STR Global Unlocked with Simon Lehmann: Unfiltered knowledge for the short term rental industry

025: Guests Aren't Googling Anymore: AI, OTAs & the Future of STR Distribution | Shaun Stewart

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The biggest disruption coming to short-term rentals is not regulation, supply growth, or capital compression. It is distribution itself.

In this episode of STR Global Unlocked, Simon Lehmann sits down with Shaun Stewart, VP of Open Distribution at StubHub and one of the most consequential behind-the-scenes figures in the history of modern travel infrastructure. 

Shaun spent 8 years at Expedia building the early supply networks that made online hotel booking possible, 2 years as Global Head of Vacation Rentals at Airbnb where he helped make instant booking a reality in a category that had never transacted live.

He has watched distribution power get created, consolidated and disrupted across multiple industries.  This is not just a conversation about tactics. It is also a structural argument for why everything STR operators assumed about distribution is about to be renegotiated.

In this conversation, we discuss:

  • How a chance encounter on a flight in the 1960s between two executives named Smith gave birth to Sabre, the GDS, and the entire modern travel distribution infrastructure.
  • Why the moment Airbnb pushed vacation rentals into live inventory transactions was the most important and most resisted shift in the history of the category.
  • How AI is replacing Google as the top of funnel and what happens when ChatGPT and Gemini start taking commercial deals from OTAs to influence what they recommend
  • Why owning and controlling your own inventory source of truth is more strategically important today than it has ever been.
  • How a Boca Raton property manager with a dozen homes built a suite of AI agents to run his books, staffing, and operations.
  • Why the Uber vs Waymo cost structure is the warning sign for STR operators who have not modernized yet.
  • Why Shaun admits he would have bailed on Airbnb long before it became Airbnb, what the Sonder S1 got wrong about direct booking, and which single infrastructure layer he would own if he could only pick one

Explore more:

Connect with Shaun Stewart on LinkedIn [https://www.linkedin.com/in/shaun-stewart-07b47b1/] and learn more about StubHub [https://www.stubhub.com]

Podcast supported by Pricelabs

PriceLabs brings automated pricing and market intelligence together in one platform trusted by property managers at scale. 👉 Get started with Pricelabs here: https://shorturl.at/wvKTa 

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SPEAKER_01

If you're a vacational manager with Ken Homes, like you're listening to this and you're like, what the hell am I supposed to do?

SPEAKER_00

Let's talk about the elephant in the room. Search is changing. And and you're old enough to remember, that was an incredibly controversial statement. I would put my money in the same color and number as you in terms of how this is gonna evolve.

SPEAKER_01

I think you nailed it with the Europe to North America comparison, but if that's just wild to me, that's a Harvard business study on like monopoly impact on innovation.

SPEAKER_00

So there is a big question if AI becomes the new top of funnel, is that gonna happen? You are listening to STR Global Unlock, brought to you by ATL AfterDate. The show where I speak with the leaders taking short and rentals worldwide. I have time to even after two decades of find selling and investing to the network that fans content and categories. Real conversations, global insight, no PR cloud. Let's get started. What if the biggest disruption to short-term rentals is not regulation, not supply growth, not even capital compression, but distribution itself? What if Google disappears at the top of funnel? What if AI agents decide where you get the book? And what if the real power in travel was never the brand, but the inventory? Today's conversation is about infrastructure control and the next great reshuffle of distribution power. Today I'm joined by an old friend and amazing person, John Stewart. John has spent decades at the highest levels of travel and technology, from leadership roles inside Expedia and Airbnb, to building self-driving cars at Wimo, to now building infrastructure at stop off. What makes this conversation particularly interesting is that Torn is currently working on rebuilding distribution infrastructure in the live event industry. An industry that evolved very differently from travel. And that contrast gives us powerful insight into what may happen next to children rental and hospitality.

SPEAKER_01

Good to see you, son, and always uh always appreciate our time together.

SPEAKER_00

Likewise. And you know, you and I were sort of thinking, what are we gonna do together on STR Global Unlocked? And and I was like, Sean, we have plenty of things to talk about. So, Sean, let's start with rapid fire for you, short answers, Sean. Um, AI increases platform power or decreases it.

SPEAKER_01

You're probably right. You probably give it an increase that it that now the source of supply becomes even more important. The user experience diminishes, potentially the brand even diminishes, where it's now just who has the best inventory to buy, even regardless. So you're right. No, I I give that an increase in platform power.

SPEAKER_00

Will OTAs be stronger in five years?

SPEAKER_01

I would argue, yeah. I think still having the aggregated power of supply means they're they're still very well positioned for this evolution.

SPEAKER_00

Direct booking strategic or romantic?

SPEAKER_01

Uh strategic. I I I see direct bookings as a dial. You're at 1%, what can you do to get to five? Doesn't mean that's a bad place to be. The goal of direct transactions is always growth. You're at 5% now, great. How do you get to 7% direct transactions, 8%, 10%? You're doing leave behinds. Anyone who books from Airbnb is getting an email from you after recommending they sign up for loyalty programs. That never to me is a waste of invested time and effort. There's always a stronger cost of distribution and cost of relationship ownership coming direct. I I think you should always be strategically investing in the power of direct. I think you should not romanticize getting to 100%. The only time I question people is when they're like, we're going to be 100% direct. The Saunder S1 of IPO is like it's going to be 70% direct. And we all knew that wasn't realistic, but it's an area that you should be investing in monthly.

