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How the vacation rental space can benefit from Airbnb's IPO

Nico Barawid Casai CEO joins Yahoo Finance to discuss how the vacation rental space can benefit from Airbnb's IPO.

Video Transcript

[MUSIC PLAYING]

ADAM SHAPIRO: Welcome back to Yahoo Finance Live. We want to talk about the Airbnb effect with hospitality startup in Latin America, Casai. And one of the things that's important is that despite the pandemic, we're watching people who will get on airplanes go to locations in Mexico and in the Dominican Republic. You can see that data at the airlines for America.

But somebody who knows that on the front lines is the CEO of Casai, Nico Barawid. And he's joining us now to talk about what you're seeing as far as people who are booking in Latin America. So do you expect this trend to continue? I mean, we've got the Airbnb IPO coming up. But it seems as if people are willing to go to warm, lovely locations. And for that, you have to head south of the border.

NICO BARAWID: That's true. Thank you for having me, Adam. Yeah, you know, what's interesting about the travelers that we have now is that previously, prior to COVID, we had primarily international travelers that we saw in Mexico City. We have about 200 units in Mexico City. And what happened in April and May was that whereas, previously, our shift was majority international travelers, now it was mainly domestic travelers, so travelers traveling within Mexico.

Since September and October, the international travelers, as you say, have come back. And so, you know, we see travelers both coming to Mexico City, in addition to travelers, you know, working from the beach destinations of Mexico.

But I think what's going to happen as a result of COVID is that the heavy focus that a lot of international brands had on international travelers is going to totally change. Because now, the majority of the business locally, as is the case in every country around the world, is local domestic travelers.

SEANA SMITH: Nico, I'm curious how this has affected your pricing strategy. Because we've seen Airbnb prices on some of their one-night stays as a result of the fact that not as many people are booking trips. What are you guys doing because of this?

NICO BARAWID: Our pricing strategy has very much reflected the shape of the curve of the business since COVID. So just like the rest of the industry, in April and May, we did have very attractive discounts for travelers that were staying for a month or two, whereas now, you know, our average length of stay has gone down from over 30 days in April and May to now back to where it was prior to COVID and about four or five days. And so, as a result, our pricing strategy has reverted back to what it was in January and February.

An interesting thing, to the point that I was just making, was that previously, we were pricing primarily in US dollars, whereas now, you know, as I mentioned, we see a lot of domestic travelers. And so now we're pricing as well in Mexican pesos.

ADAM SHAPIRO: When you talk about boutique travel apartments, I mean, you've got to have a plan, I would assume, for expansion into other parts of perhaps not-- we keep saying Latin America, but Central America, even South America. You just raised $48 million. What's next on the target?

NICO BARAWID: Totally. As I mentioned, we have about 200 units in Mexico City. And we are looking primarily at expanding to the primary business, sort of tier 1 cities in Latin America. And so we're actively exploring an expansion to Sao Paolo and Brazil, in addition to other corridors across the region.

SEANA SMITH: To what extent are you competing with Airbnb? Because as I understand it, their exposure, at least to Latin America, is relatively small.

NICO BARAWID: Yeah, what was interesting about their S-1 was that Latin America had actually the smallest percentage of room nights in the entire portfolio of Airbnb. So they had about 7% of their room nights were in Latin America and then 10% of their revenue was from Latin America. But from our perspective, we have a very close relationship with Airbnb.

What's interesting about our business prior to COVID versus now is that prior to COVID, about 85% of our inbound traffic came from platform channels like Airbnb. It wasn't just Airbnb. It was also Booking.com, et cetera. But you know, we relied mainly on these platforms.

As a result of COVID, we focused internally a lot on building our sales and marketing efforts to the point where now, over half of our revenue comes directly. And so, we work closely with Airbnb because, you know, they are very much a leader in the space. But, you know, we are also diversifying our own channels.

ADAM SHAPIRO: Would you sell to them if they called?

NICO BARAWID: We're focused on executing. You know, so we're building our brand.

SEANA SMITH: So it's not a no.

ADAM SHAPIRO: Let me follow up real quick, because is it difficult-- I was just in Buenos Aires before the pandemic. I love the city. I hope that there are plans for you to expand in Buenos Aires. But is there a problem with currency exchange and the different economic situations that different cities might experience that you would grow into?

NICO BARAWID: Not really. I mean, as I mentioned, our-- prior to COVID, we were pricing mainly in US dollars, and now we have a mix of guests that are paying both US dollars and local currency. But the reason that it's not really that much of an issue for us is because most of our expenses are in local currency. And so, you know, I think FX challenges happen when income and liabilities are in different currencies. But for us, it actually makes it more close to having all of our expenses and income in the same currency.

SEANA SMITH: Nico, who is your demographic? I mean, is it mostly millennials? Is it the younger generation, Gen Z? Is it older travelers? Is it a bit of everyone? Who is it?

NICO BARAWID: Yeah, Seana, that's a great question and also something that's also changed a lot since COVID. So prior to COVID, I would say our prototype was, you know, a technology executive from New York or LA that was coming to Mexico City for the weekend and had heard that Mexico City had great food, right? So we were primarily targeting international travelers, and all of our marketing was in English.

Whereas since COVID, as I mentioned, since so much of our traveler base has become domestic, now I would say, we don't have clear data on this. But just anecdotally, we see more older travelers, so, you know, businessmen and women from other cities in Mexico coming. And whereas, previously, our marketing was in English, now we're beginning to do some marketing in Spanish for the local audience.

ADAM SHAPIRO: [SPANISH] Forward. All the best to you, Nico Barawid, Casai CEO. We're going to be back right after this.