For TurnKey Vacation Rentals, there’s no place like your home.
The Austin startup offers second-home and vacation home management services for property owners looking for short-term tenants. “That’s a big ticket in travel,” says T.J. Clark, TurnKey’s co-founder and CEO. “We think it’s the largest travel ticket there is.”
Clark estimates the vacation rental market in the U.S. and Europe is worth $110 billion. While many startups in the vacation rental space focused on consumer demand—think airbnb—he says he realized that managing the supply was an untapped niche.
Many owners go into the rental market only to find that managing a property becomes a full-time distraction.
“They find it’s a lot of work, and these owners have day jobs,” he says. “They are not in this to be a property manager, where you have to respond to problems right away. When you have a plumbing issue in the middle of the night, you can’t respond to it later.”
Others hire a property manager, but these companies often have a very limited reach to potential customers. Clark says such firms typically don’t advertise their listings on outside sites such as HomeAway, which is “like not being on Google if you’re trying to get customers.”
Another factor is cost. Traditional management companies can charge from 30 percent to 50 percent of revenue. The average revenue for a house is $26,000 a year from about 17 bookings at $1,500 a week, according to PhoCus Wright, a travel research company.
Purchases of investment properties jumped in 2010, following falling property values and low interest rates after the real estate crash in 2008. And, as travelers seek out lodging that’s less cookie-cutter than hotel rooms, vacation rental bookings have jumped correspondingly, from just over $60 billion in 2010 to an estimated $92 billion this year, according to PhoCus Wright. About six million properties are available for vacation rentals, but it’s a fragmented market. Even Resort Quest, which dominates the market, only has about 5,000 properties listed, just a fraction of the supply.
“There is huge opportunity here,” Clark says. TurnKey’s advantage, he adds, is that it can build market share by leveraging mobile technology in order to reduce its fees, which are 10 percent of the booking. The startup has digitized each step of the management process, from online booking to the inspection after guests leave.
“Mobile allows us to coordinate all this with a much better level of control than you had even five years ago,” Clark says.
TurnKey is still small, with about 40 properties that rent from $150 to $3,000 a night in Austin and Aspen. The startup raised $1.5 million from executives in the online travel world such as BnB.com founder Eric Goldreyer, Hotwire and Tripit founder Gregg Brockway, and Orbitz CEO Barney Harford.
Guests are provided an app for either Android or iOS that contains a residence address and a map to get there, along with the code for the digital lock on the front door. “Instead of having that three-ring binder, in the app the guests can see ‘things to do in the area’ and the house guide with the Internet password,” Clark says.
TurnKey deploys Samsung tablets to third-party vendors, such as a cleaning service, which lists tasks that need to be performed and problems that need correcting, such as broken furniture or appliances. “When they’re completing a task and if they can’t, they can take a photo and video for inspection purposes, issue a work ticket to get a handyman in there, and even reorder supplies like soaps and shampoos from Amazon Prime to ship straight to the property,” Clark explains. “All of this reduces the manual work on our team.”
TurnKey’s biggest competitor locally is VacationCake, a short-term rental management companies with about 30 properties that is listed on sites such as HomeAway. Lauren Bard says that while technology does help operations, she feels that personal contact with potential renters is important.
“We respond to all inquiries by phone,” she says. “That’s how we screen people to get an idea if they will be sane, reasonable tenants. This reassures our customers.”
Clark says TurnKey also speak to guests upon booking, especially first-timers. He says they are unable to connect with guests in about 5 percent of the bookings, though, “in hundreds of bookings, we’ve only had to ask one guest to leave.”
Austin has developed a niche for startups in the vacation rental industry. HomeAway (NASDAQ:AWAY) was founded there in 2005 and now has more than 700,000 listings in 171 countries.
Prior to founding TurnKey, Clark was CEO of Limos.com and corporate counsel at Hotwire. Co-founder John Banczak had leadership roles at HomeAway, BnB.com, and Hotwire.com, while John Squires, TurnKey’s vice president of technology, had been HomeAway’s director of engineering.
Looking ahead, TurnKey is planning to expand to two additional markets by the end of the year, including one on the Texas Gulf coast. They’ve found that Austin is a steady 10-month market, without the peaks and valleys of more seasonal destinations. That’s got them thinking of expanding into similar metros such as Chicago, which has a steady convention business for 10 months of the year.
“Airbnb did a great job of paving the way in the metros, and showing there’s a whole new market there,” Clark says. “It’s not just ‘vacation spots.’”