AI is going to compress STR management fees hard. Would love advice on this model

AI is going to compress STR management fees hard. Would love advice on this model

Member since 2025 · 22 posts · 17 votes

Hey everyone, I'm Christian. My background is cyber operations and AI, and for the past year I've been building an AI-native backbone that runs the back office of short-term rental management: revenue management, guest messaging, cleaning coordination, QC, owner reporting, dashboards. This isn't a software demo. The system currently serves around 100 properties, and the unit economics have us on track to run management profitably at an 8 percent fee with roughly a 60 percent contribution margin.

That last sentence is why I'm posting. If those numbers hold, I don't think they stay unique to me for long. My honest belief is that over the next several years, AI is going to do to management fees what it does to every labor-heavy service: someone in your market will eventually offer owners 10 to 12 percent and still make money, and the operators charging 22 to 25 percent with big back-office payroll are going to feel it first.

The model I'm weighing is not to go compete in every market myself. It's to work with established local hosts and managers who are already good at the local side, meaning their brand, their owner relationships, their cleaners and vendors and boots on the ground, and put the remote back office on the system. Either operated for them or with their existing team trained on it. The idea is that an operator who has zero AI expertise shouldn't have to lose to fee compression just because they can't build this stuff themselves.

Before I go further I'd rather get punched in the face by people who actually run portfolios than validate myself in a vacuum. So, brutal answers to any of these:

  1. 1)Do you buy the fee compression thesis at all? If you're charging 20 percent plus today, do you see it holding for five more years?
  2. 2)If you could hand off part of your back office tomorrow, what goes first? And what would you never let an outside party touch?
  3. 3)How would you want something like this priced: percentage of booking revenue, percentage of your management fee, or flat per
  4. listing? Which structure would make you walk?
  5. 4)What's the dealbreaker? Data access, loss of control, quality of guest comms, something else?
  6. 5)Has anyone here used a white-label back office or remote ops provider? How did it actually go?

Not selling anything and deliberately not naming anything. I'm at the stage where honest criticism is worth more than interest. If the consensus is "fees aren't compressing" or "I'd never trust an outside back office," that's exactly what I need to hear.

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Mike GrudzienPro Member
Lender · Eugene, OR · Member since 2019 · 2k+ posts · 1k+ votes
2mo

I like the human touch.  Sorry, just old school.

See this reply in the discussion

9 Replies

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  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    2mo

    If I am hiring a PM they are a boots on the ground value add company that can do what AI can't. 

    Remote PM's will definitely feel the crunch.

  • Cliff H.Pro Member
    Rental Property Investor · Nashua, NH · Member since 2014 · 609 posts · 485 votes
    2mo
    I understand the knee jerk reaction across all sectors that AI is just going to make everything cheaper, I’d challenge the concept of racing to the bottom with lower fees and ask instead, “what can world knowledge and trained algorithms do to add value that wasn’t there before?” If all we we do with new tools is faster, cheaper, less human we’ve already lost the market to the next cheaper also-ran, racing faster to the bottom.
  • Collin HaysBusiness Member
    Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
    2mo

    My management company is mostly doing things that AI and virtual assistants cannot.

  • Mike GrudzienPro Member
    Lender · Eugene, OR · Member since 2019 · 2k+ posts · 1k+ votes
    2mo

    I like the human touch.  Sorry, just old school.

  • Member since 2022 · 1k+ posts · 1k+ votes
    2mo

    I see it as a bifurcated model that gives a 3rd option between self management and full service. AI assisted lite management for a low fee vs full service at a higher fee. 

    An AI system could manage 80-90% of the basics: Calendar management, auto messaging/replies (whether pre-programmed responses or searching past messages for answers), cleaner scheduling, supply ordering and revenue management. A PMS can do most of this already. With a good cleaner and this type of system you could be on autopilot for extended periods of time. 

    However it's the more complicated 10-20% of issues like needy guests, cleaners flaking/insufficient cleaning, urgent plumbing/electrical issues, refund requests etc where I don't see AI making a dent in, ever. Boots on the ground management with local contacts, especially with in house cleaners and maintenance, will win every time. It'll cost you though, as it should. Certain types of investors have no desire and/or simply cannot devote the time/bandwidth to anything that resembles self or AI assisted management, so for them full service will always be their only option. 

    Some independent hosts will be happy for tools such as this although it's tough to say what they'll pay for it. Like anything you get a range of hosting styles and personalities where some people don't mind some aspects but hate others. Best thing you can do is put a price on it and see what the market tells you. 

  • Andrew SteffensBusiness Member
    Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes
    2mo

    I have not felt it and I do not think I will feel it for some time.  Most of my clients are 40s and 50s and do not want to learn it and run it themselves.  Getting PMs to adapt AI at 8% and then charge 12% for boots on the ground support, the boots on the ground is the most expensive part and 4% margin is abysmal.  I would need 200 properties operating at $60k average unit revenue to make about $500k in gross profit and then would need a lot of in person help to make sure those properties are in stellar shape.  Even if I did and hired 2 helpers at $25/hr all in Id be killing myself to make $300-350k and there are better ways to make that type of money with less work.

