Why AI Recommends Airbnb Instead of Your Rental Business

What We Need to Grow, Episode 060: Where Are We Showing Up. A Founder Talk conversation with Nathan Harwell, owner of B&B Hosting. Cleaned for readability; the words are the speakers' own.

Caleb Pedosiuk: All right, Nathan, we are talking today short-term rentals, the business you're building across Texas and Nashville. Just for a couple minutes before we hit record, we were talking a little bit about Texas. I've flown in, been in a big city, I've never really explored the countryside, and from a map, if I look at it, I see East Texas looks really lush, mountains and lakes and stuff. And you were mentioning West Texas is big sky, potentially bigger sky and more stars than someone's ever seen before. So very inviting, sounds really beautiful. But right now you're actually in Tennessee, in Nashville, in one of your short-term rentals. So please share a little bit about B&B Hosting and what it is that you guys are building with it.

Nathan Harwell: To clarify, the one that we're in now, we were at a conference earlier this week, and so we're staying over. We don't actually manage anything in Nashville right now. But like I said, I'm coming to you from a glam station in a closet. It's a girls-weekend-themed place. It's really cool.

So what we do, we are end-to-end short-term rental management. We can start out with design, consults, helping, consulting on property selection and different things like that. Then we can help with design, install. Then the full management of the property through its short-term rental lifespan.

Caleb: So did you come at it through a construction background? I'm always curious to see where people get into a model that builds a book of business and has some form of recurring revenue attached to it, because for most people in the general population, that's not their first step. Their first step is to go build, learn some skill. And so I'm always curious about at what point that transition happens. So was construction your background, or how did you get into it?

Nathan: That's a great question, a great story. My background actually was in large commercial electricity contract structuring and negotiation. And I found myself in 2021 a 49% owner of a company that I built from the ground up, and then all of a sudden without any ability to shape the future of where we needed to go, as the market changed and everything. So I found myself in a position where I built this and I could actually end up with my income going away, for a company that I owned and built, overnight.

And I knew for years that I should be investing in real estate, so it was always an interest. During that period of time, I decided, you know what, this is not going to happen again. I'm not going to be in a position where everything could be gone for no good reason. I don't mind partnering, I don't mind having partnerships, I don't mind building companies with other people. But not that.

So we went out and joined a mastermind group in the short-term rental industry called Vodyssey. And that was a tremendous decision. The knowledge in that group, for a new short-term rental investor, is as close to removing the risk from a short-term rental investment as you can possibly get, in my opinion. And it's proven that for us.

So we bought our first short-term rental shortly thereafter, and then our second pretty much immediately after that, a couple months after. And we followed all the principles. Our two properties, within the first year, ramped up all the way to the number one and two revenue properties in the Abilene market.

And then comes along this company, B&B Hosting. It was owned by some friends of ours. There was a hole, there was a space in the Abilene market for property management, especially local property management, on short-term rentals. This company, they were calling us every few months, if that long: hey, come on, let us, we can really help. And from our standpoint, we had the number one and two properties in the market. We had only one place to go, and that was down. So we were not going to turn it over.

But one night, one Sunday night, we're headed to one of the properties at 11:30 at night, when we wanted to be doing pretty much anything else. And I told my wife, maybe I'll give Blake a call tomorrow and see if they can handle this stuff. Just see if I can work out some kind of agreement, because we were not going to turn everything over by any chance. And before I could call him the next day, he called me. And said, y'all want to buy this thing? It is too much for us, we can't handle it.

So long story short, we did. We bought B&B Hosting with, I believe we had 19 properties, in July of 2024. And we had knowledge of the market, we knew how things worked, we knew what was available out there. His wife had started it as a side gig and it just grew, because like I said, there was a big gap in the market for something like B&B Hosting. And they didn't really know what was out there and what the capabilities were of some of the tools that you can use.

So we've been able to grow it from that 19 to just over 100 today. Mostly in the Abilene market. We have three little spots 45 minutes down the road, but mostly Abilene. And we do intend to expand. Our vision is, we are very hospitality first in our way of doing things. That I can say absolutely with confidence is unique in the entire industry. And our vision is to make that the standard.