SPEAKER_00

Biggest risk founders are underestimating, and you've been exposed to a lot of founders in your recent career as well.

SPEAKER_01

Oh man, the plate. I'm not a founder. I'm not strong enough to be one. I come in as an operator and help founders, but the challenges of founders are substantial. The number one is um the suspension of disbelief. If you want to be a founder, you have to be willing to pause all logic and reason because what you're doing makes no sense. What you're doing fails 95% of the time. Uh, what you're doing has major obstacles that others have been uncovered and slammed their heads against the wall with. I I know founders have built majorly successful companies that have filed for bankruptcy half a dozen times on the path to that. The Airbnb story of being rejected by a hundred plus VCs and investors. I would have bailed off that train so much earlier in that evolution. You want to be a great founder, you have to ignore everybody and believe in yourself and believe in the idea, believe in refuse all the logic that suggests this isn't gonna work. And those are the ones that somehow make it work.

SPEAKER_00

Love that. Last one, the one infrastructure layer you would own if you could.

SPEAKER_01

I'm struggling with which component of it, but it's it's probably not the GDS anymore. I it's the CRSs, I think, now are where the power is held. That the CRSs have become the GDSs of like the 70s and 80s. And so to me, it's it's that those pipes owning the CRS, the reservation systems that are the source of truth. I think that's incredibly powerful.

SPEAKER_00

And this is what I love about you and your background and what you have seen. You have so many different facets. And I always talk about, you know, here's Sean Stewart started as a bell boy in Australia. And seeing the world in all aspects, building self-driving cars. And I remember I was at the VRMA in Phoenix and sending you photographs of Waimo standing in the middle of the road and saying, hey, Sean, what's happening here? So this is this, I mean, this is absolutely incredible. And you've done some of the biggest uh keynotes at ARM conferences and et cetera. So I'm so happy to have you episode supported by price labs, a comprehensive revenue management suite for short-term rental operators, dynamic pricing to market dashboards and listing optimization price labs and the tools to make confident uh data-driven decisions across your portfolio. If you're managing growth in 2028, revenue intelligence is critical. You can find more details in the show notes. So, Sean, let's start with something fascinating. And you alluded to that already in our early conversation. In the 1960s, Cyber was born out of an airline executive sitting next to IBM, right? And that decision ultimately built the infrastructure of modern travel distribution. But ticketing went a completely different direction. Can you walk us through how travel built open infrastructure?

SPEAKER_01

You bet. I love that story. Like, because when we were early at Expedia, we opened the New York office out here and started to add hotels to the Expedia platform. But before we even had merchant agreements with hotels, you had access to inventory through the GDS. You could show GDS inventory, you could secure a 10% agency commission. You didn't contract any of the hotels with an integration into one of the three or four major GDSs. Expedia offered all of the hotels on the planet on day one. So you had this coverage of supply that was still using that agency model back then. And then you built the merchant model supply on top of that as you directly contracted with the hotels, you started to layer on this other source of supply at those higher margin levels. And so I remember back then being obsessed with like, how did this get built? This was 2001. It was how does a system already exist globally that you could patch into to have access to every airline, every hotel, every car rental, that Simon can go home tonight and create SimonsHotels.com, connect into a GDS. Well, these days we've replaced GDSs with CRSs, but you could have that coverage of supply. And so the story, as you mentioned, is a pretty wild one. Two executives get on a flight, I think New York to Chicago. Both of them have the last name of Smith, bizarrely and ironically. CR Smith was the American Airlines executive. I can't even remember the first name of the IBM executive. He doesn't have the lure as uh as much in the story. But they sit next to each other on a flight, and the American Airlines executive back then is complaining about the fact that they have phone agents internally booking flights for people. People call in, they have to book a flight uh ticket or inventory for the customer. This is within American Airlines. And the complaint is that there's no single system of inventory so that any agent can book any seat all at the same time. They're using paper records and a bunch of manual tracking of which seat is available. And this happenstand sitting next to each other on a flight gives birth to the first project, which was Sabre, where IBM teams up with American with the first intent of just building an internal inventory system that was live, every sales agent could plug into and access ticket volume from there. And we all know, if you're in the industry, you all know how this evolved from there. Three or four GDSs. First, the airlines start building their own one, United builds theirs, and American builds theirs. Then they start giving non-employees access to this system. They give terminals. The travel agent in Tokyo has an American Airlines Sabre terminal, they have a United Airlines terminal, and they're able to switch from one machine to another to book different airline tickets for customers. And these agents don't need to contract directly with American or United. They're able to earn money as commissions without ever having a direct negotiation with the airline. And then from there, they say, wait a sec, the travel agents actually drove the next evolution, which was they said, we're sick of jumping terminals, like put all the airlines on one. Like, why do I need five pieces of massive hardware in a travel agency in the 70s? And so by the 80s, they start layering on all the airlines. Saber now has every airline competitive offerings. By the 90s, they add in hotels and car rental into the system. And eventually these GDSs become connected to the web kind of 1.0 version of the internet, where suddenly these websites are able to distribute inventory globally to customers, starting with this GDS infrastructure. Then the technology evolves into CRSs like Marshall at Marriott, and suddenly the GDSs start to get skipped and the kind of integration goes from CS CRS directly to customer. So just an incredible component of the infrastructure and technology and innovation that created the travel industry we have it today. And that created yield management at the level of sophistication we have. Airline tickets are priced in one of the most complex and sophisticated manners for a perishable product. And so I guess what you're alluding to is I'm now in the ticketing space. I joined StubHub Q4 last year to help uh work on a project here. And I never realized how much I take for granted the GDS and the travel infrastructure that was developed from the 50s onwards, because it makes our industry one of the most sophisticated from a distribution perspective. And the comparison to how a ticket is sold to a live event, again perishable, just like a flight or a hotel, but in a far simpler, more interesting, direct path to market, which I think is where we started chatting about the comparisons here.

