In conversation with Merilee Karr, the founder and CEO of Under the Doormat. She is a passionate advocate for a short-term rental industry with a focus on driving up standards, providing flexibility and delivering quality accommodation. Her aims? World domination of travel tech plus continued growth for flexible renting and BTR.
Tell us about your personal journey and what led to youfounding Under the Doormat
I started out in the energy industry for Shell, so a big multi-national corporate, and I worked globally implementing major change programmes.
For example, I was in innovation, setting up the IT presence in India back in 2001, and in property management, managing the maintenance of around 12,000 petrol station sites across 43 counties.
I’m not an engineer so that was obviously a really interestingarea, and I learned a lot about property management and the customer journey – what you can deliver in terms of customer experience through a dispersed network of properties.
My passion though is homes, residential property, and my bigger passion is travel, cultures and people around the world.
Back in 2014, when I started Under the Doormat, I was combining my experience of the corporate world with my vision to create the opportunity for people to make the most of their residential property when they weren’t using it, but also to have a professional service so guests could access the quality of a hotel in the comfort of a home.
That was how I went from being in a big corporate to renting out the first home in 2014.
Were you there before Airbnb, did Airbnb prompt your thinking?
In many ways it came from my own personal experience. I would travel for a ski holiday and love staying in a chalet with friends. Or I would travel for a triathlon, and you would need to rent a home so you could get up early and make your own breakfast.
It was early days for Airbnb, which seems hard to imagine now, but it was just getting started and wasn’t a household name.
However, I did stay in an Airbnb in Lausanne, Switzerland, arriving at 10pm on a Friday to find the house hadn’t been cleaned by the host and that they were expecting us to cat-sit for the weekend!
That confirmed my thinking that people who own high-end properties were not meant to be hosts. Decoupling the host and the guest seemed key – most people don’t want to sit down with a glass of wine with their hosts, they want a wonderful house to stay in which provides them with a great, authentic experience.
Many hosts can actually be on the other side of the worldanyway; if you own a high-end property you’re not cleaning up after guests, washing linen and doing all these key tasks.
The big ‘ah, ha’ was that, at the bottom end of the market, people might want to be hosts, do the chores and keep the money. However, at the high end you have second–home owners or institutional real estate who could be benefitting from the value which flexible rentals can give them but they want a company to manage everything from insurance to cleaning linen, doing guest bedding and, to be honest, areas like revenue management which the hotel industry knows very well but residential real estate doesn’t.
What’s a typical day – and what’s top of your in-tray?
In December, we merged with Veeve so the Under the Doormat Group is now the largest operator in the high end of the market in London and Paris, as well as one of the leading technology companies within the global flexible rental market.
That’s exciting because, especially when we’re talking to people within the Build to Rent sector, there’s a lot of small operators within that field and, as flexible rentals mature, it’s all about professionalism, it’s about standard processes and capabilities of bringing revenue management and driving ROI to our partners.
We can do that because we’re now the only company which does everything from end to end – we’re the operator, we provide the technology and are also operating on behalf of the UKAA and the Short-Term Accommodation Association theTrusted Stays industry platform which helps building owners and operators access the corporate and government market.
So, there is a lot going on, and a typical day could involve talking to one of our companies about their goals for the year, spending time on budgeting and working out our growth plans. I’ll often meet with clients or potential clients. Yesterday I was meeting with a large Build to Rent operator about providing the technology and the platform to support government and corporate short-term rentals.
Also, I’m often doing interviews for industry like this one, or sometimes with the press as I’m also the chair or president of the Short-Term Rental Accommodation Association. It means I’m speaking to regulators about policy and also to journalists about the direction of travel the industry is taking.
What’s on the agenda for 2024?
We are increasingly working with BTR and multi-family, both in Europe and North America, around technology and operational capability to access flexible rentals. I think that providing access to corporate and government rentals, and not just the leisure market, is increasingly attractive to institutional real estate as it provides counter-cyclical demand and supports the incremental yield that flexible rentals deliver, with a better balance on community aspects.
For the BTR sector a few things are shifting – we’re in a world of higher interest rates, so owners and operators are under increased scrutiny for return on investment – and what we’re seeing is that the flexible rental component in a development (which could be a simple guest suite, to a few apartments, a whole floor or even a building) tends to perform between 20-40% higher on a net basis (net of all costs and voids) compared to long-term rentals.
That’s a pretty good opportunity to have as a component of a strategy for BTR and multi-family owner/operators.
The other thing we are starting to see is that students often make up a good portion of the BTR community and that’s something some BTR operators are looking to move away from. Flexible rentals often provide a better mix to align with communities, while driving the required occupancy and yield.
So, attracting new audiences – particularly professional and corporate audiences –through short-term rentals is pretty much free marketing. They pay to stay, they learn about the development and can then either stay on themselves or tell their friends and colleagues about it.
It will be interesting to watch this play out long term but what we’re seeing is that we’re helping a lot during lease up, getting the development to that stabilisation point whilehaving an income stream in the lead up so they are not having to heavily discount to fill the building initially (helping to deliver better long term yields on the development).
That can help get new developments over the line because the initial business case is stronger, and it helps reach the target occupancy faster.
What’s great is that now the flexible rental market has matured we have the evidence, the data, which can help business cases and get developments approved. If this is used strategically, the real value this can drive for a development is relevant in the longer term and is huge.
I’d still say the UK is behind the US in terms of industry maturity but in many ways we’re here to help support that innovation in the UK.
