The integral role of tech innovation in the future of hospitality

Over the years, the short-term rental market has grown exponentially and it’s still on the rise. According to a recent report by Vantage Market Research, increasing expenses on holidays, accommodation and travel have played a significant role in the growth of the short-term rental market. And perhaps much of this growth can also be attributed to tech innovations that have evolved and expanded the way that we book holidays and accommodation. 

It’s been reported that SA is the biggest Airbnb market on the continent, and that in 2020 alone, travel on Airbnb contributed over R8bn to the economy and supported about 21,500 jobs. With this in mind, It’s clear that tech and digital innovation in the short-term rental market is, and has been, an important driver for the growth, expansion and sustainability of the tourism industry as a whole.  

We recently had a chat with Chregan O’Flynn and Max Urban, the co-founders and MDs of SA’s largest short-term rental management company, Propr, to discuss how digital innovation can address market challenges in the industry and the role that tech will play in the future of the hospitality industry.

Propr manages operations at over 500 properties across SA and Dubai. 

Please tell us a bit about Propr and why you were inspired/motivated to start the business?

Max: I started Propr in 2015 when I noticed the meteoric rise of Airbnb in London while living there. Returning to Cape Town, I started managing the properties of members of my backgammon club for want of a better thing to do. Within four months I found myself managing close to 50 properties and it became clear how dire the need was for a hassle-free Airbnb management service for property owners.

My business partner, Chregan O'Flynn, who has a background in tech, joined the business full-time in early 2016 to build the tech necessary to scale the business. Since then, Propr has grown into SA’s largest luxury short-term rental management company operating 500+ properties including two apart hotels across Cape Town, Johannesburg and Dubai. Our portfolio caters to both business and leisure travel, with options ranging from studio apartments to seven-bedroom penthouses and villas.

Chregan: Propr has become known for putting its guests first and we have a dedicated Guest Experience team that ensures every stay is memorable. We tightly control the value chain by keeping the majority of the service delivery in-house. We have 150 dedicated team members who handle everything from property management, maintenance and guest experience to housekeeping, linen and operations. We are a Marriott approved management company and have partnered with them on their Homes & Villas division. This means that Marriott Bonvoy members can earn/spend points by staying at Propr’s properties. We are also the only management company in MEA with a direct API partnership with Airbnb.

What would you say are some of the biggest challenges facing the short-term rental market in SA right now?

Max: The biggest challenges facing the industry relate to global macroeconomic and political factors, as well as a few domestic factors:

Macro: The global uncertainty relating to the Ukraine war and its potential escalation may become a factor. We have, however, already witnessed rising energy costs which has a direct impact on the cost of travel and disposable incomes. Travellers may opt for more local travel and undertake fewer long-haul trips.

Domestic: Load-shedding may influence travellers’ decisions on whether to come to SA. This is certainly true as we escalate up the stages of the load-shedding ladder. If I am considering an expensive overseas trip, I may just skip SA and go for another option. We are lucky that Cape Town is so beautiful and that travellers are willing to put up with the electricity problems.

The meteoric growth of Airbnb in cities across SA has sparked a fierce debate on whether short-term rentals should be allowed in housing complexes. Noise complaints, security issues and lack of accountability have led some complexes to prohibit short-term rentals.

Industry specific: The lack of available off-the-shelf tech built for a developing economy like SA. Most tech solutions offered in the market are geared towards developed countries and assume a level of sophistication in the labour and supplier markets. SA’s high crime rate also brings challenges with it that overseas technologies are not able to solve.

The biggest challenge in this business by far is to give a consistent guest experience across dispersed, dissimilar properties while remaining profitable.

What role has tech innovation played in the growth of this market?

Chregan: Airbnb as a technology platform has certainly democratised the access to guest demand much in the way Property24 has eroded the advantage that real estate agents used to have. Now anyone can start an Airbnb and earn extra income without having to solve the complexities around taking payment, guest damages, marketing, pricing etc. With their design focused approach, Airbnb has made this easy and is giving its hosts tools to be successful.

