Rachel: How am I going to be investing in the property to help support that experience still, that they can still create the memories and want to book here that's going to set you apart from somebody else? Yeah. Cause if you if you want to go back to the investment side and looking at the occupancy rate, what's going to get you the next occupancy is the experience that somebody's sharing, like how, how they felt, how, how Well everything was appointed and taken care of and and just all the total experience of the place, not just, ⁓ it was a nice it was a nice bed. Welcome to Return on Design, the podcast where beauty meets strategy and interiors become assets that perform. I'm your host, Rachel Niederhofer, designer, investor, and builder of high impact spaces that deliver real results. Alongside my husband, I run both a design firm and a real estate investment company. where I live at the intersection of creativity and ROI every day. Each week, I'll be unpacking what most people overlook, how strategic design decisions can grow your investment, elevate your lifestyle, and unlock the full potential of your property. You'll get real tools, proven strategies, and unfiltered conversations with industry experts who are doing it right. So if you're ready to invest with purpose and leverage design as a powerful tool, this podcast is for you. The short-term rental market has changed. A few years ago, it could be, you know, I have a good property, it's pretty clean, I'm in an okay location, and that was enough to get bookings. But now there is more competition than ever. It's the data starting to actually show a lot more of that too. I mean, as short-term rentals are increasing, occupying rates are still near 60% in most markets. You know, and investors, they're so used to looking at what am I buying it at? What you know, what's the cost of the property? What am I buying it at? What's the average occupancy in the area? But there's a missing factor that I just don't know we're giving enough weight to the conversation. And that is what is the experience? This experience is what's really driving those booking rates. Yeah. So how do you how does your property stand out and differentiate from the rest? Yes. And again, I believe the experience is what is differentiating people and making some. Earn substantially more in their revenue than others. So, welcome back to the show. This is exactly what we are going to be diving into today. So let's just kick it off here. Like, what is experiential design? This is one of the, I guess, bullet points, if you will, in our return on design approach. It is the experience. What are the design decisions evoking in terms of experience? And experiential design is really designing around human behavior. I mean Pretty much what it says, like how are they going to experience this space? And how is the design supporting or influencing that experience that we're trying to create? Yeah. And as investors, you know, we're so used to looking at occupancy rates, nightly rate, you know, the return on investment, but people aren't booking off spreadsheets, they're booking off experiences. Right. So let's just boil down a little bit. this whole idea around experience. I like to think of an experience as similar to more of a hospitality design where if I'm gonna go to a restaurant, I'm going for the food, hopefully, but I'm also going for the experience. Like there's certain atmospheres and ambiances that can influence everything about, you know, the food, what I'm tasting, how it makes me feel, whether I want to stay a little longer. Whether I'm going to talk about this to my friends and recommend this place to other people, that same thought process is exactly how investors need to be thinking about their short-term rentals. Is okay, yeah, I have this great property, let's say on a beach as an example. So you have to think about it beyond, I want it to aesthetically support being on a beach, but also influence how they're going to experience the destination of the beach. Yeah, helping to kind of bring that inside or that outside in rather and and just support the lifestyle of being in that area. Yes. And whenever there's, you know, maybe it's dark or you can't be on the beach, or maybe it starts raining or whatever that could pull them back inside. What how am I going to be investing in the property to help support that experience still, that they can still create the memories and want to book here? that's gonna set you apart from somebody else. Yeah. Cause if if you want to go back to the investment side and looking at the occupancy rate, what's going to get you the next occupancy is the experience that somebody's sharing, like how how they felt, how, how well everything was appointed and taken care of, and just all the total experience of the place, not just, ⁓ it was a nice, it was a nice bed. Yeah, which includes your accommodation, you know. Are you family friendly? Do you have the accommodations necessary for that experience to be something that resonates with people? So yeah, then they become your marketer. They, you know, share the booking. They refer their friends to this incredible place they went to and in turn keeps your booking rate up. Yeah. I also want to point out from an experience standpoint is this luxury market and how when you're going to a resort. More of your luxury clientele. Experience is expected. And that is who you're competing against with a lot of these short-term markets when you're really getting much higher revenue than your peers, much higher booking rates. You know, you're tapping into a different market. And experience is a necessity. Yeah, there was kind of this lull there at the beginning of all this short-term rental. Yes, craze, if you would, where you know, they all these short-term places came on the market and resort bookings kind of dropped. Well, the resorts have upped their game