So, who’s a short-term renter?
There are basically three different types of people who could be your typical customer.
Firstly, they could be people travelling for business, consulting perhaps, and those stays can be quite long, a couple of months or in–and-out over a period. Those people are usually booking the rental through Trusted Stays because that’s the platform they can access through their own, corporate systems, like Amex Travel or Carlson Wagonlit(CWT).
That’s something which is valued by BTR because accessing the corporate market is very fragmented and even if you know the corporates around your building, if you’re not on the global distribution system (GDS), they simply will not book you.
The other group are what we call flexible renters, people between two properties, or who might have relocated to a city.
These are an attractive audience because if they come to a BTR development and they like it, they could translate into permanent residents. They also often fit with the profile of the communities BTR operators are hoping to attract.
The third group is the leisure travellers who might be on holiday or visiting friends and family.
What’s interesting here is people don’t come to London or Manchester, Liverpool or Leeds to spend all their time in the apartment. They want to be out and about, they tend not to use the kitchens and that means less wear and tear than you might get from a long-term resident.
All these short-term renters provide a base and a higher income stream, and you want this mix because, especially in the lease-up period, they bring an energy and a vibrancy to the development which can help with the long term sales of the development.
You don’t want it to feel empty and it also makes any commercial tenancy much more viable because customers are coming and spending money at the shops or restaurants.
Even in the longer term you might want 10-20% of your portfolio to be short-term renters because it helps make those commercial tenancies more viable in the long term as well.
How does your agenda dovetail with that of UKAA?
Back during the pandemic, the Short Term Accommodation Association (STAA) and the UKAA decided to join forces and created the industry platform Trusted Stays.
What we wanted to do was solve a challenging problem we both had, which was to reach corporate professionals for operators in our industries.
The first thing we did was achieve the first government RFP(Request for Proposals) for flexible rentals and secondly we were able to access the global connection system through Amadeus. So, we are the first company globally to bring the whole of the flexible rental system – and that includes Build to Rent – under one umbrella.
It means we can take the supply of apartments and homes and get them distributed to corporates who are looking for places for employees to stay, that meets the duty of care requirements that corporates need. That includes government too and even schemes like Homes for Ukraine.
More recently, a pilot with one of the largest UK property portals means their customers can also access flexible rentals through professional operators. Trusted Stays is the UK partner for that portal and that allows us to access new customers and assist people who are looking for short–term places to live, perhaps while they are between homes or renovating their main residence.
In working between the two industries, we are actually solving problems that are common to both. We’re working together to unlock these opportunities.
It is great to be talking about these ways we are adding value to our membership because often when people talk about associations they’re asking: “Why am I joining, why should I pay, what will I get out of it?”
At the end of the day, if we’re able to provide that commercial value to our members it’s a good reason they should be working and supporting us as Associations, both on the regulatory side and by helping us to unlock new opportunities so both industries can grow.
What does the future hold?
One, if we look at it from a macro-economic and political point of view, we’re in a period of continual change.
For both the BTR and the short-term rental industry it’s going to be all about standards because that’s what government and consumers want, and that’s true not just in the UK but all around the world.
We’re also in a world where there is a shortage of housing, especially in the major cities and I think we can be part of the solution, not the problem.
If you allow people to have flexible terms in their leases, resident hosting allows people to have longer leases, more flexibility and enables people to afford the higher-end BTR properties.
We can all recognise we’re in a time where people will tend to rent for longer and while owning a home is something to which people aspire, it’s not going to be possible for everyone.
Also, increasingly people are choosing not to buy a home, so the more flexibility we can offer to consumers, the better able we are going to be to adapt to the changing needs of the market.
As industries, this flexibility provides not just the possibility of more consumers but also therefore a better return on investment and more opportunities for growth. The commercial prospects which align with flexibility come at a premium and that’s exciting because the expansion of our industries is a huge opportunity for professional operators.
For my business, I want to be at the centre of that change. I want people to have the technology so they can accept a tenant or a guest for any time period they might want, at any home or development.
We’ve already integrated with the likes of Amadeus and been able to bring that corporate demand into the market, and we’re also providing technology to governments so they can have the data they need to understand the sector and appreciatewe’re not taking away housing but rather enabling the best use of the stock that’s there. Ultimately ensuring every property is being used every day.
Benchmarking has been a BTR sticking point – how do you use it in the flexible rental sector?
To give an example, we operate a building for The Cadogan Estate and we’re able to benchmark that asset against other apart-hotels and other flexible residential assets on a daily basis.
We know forward projections and can see in advance of the coming quarter if we’re outperforming or under-performing the leading indicators. That’s gold dust because we can tellwhere the market is and respond much more quickly.
It’s also interesting for the investors and aids their understanding of how our sector is using data and technology and where this could play a role in getting better data and tech into the BTR sector.
What’s your call to action?
For me the real challenge is partnering and innovating and how we bring together the advisers, the underwriters and the operators to look at specific business cases and how we could do things differently in the future.
There’s a lot that needs to happen in order for BTR to continue its growth in a world of higher interest rates – especially in proving the business case – and I want to be part of that solution, getting planning approvals, lender approvals and seeing a long-term strategy for growth.
As American I’ve been in this country for more than 20 years,but you don’t lose your culture or forget your roots.
As I said before, the US is ahead in this innovation, but I would love for once for the UK to leapfrog ahead of North America. I think it’s possible – there’s a lot of smart people and smart capital here so hopefully that’s a good challenge to put out there.