SPEAKER_00

Exactly. So going deeper into that conversation, uh, where you are at stop up right now, obviously where you're looking at is ticket mask to build a centralized control in terms of ultimately we're going towards short-term rental and we're going towards inventory distribution. But maybe you want a little bit further on on where you're coming in with StubHub, what you're looking at in terms of infrastructure environment of selling these tickets, and something very similar happened, you could call it um a GDS in the ticket industry as well, right?

SPEAKER_01

Yeah, so the the kind of opposite trend happens in ticketing, which is in the 50s and 60s, there isn't as much of this infrastructure development like there is in travel. The two era, you know, people didn't meet on an airline with an IBM executive and start designing what ticket distribution could look like. And then you get into the early 70s, which is when Ticketmaster gets founded in the US. Uh, I think it's 73 or 74. And they take a very different path to market, which is over the next couple of decades, they take an approach of taking over the distribution and execution of distribution for an event for a venue. We will run your box office. Like if you go up to the window at the venue to buy a ticket, that's a ticket master employee. When you get to the, you know, the internet and the websites exist, the direct website, that's run by Ticketmaster as well. Your pricing, your systems, your back end is all a Ticketmaster solution. So almost like an all-encompassing solution. But what it did was it took a single path to market versus the travel industry taking this multi-pronged approach to market where anybody can access the inventory. They take a very different approach, which is this single exclusive channel to market, and they take away the distribution power and remove the need for a lot of this innovation and skill set to be developed in pricing and how you distribute a ticket around the planet. And so the result is a very different outcome. And so the comparison to what we were talking about in the airlines, this is like if American Airlines website was run by Expedia, the boarding pass scanner when you get to the airport is owned by Expedia, the pricing and distribution are is controlled by an Expedia system and Expedia backend. And there's actually no path where you book directly from American Airlines. Everything is actually booking through this third-party distribution solution. It just doesn't exist in travel. It's mind-boggling to think how that could even evolve to be that type of path to market. And so what's happened as a result is with that primary exclusivity, the concept of secondary gets born, which is people reselling tickets after they've their original purchase, where market calibration occurs and pricing where supply and demand actually start to meet, and where global demand finds its source of aggregated supply. Instead of having this global distribution infrastructure, it starts to pop up in this too fragmented world. You've got secondary selling the kind of the meta view of everything, while the primary is just selling what they own and have control over. And so when Subhub approached me, the question was there's starting to be signals that this division is fraying, that the rights holders are no longer satisfied with single channel path to market, exclusive path to market, and they want to open up their distribution network in the same way that flights were doing in the 60s and 70s. And that's what's this incredibly exciting evolution happening in the ticketing space that has such analogies and comparisons to what has evolved in travel.

SPEAKER_00

So summarizing that for our audience, if you sit on today's flight from Sydney to Melbourne or from New York to Chicago with 138 seats, you can be rest assured there's 138 different prices. If you go to an edge shearing concert in Central Park, probably everybody paid the same price. So, and and now let's build the bridge towards STR and what happens when infrastructure is built differently from the beginning. And I think that's where it's exactly going for in your consideration. And is this where it becomes relevant for the short-term rental industry as well?

SPEAKER_01

Yeah, I mean, the vacation rentals went through a similar kind of change in distribution, but mainly because Homeway and VRBO kept them in the listing model, the advertising, right? So when I got to Airbnb and we were looking at how do you make vacation rentals instantly bookable like a hotel. And you're old enough to remember that was an incredibly controversial statement. Like, we're gonna make a vacation rental be as easy to book and transact on as a hotel. Live inventory, live availability. And the first year at Airbnb, the first 50 meetings I had, people said to me, You are absolutely nuts. Like nobody's ever gonna allow this. Because vacation rails had a deposit agreement, a safety agreement, a short-term lease. They wanted to talk to the person who was going to be staying in the house, ask them about their dog and what how poorly behaved their children are. The concept of instant transactions was terrifying. But what happened to happen to make that a reality was you had to make the vacation rail industry comfortable with it, but you also had to develop the infrastructure so that there was live available inventory that could be transacted on. So we had to go build essentially what hadn't evolved on the GDS landscape because the GDS never consumed vacation rentals. It was flights, hotels, cars, but that category never hit there. Because of the strength of the homeway and VRBO model meant you could just do a listing for$400 a year, take the transactions yourself, negotiate the terms. It was a newspaper model instead of a transaction model. And so when we get to Airbnb and we start connecting property management systems, it was the live reses of the world. You were going out and connecting all these inventory systems directly into the Airbnb marketplace, which then gave people a little bit more comfort that live transactions was a possibility. That if we have the source of truth connected into the marketplace, we can book your home without a double booking, without any consequence. But it came back to technology. You had to get people comfortable with something new, which that's one feat, one challenge for sure. The other piece was the underlying infrastructure of how the inventory was shifted around and distributed.