Caleb: Well, I would love to hear a little bit more about the unique approach you take with that. But a quick question first. When you bought that business, you gave a number of how many properties it was. Were you purchasing that book of business, meaning those properties were owned by a number of different owners, and the book of business B&B Hosting had was the relationships with them, agreements in place? Let's say there's five different existing real estate investors that own those properties and they're saying, hey, we trust B&B Hosting to look after these properties for us. Or were you also purchasing properties?

Nathan: It was a book of business at the time. It also led to other opportunities to purchase properties, and we did that, we executed on one of those. That was a really good opportunity. But the short answer is we bought the book of business.

Caleb: Very cool. So what is your unique approach? Anything you want to share about it? Is it experiential tourism? Is it that when people show up at your properties, it's more of an immersive experience? You highlighted you're in Nashville right now and it seems that there's a theme to the property you're in. Do you guys specialize in themes, really figuring out what is the experience of this property and leaning into it?

Nathan: So that is important, having an immersive experience throughout the property is important. What we can get owners to do versus what we recommend are two different things, generally speaking.

The mindset too often is that the house itself is what you're renting. And to an extent, that's what you're selling to the public. And to an extent, you certainly have to have a good piece of real estate. It doesn't have to be the most incredible piece of real estate. But what matters most is what you do with it after. And most people have a budget in mind that is woefully too low for setting up a true experience where you're really going after the short-term renter and what they're looking for.

Too little thought is put into, who's my target market? What would I like? A lot of owners will say, well, I have no idea what to do, how to make it appealing to my target market. And I'm like, well, what do you look for when you're scrolling through listings for your family, for whatever holiday it is or whatever event? Think about the things that you would like, that you would be looking for. Oh, the kids will love this, and my husband and his buddies will love this. And we're all traveling together and, oh, look at this spot for me and my sisters or girlfriends to sit and enjoy. What a beautiful setting that is, as we're sitting around drinking a glass of wine. Everybody's different.

So too little thought is given to that. And too little thought is given to the decor, and how it really, if you have a consistent, it doesn't have to be Disneyland, but something consistent that's telling a story throughout the house. Then there's got to be things to do for the different, who are all the people that are coming that are part of your target market. So if it's families, what do you have for the kids at the house if you get a bad week, a rainy weekend and people can't get outside? What is going to be a blast for the kids at that house? What are the different family units? In my case, if it's Dad, I want to be able to be outside at the grill, cooking a delicious meal, watching the game, hanging out with the dads or my boys, maybe they can be playing cornhole in the background. I want things to do.

So that's the bottom line. You've got to break down who's your target audience, and you really have to market to those targets.

Caleb: You're mentioning marketing to them now, and that's for once you have a property, you're generating demand for that. How are they finding you? This is a conversation that surfaced recently. I've seen it in two instances, one in Chicago, the other in the Montana area, where they've looked and realized a lot of people are finding short-term rentals outside of Airbnb. They're just reaching on their phone, saying, hey, whatever tool, whatever platform they have come to like and enjoy, could be Claude, ChatGPT, Perplexity, whatever. And they're saying, we're headed to the Chicago area, we're headed to Tennessee, Nashville, and we're looking for a spot. It's going to be eight of us. We're going to be here for these times, we've got this event. What are the restaurants worth checking out? What would be a great place to stay? Is this a good neighbourhood? This is our budget, what are the options? And it is surfacing short-term rental properties. So what are you seeing on that side of things?

Nathan: Interesting that you asked that question. I actually did a search on Chat and Claude, because I wanted to see, where are we showing up in this whole new GEO, or whatever the acronym, there's several different acronyms people use. Where are we showing up when somebody searches?

And so a couple of things that I would recommend. When I initially did some just basic, what somebody might say, what anybody might think of to put in as a prompt, it returned, you can say, what are the best short-term rentals, show me the best short-term rentals in Abilene, Texas, or whatever it might be. What they return right now are mostly, not even always Airbnb or VRBO. A lot of times it's these third-party aggregators, fourth party you might even call it, that are out there that we don't list on. I don't even know how they, they must be using the Expedia system somehow, with VRBO and all that. But anyway, it's not good right now.

