Can HomeToGo as a SaaS offer, Steffen Schneider?

I am pleased to welcome CFO Steffen Schneider for a two-episode discussion of HomeToGo and the business’s growth chances.

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We have discussed the following topics:

Intro

[00:00:00] Steffen Schneider: Our Smoobu software is very easy-to-use software as a service. Where you pay a monthly base fee and then per each property, another fee. If you buy our software, we would get a monthly base fee and then for the property, it would be around €25 per month, so it doesn’t sound much, but there’s no churn in that business. We could, for example, say, Okay, the price you are offering your property during the peak season, you can easily charge 10% more or even 20% more because all your neighbours are charging 20% more while in the shoulder season, you might want to reduce the prices by 10% that increases your utilisation.

Introducing Steffen Schneider of HomeToGo

[00:00:48] Tilman Versch: Dear viewers of Good Investing Talks, it’s great to have you back and we are having another home studio video today with Steffen Schneider of HomeToGo. Hi, Steffen.

[00:00:56] Steffen Schneider: Hi, Tilman. Nice to be here and happy to be on your podcast.

[00:00:59] Tilman Versch: Great to have you here. Steffen is running HomeToGo and maybe we’ll switch to the other camera, Steffen, because now I have a bit of a challenging question HomeToGo is in the holiday rental market and the housing you rent out like Airbnb and Booking.com and Vrbo are your competition. With this competition in mind, why does the world need you? I said it’s a challenging question.

Reasons for considering HomeToGo in a competitive market

[00:01:27] Steffen Schneider: All good. First of all, you know, I’m the CFO of HomeToGo. I’m not the CEO, but to answer your question, we are an important part of the overall vacation rental business and you know, you mentioned Booking.com and Expedia. They are partners of ours and even Airbnb, we are a supplier of Airbnb because they use many of our software customers and therefore we are a very integral part of the business and we can go through it.

Partner by partner, so suppliers from the starting from the Big OTAs to the property managers to the actual host. And we have solutions for everyone on the supply side and that helps us to basically get the biggest offering in the market with more than 50 million offers. And that of course is something which travellers really enjoy.

Customer persona A – the renter

[00:02:17] Tilman Versch: So my plan was to go more through it from the customer side and look at your customers. And then also you can spice in the partners, maybe. I’ve created three personas as your customers. So let’s start with this dude. He lives in Berlin, does investing and likes to travel using Holiday Homes. And he comes in touch with you. What can you help him with when he looks for a holiday home in Europe?

[00:02:47] Steffen Schneider: So, you know, you will refer to holiday homes we always call it vacation rental and the reason why we say vacation rental is because we are present in the traditional vacation areas. So at the sea, in the mountains, at the lake, et cetera. If you want to go to city centres, there are other companies better suited to have more city centre inventory.

We always joke about it. You can find properties with us in Berlin, but then you’re more or less in Potsdam and not in Berlin. And if you want to go into traditional vacation areas, we have more than 15,000,000 offers globally with a big part in Europe, in North America, but also in the southern hemisphere. And there’s not anything you can’t find with us. So being a very big, very small. Rather expensive, rather cheap, rather special, like a castle. You can find everything with us.

[00:03:45] Tilman Versch: How can the customer find you like, aside from meeting you at the Capital Markets Conference?

[00:03:50] Steffen Schneider: So, you know, most people come to us via paid marketing. So Google, Bing, Facebook. But there’s also a big part which comes from organic searches that go straight to HomeToGo or one of our subsidiaries, for example, Casamundo, Edomizil, et cetera, et cetera. And it’s sometimes very funny when you have people talking about it and they say, well, you know if you really want to find good properties, you have to go to Edomitsi.

They’re much better than, for example, what you can find on HomeToGo. But the technology, it’s all the same. The inventory, it’s all the same. It just looks a little different and has a different URL. And it reminds me always, like when people were saying the Bosch vacuum cleaner is better than the Siemens vacuum cleaner, but it comes from the same factory. It’s just a different brand.

[00:04:42] Tilman Versch: And how can you earn money with you looking for accommodation when he’s travelling and going to HomeToGo?