SPEAKER_00

I love it. And you know, I have a big smile on my face. I I basically remember when Brian Sharples came off stage in at FocusRide in 2008 saying we'll never make our inventory bookable because the homeowner wants to decide who's going to stay my property. I could have strangled him and said, hey, we're running the largest property management company in Europe already at 24,000 units. All our stuff is bookable. So short-term rental lacked of that infrastructure that you've just alluded to. And I remember this conversation I had with Jeff Boyd from booking or priceline. He said to me, Simon, we want this inventory bookable and then we can transact. So we moved from a super fragment supply ultimately. And we at the time were the first property manager in the world to integrate our entire inventory, 24,000 units, through an XML feed, to booking.com in 2008. That's 17 years ago. So we had OTA aggregations, then we have PMS concentration, and now we're entering another shift. And I think that's what our conversation is about. Sean, we don't want to dwell on the past too much. We are in the present and we need to look into the future. And you and I cannot have a conversation without talking about what does this mean now in terms of top of funnel, where we came from. I think we understood how travel is being aggregated through GDSs and other platforms. OTAs came about, the aggregated travel, uh, and we've seen the evolution of that, but now we have another phenomena called AI and the new top of funnel. And that's the big conversation. And with your experience, especially now working at Stub Hub, but seeing the evolution of travel aggregation and distribution, let's talk about the elephant in the room. Search is changing. Consumers are increasingly asking AI agents instead of Googling. I mean, my children, I just said to you, I have five children. They they use Google in the past, but now it's like, why do I need Google? I do everything on open AI or tools like that in terms of my homework, in terms of my studying, in terms of my research. If I have a question and my dad and my mom can't answer, I ask uh open AI or anything similar. So there is a big question. If AI becomes the new top of funnel, is that gonna happen?

SPEAKER_01

I see it happening every day, and already that the top of funnel has dramatically altered. My wife is planning our spring and break vacation. Um, and last night we're watching the Olympics and she is sitting there. I'm a ChatGTP service and she's a Gemini person.

SPEAKER_00

She is that's the difference.

SPEAKER_01

There's a household debate. It's uh I'm a first adopter, I feel loyal to ChatGTP, even though she keeps showing me examples where Gemini has a far more detailed response. But she is conversing back and forth with Gemini about planning this trip for spring break through the south of Idley. Um, and she's asking what destinations and now look at uh hotels. Are there good hotels in this area? Should I look at vacation rentals? I'm looking for a home for five people. Can you find me availability? So, what clearly has altered is at no point did my wife Google any of these terms, start with a Google search and start reviewing websites. It was straight into an agent. And that experience is incredibly conversational, it's incredibly flexible. It feels like you are talking to one of the most educated travel agents on the planet. They have an answer to every question, down to the restaurant, the airport transfer. They can answer all of it. And today, in its early kind of design and incarnation, the monetization hasn't played out yet in that model, which is Gemini largely is answering the questions based on its truthful view of what is the best answer to the question. Where it has no bias yet, but is driven by click-through rates, impression costs, anything like that. But you know that's where this is going, right? They unless they're satisfied with purely subscription based monetization of the product, chat GTP, I pay 20 bucks a month. Maybe they're satisfied. With just taking$20 a month. But you know Google isn't. Google has seen this book before. They know how this evolves. This is not going to be a subscription-based solution. The monetization on this is the clicks and the impressions and the recommendations. So when you ask Chat GTP or Gemini five years from now, hey, what's the best flight from New York to LA on the 4th of July? If American Airlines is paying that AI product a little bit more to be recommended, then how does that influence the recommendation side? And I think that to me, there's lots of interesting areas of AI, but this top of funnel change 100%. It's already, they're already out there negotiating different economic structures and deals for integration into the agent experience. So there's a StubHub integrated experience into Chat GTP. You can ask it about tickets, you can then book and be bounced off into the StubHub experience. It's integrated within ChatGP as an app. They're going to find ways to keep the answer very strong and relevant and informative, but also factor in who's willing to pay the most to be included in that answer, which is incredibly interesting. The second piece there, I think the follow-on question then is do they get into supply? Do they actually try to secure their own supply? And Google was the boogeyman of the last two decades of like, oh, Google's building going to build an OTA. Every year, Google's building an OTA. Every year at FocusRight, every year at DARM, Google's building an OTA is going to have their own supply. But they never did. They monetized driving traffic to other people's supply aggregation. In this top of funnel shift, the value, the protection you have is if you own the inventory. If you are the aggregation of supply, then you have the most powerful component in this, assuming that none of these AI top of funnel changes have an interest in negotiating inventory access from supply side, which I would assume they don't, and that would be my guess. So they're going to change the top of funnel experience, but the customer is going to end up landing wherever you book the inventory through some potential change in user experience to get there, but you still end up where the inventory is. So having actual control of the inventory being the source of supply, I think is more crucial today strategically than it ever has been as this top of funnel shift occurs.

