Watch: Top 3 HMO design techniques to maximise profit

Stuart Scott (00:09.23)

guys, can everyone hear me okay? Excellent. So I’ve got 15 minutes to share with you three top design tips so that you can get better profits in your HMO portfolio. Who’d be interested in that? More profit? Especially in current economic times as well. So three tips in just 15 minutes. So a little bit background about myself. I spent around 25 years running design and innovation teams.

So I worked my way through agencies, got to creative director, got to as far as I could. And then I did what many of you in this room have done. I started my own company. I built my own agency, I sold it, and then I built a second agency. These are some of the companies that I worked with designing products and experiences. The three tips that I’m gonna give you today are exactly the same techniques and models we used for these companies. Now we use them in real estate, for service accommodation, and also for HMOs.

Now I thought I’d start with a couple of little stories. Does anyone remember these? buckets and… Interesting story about this. Kodak invented the digital camera, but they suppressed the technology because they thought it would harm their film sales. They believed they were a film company. So they didn’t innovate. People within the company innovated, but they as a company didn’t innovate. They stood still. They thought they were a film company. Actually…

They were in the business of capturing people’s memories, but they thought they were a film company. Does anyone remember one of these? We all had these. Fantastic. Sony missed the boat. They thought they were just a manufacturing company. They focused purely on manufacturing. They didn’t want anything to do with software. Customer side, the brand side, the software side, the rise of MP3 players, they weren’t interested. They focused on the manufacturing.

they started falling behind. They didn’t adapt to the market.

Stuart Scott (02:13.642)

Ajaz was a client of mine who was very big student landlord. Ten years ago, he bought a student portfolio. He didn’t touch his portfolio for over ten years. And then he came to me and said, I’m getting major occupancy issues. Now, in his own words, what worked for him ten years ago no longer worked. And I asked him, well, what’s the difference? What’s happened? He said, well, new players have come into the market and they’re up in their game and people are choosing to rent there.

because they’re voting with their feet. So what was happening was his product was moving further away. He hadn’t updated, he hadn’t adapted, he didn’t change with the market. So he had to bring his product up to spec, improve the facilities, then he was able to charge a far higher rents than he was able to do before and then hit maximum occupancy as well.

So my first tip that I’m gonna share with you is constant product innovation. Keyword, constant. Now, this box represents how things are done. When I first entered the HMO market and people told me social spaces don’t work, design is an ego thing, don’t bother doing anything, customer’s a problem, everyone’s telling you to stay inside the box.

This is how things are done. But we can’t innovate if we stay inside the box. There’s a sea of boxes out there, a sea of vanilla. Julian will know this particularly well. There’s a sea of vanilla out there. 90 % of your competition is going to be vanilla. But there’s a sea of this out there. Our responsibility as landmortem developers is to push the boundaries. So we’re trying new things. We’re constantly trying to push the boundaries.

of what we can do within the parameters of shared living. So the transition from HMOs to co-living is a prime example of pushing boundaries of the product and the experience.

Stuart Scott (04:20.318)

Ultimately, we’re looking to break the box. Now, when I showed you the images of the brands that I used to work with, they didn’t pay me to stay in the box. They don’t want vanilla. They’re paying for you to break the box. They don’t want what everyone else has got. They want to be special. They want to be unique. They want something they’ve not seen before. You get that by breaking the box. You have to go within the rules, of course, there’s rules, but we’re here to break the box.

The way you do that is you experiment. You run experiments in every project. So if you guys are running HMOs, commercial conversions, whatever projects you guys are working on, you’re looking to run experiments in those projects. Let me show you some examples of some experiments that we’ve been running. So this is one of our projects down on the South Coast. Every single project that we do, we’re trying new things.

You guys have probably seen some of our photo shoots of all the crazy timber stuff that we’ve done over the years. Every single time we’re doing a project, we’re running experiments. So you might look at this and go, well, actually, within this, we’re running new types of materials, new types of durability, new types of construction methods. There are things within this that we haven’t done before. There is elements that you recognize, but behind the scenes, there’s small experiments that we’re running within them.

so that we’re constantly trying new things. Coworking, very good example. So, coworking, we started implementing coworking within, in about 2015. Fast forward to post-COVID, we’re the only supplier with coworking, dedicated coworking spaces in our HMOs. If you constantly experiment, you’re gonna be ahead of the market changes. So, you’re ahead of the market.