And so I tried to do a little bit of training about who we are as B&B Hosting, the experience that we deliver to guests. And does this work? I don't know. But telling it, look, when somebody asks what are the best short-term rentals in Abilene, these are they. And when I mentioned B&B Hosting to it, it returned, oh yes, sorry, I didn't even think about that. B&B Hosting is the top professional property management in Abilene, and they consistently are all of these very, what you would assume about a professional property management company around the country. You're going to get consistently clean spaces, they'll be responsive if there's an issue, those kinds of things that you wouldn't get from a small local co-host as much.

But then it says, from a small local co-host, you're going to get more personal touches, a more intimate type of relationship. And so I had to do the correcting on that. And I said, why don't you go and look at the reviews out there, and you tell me what you see and how this compares from a hospitality standpoint? Because again, we are a hospitality-forward company.

And then after it goes through reviews and looks through all, it's pretty incredible what those guys can pull from market data, the AI. But now it says, oh, okay, you're right. Yes, B&B Hosting receives much more consistent review comments from guests about the personal touches, about the overall hospitality, about the overall experience. Others get it too, but not nearly as consistently as B&B Hosting does.

And I said, okay, remember that the next time you get this question. But we'll see what happens with all that. I think some training potentially, I don't know the impact of my trying to train the AI on behalf of my company. I don't know what impact that will have, but I did try to make it fact-based and give it the links, the clues on how to find that information.

Caleb: Just to respond to that. Sarah on our team, I think you may be aware of this already, but Sarah on our team runs point on all the strategy and delivery for all of this work that we do for clients. And you are exactly right, it is not accidental. It is actually quite objective.

In terms of what surfaces, it's more quantifiable than it is qualitative work, in the sense that if we look back the last 15 years, minus the last couple, so much content, we're talking about Facebook coming out, Facebook taking off, YouTube taking off, and then Shorts content, Instagram taking off, then we got Reels and interest-based stuff. It was primarily human attention, visual, so we're talking watch time, click-through rate of things, where are people dropping off. Viral content was something relatively new over the last 15 years. And people have optimized content for that. In that sense it's more qualitative at the surface and then quantitative when people break it down and say, all right, what are they actually looking at, what's going on under the surface? And algorithmic magic is then using its math to be able to do that.

But recently, and this was an aha moment for me in the spring, was, oh my goodness, the machine layer is now the gatekeeper. Because if we pretend for a second that the machine layer is sort of blind, it's like this super intelligent blind entity, but it is just looking and scanning the top layer of things to then understand it. It's not able to look and clearly see things that seem evident to us. It has this super intelligent layer that is processing large amounts of data and then drawing its conclusions.

So at the data layer, the aha moment for me was that actually a content strategy that understands first and foremost the machine layer, and is reverse engineering what it needs from there, is actually a more effective way to serve the human layer when they're reaching and asking whatever they're asking. Because the filter between getting to here is actually happening in a more objective way at the bottom.

So to me, it's interesting that a lot of people, if you know the phrase, you don't put new wine into an old wineskin, I would say a lot of people in this new era of LLMs are taking the new wine of how people behave, how they're talking to their phones, they're asking things like this. This is the new behaviour, but they're putting it into an old model, being like, how do I go viral? If I post enough times every day, is it going to move the needle? It's actually trying to put a new behaviour into an older wineskin. And the problem with that is both end up being wrecked. People are looking and saying, hey, how come our content strategy doesn't work? How come we're running ads like before, there's a drop-off, but they're not converting the same way? And then on the flip side, you have these people that are attempting to find the best thing and they're frustrated. They're like, ChatGPT, how come you recommended that and not this? And then it goes, oh, sorry, my mistake, I should have read deeper.

So it's interesting to me, because not everybody that I talk to actually has this level of visibility into it. And it's really fascinating to me that you've got it.

Nathan: Well, I didn't rage against the AI machine, but I was a slow adopter. But now that I have kind of built our profile. And that was one thing that was super disappointing too, by the way.