[00:04:50] Steffen Schneider: How do we make money? Okay, so we get a so-called take grade with our partners and partners are all the suppliers. So these 50 million offers are not properties we own. They are owned by most of the time private people who are then using the help of a property manager or the help of an OTA or come directly to us. And we get a so-called take rate and that’s the margin we are getting. We had in Q3 last year or this year more than 11% take rate. So if the traveller is, for example, paying €1000 per week of vacation rental in Portugal, we would get on average €110 out of it.

[00:05:34] Tilman Versch: How do your partners earn money with this customer?

[00:05:39] Steffen Schneider: So again, out of the €1000 that the end traveller is paying, it depends on what kind of partner is involved. So if you take for example a property manager who’s doing everything, cleaning, changing the linen, changing the keys, doing repairs but also making sure that there is sufficient utilisation, they can take up to 40%.

There are even stories where they take more than 40%. So out of €1000 maybe €600 end up with the owner of the house, €400 end up with the property manager and then the property manager again could for example give us €110 and keep the rest for themselves.

[00:06:27] Tilman Versch: Maybe walk us through what is your smallest partner in this area? And what is your largest partner and how many units do these partners have on average?

[00:06:38] Steffen Schneider: Yeah. So we have around 60,000 partners. And that goes from the Booking.com and Expedia groups. Both of them have around 6 million to the actual host who has like 1.

[00:06:52] Tilman Versch: Is this ability to have collected so many client fees as we Germans might say like small units also part of your mode and you have this already done?

[00:07:05] Steffen Schneider: As always, it comes with the pros and cons. So if you have very big partners, of course, you get like connecting one partner, connecting one API, you have a huge amount. And again for us, catering to the traveller, to have the claim that they find the biggest selection of vacation rental in one go is an important claim, so it’s good to have the very big partners, but they’re more attractive inventory for us in terms of how does the inventory look, what is the take rate, what is the conversion, et cetera.

It’s more like the middle group. So the property managers who have like between 1000 and 10,000, maybe 100,000 units and if you’re directly connected to the host, again you have like more, let’s say more control over the calendars. Usually, the business comes to you first. So each group has their certain pros and cons.

Customer persona B – the small holiday home provider

[00:08:05] Tilman Versch: Let’s move to my persona number two that I made. So this dude has a mother. She lives somewhere in the rural space and she has a house that’s too big for her alone, and she wants to rent it out for certain periods of time. Like to people who work in a factory nearby or even like holiday travellers. How can you help this person?

[00:08:26] Steffen Schneider: Well, I mean, the easiest way for this person would be to use our Smoobu software. It’s very easy to use the software as a service where you pay like monthly base fee and then per each property, another fee. It’s very easy to build their own web page and own online calendar, and it has a built-in API connection which then enables the mother of the person you just mentioned to connect it to Airbnb, connect it to Booking, Expedia or HomeToGo and the good thing about this if she gets one booking, let’s say from Airbnb, it automatically blocks the calendars in the other ones, so there’s no overlap and that’s something which sounds easy but is a big fear for many of the host.

[00:09:18] Tilman Versch: So she is a bit of a boomer and she’s not that tech-savvy, is it easy to use Smoobu for her?

[00:09:23] Steffen Schneider: Yeah, very easy.

[00:09:26] Tilman Versch: And how can she find your offer? Like so how are your marketing Smoobu?

[00:09:32] Steffen Schneider: So there are certain, let’s say certain areas where you have like online groups, but also certain areas where people who own vacation rentals are present. And therefore it’s important for us to be present. So when you cater to these kinds of groups, it’s not the traditional online marketing you have for our marketplace business where you spend money on Google, Bing, et cetera, when people are looking for vacation rental in Greece. So that is a little bit different, but ultimately as always, you need to find the respective interested parties and then cater to them.

[00:10:14] Tilman Versch: How can you get paid for your service or how can you earn money with this mother?

[00:10:21] Steffen Schneider: Yeah. So I mean in this case, if she would buy our software. So we would get a monthly base fee and then for the property, it would be around €25 per month. So it doesn’t sound much, but there’s basically no churn in that business. So once someone has keyed in all the details, once someone is using the software, they basically stay.

So it’s a very good business model because the customers are very happy about it. Therefore it’s a nice recurring stream of revenues and if we have more than one customer it adds up and the Smoobu business is a business which is developing really nicely.

[00:11:02] Tilman Versch: How does it make life easier and save the customers time?