SPEAKER_00

You probably have answered already 10 of my next questions, so let me summarize that. In terms of AEI is the new STM marketplace, paid placement inside LLM recommendations. So that needs to happen. I had a very interesting STR Global Unlock podcast episode with Glenn Fogle, and I asked him, you know, are you going to be the only staff in five years with booking.com? And Glenn said, clearly not, because we figured this out. And that alludes exactly to where you're coming from. So the battle between Expedia Booking or Airbnb for AI real estate will continue to happen regardless, because that's where the content sits at the end of the day. Because the big question for our audience is, hey, what do I need to do with my inventory? So I control 300, let's say, luxury premium units in a particular destination. Where is my future customer going to book? Who is going to be the merchant of record here? And how what do I need to do for that inventory to be found for people who are using other tools such as a direct OTA to uh to research? Because with your example that you've just made with your wife, how do you then transact? So you're building yourself an incredible itinerary, right? So this is a life case. So you're going to South of Italy, you figured it all out where you want to go, all the recommendations, everything you get, but then you need to transact. What is happening after that?

SPEAKER_01

And that's where so you have the AI side, which is you want to be the truthful best answer. So which house in southern Italy has the best reviews? I need it with a pool. And that's where you want your property to actually be the most appropriate answer to the question, which is our reviews are good and we have great service, and like everything looks good, so that with an authentic, unmanipulated answer, your property is the right property to recommend for that outcome. So that doesn't change much about how we've operated. Be the best, have the best reviews, have the great greatest photos, be discoverable online, which then feeds these engines that would recommend you based on you are the right fit. The second piece is to keep abreast of how the manipulation of the recommendation starts to take hold. I keep an eye, my news alerts are on commercial business partnerships with folks like OpenAI, where the AI engine is now having a third party agreement that is somehow going to participate in what's being recommended. If you're going to integrate booking.com into Chat GTP, what does that mean? And when someone says, where's the best place to book a hotel or a vacation rental? Does it now recommend booking because there's a partnership between? So on one side, you have being the truthful correct answer, and the second is watching how things evolve and the manipulation of that answer and incentivizing the guidance to be driven towards one company over another. That's where I think we're in the early innings of this evolution, but is the most consequential. Because Google started with organic. Used to be that you're at the top of the list because you're the best answer to the query. Then it became well, why don't we put sponsored listings above that? And if you have the highest CPC, you're willing to pay the highest impression rate, then you're suddenly at the top of the list. You're the best answer, even though organically maybe you're not. I think that's the story that will play out through these AI agentic experiences, these kind of conversational recommendations.

SPEAKER_00

So basically, Sean, you're implying that the the AI, the open AIs of this world are not going to disrupt the travel distribution because that's not, let's put it in simple terms, attractive enough, or there's other issues to solve quicker than having strong commercial partnership agreements with the existing OTAs today, and just let that flow ultimately instead of them becoming ultimately the transactional platform. That you're implying very clearly that's not going to happen.

SPEAKER_01

Yeah. I think you've seen that playbook before with like TripAdvisor attempts at going into the merchant model and securing their own inventory. And Google was just the boogeyman for decades of like they're going to launch an OTA, it's going to compete with Expedia, you're going to contract as a hotel or a vacation rental directly with Google, who will then sell your inventory. The inventory aggregation and management and pricing competitiveness, it is a very challenging, endless task. Like the Expedias of the World, the bookings of the world, they have hundreds of market managers whose sole responsibility is to make sure the pricing of the inventory they have on their platform is competitive. It's not an easy thing to do. And it takes years to build up that momentum, the contract volume, the sophistication of tooling. Everybody who's tried it, even with deep pockets of a Google TripAdvisor, has not succeeded since the major OTAs have been developed. So I my bet is that an open AI doesn't decide I'm going to go up against booking and start contracting hotels and flights and have my own inventory that then I become the merchant of record and the source of truth. I think they say, hey, there's four OTAs out there. You guys can all bid so that I recommend you. And I monetize the lightweight, light headcount, light asset approach, which is I'm driving traffic. I'm not responsible for inventory. And so how this evolves where you manipulate the recommendations of these systems is going to be incredibly interesting. But if you're a vacation model manager on the Oregon coast with 10 homes, like you're listening to this and you're like, what the hell am I supposed to do with this? I'm not negotiating directly with OpenAI. What you do need to do is be the controller of your inventory. Where does your inventory lie? In the end, where's the source of truth of your inventory? Who controls it? How much are you giving over control? Are you selling to wholesalers? Are you putting it on other platforms? Because this buck seems to stop with the source of truth, the inventory system, the GDS where we started talking, the CRS, the channel manager, the property management system. Wherever that final destination of the inventory is, that seems to be an even more powerful element of ownership than it than it ever was before.