now. And so now the the short-term rental, they've got to do theirs. They've and they are up, they are bringing it up and really going after this experience of immersing you into a just an entire setting when you go into some of these places. You know, we've looked at someone, it's like just, ⁓ the colors, everything blends and just comes together so nice. And it just it creates this, I really kind of like being here. You know? Yeah. I don't even think it's limited to a view anymore. Where, ⁓ if you have a you know, balcony view of the ocean versus well, I don't have the ocean view. I I have a pool view, but I have all of these other accommodations that are going to help our experience. Like maybe you have a gaming area that has a pool table or a shuffle board as an example. Yeah. So from the investor's perspective, these are things to start thinking about if you're not already. Like if if you're wanting to get into this short-term rental market, or maybe you are and you want your bookings up, you know, evaluate it from a perspective of, okay, how, how is someone experiencing this place? Is it just purely me as the investor relying on the city infrastructure to drive the experience? Or am I leveling it up to also creating an experience within the rental itself that supports the destination experience that they're already coming for? Yeah, because we're seeing we're seeing a shift in a lot of travelers and they're not just booking the room just to be in at You know, in the city. They're they're looking for the unique stays the low with the local experiences and how are you tying your your rental property, your destination in with the from the destination of the overall trip? You know, are you are you supporting all of that? Why do you think that there's such a gap with investors? Like some of them seem to have this down and then there's a whole group that just are missing it. Because I think for so long we've just looked at it fr by the numbers. You know, and the numbers matter, yes, but we've got to figure out, you know, better ways to support those internal numbers that we want to look at. And those experiences, again, like I said, if the experience of my short-term rental, the experience that you have staying in my place supports you wanting to come back and you talking about it. I mean, everybody wants to go to that destination where somebody was just raving about. their trip, you know. ⁓ we had the most amazing time here. Why? What about it? ⁓ the place we stayed was it was phenomenal. It was great. You know, ⁓ yes, we did, we went and did these things in the at our destination, you know, and in this city, we went and visited this. But where we stayed was incredible. It was comfortable. It was relaxing. It just it was inviting. We we just had so much fun there. The experience that we had drives them wanting to come back, meaning Your rates go up, your occupancy rates go up, your ⁓ revenue rates go up, your ROI in turn goes up. Yeah. So let's break this down for our listeners in some contextual examples. One that comes to mind for me is, you know, let's first focus on the geographical location. And what is it that is already enhancing people wanting to come there? So if the weather's beautiful and People are coming there to be outside, maybe summer is your peak month, then you should probably be putting a good chunk of your investment to drawing the experience outside. And when you're acquiring these properties, that needs to be a focal point of importance. Not just limited to location necessarily, but a location that's going to support the experience. Or if it doesn't already have that exterior experience. then how can you invest in the renovation to support that? Like maybe, you know, outdoor fire pit, a hot tub. What's another outdoor example? Well, or just even ways in your renovation to bring the outdoors in. And the, you know, we've seen, okay, we open that patio room up so that you can actually open it up and it feels like you're outside even though you're in. Yeah. You know? And there are ways to create those that experience to bring it all and tie it together. Another example, let's say you are wanting to offer maybe a an oversized property that can accommodate very large parties. You know, from a design perspective and an experiential design perspective, one thing to think about is how are people going to gather in the space? Because you have to have the balance in a in a huge property of privacy and comfort, and also the gathering fellowship and like. Hanging out together because that's part of why people are going there, right? So maybe you have a focus on your luxury kitchen or, you know, your seating accommodations, ⁓ something that you're investing in intentionally with the pure focus of how they're going to experience that space versus just investing in, ⁓ this kitchen's outdated. We need to, you know, fix it up. When you're looking at those larger spaces or even just multi-unit. deals. I mean, I remember there was one that we rented with your brother. And it was it was actually two houses on the property butted up together. And it was it was really ideally situated for us to have our our separate spaces a little bit and accommodate our families. But then yet we got to we got the shared experience of everything together. Yeah. And that, you know, that was an experience that, you know, that particular Yeah, investor and host had had done really well in that. Yeah. Yes, it had the primary house in the front. Mm-hmm. It maybe had three or four bedrooms. And then a secondary house in the back that I think had a few less bedrooms, but it was still I think it was two. Yeah. And then we had the common exterior space with a hot tub and a they had the fire pit. They had the ambiance with the party lights and so it was very community accessible but separate and private. Yeah. I mean we could enjoy everything together as a