[00:11:11] Steffen Schneider: So you key in the information once. So again staying with your example. So that’s the house. That’s the property. These are the, how many rooms, what is present is the TV, dishwasher, et cetera. Once that is in, she can do everything on her own, but she can also connect it directly to the big platforms.

For example, during peak season, she can increase prices very easily and then it increases the prices overall platforms. In the offseason, she can decrease the prices very easily, and once the data is in it just comes automatically. The bookings flow in automatically and then she just has to make sure that you know there’s someone present who is handing over the keys and helping with whatever kind of services she’s willing to offer.

[00:12:03] Tilman Versch: So how does onboarding work? Is there some person at Smoobu sitting and having a call with her or is she asked to fill it in?

[00:12:12] Steffen Schneider: So most of the people do it themselves. It’s very easy and user-friendly, but if there is a need for someone to help, there’s someone to call, yes.

[00:12:21] Tilman Versch: And what kind of return does this person get overtime? So maybe get out some examples of your success stories which you have enabled through Smoobu. Do we have any idea what is the return on the €25 the person pays a month and what the highest the most successful people can get from this investment?

[00:12:42] Steffen Schneider: Well, it’s difficult to quantify that because what is the alternative? So taking your example again, if the mother is able to book out the property each week all on her own because she, you know, has a local network of people, or there’s a factory next by with people who want to rent it out, then you know the additional utilisation might be very low. But if it’s rather empty and suddenly she gets all these bookings from HomeToGo or other platforms. It’s a big difference for her.

But to put like a percentage next to it would be difficult because if just one week, you know, taking my example from early on. If she’s renting it out for €1000 per week, put it in the comparison to the €25 it costs. And again, even if she would take a property manager, if she only needs the property manager for cleaning and changing the keys, et cetera. But is doing all the booking there herself, she can pay much less to the property manager, so it’s a very attractive opportunity.

[00:14:01] Tilman Versch: Talking about the property managers, are you also getting paid by the property managers for qualified leads?

[00:14:08] Steffen Schneider: So the qualified leads business there still it’s like a really tiny. So we call it like the CPC and the CPL, but the CPL, it’s really minor, it’s an old business. So usually there’s still some CPC business left where we get paid for the click and the cost per lead is a similar business model, but it’s really minor.

Customer persona C – the professional rental agency

[00:14:34] Tilman Versch: Okay. Let’s move to persona number three. And maybe look out of the window here in Berlin, because there are more professionals like home rentals or people who have maybe 10 flats, they rent out and they also have issues with managing their business. So how could you help them?

[00:14:54] Steffen Schneider: So I mean the software and you know don’t want to talk about only the software, but the software itself, the majority of people are using it for up to 10 properties. There are some who even use it for up to a hundred. Although I would say, if you have a hundred there are better opportunities, so then you come already in the semi-professional areas but you can easily scale it so you have all the basic information in and you just need to add the additional properties and off you go. So it’s very easy to manage all the things in parallel.

[00:15:27] Tilman Versch: How is your sales approach or your marketing approach for Smoobu for this kind of customer different than maybe the single- or two-unit person?

[00:15:36] Steffen Schneider: It’s pretty much the same.

[00:15:39] Tilman Versch: And they also can earn the same like you also earn the same way money with this?

[00:15:43] Steffen Schneider: Yeah, it’s exactly the same thing. It’s, you know, effectively you make more because the base fee is still the base fee and then the €5 you pay per property. So it actually has a better utilisation of the base fee over the amount of properties. So the more properties you manage the higher the profitability.

[00:16:04] Tilman Versch: Is so one person with 10 properties means €25 base fee and €50 on top. Yeah.

[00:16:10] Steffen Schneider: Exactly. Yeah.

[00:16:11] Tilman Versch: And is there any other lever you can earn money with this person?

[00:16:15] Steffen Schneider: Well, there are many opportunities. So for example, I mean, we, again, using all the knowledge from our marketplace. We know what is the current price. So let’s assume the property of your persona is in the German Baltic Sea, where we have a lot of information. We could, for example, say, Hey, the price you’re offering your property during the peak season, you can easily charge 10% more or even 20% more because all your neighbours are charging 20% more.

While in the shoulder season, you might want to reduce the prices by 10%. That increases your utilisation and that’s things information we have. We are currently not charging for it, but we could easily do that and it would still be a very valid proposition to the owner.

