Management rights expert talks Airbnb, corporate buyers and why WA is the place to invest

AccomNews Sunday, March 13, 2016

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accomnews recently caught up with long-time industry figure Steve Dawson to find out how his experience with management rights overseas has affected his opinion of the industry here in Australia.

Read the full interview in this month’s issue of Resort News.

Mr Dawson embarked on a management rights journey that spanned five countries in two decades. I got into local management rights in 1997-8, selling management rights along the Sunshine Coast after making a franchise style agreement with Resort Brokers Australia but I soon became interested in other places with different legislation so made the natural progression to NSW, then NT, then Tasmania, Fiji and Bali.

The year 2000 was a brutally hard year for Mr Dawson and the industry in general as the ATO implemented the GST regime where no-one had clarity on the effects of GST on the net profit that accommodation businesses produce and rely on for sale-worth. “Fast forward a couple of years and the emergence of three corporate giants, Breakfree, S8 and Oaks Group would forever change the landscape of the selling industry. Where mum and dad operators previously would hold management rights for around three years, the corporates were aiming for long-term tenure.” This also made the value of management rights jump 25 to 40 percent higher in some cases.

Banks scrambled for business and Bank West entered the fray with new policies allowing for a much higher level of gearing. As quality listings became harder to find, Mr Dawson got licensed in other states and went as far South as Hobart to transact some of Tasmania’s earliest management rights and as far north as Darwin to structure some early deals. After transacting Australia-wide, he moved on to international markets and sold in places like Bali, Vanuatu, Fiji and Thailand. “I moved to Bali in 2007,” Mr Dawson noted with a smile. “I was having a sort of midlife crisis, my twins had just been born and I really wanted to semi-retire, take it easy and not work too hard but a year later I had 202 staff and was managing a large management rights firm so cutting back didn’t exactly happen.”

An old client drew him back to Australia in 2015, along with the desire to enrol his now nine-year-old twins in an Australian school.

AN: Do you see Airbnb as huge competition going forward?

SD: People don’t talk about Airbnb as much as I’d expect but it’s on the peripheral. I think it’s maybe something that people can’t do anything about so it’s like the OTAs, let’s just get on with the business of doing what we do well. I also think there might be some ignorance going around about how many rooms are being sold on Airbnb in non-urban areas. There’s a prolific range of options from shared rooms to whole properties, so managers should keep an eye on what’s available in their area. It definitely has an effect but again most of them are unable to offer a supreme level of service so as long as managers are able to do that, it is just a case of absorbing the additional stock. I don’t think it’s a war but business is competition and it’s adding another option for consumers.

Management rights properties should capitalise on their strengths. I don’t think the consumer quite knows that the onsite manager will have a plumber and an electrician on call 24/7 but if you’re staying in a house or whatever, you don’t know. It was highlighted for me on the first night I arrived. I popped into Woolworths to get a couple of groceries and there was a guy looking furiously, visibly upset and he’d checked into an Airbnb and the battery didn’t work in the remote control and there were no additional batteries in the drawer so he was there trying to buy a battery at 9pm. I presume some people will have those sort of experiences, so you can see the advantage of going to a professionally managed property and customers will too.

AN: What do you see as the biggest challenge facing the industry right now?

SD: In Australia I think it’s definitely the banks. My past clients have been telling me the banks have tightened up on lending policies. There’s also the corporate appetite where 10-15 years ago, mum and dad would buy some management rights and keep it for three or four years before selling. Nowadays, a lot of the larger rights are absorbed by the corporates, which will own them in portfolios forever, slightly limiting the amount of stock that comes onto the market for the private investors.

Not to mention the fact that we’ve seen the sale of Starwood form a new accom superpower, so I strongly suspect there will be some interesting times ahead. They will be extremely powerful just from sheer volume as nobody’s had the volume to be able to stand up to the OTAs and say ‘no, we’ve got another platform’ but who knows how that’ll turn out. They are either going to have the ability to massively negotiate some commission terms or build their own platform that serves their own needs.

AN: Do you have any other tips based on observations of managers buying rights over the years?

SD: Managing expectations is crucial: ensuring that guests get as much as they think they’re going to get or more. As soon as they feel hard done by or haven’t received value for money even if they get something really cheap, there’s a perception that they should’ve known about the negatives. I think that’s changed these days, we expect to know about the negatives and not just be told all the positives.

Mr Dawson has had a vast and fulfilling career in the industry already but he is by no means done. “What really keeps me going and makes me want to make further deals is seeing how people further their careers. One of my clients said I’ve bought and sold six resorts for them over the last 15 years or so, sold them into and out of properties from the Sunshine Coast to the Whitsundays to the NT and then to Fiji so it’s great to meet people who make a career out of it.

Although his new company Australasian Business Sales will have an office in West Australia, Noosa remains Mr Dawson’s favourite place to work in the industry and he told Resort News that he intends to make sure he’s back on the Coast every weekend. “I have missed the Australian way of life and now is time for my next chapter.”