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1 month ago

December 2022: Message from the StayMarquis Founders

That's a wrap for 2022 -- the year the world began its transition to a semi-normal, post-pandemic state. As it relates to the rental market, 2022 can be summarized by 1) continued rental demand during the peak season; 2) low occupancy during the off-season; 3) quickly growing supply (mostly from investors and owners who purchased in 2020 or after); 4) increasing number of owners with investor-first / personal use-second mentalities and 5) continuous convergence of the hotel and vacation rental industry leading to increased guest expectations, for better or worse. See here for a full report on the 2022 rental market.

As we enter 2023, we expect demand for vacation rentals to remain high, however, with over 21% increase in inventory over the past 12 months, the rental market has become ultra-competitive. The “Class A” properties (top tier properties that have great amenities, professional design, and clean, up-to-date finishes) will realize rent growth and should sustain occupancy levels compared to the prior two years. “Class B” and “Class C” properties will experience a decline in average nightly rates and occupancy, resulting in lower annual revenue per property. With the substantial increase in quality supply, it will take an honest assessment of your property's market fit to avoid a considerable reduction in revenue, especially as recession fears loom. Our advice -- reinvest in your property. A good rule of thumb should be to invest 5-10% of rental revenue back into your property per year. Not only will you enhance the revenue you're able to generate in future years, but you will simultaneously create value in your home.

Despite interest rates on the rise, we expect property values to fall only slightly as inventory constraints remain. Distressed opportunities will remain rare as owners who wish to sell likely hold long-term debt at extremely attractive interest rates, which may prompt them to try their luck on the rental market before taking an offer that they deem “unattractive”.

We expect new construction to flood the rental market more than ever before, but likely last minute as developers hold on for as long as they can in attempt to sell. This will mostly affect Class A properties. With construction costs rising (i.e., labor, materials, financing fees) and a shrinking buyer pool, developers will choose to rent before selling for a marginal profit, if not a loss -- so long as they are able to refinance or execute extension options on their construction loans.

Institutional investors will continue to jump into the vacation rental market. There is simply no other real estate asset type that has the risk-adjusted returns that vacation rental properties located in premier vacation destinations do. On average we are seeing unlevered annual returns in the 7-8% range, and history shows an annual appreciation of 5%+. Strong returns coupled with high liquidity (single family homes are the most liquid real estate asset you could own), investors are vying for exposure, which will apply increased pressure to amateur hosts. The industry has been found, and the glory days for individual homeowners are nearing their end.

With a constantly changing industry and real estate market, we too are making changes. We summarize these changes below:

