A Conversation With ... John Starks

Heather Mosley | SBJ

Tell me about the concept behind Nightly.
We do full-service, short-term rental management. That’s Airbnbs, Vrbos. We target intentional investors. Those are the people that really look at the numbers and want a return on investment. We do the maintenance on the property, we offer consulting services on best practices, we’ve done all the diligence on what is required, what’s recommended. We help with licensing. We have a whole shopping cart experience. We’ve presented to the Springfield [City] Council. We do all the sales tax filings. We completely take care of the property.

You have a website where customers can book directly, but do you also work with major booking platforms?
We send to all the major platforms, Airbnb, Vrbo, Booking.com, Bnbfinder, Expedia, Travelocity. But we also offer direct booking capabilities. So, then you avoid all those OTA fees, online travel agencies, and we can offer potentially a discount.

What about your business differentiators? On your website you promote a five-star guarantee and $5 million in coverage.
One of the things that we’ve come up with that no other management company that I’m aware of will do is we guarantee five-star reviews for our guests. A lot of other people might say, “We have a lot of experience and we have really good people and we have really good processes,” but if they make a mistake, they still charge you a management fee. For us, if it’s something that’s within our control, let’s say for example we’re managing your property and there was one hair left in the sink and we get a four-star review, we consider that a disaster. We’re going to waive our management fee up to $500. The second thing is there are all these war stories about somebody stayed in my house and they partied and they tore the place up. For every reservation we manage, we have insurance that will cover your property up to $5 million.

These guarantees sound expensive. So, what is that business model for management?
We are not able to manage properties that don’t generate a certain amount per year. With the overhead and the team that it takes to execute at this level, the property typically has to generate at least $40,000 a year or more. Typically for our industry, it’s between 20% to 40% for full-service management. Our management fee is 25%, but it’s different. A lot of folks might do it for 20%, but they charge on the gross. What most people don’t know is Airbnb takes 14%. We charge on the net.

What’s your footprint and how many properties are you managing?
Right now, primarily in Branson and Springfield, but we’ve done little to no advertising. Because of word of mouth, we’re now in Colorado, we’re in Hot Springs, Arkansas, and Little Rock, and we’re in Pensacola, Florida. We’re in five states.

I see 31 properties available to book on your site. Is that your total number?
That’s what we actively manage. However, we have other companies that we run their entire back office. Once they saw our solution, they’re like, “Hey, I want you to do all my trust accounting. I want you to do my revenue.” So we control all the pricing. We control all their sales tax filings, all their payables. When you look at our website, there’s 31 properties, and there’s probably about a dozen that are in the pipeline to come on board, but behind the scenes, there’s another 87 properties that we’re managing as well.

You’re a couple years into the business. What have been the biggest challenges you’ve faced?
Whenever you’re starting something up, you have to wear a lot of hats. The other thing is just creating awareness, and then also bootstrapping your company. So, starting without a loan, and then basically just underwriting everything until you can build enough capital and cash flow where you can bring on other people and stop working in the business and start working on the business.

You worked in the corporate world for a long time and you wanted to get into your own business. Tell me about that journey.
I spent 20 years in corporate America working in all different types of operations and sales and customer service, and it taught me so much. It wasn’t until I turned 40 years old that I figured out the day I stopped working for the company was the day I stopped getting paid. I know that seems like common sense. But I said, you know what, I’m going to start working on passive residual income. I started investing in real estate and different businesses, and that was about 10 years ago. I was like everybody else, go to work, get a W2. It wasn’t sustainable, so I started doing this.

Where do you see the opportunity in this region for property investments?
During COVID, all the cruise lines were closed, all the hotels were closed. The only place you really could gather as a family was in a short-term rental. When you base your revenue projections on what a property can do, you look back historically, but you have to remember that those properties were performing really well because it’s the only place you could go. Well, now cruise lines are open, hotels are open. What that does is it provides a lot more supply for maybe the same amount of demand. The ones that really do well are ones that offer a unique experience, a treehouse or a tiny home or a wagon or container house or amazing views. The ones where there’s 1,000 condos all in the same building, all using the same pool, all using the same amenities, the only difference is price. So, it’s kind of a race to the bottom. You compound that with interest rates and my mortgage may have doubled or even more so my revenue’s gone down, my costs have gone way up. Now my free lake house is no longer free. People might be in a position where they may have to sell. We’re going through peak season right now. Coming out of that, I think there’s probably going to be some good deals if you keep your eyes and ears open.