family. The kids could run around, do all the things, you know, and when when the little ones needed to take a nap, we you know, we had the separation. Yeah, that was a great booking. So something to keep in mind from a perspective. And I don't know if that property was able to be booked like by two separate parties or if it was all one and the same. Mm-hmm. Because two separate parties might be a little odd. Mm-hmm. But having it as like everyone's still traveling together made perfect sense. Yeah. Yeah. Again, they're not just buying rooms or renting a house. They're they're renting memories. They're renting community. They're they're renting the immersion of where they're at. Yeah. And touching back on the ⁓ that luxury market, you know, there's an expectation of convenience also. So sometimes I feel like as an investor, we can limit convenience to, ⁓ well, you can it's a walking distance to something, which absolutely there's a level of truth to that. Yeah. But there's also conveniences that matter ⁓ in that luxury space. As an example, you know, let's say you are booking on a late, well having some equipment, if you will. To allow people to enjoy the lake. Maybe you have paddle boards, or maybe you have fishing poles or something that's influencing that experience that you are still providing as the host, and you're thinking about that experience-driven design. And that's going to create a convenience that's going to impact people in a positive way. Yeah. Yeah. Versus like, ⁓ we're on the lake, but we don't have. Anything to get on the water. I can basically sit here and look at the water, but I can't do anything with it. Yeah. And that that does happen a lot. That does. And that's a simple thing you can do. And we've and we've been to both where it's like, ⁓ if I want to enjoy the water, I gotta go rent everything and put it all together and do it. But then there's been the places where it's like, Hey, I've got I've got some things that we can we can enjoy. We we may not get to do everything. Right. I mean. But we can we can still have fun and we can enjoy this because that's what we came for. So those little extra details that drive those occupancy rates up, drive up that, you know, marketing and referral, and ultimately drive up your investment revenue at the end of the year. You know, okay. So with that, like where do you see most investors are kind of getting this wrong in the the short term market? I mean, I know what I see a few times and a few things. I think like I was mentioning earlier, the focus has been purely on the destination. So maybe it's the beach or, you know, a popular town or you know, like Nashville. Let's use Nashville as an example. The destination can play for itself in a lot of ways. And that's where investors have focused and been able to get by. Versus now the shift is yes, we want the destination. But we also want an experience that's really differentiating and setting it apart. And those are the ones driving the higher bookings, which are also the ones that are able to compete with these resort style experiences. Whether it's a boutique hotel that's that's creating a unique experience for people, maybe a bachelorette party would book there, or if it's a larger scale resort that has the experience. And I think previously. You didn't have to think about it as much to actually turn a profit on your short term rentals. Yeah. And now the shift is is exactly that. If if you don't have that experience element to your offer, you know, your margins are not as high. You're not getting as many bookings as those that do. Yeah. I think a lot of investors are still ⁓ they're renovating these short term rentals like it's a flip. You know, and and it's about the finishes and which those those things do matter. They still matter. But a flip is designed to sell. A rental, a short-term rental is designed to be experienced. So it's something you want people coming back to over and over again. In addition to that, there's been ⁓ an approach where the more beds I have for people to sleep, the more I'm gonna be booked and occupied. And so they're skimping on that experience of what the expectation is, what's gonna drive the booking and it's not always just quantity over quality. No. And it's the quality of the experience, which includes the finishes and how people are actually enjoying it that are driving. Yeah. I mean the best performing short term rentals are the ones that they're not the ones that are the most lavishly upgraded, but they are the ones that are the most memorable. Yes. Memorable, that's good. Well, I think that is a beautiful place to kind of bring that full circle is the memorable. Memorable and experience go hand in hand. And if they have a bad experience, it's gonna evoke a bad memory. They have a good experience, it's gonna evoke a good memory. And as the the market has shifted and continues to to evolve, so investors who are not thinking about this. concept of experienced design and real estate investing, they're missing it. And whenever you do think in this context of design and investing coming together, that's when you really start creating higher profit margins and in the short-term space, better experiences, longer referrals, and of course more bookings. Your short-term rental is not just competing on price anymore. It's it's creating On or you have better pricing now because you create more experience, more more opportunities that that's what people are looking for. So if you like what you've heard today and this is in ⁓ evoking you to think and challenging you in a different way about short-term rentals and how to actually ⁓ set yourself apart in the market, make sure you like this and subscribe to our channel because we are continually unpacking. ⁓ content about design, investing, and how to leverage them together to create powerful assets. Thanks for listening. And we'll see you next time.