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Is there are also a case where investors can get a certain fantasy about like, you’re also taking a share of the total payment that the person gets, like a share of

Thoughts on volume-based models

[00:17:43] Tilman Versch: Is there also a case where an investor can get a certain fantasy about like, you’re also taking a share of the total payment that the person gets, like a share of

for the payment, if the person gets €400 for the rental or the €1000 and you take 0.5% or 1% because you manage the payment for this person as well?

[00:18:04] Steffen Schneider: So again that would be something that you would go from the more subscription or software as a service model more to like a volume-based model and we have certain parts of our business. There is already volume-based where we get a certain share if there’s a booking. So that’s also something we could do. In that particular case, we don’t do it yet, but it’s technically feasible and it might also make economic sense.

The typical customer

[00:18:32] Tilman Versch: So we had these three personas I’ve created as customers. Is there any 4th or 5th persona you want to add as a customer for you?

[00:18:42] Steffen Schneider: I mean, there are so many people that, let’s say, the majority of our customers. So the traveller is more than 35 years old. It’s usually a family with children. And these are the standard users of a vacation rental. And it’s one of the things why, again, I know you don’t want to talk about the supply side yet, but it’s one of the reasons why the supply side really likes to work with us because these families usually mean fewer issues. So you have a group of young men, a typical bachelor party, et cetera. It gets loud. Maybe things get broken, et cetera. If you have a family, usually it’s very easy and the suppliers love that.

So the traveller is more than 35 years old. It’s usually a family with children. And these are the standard users of a vacation rental. And it’s one of the things why, again, I know you don’t want to talk about the supply side yet, but it’s one of the reasons why the supply side really likes to work with us because these families usually mean fewer issues. So you have a group of young men, a typical bachelor party, et cetera. It gets loud. Maybe things get broken, et cetera. If you have a family, usually it’s very easy and the suppliers love that.

[00:19:28] Tilman Versch: Is it maybe that customer might not be the perfect thing to name? It’s also like you have a partnership approach. Also more in thinking about like this positioning you are or…?

[00:19:42] Steffen Schneider: Yeah. So the partner or the word partner we are using for our suppliers because with many of the suppliers we are in a, let’s say, frenemy combination because, on the one hand, we are competing directly for the traveller. So the big OTA wants to get the traveller directly. The property manager wants to get the traveller directly and even your personas.

If they can get someone to do it directly, they would certainly take that. So, you know, always cut out the middleman. But on the other hand, they need us for many of the property managers. We are the number one or number two booking channel. And even for the big OTAs, we are an important part of their bookings.

So they need us, we need them, and therefore we call it a partnership with the traveller. You know, we want to have happy customers, happy travellers, because the best marketing we can have is that someone goes out and says, Oh, wasn’t that great vacation rental? I found it via HomeToGo. And then he tells all his friends about it. We even calculated already if someone likes the property so much and is renting it out next year.

Again, they usually do it directly with the owner, so when they come for the second or third time to the same property. They usually go directly to the owner and the owner says, you know, I’m happy to leave out any middle person and the traveller is happy so, but that’s fine for us. We basically assume that to happen because it’s still if someone is so satisfied with the property, they will also talk with friends about it and say, Oh, I found that great property with HomeToGo and I’m so smart, next year I‘ll book it directly with the owner. That’s perfectly fine because at some point they will book again and they will most likely come back to us and find a new property.

[00:21:38] Tilman Versch: So you don’t take away some of the pain points as the platform in the middle like I tend to book holiday rentals as well, but like do it with admin because I have someone who I could call if something comes up as an issue?

[00:21:50] Steffen Schneider: Yeah, I was just talking about if you book exactly the same property a second time, then usually you know the owner and then usually there are always exceptions to the rule. Then there’s a direct business between the owner and the traveller. If someone is booking something new, it’s a different story.

[00:22:11] Tilman Versch: So you must be very good at marketing then to help the ecosystem?

[00:22:15] Steffen Schneider: I’m personally not, but the colleagues are, yes.

Marketing efficiency

[00:22:18] Tilman Versch: How happy are you with your efficiency generally in marketing also compared to other players?

[00:22:26] Steffen Schneider: Yeah. The good thing is that coming from when we started the business almost 10 years ago, it was like a meta-search engine and by now we still the meta business or advertising business as we call it now is still a part of it, but no longer the biggest part of the business. But when you like the whole DNA was to work very efficiently with very thin margins. So we always knew that how to get as close as possible to–

[00:22:56] Tilman Versch: Sounds like a very German business. Sorry.