SPEAKER_00

That's the fantastic message. First of all, I think I would put my money in the same color and number as you in terms of how this is going to evolve in terms of distribution on the top of funnel. But at the same time, who wins, who owns the inventory wins. And you've made a very strong argument on that. And I think that's now where you're going deeper for our listeners as well to think what does that mean for me to be in South Carolina with 200 units, a family-owned business, third generation, whoever owns the supply ultimately controls the game. And that's what you're implying stronger than ever, even if the funnel changes. So let's bring this home to short-term rental. If AI reshuffles the funnel, does inventory aggregation become even more critical going forward?

SPEAKER_01

Inventory aggregation from the perspective of an OTA? Yeah, I mean, I think that side of it, the third-party OTA battle doesn't change, which is you have to have the best inventory collected at the best pricing and the best terms. And that was always the game. I think the difference as a supplier is now recognizing that you want your inventory to be distributed across as many different platforms as possible with all the same global distribution. It does happen or doesn't?

SPEAKER_00

Doesn't it still not enough? In Europe, multi-channel platform distribution is common. In the US, it's still not happening.

SPEAKER_01

That's right. So you want to invest in making sure that multi-channel infrastructure exists. You're putting it out there as many different places as possible. So whatever these type of funnel systems are recommending, it ends up with your house, your unit, your availability. And because it maybe it recommends booking, maybe it recommends somebody else. But in the end, your inventory on booking should feed back to your source of truth. Where do you control the pricing? You control the inventory. Because that that seems more consequential today than it ever has been. The concept of taking uh a collection of hotel rooms and selling them to a wholesaler, taking them off of your system, giving them to crews, you're giving away the power of the most important part of the of the funnel, which is the final ownership of supply. People are gonna make sure they're hoarding control of that inventory and that anything that transacts comes back to them, which is why the Sharpell statement in 2008 was so ludicrous, like just so short-sighted that we're gonna stay a Craigslist newspaper advertisement forever. Which, if you think of today's, imagine if they had recognized in 2007 that this is that ownership of supply, control of live available inventory is the power, they were in the position to just dominate. They had all the supply, just not in an instantly transactable manner. If they had connected into PMSs, allowed people to upload inventory into extranets, connected to wherever the inventory was, they would be in a position of power today. Instead, Airbnb came and built the systems to aggregate that supply. Finally, Expedia takes over Homeway and Verbo and gets involved with building the live approach. But it's amazing that both they missed that opportunity and it gives you perspective, like Ticketmaster, where we started, on the power of a monopoly. If you are 80% of demand in a market, your innovation decisions, your technology investments alter the course of the industry. Like that, the vocational industry didn't modernize at the same speed as flights, hotels, and car rentals because the dominant demand channel didn't want to. Like that's just wild to me. That's a Harvard Business School study on like monopoly impact on innovation. That you can hold an industry in a in an archaic state if you control enough of the demand on the supply side, which is which is the homeway story, and funnily enough, the ticket master story. The ticketing space did not evolve into multi-channel distribution, infrastructure to sell tickets everywhere, standard commission concepts, because there was one dominant player and it didn't suit their best interest to take that path to market or take that on that evolution. So they keep the industry where it is. And the ticketing space, that's starting to crumble now, where the the opportunity is just too clear. It's 2026 and people can't sell tickets beyond single channel. Like it's it's time for change. Uh, and I've just been thrilled to be a part of that change and actually get to participate in another major evolutionary shift in distribution of a perishable product.

SPEAKER_00

Can imagine. And, you know, we talked a lot about now control dependencies on platforms, the aggregation of inventories becoming more critical. I think there is also a chance for operators to reclaim control to a certain extent over distribution as well, with what's happening out there. So let's become a little bit more practical to cover that particular topic. If you are a property manager of 500 units today, what would you prepare for over the next year or two in relation to distribution to remain relevant within what's changing right now?

SPEAKER_01

And I think you nailed it with the Europe to North America comparison, that if your inventory is not connected and live available, live availability is pushed to all of the major demand channels out there. My question would be why not? That this funnel is changing where you want your availability to exist, no matter where the customer is recommended that they transact. And if it's connected to your piece of infrastructure, your property management system or your CRS, you are in control. They're feeding off of your pricing, your availability. Your system is the source of truth. It's the system of record. That's what you want. That keeps you in control, but also means that your distribution network is as large as it can be. If there are channels that Top of Funnel is going to recommend where your availability does not exist, I would want the answer of why to be a very compelling reason. Why is your availability not on Home Away or Verbo? Why is it not on booking? Why is your website not have live transaction availability? That network needs to exist. And if it doesn't today, that would be my that's certainly the first place I'd be looking to invest. Well, love it.

SPEAKER_00

Super strong story. Before we continue, a quick note about price labs. Many of the revenue insights we discuss on this podcast are rooted in market intelligence and data analysis. That is exactly where price labs excels. Air dynamic pricing engine leverages hyperlocal data to optimize a rate, while their market dashboards provide priority on supply, demand, and performance. Combined with left optimization tools to become a comprehensive revenue management topic design for scale. If revenue strategy is a priority for you to check the link in the episode description. Let's continue. Let's take this to the next level. So the next, we call it the distribution warms more. So let's zoom out for a second. So in terms of what we discussed, if Google Doc dominance is weakened, let's assume that weakens. And if AI becomes the starting point, then if platforms bid for AI, as you just alluded to, uh recommendation priority is another aspect as well, because then it becomes a war. What happens to profitability and what happens to trust? Because it's becoming really blurry when you think that this bidding war, this this relate, this commercial relationship with the OTAs backed on the AI tools is happening, then we're in a way, we're going back to square one. So we're entering a very in a different ecosystem, it's not going to change and it's going to be a lot tougher.

