JF1300: Using The Best Data & Analytics To Optimize Airbnb Properties & Returns with Scott Shatford
Scott saw a huge lack of data and information in the Airbnb area of investing. He set out to scrape all the data he could and provide nice, easy to understand information for investors. Scott also used to be an investor himself but sold his properties to focus on this business full time. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Scott Shatford Real Estate Background:
- CEO and Founder of AirDNA, an Airbnb data & analytics company specializing in Airbnb intelligence
- An Airbnb pro, author, vocal advocate and industry expert in short-term rentals
- Utilizes his 15 years of experience as a data analyst
- Recently launched Market Minder, a competitive intelligence tool built to empower both beginners and seasoned Airbnb entrepreneurs worldwide with the data to make smarter decisions
- Based in Denver, Colorado
- Say hi to him at www.airdna.co
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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Scott Shatford. How are you doing, Scott?
Scott Shatford: Really good, Joe. Good to be here.
Joe Fairless: Nice to have you on the show. A little bit about Scott – he is the CEO and founder of AirDNA, an Airbnb data and analytics company specializing in Airbnb intelligence. He utilizes his 15 years of experience as a data analyst to then launch the company, and recently launched Market Minder, a competitive intelligence tool built to empower both beginners and seasoned Airbnb entrepreneurs worldwide with data to make smarter decisions.
With that being said, Scott, do you wanna give the best ever listeners a little bit more about your background and your current focus?
Scott Shatford: Sure. I spent 10 years in corporate America, working in data and analytics, data warehousing and how do you present data to make it consumable by executives. I was laid off from that job, and kind of fell into the Airbnb space. I grew a portfolio of Airbnb properties, and realized there was really no data out there to help people make decisions on where to invest or how to optimize those properties… So I kind of set out to figure out how to scrape the world of Airbnb, analyze that data and make sense of it to help people target investment properties and how to price their properties more effectively, and how to compare their performance versus their peers.
Joe Fairless: So what are some specific things that you’ve learned since launching the business that would be helpful for real estate investors?
Scott Shatford: The short of it is that there’s a massive opportunity there that still hasn’t been tapped. I think there’s a huge margin between what properties are valued at, both as purchases and as leasing properties, to what they’re able to earn on the short-term rental market.
A lot of our focus is on how to figure out where those arbitrage opportunities exist and where real estate is undervalued based off of what its earning potential is on Airbnb and other short-term rental platforms.
There’s lots of specifics in that, obviously, by how to target the right types of properties, and what types of properties are under-supplied, and [unintelligible [00:04:25].15] are performing really well… But in general, that is kind of the thesis of the business – properties undervalued based off of their Airbnb potential.
Joe Fairless: For targeting the right types of properties – does that vary based on the market?
Scott Shatford: It does, and the market is maturing a bit. There’s 40,000 properties in New York, and 28,000 in L.A. We’re used to being able to kind of just throw up any old property pretty much anywhere and you get some demand. You have to be a little bit more thoughtful about it. What is the competition doing? How much competitive supply is in different markets? But also getting down to the property level – when would a property be undervalued as kind of a real investment, like a single-family home investment? When is it undervalued as a short-term rental?
Just to kind of give you some tidbits on that – what if it’s in a bad school district? Short-term rentals don’t care about it. What if it’s on a busy street? People don’t really care about that as a short-term rental. What if you have a train track running through the back of it? People don’t really care for a three-night stay. So there’s lots of these little components about properties that make it really attractive short-term rental investments, but don’t make them really good investments for people that wanna live there full-time.
Joe Fairless: Yeah, that’s really interesting. That something that I hadn’t heard talked about. Did you go in thinking or knowing those sort of things, or based on the data that you scraped that’s some things that you discovered?
Scott Shatford: It’s stuff that we discovered over time, talking to people that have gone pretty deep into how to analyze properties and markets in this space, and that’s definitely some of the ideas that I’ve come talking to some of my customers over time.