[00:23:00] Steffen Schneider: But to really make sure that okay with the last Euro of marketing spend we make exactly €1.00 of revenue. So, you know, that you basically have a zero contribution margin. But to know how to do that enables you to also basically meet any other kind of margin you want to have. And we are very efficient in it.

And we always make fun of our paid marketing team there. We say, Okay, whatever kind of efficiency gains we are making, for example, with more repeat customers, they immediately spend it because they are going for whatever our goal is and having that skill is actually quite helpful because that enables us to make sure we want to reach a certain limit and then we’re going to reach it. So last year we reached our Adjusted EBITDA target. This year, we will reach our Adjusted EBITDA target and then we will increase it from there.

Winning in marketing

[00:24:00] Tilman Versch: My second question on marketing was if there is anything especially good you’re doing in marketing and I think this could be the thing or are there other things where you say, Okay, when I look at other players in the market, we’re good here.

[00:24:16] Steffen Schneider: I think when it comes to paid marketing, we are really good and it comes down to very little things. For example, this year during Q1 we had very good success with people looking for a vacation rental with a dog. So as always, the broader you are in your search, the more traffic you get and the more narrow you are, the less traffic. But for example that worked really well.

There were other success stories where I was not allowed to talk about it publicly. Yeah, but, you know, the truth is also when I look at some of our competitors, they have a great brand. As the colleagues from Airbnb are saying, Airbnb is a verb and a noun. So that is something I look at with big envy because that is really an impressive thing they have done. So, you know our brand can still grow. There was a survey by [unintelligible] and out of the top six, there were four brands from HomeToGo, so not too bad, but still room for improvement.

[00:25:26] Tilman Versch: So marketing is the one thing and conversion is the other thing that makes a business happy or business owners happy. How have you come, and let’s factor a bit of history here, better in converting customers over time?

[00:25:41] Steffen Schneider: It’s like a constant process and it’s the kind of when I– Now our product team, they’re doing constant A/B test. Every day they’re like a hundred tests going in parallel and it comes down to really tiny things. For example, is the checkout button here or is it here? Is it green or is it blue? Is it red or is it yellow? It’s really interesting to see the results of these A/B tests. Sometimes there’s no difference, sometimes it’s a huge difference.

And then to test it, to apply it and then to see how the conversion rate is picking up. There are certain things when you scroll down the page like what is happening? How much do you see at the top? Is it faster? Is it slower? For example, to have, you know, with more than 15 million offers? Initially, we showed a lot of offers until we realised during the A/B test that the travellers actually were not too happy about seeing 30,000 search results in certain areas. So now we show like 300 and then they can load another 300.

In order to not have that feeling of, Oh, I saw these great properties but maybe on search page 300, there’s an even better one. And then they keep on searching and not booking. So most of these steps, there’s very rarely that you do like that one thing which then makes a complete difference. It’s a slow improvement of the side year over year and it’s very important when we very often talk to the property managers, the property managers always talk about the inventory as their property. When we talk about the product, it’s always the marketplace, always the technology and that distinguishes us from them.

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Team sizes

[00:27:41] Tilman Versch: How many people work on this task? So how big are your teams? And how many systems you’ve implemented over time that take away work from the people?

[00:27:52] Steffen Schneider: Yeah. So overall, we have more than 600 people in the group and out of that 1/3 are real engineers, software engineers, et cetera. And then there are another hundred who, you know, work around the product, many things like with the ranking for example. The important thing is what are the properties we show you. And again, it’s helpful. The more information we know about travellers, the better it is to show a certain amount of properties.

And like last year, my family and I went to Denmark and my wife was looking at HomeToGo with our family laptop, I was looking at HomeToGo from my work laptop and we put in exactly the same keywords, and got completely different properties because I had a much longer search history because I constantly look something up. Therefore the algorithm saw me as a different person than my wife, and therefore we saw different properties. So sometimes it’s really interesting.

[00:29:03] Tilman Versch: So it’s also getting more and more tailored the more data you put in. So it’s not a static search, so it’s not–

[00:29:08] Steffen Schneider: No, no, no. The ideal customer of ours is a customer who has booked already before we know who the customer is and if they booked last year for a family with two kids and one dog the likelihood that they will book and look again for properties which suit a family which suits a dog is relatively high, so much easier to show them properties which meet their needs.