SPEAKER_01

Yeah. I don't think that dynamic shifts too significantly. Where if you had 50 homes in the Oregon Coast, you were already struggling to compete top of funnel against the Google, the big brands that are buying your terms. Like if you're competing on Oregon Coast search terms with Airbnb and Expedia and Verbo and Home Away, pre-AI, it was already incredibly difficult. And the and the better answer was like use these massive marketing channels with massive budgets to sell your product, optimize pricing so that you're making the yield that you want to, try to minimize cost of distribution. If they're the merchant of record, they're eating fraud, they're eating processing of credit cards. There's a bunch of distribution cost things that are compelling there. So if you're still the small property manager, I don't think you're suddenly going to start competing top of funnel and doing a direct agreement with OpenAI to recommend your homes over the other options out there. So that to me doesn't change dramatically. What it to me is just increases the importance of A, you being the right answer to the question, what's the best property in the Oregon Coast? Actually being the best property on the Oregon Coast is still fundamental. And the other piece is having availability and presence and profile of your inventory anywhere that a system may end up recommending, even if it's manipulated with a commercial agreement. If Virgo does a deal with Gemini and is the number one place they recommend vacation mammals, I would want my availability there. And I would utilize the spend that Virbo is doing to promote my product because I'm not going to compete in that manner. The interesting piece will be at the top of the funnel whether the cost per click, the cost per impression, how it compares to the traditional economics of search. But unless you're a beast, unless you're getting into your world of hundreds and hundreds of homes, then you potentially have the ability to compete at the top of the funnel. And then it becomes a debate around the economics and the cost of exposure. But for most people you and I know in vacation annals, they don't have thousands of homes. They have dozens. And if you're dozens, competing for top of funnel exposure probably isn't your best use of funds. You want to utilize these massive demand channels that pay through the nose for traffic to best suit you. And the best way to suit you is to be the final control of the inventory. What shows up every there is coming from my system integrated to my platform, my control of pricing, my control of availability. And that comes back to a lot of selection of solutions. What property management system are you on? What does it integrate with? How many platforms does it distribute you on? Property management systems to me aren't a functionality focus of like how good is it at balancing the books and sending out emails when people book on my website. It's where does it sell my inventory? How does it guarantee that demand across the planet has awareness to my inventory and my product? And if I'm on a PMS today that doesn't reach the globe in the way that it should, uh that would be the first area of focus is like, how can you find an alternative solution that does?

unknown

Yeah.

SPEAKER_01

Because I think today more than ever, you have to be everywhere.

SPEAKER_00

And who said to me when I asked him to be on the podcast today with me, he said I'm too disconnected to this industry? It was you, Sean. So anyway, in summary, it's all about, in a way, think about reputation, performance data will matter more than potentially ad spend, especially for the smaller operators, as well, to stay relevant within this distribution world. But before we wrap this up, I I you know, I want to do a personal reflection with you, Sean. And uh, as I said at the beginning, I have enormous amount of respect for what you've done within the travel industry, where you came from, and what you've done and seen. And you've seen Expedia rise, you've seen Airbnb's evolution, that's where you and I met, and and now you're working on reshaping, reshaping the ticketing industry, right? Are we early or late in this AI shift when you look at our industry?

SPEAKER_01

I think across the board we're early. Um this is we're just seeing the kind of early seeds being planted of potential impact and the evolution of how this continues to alter everything we do is is is going to be substantial and significant. I believe in the disruption most people are predicting. Uh, and I see it every day. Just how I work has changed dramatically. Um, and I think that will continue to evolve. Um, there's an amazing efficiencies to be seen. I met I met a property manager a couple weeks ago when I was down in Florida in Boca. And he's he explained to me, he was like, Do you use AI much at home? I said, Oh, I'll dabble it a little bit. And he said, Can I tell you what I've done over the over the past year? And I was like, sure. He's like, first, I set up an AI system that manages the financial books. It's just one agent that I helped develop. I have a younger younger son who helped me figure out like how to build something that managed the financial books and did the PL at the end of the month and all this kind of stuff. Then he's like, then I created another one for managing employee staffing, who's housekeeping, who's on what shift, what day a week are they working on. He's like, then I woke up a couple months later and I had five of these different AI agents doing different tasks every day for my business. This is now five or six employees he has that run 24 hours a day maintaining his business in a way that he traditionally would have had to hire people to do. Then he said, You know what I got tired of? I said, What? He said, I got tired of managing the five or six agents. So we built a management layer. There was a management agent, and I would tell the management agent, this is what I want your team of six agents to do this week. This is the priorities, this is where they should invest time. And now all I do is I manage that one agent who manages the rest of the agents that manage my little business. That is a Boca Racon property manager with a dozen or so homes who's managed to build a suite of support systems through AI agents. If he can do it, I can do it, you can do it, all of us have access to that. So the terrifying side of it is job security and what's going to happen to you know employment levels on the planet when all of these jobs can be quickly replaced with pretty basic levels of technology knowledge and individuals like you and me can figure it out. But the flip side for a small business like vacation rentals, where the margins are tiny, like you are succeeding and failing within a band of five, six percent, uh, there are cost efficiencies here that can't be ignored. The people who aren't considering what tasks could be done by something more efficient and less costly, uh, I think that ends up being a problem down the line if you haven't modernized in that way. Because the vacation rental home, because you're competing against that Boca Ratome guy. And because he he has more efficient costs of execution, he can charge a lower price for his home than you can. And he does he can still make 20% margin more than you can with a price 20% cheaper because his business is more optimized. So you can ignore the cigar peril, but the guy down the street or the woman down the road adopts it, and suddenly you have a different cost structure to compete against. And that's where the problems start to arise.

