Below is the first installment in a new series profiling RET portfolio companies and their executives. Today, we talk to Roman Pedan, founder and CEO of Kasa.
RET: Can you give a quick rundown of how you came to found Kasa?
RP: I was working in private equity at KKR in New York City and we were doing huge deals, deploying immense amounts of capital to buy hotels. But in my personal life I was Airbnb-ing an apartment on the side and staying in more Airbnbs when I traveled. It seemed like hotels represented the old way people travelled, whereas more and more people seemed to want something different.
But Airbnbs weren’t perfect. While short-term rentals were getting popular, they lacked consistency and reliability and therefore hadn’t fully earned trust from consumers. I founded Kasa to try to solve that problem.
RET: What is the inefficiency in the real estate industry that makes Kasa necessary?
RP: Here’s the main issue: On any given night, over 1 million apartments sit vacant across the US. Combined, that’s a major metropolis of emptiness. For property owners, that means less yield on their investment. For potential renters and travelers, that means empty space that nobody is using. Kasa helps utilize space more efficiently which means more cash flow to owners and more options and lower prices for renters and visitors.
RET: How do you solve that problem for property owners and guests?
RP: For property owners, the Kasa model—managing the end-to-end accommodation experience and passing along 100% of the cash flow, minus our management fee—generates above market returns. Multifamily owners can also easily backfill vacant space with Kasa rentals, and having Kasa in their buildings can help multifamily owners adapt quickly to changes in the community and adjust the unit mix to best suit the property needs as they evolve.
For guests, our model allows us to offer consistency: they get high-quality hospitality experiences for lower costs and in a wide range of locations.
RET: How does your technology differ from your competitors’?
RP: At one point, we realized we were operating a certain kind of hotel that had never existed before. Early on, we were managing 100 units spread across nine buildings, eight cities and three states, and there was no software that could support that kind of distributed operation. We had to build that technology ourselves, including software and systems that can better help us track operations of our distributed units, manage all aspects of the guest experience and support comprehensive financial reporting to our partners. We also stand apart with the rigor of our trust and safety technology and policies–they are our top priority and we believe they are also the most advanced and stringent in the industry. Ultimately, our technology generates better financial returns for our property partners, higher quality experiences for our guests and more trust with our neighbors.
RET: What advice would you give to a young entrepreneur just starting out in rent tech or proptech?
RP: Get in the weeds.
One oft-repeated snippet of leadership advice you hear is that executives should always stay as high-level as possible — they should learn to delegate and look at things from 1,000 feet.
I agree with that to a point, but you also have to get into the details and enable your team to do the same. I’ve stayed in many, many Kasas, for instance, and as part of that I’ve drilled into every detail of the customer experience. I’ve experienced it all firsthand. That’s crucially important for any leader, and it has informed my formulation of Kasa’s strategy moving forward.
RET: What accomplishment are you most proud of?
RP: Kasa was able to not just survive the COVID-19 pandemic, but we took the opportunity to quickly pivot and forge a clear path to continued growth. The sudden collapse of the hospitality sector caught us all off-guard, but I am so proud that the Kasa team was able to respond by developing a revenue-sharing management model that allowed us to continue to pass along income to our property partners while growing our business, as well. During COVID-19 we maintained occupancy levels that were double that of the hotel sector and we expanded our portfolio two-fold. It was a gargantuan feat, and I’m so proud that the Kasa team was able to accomplish it. The pandemic is not yet behind us, and we already know there is some hard work ahead as we continue to build our business. But I do think this once-in-a-century challenge will also offer once-in-a-century opportunities to rethink how we use livable space.
RET: What’s next for Kasa?
RP: We’re looking to accelerate investment in our proprietary technology. Our existing suite of products and systems are a key part of our “special sauce”: They enable Kasa to manage units across various property sizes and locations and generate unmatched operating margins, while maintaining exceptional guest experiences at an affordable price point. But there is still so much to be done. We plan to even more effectively streamline our operations and minimize onsite overhead by developing additional technology that focuses on community safety, guest support, and improving the Kasa experience at all touchpoints. We believe these developments will be transformational for the industry, and will represent entirely new tools that have never existed before. Stay tuned!
RET: If you weren’t a proptech executive, what would you be doing?
RP: It would have to be improv comedy. Generally, I like building things so it may seem strange to choose comedy, but I’ve done some improv and it’s much more similar to starting a business than many would think. In both, you build and create as you go, collaboration is key, and it is critical to have sound principles. Plus, besides being immensely challenging, improv comedy is fun!
RET: What is one challenge about building a proptech company that you weren’t aware of five or ten years ago?
RP: The fragmentation of the sector across the ownership, management, software, and hardware sides means there are immense integration challenges. In order for the various systems to work together in a cohesive manner, a company must vertically integrate to support the full stack of needs themselves, while also mastering enough lateral flexibility to fit with the fragmented solutions already in place. All of this should provide higher quality, lower costs and more dynamic offerings versus others — but it’s incredibly challenging to do right.
RET: There’s an old trope about real estate being slow to adopt technology? Do you think that is still an accurate characterization?
RP: Real estate has a few structural elements that make it slower to innovate–generally, people invest in real estate for predictability, and their investments remain very illiquid over long periods of time. As a result, real estate investors have tended to be risk averse and don’t want to try new technology. Technologists, accordingly, have steered clear of real estate.
However, as yields have compressed (and the impact of NOI moves has thus been magnified), the potential benefits of technology to increase revenue or cut expenses have become more obvious. The equation has flipped: it would be riskier (possibly existentially so) not to explore new technology, and owners who are able to incorporate technology thoughtfully will emerge with a competitive advantage.