Conversion mistakes

[00:29:37] Tilman Versch: There you might be even better than Airbnb because I have some pain points that they remember me. I bet Airbnb they have to change it. Let’s talk a bit about conversion mistakes. What kind of costly conversion mistakes do you want to avoid in the future? You don’t have to disclose all out-of-competition reasons, but maybe you have some examples.

[00:30:04] Steffen Schneider: I would less see it as a conversion mistake. It’s just that we, you know, sometimes we get certain traffic which doesn’t convert and then it’s not so easy to see why is this traffic not converting. So didn’t it convert because we showed the wrong result? So maybe someone was looking for a big villa and we showed them rather budget objects or the other way around. Was it that maybe someone just was looking for certain kinds of ideas and never really had an intent to book?

So we were thinking that this was a high-intent customer, but actually, it was a rather low-intent customer. So there are many, many things and unfortunately, we don’t always have the perfect information there. So sometimes it would be really nice to have like afterwards the opportunity to ask to do a survey with the customer who booked or who didn’t book to know what went well, what didn’t go well.

Payback periods

[00:31:19] Tilman Versch: What is the payback period of a newly acquired customer across the different business lines and offers you have?

[00:31:26] Steffen Schneider: So when we have like the typical marketplace customer, these are the customers we make sure that already bought the first booking, we have a positive net contribution while if you have more the software as a service there the custom acquisition costs are initially higher than what we get with the first month, but usually after one year we also are back in the profitable territory.

Measuring retention

[00:31:55] Tilman Versch: Let’s switch to the topic of retention as investors call it. So how happy are your customers with you and how do you measure this happiness? Maybe also breaking it down to the product lines.

[00:32:09] Steffen Schneider: Yeah. So when you look at the subscription customers, you can see very easily how happy they are because if they just keep their subscription going. Let’s assume they are happy and we have very little churn. So that that’s a good sign. When we look more at the marketplace, there again, we have to distinguish between the on-site customers where we have the full information and there we can see if they are coming back. And these are, I would say, the most attractive customer group of ours because if they come and book with us for the second or third time, they cost us significantly less. So we can just calculate it.

Again it’s about 88% and the reason why they cost us so much less is because we can save Google text. It doesn’t matter if it’s Google or Bing, et cetera. It’s just we save a lot of paid marketing. In addition, we have the information about the customer. So most of these repeat customers have downloaded the app by the time they’re very easy to retarget, so we can send them an e-mail and whatever they looked up in the app, we can say, Oh, you looked up Croatia.

Look at these offers, which are currently in. There and might be of interest to you. So that’s the most attractive customer group. We actually think that our repeat customer group is bigger than we can identify because they’re also people who still then go on the advertising business and do off-site and still book with us, we just don’t know unless they use the same IP address.

App share

[00:33:51] Tilman Versch: How has the app share grown over time for your business of traffic?

[00:33:56] Steffen Schneider: It’s growing. So the absolute amount of app downloads is growing. The monthly average number of users is growing. The actual share I think is also growing, but I don’t have that number ready at the moment.

[00:34:09] Tilman Versch: Okay. And how easy is like if there is someone looking through the app, how likely will this person then convert? Maybe, I don’t know, if you can just close something on this.

[00:34:24] Steffen Schneider: It’s important to see that the majority of our travellers are booking in the first quarter for travelling in the third quarter. So it’s the traditional main or in the northern hemisphere summer holiday. So, therefore, we see a lot of traction in the app. So when travellers are looking at something and look at this information is helpful for us because when they then come into the stage where they want to make a booking, we have a pretty good idea of what they are looking for. But it’s usually, for example, after the summer, people rarely book for the next season.

There are some people, there are some early bookers who come home from the last holidays and they book already for next year. But the majority of bookers are really in the next summer.

App traffic

[00:35:22] Tilman Versch: This could mean maybe me. I‘m not that bad. Yeah, and generally thinking do we have some observation on how much is really app traffic over time or is it more like the people also browse? So like is it in some categories you just shop via the app or in your category it’s a more complex transaction and you have to find pictures in higher resolutions?

