportunity. We don't require a lot as our system, but as we look at when it comes to the linens, the towels, the sheets, the kind of the toiletries and things, that's probably where we'll continue to evolve and have a little more refined consistency across.

Lukas Krause
But outside that, it's just a guest experience. That's probably what we obsess about the most. That has created a virtuous cycle that has allowed us to get a third of our bookings coming back from direct bookings. So for us, and where the restrictions are, if you're not showing up with great guest reviews, what's going on? Is it the wrong property, is it not a good home? Or your process is not right? Because we want to uphold the brand and the brand experience. Even though we're around 1400 properties and growing, it's still just such a small subsection of a much bigger industry. And to us it's about being able to provide better experiences so that we can have that advantage of repeat guests and people coming back because they remember us and they had a great experience.

Heather Bayer
So in general, your franchisees have a fairly free hand in how they run their businesses in terms of operations and hospitality?

Lukas Krause
Yes, yes. And you know, I think there has to be. A beach experience is a little different than what you're going to have at a ski resort, or a traveler going to Dallas, Texas, there's different things we're catering to for that. And so you want to make sure the guest is a little different and what you want to have for the experience and you want to tailor it to them more.

Heather Bayer
So I run a training company. You do a lot of training. How does that work? Do you have people come to you? Do you do online courses and things that they can dip into and dip out of when they need it?

Lukas Krause
Yes, yes, and yes. We have, you know, we look at training as a continuum. We're kind of continuing education. We have online courses to build kind of foundational knowledge. Then we have them come into Denver and dig deeper into the business, learn the SkyRun universe of all tools and resources. And then we have, you know, one-on-one coaching when it comes to sales training. And they have a onboarding specialist who's meeting with them weekly. So we're really trying to support people throughout the whole lifecycle. But once they graduate from training, that's not the end. They have a business coach who's meeting with them on a quarterly basis. We have power webinars where we do trainings on a monthly basis. And that could be a topic relevant to the business or it could be just something in general. Let's talk negotiation.

Lukas Krause
And so we try to create really an environment of learning and growing, and we always take advantage of our conferences as great chances to get everyone together. And we try to be very heavy on that, because as you know, the business grows and it changes and the needs are and your skills are, so as we said, we try to meet and support people where they're at. We have people in a lot of different places in the life cycle. And so our real role there is to really set them up for success to get to that next level.

Heather Bayer
Yeah, talking about conferences, I know 15 years ago there was one, mind you, ten years ago there was only one podcast and that was mine. Now look, there's hundreds of them. But yes, you've got to be selective too, about what you go to. What do you go to? What do you recommend that people...., conferences that people should go to?

Lukas Krause
I think it's go to as many as you can, and get as much information. And I think it just depends on where you're at. If you're part of our system, you know, we have great attendance at our events, and that's really important because it's not only about the training we're trying to provide, but creating more of the community, establishing more of those relationships. I find going to as many of the events as you can, not only for content, but what other vendor solutions out there as technology. I mean, you see it when you go to the trip, basically the floor of the vendor partners. There's so many different, you know, solutions out there. I find that almost as just as valuable getting to spend time and see what is new, what is out there. Keep your finger on the pulse. And then as we've talked about, there's a lot of value of just networking. And so you joke about, right, we have our industry trade associations, and then you have some of these other ones that are popping up around it. And so some of them are general, like the IMNs of the world.

Lukas Krause
Some of them are now data driven, right, in pricing and revenue management. So I think it's really important is to get out there and make that investment. This is someone who believes in continuing learning. So I'm an advocate of really trying to get in as many as you can. Even with, I'll say, conferences that aren't high value, you still can take something away from it and make sure it's a worthwhile use of your time. But it takes an engaged person to get that value too. It's not going to be spoon fed to you often. So you got to kind of go out there and get it. Try to seek value at an attending.

Heather Bayer
Exactly. I like some of the smaller ones. I'll go to the VRMA Conference each year, because I think everybody feels they need to be there, but the smaller ones are more intimate. I went a couple of years ago, one of the first SCALE conferences. The Book Direct Summit in Miami was one of the best conferences I've been to in a long time, and there were 150-170 people there and there was so much value in that. So, yeah, you can get value in just about everything. As you say, if you commit to, you know, go with intention. You know, I'm going to make five new networking friends and check out five new products. Just some sort of intention to get you there.

Heather Bayer
So Lukas, with so many franchise options out there...., I say so many, I know half a dozen. So perhaps there aren't so many. How does somebody pick the right one?

Lukas Krause
I think there's a lot of important things as you look at it. To me, there's a lot of great franchise brands and we always tell that it's got to end the way we preface it with our prospects. It's simple. We're here to help you in your journey of deciding, is this right for you or not? Whether it's our category, us as a business, and I think it's really important to understand who you're working with. So always encourage not only you're meeting the team and the team behind it, but you're also meeting the franchisees base. The other, all those people who with you might be working shoulder to shoulder with you and they're launching their franchises. So asking really intentional questions of how does your franchise base engage, how do you guys share ideas, how do you work together? So that to me is really, I think what's important. And then the practical stuff's obvious. As you go through the discovery process, you'll see what tools, resources, support. But as you're looking at that partner, where are they heading? What is the trajectory? Because it's not a fixed point and so you're making a long-term relationship.