For me the original idea was that hotels are over-priced, there’s not enough competition for hotels, and the one-bedroom apartments were undervalued based off of the hotels that were right across the street. So my investment thesis to start off with was I wanna buy everything across the street from the Four Seasons. High-end hotels are charging $400/night, and I’m gonna put on a bigger space, with a washer and dryer and a balcony, and twice the size, and I wanna price it at half the price… And how can a consumer not say yes to that?
Joe Fairless: Right.
Scott Shatford: So that was kind of the original thesis… And a lot of the ways that people are still investing is that hey, this hotel has 88% occupancy, has an ADR of $380, but this nice, new high-rise condo complex went up across the street and I can make a lot of money by running that at $300/night and offering a lot more amenities and space.
Joe Fairless: Yeah, that seems like a no-brainer right there. Do you also invest and buy properties across the street from hotels, or have your own Airbnb rentals?
Scott Shatford: I have like seven Airbnb rentals in Santa Monica… I ended up getting rid of those properties really to focus on this business. It’s a full-time growing business, it’s doing pretty well; we’re about 25 people and trying to add another 25 this year… I’m totally focused on the data and how to empower other people to make these decisions.
Joe Fairless: And how does your company make money?
Scott Shatford: We sell that Market Minder report that you mentioned. It’s a subscription product, you can buy for over 30,000 markets around the world; you can subscribe to it for anywhere between $20 and $150/month. We also sell to corporate America. We sell to the major hotel chains, we sell to the hedge funds, we send to DMO’s (destination marketing organizations) and a laundry list of other people that are really interested in how Airbnb is impacting or disrupting traditional lodging and opportunities that it’s creating in the real estate space.
Joe Fairless: What else haven’t we talked about as it relates to the data that you are uncovering, that’s relevant to real estate investors and we should talk about?
Scott Shatford: That’s a good question. What our core technology does is it really looks at every single Airbnb property and tries to uncover via the activity on the account of that property exactly how it’s performing – the seasonality of that property, revenue-generated occupancy rates… So really just trying to replicate traditional hotel stats for the short-term rental market.
One of the tools that we’re trying to develop with all that data is really first automated valuation model for short-term rental properties. We’ve titled that The Rentalizer, that’s what we’re calling that product, and that’s where we see the future of our business – people don’t wanna think too hard about overall market data and historical trends; they wanna put in the address and see what the comps look like and what that property could earn as a well-run vacation rental. That’s kind of the direction that we’re heading as a business, is being able to do that and do that well globally.
Joe Fairless: And what are some trends in certain markets? Because I’m sure you look at different markets. Anything interesting across the U.S. in certain markets or regions that you’ve noticed?
Scott Shatford: I think the people are starting to get out of the major markets for these investment opportunities. They’ve become saturated, there’s a lot of hotel development in these major markets… So what we’re seeing is a flat growth in San Francisco, New York, Chicago, New Orleans – these markets that were really hot for the last five years – and they’re looking for opportunities in these secondary and tertiary markets where there just aren’t a lot of properties… Maybe like a Louisville, Kentucky, or something of that nature.
People are trying to figure out 1) how to get into these smaller markets, and 2) I think the trend right now is how to capitalize on the growth in group travel. This is millennials traveling for a bachelor party, 20 people showing up for whatever sort of event… There’s a lot of money being made on buying 4 or 5-bedroom homes in some of these cheaper markets and renting them out for $1,000/night on the weekends to the group travel.
I think there’s been a big transition from trying to replicate hotel supply (1-bedroom or studio right in the middle of town) to — I think the new opportunity has been in larger places… Larger homes, in smaller towns.
Joe Fairless: With the larger homes in smaller towns – maybe not even specific to that, but what type of data points are at the core of what someone should look at when assessing the opportunity for if they should do Airbnb or not?
Scott Shatford: We have a separate product, it’s called Investment Explore. We think the real basics are “What is the average home cost in a zip code, of different sizes, versus what the average property is making on Airbnb on average?” That really simple, basic comparison of what properties cost and what they’re earning on Airbnb is obviously the best place to start.