  1. Commission Changes -- To uphold (and improve) the service quality we deliver to our clients, we must increase the cost of our “Marquis” service by 5% (there has been no change to the cost of our “Elite” program). We are granting owners the opportunity to decrease this commission by increasing their property's “Expected Value”, which is the projected annual rental revenue the property can generate. Expected Value is based on:
    1. Availability -- How many future nights are available to be booked?
      1. The more nights (and premium nights) you have available, the higher the revenue potential
    2. Exclusivity -- Is the opportunity to book your home guaranteed for us, or is it possible that your property gets booked outside our efforts?
      1. If we are your exclusive rental partner with complete channel control, we can generate more leads translating to more revenue
      2. *Note: Granting us exclusivity doesn't exclude other agents from earning commissions. We split commissions with 3rd party agents when they bring a renter
      3. **Note: If you have your own listings on 3rd party channels, let us know so we can discuss the best path forward
    3. Pricing -- Is your pricing realistic?
      1. The closer your property's pricing is to our recommendations, the higher the probability to secure bookings and the more revenue we will generate
    4. Discretion -- Do we have discretion to adjust pricing without your express approval?
      1. Our team's ability to make quick decisions maximizes revenue, especially in low lead time scenarios
    5. Strategy -- Is your property set up to allow for high probability bookings?
      1. The lower your minimum length of stay, the higher the probability to secure bookings and the more revenue we will generate
    Connect with your Account Manager to discuss ways in which you can increase your property's Expected Value.
  2. Your Account Manager -- On that note, every owner will now have a dedicated Account Manager with a DIRECT line of communication that you can call or text with questions. While your Account Manager does not work 24/7, you will always have support. You can email owner@staymarquis.com if you need additional eyes on your question/issue.
  3. Exclusivity (and its benefits) -- To strengthen our partnership and improve our rate of success with each owner, we are requesting exclusivity. Now that we are nearing 100 exclusive properties, we have a large enough sample size to tell us that those properties generate 29% more rental revenue on average than non-exclusive properties. Owners who provide StayMarquis with exclusivity receive:
    1. Featured marketing through our Travel Agent partnerships which reaches high-end clientele all over the world (Lacure, SmartFlyer, Edge Retreats, and more)
    2. Marketing your listing through EELI, the local MLS offered exclusively to Hamptons brokerages
    3. Priority placement in search results on StayMarquis
    4. Creation of drone videos & floor plans for your home
    5. Access to marketing channels you can't access anywhere else including our exclusive partnerships with Plum Guide and OneFineStay
  4. Luxe Program Changes -- We are now requiring exclusivity for our Luxe program -- our invite-only collection of ultra-high-end homes where we provide rental management services for the cost of 10%. Current Luxe owners who do not wish to grant exclusivity may move to our “Elite” or “Marquis” programs at market rates.
  5. Channel Exclusivity -- For all new homeowners, we require complete channel exclusivity, meaning that you may not have your own listings on any channel where we advertise including Airbnb and VRBO. For legacy owners, we are implementing a 2-strike rule. The first time you decline a booking request because of a conflict or competing inquiry, we will issue an alert. If it happens a second time, we will require complete channel exclusivity or will discuss alternative options. At the end of the day, we want nothing more than for you to be successful but when you have your own listings, we are competing against each other. That is not the recipe for a successful partnership.
  6. Year-Round Property Management Service -- Our Home Vision property management service continues to grow! With this program, you receive weekly home inspections, vendor coordination, contract negotiation, supplies inventory and replenishment and the performance of a variety of home maintenance services. Every owner has unique needs and requirements, so we start with a 3-month trial and customize the service-level from there. You may learn more about the program and obtain an initial quote here.
  7. Rental Management for Non-Marquis Bookings -- Private rental management service, where we provide guest communication, check-in, check-out, concierge, and cleaning services for non-StayMarquis bookings, is now ONLY offered to Home Vision clients at a rate of $500 fixed fee plus $50/day.
  8. Commission Calculation -- To be in line with market norms, our commissions are now based on gross receipts except for utility and security deposits. This means that our commission is calculated based on rental revenue, fixed utility fees and any other ancillary fees that you charge a guest.
  9. Additional Marketing Channels -- As a registered NYS brokerage, we can now advertise your property on the local MLS system (EELI.com) and Hamptonsre.com. This means that we can advertise on every channel that traditional agents advertise on. Additionally, we now have an exclusive relationship with Plum Guide and OneFineStay, two channels that cater to a high-end renter demographic. This means that only StayMarquis properties may be advertised on their sites in the markets we're in. Other owners cannot go directly.
  10. Partnerships with Local Real Estate Agents -- In Q4 2022, we rolled out our Agent Partnership Program, where we partner with local agents to help effectuate bookings. As the online rental world continues to take market share away from traditional means, traditional agents are simply not equipped to handle rentals, nor do they want to. As such, we are now partnering with them to help rent their clients' homes and/or find their clients' rental properties. If you have a local agent that you care for, please tell them about us. We want to speak with them!
  11. Supplies Changes -- We are upgrading the supplies that we provide to guests under the Marquis program. This is going to include higher end and more environmentally friendly products. More to come on this!
  12. Bedding and Linen -- For your (and our mutual guests) benefit, we purchase bedding and towels from Kassatex and Frette in bulk to achieve wholesale prices and pass those savings on to you. You will not find this type of pricing for high-quality, hospitality-grade linen anywhere else. View 2023 linen pricing here and place your order for this upcoming season with your Account Manager.
  13. Property Improvements/Enhancements -- To enhance the marketability of your home, and the overall guest experience, we are now providing owners with a “Rental Viability Assessment” (“RVA”), which is an in-depth analysis of your property and the improvements we recommend making. Included in an RVA are improvement recommendations, estimated costs for such improvements and the estimated incremental revenue you will be able to generate. An RVA involves a thorough in-person inspection for a $1,000 fee but is waived for owners who provide us exclusivity.
  14. Home Prep Services -- To prepare your property for the rental season, we offer home preparation services:
    1. Services include:
      1. Procurement of new linen & bedding
      2. Installation of keyless entry
      3. Designation, organization and set up of owners' linen closet
      4. Cleaning (standard or deep clean)
      5. Organizing & decluttering
      6. Moving furniture
      7. Handyman service
      8. Grout cleaning/regrout
      9. Paint touchups
      10. Ordering household essentials & supplies
      11. Cleaning/tune up of BBQ
      12. Changing air filters
      13. Power/soft washing
      14. Washing windows
    2. Our pricing for these services, and all ancillary services, is here.
  15. Home Renovations -- Should you wish to make larger scale improvements to your property, as part of our “Refresh to Rent” program, we offer project management services for 10% of total project costs (minimum $2500). Project management includes:
    1. Advising on improvements
    2. Recommending and collecting bids from vendors (maximum 3 bids per trade)
    3. Bid-leveling and contract negotiation
    4. Vendor coordination
    5. Invoice collection, review, and payment
    6. Budgeting
    7. Onsight oversight of vendors, receiving, inventorying, unboxing, and assembly of furniture is billed hourly at the “Project Manager” rates found here.
  16. Financing Home Renovations -- As part of our “Refresh to Rent” program, we partnered with Better to provide all StayMarquis owners with an attractive financing option to help pay for the improvements. Better offers owners a personal line of credit up to $50,000 to furnish, decorate and/or renovate your home. Owners have 1 year to spend and 3-5 years to pay back only what you use. Interest rates are based on your credit score (they only perform a soft pull) and term of the loan and are as low as 6.25% -- extremely attractive rates especially considering the loan does not require a personal guarantee. You can learn more and apply here. The application process takes only minutes.
  17. Changes to Event Clause -- We made a change to the “Event” clause (section 4b) in the Booking Agreement. The language states that there is a $10,000 penalty should your guest have more people at the property than originally indicated without express approval. However, please note that StayMarquis is not permitted to deduct this amount from the security deposit, which is reserved only for damages, excessive cleaning, or excessive utilities (in event a utility deposit is collected). Owners may take legal action directly against the guest, and this clause serves to give you, the owner, a “head start”. Additionally, the purpose of this clause is to protect you and your home from the guest throwing a party but is not intended for you to penalize the guest should they choose to have a reasonable number of people over for a let's say, a BBQ. You should expect this type of use of your home.

We are simply infatuated with vacation homes - every aspect from buying, designing, renting, and managing. Every year we make improvements to existing services (and add new ones) as it is our goal to serve you throughout the entire lifecycle of owning a vacation home. Thank you for your continued support and using us as your go-to resource for your vacation home. We wish you a happy and healthy year ahead and look forward to growing our partnership.

Kind regards,
Bryan Fedner and Alex Goldstein
Co-Founders and Co-CEOs

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