This sparked the first wave of growth in this market between 2008-2012. The second wave of growth was driven by professional host management companies. As people realised how much money they can earn on Airbnb more and more properties were listed. But many of these property owners either lacked the time or inclination to deal with the hassle associated with running your own Airbnb. A large percentage of the global 7-million Airbnb listings are managed by professional hosts, which has driven growth and investment in various technologies to support these professional hosts, including property management systems, insurance products, payment systems, pricing and revenue management tech to name but a few.

The fast growth in property supply globally has resulted in more competition between hosts to capture the limited number of guests. This, in turn, is driving innovation in tech in this space.

In what ways can tech innovation address the market challenges in the short-term rental industry while still prioritising the guest experience?

Chregan: Tech can help solve the biggest challenge in this business, which is to give a consistently great guest experience across a large portfolio of dissimilar and geographically dispersed properties. Some pieces of tech don’t directly touch the guest. An example of this would be our key system. We hold over 2,000 sets of keys. To keep track of them we use a QR code system, which allows us to scan keys to team members or guests.

None of the keys has the address on them so if a guest loses a key on the beach, it does not pose a security risk. Our system keeps track of these keys and alerts us if a key is not where it is meant to be and automatically creates a task for our team to hustle and find the key and/or replace a lock if necessary. It would not be possible for a person to do this manually.

Max: There are many other examples of logistical tech like this that run in the background. Other pieces of tech do touch the guest in some way. Automated communication is a good example of this, and it is critical that the timing and tone of these messages don’t make guests feel like they are dealing with a robot. Another example is our noise sensor integration, which allows us to operate in buildings that may otherwise have banned short-term rentals. The very best examples of tech are not noticed by the guest or property owners.

What has been Propr’s approach to addressing these challenges?

Max: Most short-term rental operators use off-the-shelf software applications to cobble together a working property management system. The problem with this approach is that hosts need to make compromises and find workarounds to stitch these disjointed pieces together which then impacts the guest experience. What’s more, many off-the-shelf solutions are designed for developed markets and are not suitable to the SA context.

Propr decided early on to build its own tech from the ground up. Most people don’t realise the sheer number of moving parts in this business. It is an order of magnitude more complex than running a hotel since properties are dispersed across cities, which adds logistical complexity to housekeeping, maintenance and meeting guests.

Moreover, each property is different, with its own requirements, features and inventories. Propr’s property management system keeps track of all of these moving parts so that we are able to deliver a consistent guest experience. It also harnesses technology such as machine learning and AI to ensure that it gets better over time.

Chregan: The more time we spend in this business, the more needs arise and so we code processes for these into our system. Without the ability to customise our tech, we wouldn't be able to innovate and streamline as much as we have. 

When considering the future of hospitality in SA and perhaps globally, what role will tech play in making sure that this future is sustainable and beneficial for both guests and owners?

Chregan: The past few years have shown that guests’ expectations are increasing, especially following Covid-19. Hygiene, sustainability, seamless communication, easy purchase of add-ons such as fridge stocking, additional cleans and booking of tailored experiences are becoming more important and tech can help make this a delightful experience for guests. With all this innovation happening in this space it is easy to forget one basic undeniable truth: a happy guest leaves a good review, which leads to more future bookings, which, in turn, leads to happier property owners who trust us with their properties. The guest is the start of that virtuous circle. The best examples of tech in future will bear this in mind.

What advice do you have for someone that owns (or hosts) a short-term rental property in terms of navigating the current climate of the short-term rental market?

Max: As this industry becomes more and more sophisticated it will become increasingly difficult for solo hosts to maintain their booking revenue and meet guests’ expectations. It will require more time and effort. There is a reason we exist, and we would advise hosts to outsource the management of their short-term rental to a reputable management company. The good ones more than repay their commission in increased revenue and saved time.