Chat knows, because I've done some cultural things with it. I've used it as a tool to build some of our cultural vision statements with some art that goes with it, that's around the office, and mission and core values, putting those things in interesting ways that are easy to absorb for our team. And so it knows our core, quite a bit. It knows some of our listings, because I've drug it through our website.

So knowing that it knows us, to have that return when I asked what are the best short-term rentals, or I even asked what's the best direct booking site, to book direct with the owner or property manager in Abilene. I would make it more simple than that, but it still returned Airbnb and VRBO and didn't mention us at all. And I was like, well, what about us?

So I was disappointed that even with that knowledge of who we are, because we've worked with it a lot, and I've even built an inventory website using Chat and Codex, and our weekly newsletter for employees, I built that in there so that it's a form that we can fill out and it'll pop out our newsletter. I was disappointed that it didn't return us automatically. But hopefully, hopefully.

Caleb: There's an analogy. No analogy is perfect, but there's an analogy I was thinking about. Picture there's a downtown space, a lot of walking distance, lots of shops, restaurants, gift shops, coffee shops, clothing, all this stuff. And you're a shop owner down here.

And there's a number of hotels, and those hotels have a concierge out front, and you have new guests that are coming in. Some of them will take time to go walk around and peruse, and have the time and bandwidth to go and look at, oh, that's interesting, maybe we should go there. But not all will. Some will ask the concierge and say, hey, what is a good restaurant? What is a good cafe? What is a good gift shop? And they will ask, and they will trust that the concierge will recommend something.

Well, a concierge does not have an unlimited amount of time and effort to be able to go into every single shop every morning, walk into the restaurant, read their specials, see the changes of price, see their staff, review all the reviews. It can't do that all the time. Instead, what a concierge would do, if it was a good concierge, is it will likely walk the neighbourhood on some routine, just to be like, I like to know what's going on. And it will probably take note when it sees a sandwich board updated, or the menu that's been listed in the window. It might take a look and glance. And if it's really clear, hey, we have our spring menu that's been updated, we have our fall specials, we have a promotion coming on, if it's clear enough for it to walk by and scan, it will update it.

And what's happening with the large language models is it's no secret that compute is a huge challenge, power is a huge challenge that a lot of these major tech companies are dealing with. They do not have, and this is a common misconception, these models do not have the ability to constantly scan every website and go through all the detail to fully understand it.

So one aspect of optimizing yourself for AI to build brand authority, for visibility, is you need to know where to put the content, and how to structure that content, so that the teeth of your gear are the same teeth as the gear that's coming by you. It's not smaller and it's not bigger, because you might put it there, but if it's not easy for it to scan and then to understand.

And the what comes from reverse engineering what people are already searching. These are tools that we use to be able to do that. You look and figure out what are people actually searching when they're saying short-term rentals, planning a vacation, et cetera. Figure out what they're searching, you reverse engineer that content, you make sure that it is put in the right place and it's communicating in the right way. And all of a sudden when those gears come by, like the concierge walking the neighbourhood, it goes by, and very simply, you have just handed it, oh, hey, here you are coming by, here's a little spot, take this with you, to be able to update it.

Nathan: It's interesting when you talk about the searches. I've done some research into that, and the highest volume search text is generally attached to their brand bias. It's like when people say, ah, let's get a Coke. Yeah, okay, what do you want? Dr Pepper.

So people say Airbnb in Abilene, VRBO in Abilene, and those are the top searches.

Caleb: Yeah, but so Nathan, this is one of my favourite points. People think of AEO, GEO, SXO as top of funnel. Search, hey, we're going here, short-term rentals, top of funnel. Someone lists Airbnb, now we're moving mid-funnel. It's higher intent. Now it's Airbnb's to lose. Someone lists B&B Hosting, it's B&B Hosting to lose.

This is true for B2B software, for a product. Someone is like, hey, this backpack, they list it. Mid-funnel, most people think, it's yours, Airbnb, it's yours. People celebrate, hey, we made it. No, no, no, because with more advanced strategies, you can build your strategy. If you understand what people are talking about, you can talk about Airbnb, about your differentiators. Sometimes some companies have a brand, a product or service, that is much stronger than them in a different area. That's okay. You can still talk about the strengths, but you can steer the conversation to why it is that people still choose you. Could be price, could be other features, could be some other aspect that you're playing.