SPEAKER_00

Yeah, that's a great example. And at the end, he can invest all his time in building relationships with homeowners where it really matters to build trust and put the putting human capital where it matters, right? And that's building trust with homeowners and build supply. So the business is run, and while that is running, he can invest time into human relationships because at the end of the day, short-term rental is based on trust with homeowners, and that's a significant shift. We talked about this forever, but if now the efficiency is coming, and this is incredible. I I love your example in Bokhara Tan, that it doesn't matter the size, you just need to embrace it and see what it does for you to free up your resources, become more efficient, more effective, and put your human capital where it makes a difference and let the rest happen. And and it's happening on a daily basis. It's mind-bobbling.

SPEAKER_01

No, I mean, I was thinking like there's a there's another connection there with my other world of like self-driving and autonomous vehicles, which is the same cost structure change has is about to totally disrupt the concept of mobility, taxis, and transportation as a service, which is a self-driving car. If you get an Uber, it's$10 a mile here in New York to get an Uber these days. So I'm going to get an Uber to Times Square, it's two and a half miles, that's going to be$25. 70% of that goes to the driver, 30%, uh 30% goes to Uber as the marketplace. A Waymo car can drive that at a dollar per mile of operation. That's probably the mileage cost that they're having there. So a$10 a mile of top line for a dollar a mile of operation and no rev share. So if you're Uber, you're competing against in this AI example, you're competing against an AI operated vehicle that has no Rev share, a dollar per mile of operation, you have an existential threat. Now, the short-term rental owner who's competing against someone who doesn't pay someone to do their financial books, doesn't pay someone to do their marketing campaigns, does it all through AI and different kind of more scalable, cost-efficient methods of operations, it's the same issue. The cost structure is changing, the game is changing. And you can stay Uber with human drivers at$10 a mile with 70% going to the driver, you're going to bleed out because the Waymo car will come in and say, we'll charge five bucks a mile. And on five bucks a mile, we still make$4 a mile profit and it's half the price of an Uber down the street. And you watch how customers adopt and shift to that cheaper price point. So very similar to that.

SPEAKER_00

And you can listen to your own Spotify account. I've tried that at Waymo. It was insane. So two years ago, VRMA in Phoenix, Arizona, I think none of the 2,400 uh participants of that conference have not posted about Waimo while they were there, and they all tried it out. And it was an it was an incredible experience and it was a big wakening up call to the VRMA vacation rental industry when they went to Phoenix and everybody tried to use a Waimo and uh and realizing that it's actually happening. You come in, you sit in the car and you can connect your Spotify and you can listen to your own account. Was pretty amazing. And and I had a suitcase waiting while he was coming. So he saw that I had a suitcase so the boot opened up. I thought that was just an Oh no way. Yeah, yeah. So that I haven't heard that before. That's past your time, Sean. But we were standing outside together with a guy from home to go and was like, you're going to the airport, yes. And I saw a Wymo where there was no luggage, the boot didn't open. We had luggage, the boot opened. So it was uh it was amazing.

SPEAKER_01

It was a big, a big one of the major debates or kind of contention points building Waymo was whether it was a luxury product or a discount product, which is like, do we have to sell below the cost of an Uber to get people to try this new technology, an empty car driving 60 miles an hour down the freeway? Or is it gonna be a luxury experience that people will actually pay more than an Uber experience for? And it it hasn't reached a scale yet, but in the early market, San Francisco Phoenix, people are willing to wait longer and pay more to get a self-driving car, which was definitely one of the debates I lost. Like my prediction was not people are gonna see this as a luxury experience, but it is. You control climate, you control music, it's a Jaguar eye paste that's been cleaned and maintained efficiently. It's a hundred thousand dollar vehicle driving you around. Yeah. Very interesting to see that evolve as well.

SPEAKER_00

Yeah, and I'm sure it has a massive impact on what's going on around with new technologies as well. So we'll wrap this up to Sean. This was sharp, strategic, and incredibly relevant. Distribution is evolving again, infrastructure is being rewritten, and the winners will likely be those who understand where control truly sits. Thank you so much for taking time and joining SDR Global Unlocked. Thank you, Sean, and good luck.

SPEAKER_01

Thanks for having me, Sean. I was good to see you.

SPEAKER_00

That was SDR Global Unlocked, where we say what others want. If you got value from today's episode, send it to someone who is still playing it safe. Follow the show and get more global insight at ajl.com. The globally recognized STR2017 I found it, and that probably brings to you this show. More both conversations are on the way to stay tuned.