    • Atlanta · Member since 2022 · 716 posts · 645 votes
      2mo
      Quote from @Andrew Steffens:

      I have not felt it and I do not think I will feel it for some time.  Most of my clients are 40s and 50s and do not want to learn it and run it themselves.  Getting PMs to adapt AI at 8% and then charge 12% for boots on the ground support, the boots on the ground is the most expensive part and 4% margin is abysmal.  I would need 200 properties operating at $60k average unit revenue to make about $500k in gross profit and then would need a lot of in person help to make sure those properties are in stellar shape.  Even if I did and hired 2 helpers at $25/hr all in Id be killing myself to make $300-350k and there are better ways to make that type of money with less work.


       I also get clients that try to self manage for awhile and find out they are not suited for it, no matter what tools help them. They arent used to answering calls about a leaky pipe at 9 pm, or guest showing up when a clean got missed on Saturday afternoon when they were at a movie or out to dinner.

  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
    2mo
    Quote from @Christian Johnston:

    Hey everyone, I'm Christian. My background is cyber operations and AI, and for the past year I've been building an AI-native backbone that runs the back office of short-term rental management: revenue management, guest messaging, cleaning coordination, QC, owner reporting, dashboards. This isn't a software demo. The system currently serves around 100 properties, and the unit economics have us on track to run management profitably at an 8 percent fee with roughly a 60 percent contribution margin.

    That last sentence is why I'm posting. If those numbers hold, I don't think they stay unique to me for long. My honest belief is that over the next several years, AI is going to do to management fees what it does to every labor-heavy service: someone in your market will eventually offer owners 10 to 12 percent and still make money, and the operators charging 22 to 25 percent with big back-office payroll are going to feel it first.

    The model I'm weighing is not to go compete in every market myself. It's to work with established local hosts and managers who are already good at the local side, meaning their brand, their owner relationships, their cleaners and vendors and boots on the ground, and put the remote back office on the system. Either operated for them or with their existing team trained on it. The idea is that an operator who has zero AI expertise shouldn't have to lose to fee compression just because they can't build this stuff themselves.

    Before I go further I'd rather get punched in the face by people who actually run portfolios than validate myself in a vacuum. So, brutal answers to any of these:

    1. 1)Do you buy the fee compression thesis at all? If you're charging 20 percent plus today, do you see it holding for five more years?
    2. 2)If you could hand off part of your back office tomorrow, what goes first? And what would you never let an outside party touch?
    3. 3)How would you want something like this priced: percentage of booking revenue, percentage of your management fee, or flat per
    4. listing? Which structure would make you walk?
    5. 4)What's the dealbreaker? Data access, loss of control, quality of guest comms, something else?
    6. 5)Has anyone here used a white-label back office or remote ops provider? How did it actually go?

    Not selling anything and deliberately not naming anything. I'm at the stage where honest criticism is worth more than interest. If the consensus is "fees aren't compressing" or "I'd never trust an outside back office," that's exactly what I need to hear.


     A percentage of communication and administrative work will eventually be handled by AI.

    AI cannot yet clean units, assess damages, etc., no more than AI can replace an electrical, HVAC or plumbing contractor.

    • Atlanta · Member since 2022 · 716 posts · 645 votes
      2mo
      Quote from @Drew Sygit:
      Quote from @Christian Johnston:

      Hey everyone, I'm Christian. My background is cyber operations and AI, and for the past year I've been building an AI-native backbone that runs the back office of short-term rental management: revenue management, guest messaging, cleaning coordination, QC, owner reporting, dashboards. This isn't a software demo. The system currently serves around 100 properties, and the unit economics have us on track to run management profitably at an 8 percent fee with roughly a 60 percent contribution margin.

      That last sentence is why I'm posting. If those numbers hold, I don't think they stay unique to me for long. My honest belief is that over the next several years, AI is going to do to management fees what it does to every labor-heavy service: someone in your market will eventually offer owners 10 to 12 percent and still make money, and the operators charging 22 to 25 percent with big back-office payroll are going to feel it first.

      The model I'm weighing is not to go compete in every market myself. It's to work with established local hosts and managers who are already good at the local side, meaning their brand, their owner relationships, their cleaners and vendors and boots on the ground, and put the remote back office on the system. Either operated for them or with their existing team trained on it. The idea is that an operator who has zero AI expertise shouldn't have to lose to fee compression just because they can't build this stuff themselves.

      Before I go further I'd rather get punched in the face by people who actually run portfolios than validate myself in a vacuum. So, brutal answers to any of these:

      1. 1)Do you buy the fee compression thesis at all? If you're charging 20 percent plus today, do you see it holding for five more years?
      2. 2)If you could hand off part of your back office tomorrow, what goes first? And what would you never let an outside party touch?
      3. 3)How would you want something like this priced: percentage of booking revenue, percentage of your management fee, or flat per
      4. listing? Which structure would make you walk?
      5. 4)What's the dealbreaker? Data access, loss of control, quality of guest comms, something else?
      6. 5)Has anyone here used a white-label back office or remote ops provider? How did it actually go?

      Not selling anything and deliberately not naming anything. I'm at the stage where honest criticism is worth more than interest. If the consensus is "fees aren't compressing" or "I'd never trust an outside back office," that's exactly what I need to hear.


       A percentage of communication and administrative work will eventually be handled by AI.

      AI cannot yet clean units, assess damages, etc., no more than AI can replace an electrical, HVAC or plumbing contractor.


       it already is. Hostbuddy, Rezzy, already quite a few AI messaging services

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