You’re constantly trying these new things. If we had tried these and they weren’t popular, we would have just changed them. But we constantly experiment. then, so for example, I was in one of these the other day for evaluation. A couple of people there, there was a couple of laptops, two people working, there was a printer going, someone was practicing a presentation on there. Fantastic. That’s what I wanted to see. People are using it. There’s me thinking, maybe I should squeeze another room in there. I don’t need to. It’s being used. And they’re all paying very high rents.

Stuart Scott (06:50.006)

for the access to that facility. Breakout spaces. Now breakout spaces, interestingly, in the world of co-living, you think everything is about community. with co-living, you need to balance privacy with social. Breakout spaces are in addition to the social space. So if I don’t feel social today, and I just want some space, or I’ve got a mate over, I can come to a completely…

different part of the building, which is an unhabitable size room or an oversized hallway, to go and spend some time in an area that’s not my bedroom. So that becomes valuable.

That can extend into small kind of like cinema rooms, various other things, yoga studios, bits you do at the back of the garden, garden cabins, whole range of spaces you can work on. Or one of my favorites, exterior space. You’ve got more square footage outside the building than inside the building. So why not run experiments there? I’ll give an example. actually, this last project we did, we started putting hammocks in there. Does anyone want to use them? Well, it cost me, what, 150 pounds to put a hammock in?

We experimented and they absolutely loved it. So I rolled some more of them and then my wife made me buy one for our own house. She was like, how come our tenants have got hammocks and we don’t have hammocks? And in bedrooms, of course, we’re always looking to try and improve what we’re doing in the bedrooms as well, adding new facilities in there. And this is something I wanted to, I don’t usually show stuff behind the scenes, we work, we come up with ideas and we sketch them. don’t necessarily, we don’t go to Pinterest. We…

come up with an idea, we sketch out what we potentially might do and it might not work, so what? It doesn’t really matter. And we can come up with new things that don’t exist. So just don’t be afraid to try. It doesn’t matter if it doesn’t work, just experiment. And if you do that successfully, suddenly you’ve got a completely new product. Completely new product on the market. Now I know what you’re thinking, at that point, people are gonna want a slice of the game, they’re gonna see what you’re doing and they’re probably gonna start imitating you.

Stuart Scott (08:54.933)

But that’s fine. Because going back to what I said before, constant product innovation, constant. You’ve already moved on. You’ve already moved on because you’re constantly trying new things. It doesn’t matter if people are imitating you. It really doesn’t. It’s good for the market. It’s good for you.

So constant product innovation is about experimenting and then building. And then you run back over here and you’re experimenting. So it’s a constant loop. You’re just looping back around. You’re learning constantly on every project you’re doing.

So the second tip that I’m gonna share with you is called usability design. Junin, you’ll like this one. So this is really the difference between usability and aesthetics. Aesthetic being how something looks, the visual side of it, the photo shoots, versus, for example, how useful is something? How does it work?

Is it easy to use? Is it functional? That’s usability. Now,

Does anyone know what these are?

Stuart Scott (10:11.691)

What are they called? Kitchen bars. Kitchen, I haven’t heard them called kitchen bars. I always call them perching bars, kitchen bars. That’s great name. Yeah, perching bars, kitchen bars. Now, okay, let’s start with the obvious one. Do they look good? Yeah, I think we’re all in agreement. They look good. They’re photogenic. Would someone see that on our spare room shot and go, actually, yeah, that looks pretty good. And they’ll come and view the property, yeah? All sounds good. Okay, that’s all really good.

Stuart Scott (10:41.524)

Have you ever had dinner with your family or in a line?

Stuart Scott (10:54.888)

Would this make a community? Style is basically aesthetic over usability. If this is the only dining that you’ve got in your property and you want to build a community, that’s going to be a problem. Now, if this is overflow, that’s okay. If you’ve already got dining somewhere else and this is using up a bit of extra space, no problem at all.

If this is your only dining, you’re going to have a problem. And that problem is going to lead to something called churn. Now, can you tell me what a churn is?