Lukas Krause
It could be a 5-10 years relationship potentially, if not longer. Is this a partner that I want to be with in the long run? I like their trajectory. It's kind of how I view a lot of times when you're looking at software partners, it's not just where they're at today, it's where is it heading? So to me, that's what I've seen with franchise brands, regardless of the industry that are really thriving, have a great trajectory, a great team, but also that special X-Factor is a franchise base that is sharing.

Heather Bayer
So you mentioned that this is the long-term relationship. It's not something you do for six months or a year. How do you see the future of franchising in this industry?

Lukas Krause
I think we're going to see that grow. I think we're in the infancy. As you mentioned, there are a few others that are popping up. It's one I think really fits well in the space, as I mentioned, the best of both worlds where you can aggregate data and have access to bigger buying power for vendor partners and different things, but you still have that local touch. To me, I think franchising is a great spot. It's a great cross section because it's been proven time and time again as these groups have tried to scale. I saw this in the long-term space, it's hard to make it really work once you get to continue scale, you can't centralize a lot of the local efforts, so you can't peel costs and get a big advantage by being centralized. And so franchising seems to be that kind of perfect blend of local, kind of, touch/feel support with bigger data and bigger access to resources and buying power. So I honestly think it's going to be more prevalent. But I'm not one to think that it's going to be a consolidated industry. I think there is, again, it is truly localized and there are a lot of great local strong operators.

Lukas Krause
I just think franchises are going to play a larger role and you're going to see it. I don't think we're going to see as many try to continue to make the investment of going nationally and expanding their footprint outside just owning all their own assets. I just think that there's not as much value in centralizing. I think franchising is where we'll see future growth.

Heather Bayer
So do you take on many companies that are already up and running as property management companies? Or is it not typically more people that are very new to the industry?

Lukas Krause
Very new. It's individuals who are kind of corporate America transplants who got maybe displaced or just not happy with their career trajectory and want to control their own destiny. Often it's individuals who have a business. They've made a lot of those investments in their own website. They've gone through the aches and pains. And it's funny, even though they can benefit, and I've seen this because I saw it in the long-term and it was, you know, really prevalent, was, you know, I don't need you. And even if it could be beneficial, there's a pride I started this myself. I went through the grind. So I'm not, you know, conversions happen, but they're not really a small percentage because in general, I think the individual who is bold enough like you to maybe leave a country and start a business and go through all of, I'll say, the brain damage of launching a business.

Heather Bayer
Oh, thank you.

Lukas Krause
They're not usually in a place to go, Hey, let's just kind of convert that over.

Heather Bayer
Yeah. Okay. How do people find out more about you and the company Lukas?

Lukas Krause
Easiest way is go to SkyRun.com.

Heather Bayer
Just SkyRun.com; that's brilliant. There will be information on the Show Notes for anybody who wants to go take a look, thinking about starting a property management business? Because, you know, this podcast reaches a lot of people who just have their own properties. They're looking after their own and perhaps thinking about where do I go from here? How do I start? How do I get out into this world? And franchising can certainly be a way forward for them.

Lukas Krause
Yes. And that's where we see a lot of people who are looking at this going. This is a great way to scale, and as you know, being on the management side, it's a great way to scale and participate in this activity without the capital outlay of owning the assets. And that can be really challenging, I think, for individuals too, who have grand aspirations of getting this big portfolio. But acquiring a portfolio in today's environment, given the pricing, can be a little more challenging and not as attractive I'll say.

Heather Bayer
Well, if anyone does want to know more, then head over to SkyRun.com and take a look and get in touch with them if you have an interest.

Heather Bayer
Lukas, this has been a pleasure talking to you. I am now fully knowledgeable about franchising in vacation rentals. And, you know, I hope that, and I'm sure that our listeners have enjoyed taking a trip down this lane. So thank you so much for joining me.

Lukas Krause
Well, thanks for having us. It was great.

Heather Bayer
Well, thank you, Lukas Krauss. That was great. I am knowledgeable now about franchising. You know, for somebody who is just starting out, who perhaps has a couple of properties and is having difficulty in scaling, then it may be worth having a conversation with Lukas and his team or any of the other franchisors that are out there, it's definitely a way to go. If you don't want to go independent, do it all yourself. And that may have been the traditional way. It's certainly the way I did it way back in 2003 when I was starting out, but I actually think if, if there had been this whole training package and website and all that stuff done for me, I think I probably would have been looking at the sort of investment costs that are involved in getting that up and running, because it sounds like the support is really, really good.

Heather Bayer
So I hope you found that interesting. This episode is going to be part of a new series that we are releasing on starting a property management business. So if you are hearing this on the main podcast for the first time, then send us a message if you're interested in hearing more about the new show that we'll be producing, if you're interested in starting up a property management business, because we're going to bring you a full education program on it through the new podcast show. So get onto our mailing list and we can send you information as soon as that is released so you can get to me at heather@vacationrentalformula.com.

Heather Bayer
Well, that's it for another week. Gosh, these weeks are going fast. Before we know it, summer will be over. I can't believe it's only four or five weeks now to Labor Day and the end of the summer; it's just going crazily fast. So I just want things to slow down. I want to enjoy the rest of my summer. As I mentioned in that interview, after recording this, I'm heading out to play pickleball, so I will be going out to enjoy the rest of my day outside. I hope you are wherever you are enjoying your day and that you continue to enjoy the summer.

Heather Bayer
It's been a pleasure as ever being with you. If there's anything you'd like to comment on, then join the conversation on the Show Notes for the episode at vacationrentalformula.com. we'd love to hear from you and I look forward to being with you again next week.

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