[00:35:45] Steffen Schneider: It’s all over the place. It’s interesting. Some people are looking up something on the app and then booking over the web. I would have difficulties. There are colleagues who might be able to answer that question better than me. But it’s very hard to say that you have more now in the app than on the web. Again as the CFO, I don’t care as long as they make a booking.

[00:36:15] Tilman Versch: So back to the numbers questions. So how do you measure the happiness of the customers? I think it’s MPS.

[00:36:21] Steffen Schneider: Yeah. So we do like a constant check of these MPS and the results are very good again comparing it to other OTA’s, we refer very good if we compare it to the overall travel sector. It’s very good, although sometimes it’s easy because I think the airlines have a really low score.

[00:36:47] Tilman Versch: unintelligible Then don’t talk about it but.

[00:36:50] Steffen Schneider: But it’s something where our guest relations team is looking at it very, very carefully and if there’s any kind of, you know, deviation in particular to the negative, they are looking into it, we just or the team got a Newsweek award in the US market as one of the best guest relations team and NPS was a significant factor in it.

Guest relations

[00:37:13] Tilman Versch: So guest relation teams mean like the customer could call them in case something is like there was a bed in this picture, there’s no bed.

[00:37:23] Steffen Schneider: It already starts earlier at the booking. So everyone from the management board, but also every one of the second level management team has to do at least one day per year in guest relations. And it starts from working when someone has a question on the booking.

So very often it’s like they were using the pet filter, but they have two pets and then ask, Can I bring two pets? Most of the time you could read it yourself in the description of the properties, but that’s something where we have seen very good success of by helping the respective traveller or potential traveller, and then they’re very happy to book or if there is something is and that was a learning for me when this property was not allowing two pets, the respective colleague was then immediately looking for a property which was close by, which allowed two pets and the conversion rate out of it and the kind of happiness of the customer out of it is really impressive.

I always learn, learn a lot there. And that’s like just for the part before people are booking and then you have people who have already booked them asking questions, okay, where is the next supermarket or when they have arrived and there was an issue how to deal with that.

And then of course we can help the traveller if, because if we go back to the respective partner and say look, the traveller was expecting a TV, there was no TV, then what to do about it? But usually, complaints are really a minor issue and we are able to solve them immediately and sometimes we even you know solve the issue for the traveller and then go back to the partner to get our money back.

Testing customer referrals

[00:39:19] Tilman Versch: So lesson for building a business is always try to answer customer questions, even if they stand in your descriptions and you might think they’re a bit interesting. And so this makes customers happy and how do you use the power of customers that are happy to grow your business? So do we have any special strategy to even like customer use, customer referrals and stuff like this as a growth engine?

[00:39:45] Steffen Schneider: We do some tests with kind of vouchers where we have for example customers who have booked with us, we enable them to also take an additional voucher and give it to some friends and had some good results on that, but it’s still in the testing phase. So there are many things you can do with various kinds of loyalty programmes for existing customers, but also for potential new customers. But we’re still in the testing phase there.

[00:40:17] Tilman Versch: And maybe also transfer this to Smoobu because here becomes interesting. Are there a lot of referrals happening from existing happier homeowners?

[00:40:24] Steffen Schneider: Yeah, yeah, yeah. You have these online groups, for example, and once you have, you know, some people in that group who are happy customers. Then it’s usually very easy to convince the other ones, because as always, when you know someone who has had a good personal experience and tells you to use this software, it’s working well. Look at what it did to me it’s the best kind of argument you can have.

[00:40:58] Tilman Versch: Do you expect if this continues to go on a certain network effect where it even can drive your growth because more people have experience with you, the network gets denser, the several networks gets denser and…?

[00:41:10] Steffen Schneider: Yeah, yeah. And also what you always have to see when you look at the global market for vacation rental, we would say by now a bit more than 50% is online. A large amount is still offline, so, you know, the holiday on a farm which always went through the Automobile Club magazine and the one generation passes on the property to the next generation and then they say, Okay, that’s all nice with the Automobile Club magazine, but there must be something more online by now. And then it goes online. And with every new generation, we get like new customers.

[00:41:53] Tilman Versch: Let’s jump to the questions of how good you have become over time with keeping customers. Like with Smoobu, you said there’s nearly no churn, what are the churn reasons there?

