Ah yes, the old differentiation vs. "just execute well" debate :)
I listened to Avery's BP podcast in 2020/ read her book in 2021 and credit her for motivating me to get started in STRs. Can't emphasize enough how seeing others like her and Luke share their journey has helped me grow the balls to actually do it myself! (you guys seriously rock). That said, I felt that the book was more targeted to a less hands-on remote investor who preferred to buy turn-key (or near turn-key) properties and start cashflowing fast with minimal money out of pocket ... rather than a creatively-minded value add investor with the will & skill to build differentiated experiences that outperform the competition. In my past life, I focused on the latter (differentiate & outperform), so I’ll be upfront and admit am biased here. Both strategies have merit in my opinion - but I'll explain why "differentiate" has merit (for the right investor)
In my past career I helped a handful of consumer brands reframe how they thought about product design and marketing - we helped them change the way they thought about demand from a "product" lens to a "consumer psychology" lens. I'm by no means the expert on this topic, but I've learned from some of the greats in that space who are far more intelligent than I. Here are some of the principles we taught our clients:
1. Product choice (and all human behavior, really) is driven by the desire to fulfill our psychological & physical needs
2. Needs change in different contexts (holding person constant): For instance, I might book a fancy Airbnb if I'm trying to impress a new girlfriend on a multi-day getaway, but am happy to rent a cheap motel if I'm just passing through on a road trip for 1 night solo (side note: I've been dating my gf for 5 years, so the impressing days are long gone, but she still refuses to stay in the motels I frequent when driving solo, haha. I have a soft spot for motels - reminds me of road trips with my parents out West when I was a kid)
3. Needs also vary person to person (holding context constant): For instance, my 76 year old mom tends to prefer properties that meet her physical needs (no stairs, walk in shower instead of tub to avoid tripping, stocked kitchen so she can cook), while my 22 year old nephew tends to prefer properties that meet his psychological need to be noticed and admired by peers (translation: one he can use as a backdrop for his Instagram). Emphasis here on the words "tends to" ... context is still a major driver of needs, meaning they won't always make these choices
4. Needs occur in "clusters" with other needs, some being more or less important. i.e., we have multiple needs at once and subliminally have a ranking of which are more or less important to us in that moment.
5. We're forced to make tradeoffs if the choices available to us don't deliver on all of our needs. Example: my nephew also wants a property with comfortable furniture, nearby attractions, and a coffee machine, but he might sacrifice some of those lower-order needs in order to fulfill higher-order needs
6. This decision process is fast and invisible to the most people as it is happening. i.e., you don't know you're thinking in this much depth, but your brain is quickly weighing the pros and cons based on motivations you might not even know you have
7. The most successful companies identify clusters of needs that are underserved by what's on the market today, and target those needs ruthlessly by advertising features/ creating brands that speak to them
So how does this all relate to "unique" STR properties/ features? It means that just because they are less prevalent - or even entirely absent in your market - doesn't mean the needs for them aren't there. Guests may just be compromising by choosing their best bad option. It also means that you shouldn't differentiate at the expense of executing well on other dimensions – it's an "and" rather than an "or". Start with a specific type of guest, occasion, and cluster of needs in mind and reverse engineer a property that nails them. This is the literal the opposite of starting with a random idea and forcing it into your property for no good reason, which I think is what Luke was referring to with the “mini horse in a treehouse” example. Treehouse lovers and petting zoo lovers just don’t overlap that much (although now that I think about it, my 5 year old niece would love that, haha).
A big takeaway here is that you don't have to follow what everyone else is doing - standing out might drive insane returns if you're targeting the right underserved needs. Consumer product example: White Claw/ hard seltzers exploding overnight. Needs were: cheap, low calorie alcoholic drink that allow you to drink multiple without getting too drunk or feeling bloated. Some people had been compromising on the bloated part for decades drinking light beer, then White Claw launches, and BAM! They struck oil! err ... they struck underserved demand! Or another obvious example: Airbnb/ VRBO ... people had been traveling in groups and staying in separate hotel rooms even though they preferred a more connected lodging experience ... the rest is history
To wrap this up, I'm not sure it makes sense to build these sort of unique "destination" STR properties with lots of unique features in all markets. Probably won't work as well in the Smokies or beach markets bc there are SO many things to do outside of the property and that's why people go there. There is just less pressure on the property to provide an "experience" in those places. But in places like Joshua Tree there is way less to do (in town at least - I know there is a Natl Pk), and self contained, uniquely designed places with tons of quirky stuff to do on the property are outperforming for a reason. If your standard STR is reimagining a hotel room, then these properties are reimagining a resort experience, and resorts have been around for a long time. The need is "won't get bored staying in the property for several days without leaving", and I think it has a ton of potential in markets that lack attractions in the surrounding area. Plus the ROI on additional dollars spent creating these experience on-property could be much higher than the ROI on your property down payment. Food for thought.
Net net, I think differentiation and uniqueness is one way of adding value in STRs. It takes more time and more money, but I believe the reward is there for those willing to do so.
PS – take my ramblings here with a grain of salt, I’m new to RE and don’t even own property yet, so I’m a lot of talk with literally zero walk. This approach may not be a good idea at all, and definitely isn’t appropriate for the average investor looking for something with less time commitment/ investment upfront. I still think Avery and Luke's approach is probably best for most investors. And if you're interested in hearing me ramble even more on this topic shoot me a DM!