The Investment Explore product allows you to explore different markets in your state or in the country to identify where that arbitrage opportunity is the best. In terms of other data points, a lot of people use some data points that we don’t even have, which is [unintelligible [00:10:53].21] People really are using Airbnb because the location of hotels isn’t great for where they’re going. If it’s a college graduation or visiting a relative in a hospital… There’s a lot of places that don’t have hotel supply, and so what a lot of my investors are doing is looking at where are people going, and is there a lack of hotel supply there? A lot of these are in suburban areas where there is still demand, but not for like the traditional business travelers.
So that is a huge advantage for Airbnb and Airbnb investors – hotels are gonna take five years to build something from the ground up, and they’re not really gonna add a hotel that’s like a 30-key hotel and buy a hotel, but an Airbnb host can buy five properties there pretty easily and flip them into lodging supply in three months. There’s a lot more speed to market for an Airbnb investor than a hotel can ever do.
Joe Fairless: What’s been a major challenge of your since launching the business?
Scott Shatford: It’s such a rapidly changing marketplace, and we rely on data sources both that we are scraping from websites, and both that we are getting delivered to us via some third-parties. Just the speed at which things are developing makes it more and more complicated to be able to aggregate and make sense of that information and make sure it’s all accurate… Let alone that websites change, and Airbnb is doing crazy stuff, and there’s a cat and mouse game about how we can continue to get all this data at scale. Also, there’s lots of different API changes and different — just getting data in this sort of manner, at this sort of scale, it becomes challenging.
Joe Fairless: And how are you solving that or attempting to solve that?
Scott Shatford: Spending more money on more engineers. One good thing is that vacation rentals used to be dominated by this very fragmented market, where there was like an individual property manager in every little ski town and every little beach town, that had their own little kind of silo of information. Now that the market is dominated by HomeAway, Airbnb and Booking.com – those are three major sources you can go to to grab 70% of all vacation rental properties around the world…
So it’s easier today to get a good idea of the full market size of vacation rentals and what they’re doing, but the way that we have to get this information — Airbnb is not nice enough to ship this data to us on a daily basis… So analyzing, scraping, algorithms, machine learning models – all that stuff needs to be built to make sense of that data.
Joe Fairless: And I’m just curious, with your name, AirDNA and a different company that you help others with Airbnb – two different companies, no overlap in ownership… How are you able to have that name? Just help me understand that, I’m just curious.
Scott Shatford: You just think it’s too similar to the Airbnb name?
Joe Fairless: Yeah. It’s good for you, that’s a good thing, but I’m just curious if you heard from them at all, or if that’s just bulletproof from a legal standpoint.
Scott Shatford: Everything’s pretty bulletproof on our legal standing. We don’t do anything that Airbnb does, we don’t rent places… If we were trying to rent accommodations on our AirDNA site, there might be an issue.
Joe Fairless: Right.
Scott Shatford: Since our services are complementary and completely different, we don’t really think we get into any grey area in terms of our naming.
Joe Fairless: Cool… Just curious. How can the Best Ever listeners learn more about your company? Where should they go?
Scott Shatford: Our website is obviously our best resource. It’s AirDNA.co. We provide a lot of free information there, so search for your city, search for your neighborhood… We cover pretty much every square inch of the world. Some places in Africa are lacking, but we try to cover pretty much everywhere that there’s an Airbnb property – we have data on that area.
We also have a great blog. It’s a great resource where we throw in a lot of data-driven stories about the best places to invest. We have some blogs that had over a million views, that really talk about what is the best investment opportunities at the city-level for Airbnb investments… So that’s a good place to start.
Joe Fairless: Cool. How come not .com?
Scott Shatford: We were a startup and cheap, and we’ve been trying to wrangle it from some guy in China, but he’s not very responsive these days, so… But we’re working on it.
Joe Fairless: Fair enough. Well, Scott, thank you for being on the show and sharing your entrepreneurial journey. Also some tips for some Best Ever listeners who have properties in a bad school district, or on a busy street, or next to a train track – well, look at doing Airbnb and then you can get some data from AirDNA.
Thanks, Scott for being on the show. I hope you have a best ever day, and we’ll talk to you soon.
Scott Shatford: I appreciate it, Joe. Thanks a lot.