[00:42:07] Steffen Schneider: I don’t know the exact reason now, but I think the main reason is that people are just selling the property so they no longer have the property, and then there’s no longer a need for the software. And sometimes if the new owner is keeping the software so then we lose one customer, and we gain another one. Sometimes the owner already has an existing software and just puts it there. So many different reasons for what’s happening but that’s the number one reason.

[00:42:38] Tilman Versch: So the churn in the holiday rental marketing business, let’s say it’s like this, you correct me, or the core business is then higher. So what do you think about it?

[00:42:50] Steffen Schneider: And in the core business it’s the repeat cycle for our customers is 1.1 times per year. So there’s just one big travel day they do per year. So on the one hand, of course, it’s good because if people stay for two or three weeks, it’s again one of the reasons why our supply partners love us, because if you have a traveller who stays for two weeks.

It means only changing the keys for two weeks, and changing the linens for two weeks. So a lot of money is saved for them. On the other side, in terms of repeat customers, I would love to have more kinds of short-term travellers so that we have like maybe two bookings per year and therefore have a higher repeat share.

Therefore, it’s not that we like to lose the customer. It’s just that it takes another year until they book again. But for example, from ’22 until ’23, we have increased the amount of booking revenues from repeat customers by 50%. So it’s still a relatively small double-digit amount of overall revenues, which come from repeat customers and I always say compared to the big OTA’s, we have like 70%, 80%, 90%.

It’s a long way to go and it will take us a few years to get there. But to get from a low double digit to maybe 30 or 40% we have a pretty good idea where what we have to do and where to get and again remembering the 88% less cost we have with a repeat customer gives you an idea on what kind of effect it has on our P&L.

How to think about HomeToGo customers?

[00:44:32] Tilman Versch: So how should we think about the personas thinking in cohorts? So they could be like the HomeToGo lover that comes back every year and just buys with you then there is the deep German that tries to compare everything and you have the best deal and that’s why he books for you with you every three years. And then there’s the person that’s only booking every five years like this and you can use them as customers.

[00:44:56] Steffen Schneider: I always have this picture from the pet food industry. I think it was the Zooplus who could show like the customer who booked for the first time. Then there was a churn of like 10%, 15% but whoever booked for the second time basically stayed loyal customers. So, unfortunately, we are not pet food because they book every, what is it, second month because they need new pet food. I wish it would be like that. So in our case–

[00:45:28] Tilman Versch: Yeah, but holiday content is also not that bad. The Internet likes it too.

[00:45:32] Steffen Schneider: Yeah, I don’t want to complain about it. It’s just when you have that repeat cycle of 1.1 times it is difficult to have that kind of a layer shown to investors as the pet food example could do it because it could have many reasons why in one year you maybe don’t want to go to vacation rental.

You might return in the next year, but it’s not so, so it’s so easy to show. But as I said, we have increased it by 50% this year. We want to continue to increase it over the next years and it will become a bigger and bigger part of our overall business again. This enables us to spend more money on new customers, which again will help us to grow the overall business.

[00:46:24] Tilman Versch: So how do your cohorts behave over time? Like the oldest compared maybe to the newest and have you made it that the newer cohorts have more quality than the older?

[00:46:43] Steffen Schneider: I don’t have that data really at the top of my head now. So, in general, we can see that like basically every new cohort is, is usually starting higher than the old one. But I couldn’t tell you now the exact reason why that is, but it’s usually going up and then continues to grow afterwards.

Goodbye

[00:47:05] Tilman Versch: So maybe that’s a good invite for my guests that they will ask these questions to you in future talks when they see you at the Capital Market Conference and I will close the first part of our conversation for now and we’ll be back with the second part where we talk about complexity, competition and capital allocation, CCC, in the next video, thank you very much for your attention and bye for this video. Bye-bye.

I really hope you enjoyed this conversation. If you did, please leave a like and a comment and make sure to subscribe to my channel.

Disclaimer

[00:47:40] Tilman Versch: Traditionally, I want to close this conversation with the disclaimer, so here you can find the disclaimer. It says, and please do your own work. This no recommendation what we are doing here is just a qualified talk that will help you, but it’s no recommendation. Please always do your own work. Thank you and hope to see you in the next episode. Bye-bye.

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Tilman is a very enthusiastic, long-term investor. Over the last years he has taught himself important investing concepts autodidactically. He tries to combine a positive climate and environmental impact with his investments.
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