And to me, this is one of the most, mid-funnel is one of the most exciting places, because it's higher intent. And in those points, you have the opportunity to potentially win that business.

Nathan: Oh yeah, 100%. And one of the things that we're kind of focusing on. We have three universities in Abilene, we have a world-class expo center where there's horse shows, cutting horse, rodeo, world-class stuff every month, sometimes every week of the month. And then we have Dyess Air Force Base, and then we have youth sports, great youth sports facilities, and we're very centrally located, so it's a great spot for all this.

My focus has started to turn to, I want to capture those college parents when the kids are freshmen. And I want to have that loyalty throughout. So we have to deliver on that experience that we promise every time, so that they trust.

Because right now, it's Abilene, it's a weird market right now, with Stargate there. There's 20,000 roughly acres of data centers being constructed within a 50-mile radius. So we have thousands of workers there right now. But 90% of the market is all focused on, I want these AI guys paying me, where I pulled my long-term rental off that I was getting $1,800 a month or $1,200 a month for rent, and now I want to get $5,000 a month, fully furnished, all bills paid. That's 90% of the market in Abilene right now. That's going to go away.

Abilene was already an A market. I want the short-term renter that is going to potentially, the parents for four years, multiple times a year, and I want them to go to our website first. Because we have plenty of inventory for people to go to our website first. And it's the top inventory in the market.

And what you've got right now, because of all this focus on the AI guys, 90% of the inventory is not any good. And they use AI to enhance their pictures. A door may not even be where a door was in the listing.

Caleb: Oh goodness. Yeah, the era we're in.

Nathan: So that creates this trust gap, right? Is what you're getting on Airbnb or VRBO, with their AI, so anyway, is what you're getting on an OTA, an online travel agency, is what you're getting there, what you're booking there, what you're going to get?

And in that mid-funnel, that makes a lot of sense. That's where we can close that gap, that trust gap. And help to create that trust, and funnel that down to, with us you know what you're going to get every single time, and it's going to be an experience for you, for the reason you're in town.

Caleb: Excellent. Well, you have multiple vectors that you can play. I can see strategically, obviously before you build out a strategy we do a discovery process to understand, but you have multiple fronts that you can be regularly pushing ahead to take that ground, from what I can see.

So last question I love to ask guests is, if you had to pick one thing, if you put your finger on one point that you needed most to grow right now, what would that be?

Nathan: Very interesting. I had not heard that before. That's a great way to look at it.

Caleb: For some people they're raising money, other people they're rolling out a new product, it's awareness, some people it's a team thing. What would you say it is?

Nathan: So we have a really good team. The thing for me is that top-of-mind first choice brand awareness. That is the thing.

Our site is already our number two revenue source, from a revenue standpoint. But from a volume standpoint, we're number three, behind Airbnb and VRBO. And by the way, in there reflects a little bit the power of the direct booking, because direct booking revenue is number two, but our volume is number three. So that's a powerful reason.

There are reasons behind that, of course, but I want that volume to be up there. And then we're not so beholden on, when literally the available inventory in the market doubles in a year like it did this last year, we're above that whole washout. We still have OTAs, but anyway.

Caleb: Yeah, that's the thing that we see. You pay the tax either upfront to build the organic brand authority so you show up, you're the trusted source that's showing up in AI search, or you pay the tax later to pay to play. And the former is way better, because you have a multiple attached to what you build, and from an acquisition or brand authority standpoint it is far better.

But Nathan, thank you so much for sharing all this. I think you are right at the crux of a really important shift that's happening right now, where some of these older behemoths are trying to figure out this space and wondering if they're going to be able to contend. But I do think that the game right now is leaning in the direction of smaller players being able to take market share that before they wouldn't have been able to.

Nathan: Yeah, and we didn't even get into the meat of our business and what we do and what's unique, which is hospitality. We really, man, we have a great team.

Caleb: Yeah, well, we should do a follow-up. Maybe we should do a part 2. In Texas this time.

Nathan: Yeah, maybe so.

Caleb: All right. Well, Nathan, thank you so very much.

Nathan: Yeah, appreciate your time.