Stuart Scott (11:40.49)

Exactly, yes. When you lose customers. So for example, Van for his Coho software, basically if you created an amazing software and people didn’t like it, the churn is the people you lose. So it’s when you lose customers. Now, many of you probably pay agents to look after your properties, which means that you pay a new tenant fine fee. So if you have churn, is it good for you? No. Is it good for the agent? Yes. They’re probably not as focused or that bothered about the fact that you’ve got churn.

because they make more money. Now, we don’t want churn, we don’t want to lose people. We want that occupancy there. So, if we focus on understanding what the customer wants by listening to them, so for example, the kitchen bars, if you built one and then afterwards you launched it and then you speak to the customers and you say, like, you know, which facilities were most important to you? How often you sit on the kitchen bars and nobody…

ever came back to you and said, I’ve never sat on them, no one has, we just eat in our rooms because there’s nowhere else to sit. Well, that would be pretty valuable feedback. You’d want to know about that. And that would feed back into here. Because now, remember, you ran an experiment, which is the perching benches, or the kitchen bars, you built it over here, your tenants that are in over here are fed back and giving you some feedback. And then back over here, when you’re innovating again, you’re coming up with new ideas.

you’re going to feed back and you’re not going make that mistake again. Because you’ve learned. And that means you’re constantly changing your product. You’re constantly innovating. And in a competitive market, you guys can’t stand still. None of us can. We have to maintain having a great product in the market.

So my final third tip is brand experience. Now I know Matt did a talk earlier on, he was talking specifically about the art of a brand. This is really about the experience part that goes on top of that. So has anyone been in one of these? Yeah. Do you know why Apple created them?

Stuart Scott (13:47.539)

So Apple created them because what Apple didn’t want is Apple didn’t want some 17 year old spotty kid in PC world trying to sell you an Apple Mac. Does the 17 year old spotty kid in PC world know how a Mac works? Probably not. Does he care about Macs? He’s certainly not passionate about Macs. The reason they created this was because if you’re in the research phase,

You’re thinking about, you know, I might buy a new bit of technology. I might, you know, I’m thinking about getting a tablet or something else. You come in here and they’re passionate about the brand. They’re passionate about the products they’re selling. So they control all the parts of the customer experience by doing this. The research phase, the buying phase, and also the after sale. Because of course you’ve got the genius bars. So then let’s use this analogy of this to you guys in the HMO business.

Think about the research phase. So if I’m thinking of moving into one of your properties, where do I go? I go to spare room. Think about what you’re doing on spare room. What’s my advertising like? What’s my brand like? How am I presenting with the photo shoots? And then when people want to book a room, who’s communicating? Is it you or the agent? What’s the communication like? And then you move further along, onboarding, onboarding into your property. What’s that like? Have you checked what that process is like? Then you’ve got the product over here.

Well, you can control this as the developer, the product. We talked about usability as well, why it’s so important. So then you’ve got the product side, and then you’ve got the living experience, the community. So that customer journey from all the way over here, there’s quite a lot of touch points on it. So that’s why we use the concept of touch points. In your business, think about all the customer touch points for your customers from when they’re thinking about moving into one of your rooms,

to when they leave one of your rooms. Some of them will be product related, some of them will be service related. If you’re purely developer, focus on the product related ones. But there’s a lot of life I shared with you on the usability of the perching benches and the kitchen bars. They’re decisions you could make that affect usability. You guys can affect the usability in their space, but equally the occupancy. Because remember,

Stuart Scott (16:06.056)

It’s no point just having an amazing product, getting loads of people to fill your properties and then you start losing customers. And especially in the market now, it’s about occupancy. So look to see if you can improve all of the touch points on your customer journey. So obviously we’re in the development room today, so we’re talking primarily around development. But remember your customer journey is not just in the product, it’s afterwards and before. So think about all the things you can improve there. So we’ve covered three top tips.

Firstly, when you guys are out there running your HMOs, think about what experiments can I run? So whether it’s a social space, whether it’s a new type of on-suite, whether it’s a new type of space design, or whether you’re stacking your deals, can you stack them in more creative ways? What new experiments can you run in every single project that you’ve got? So always remind yourself, so experiment, experiment, experiment. And when I say experiment, I mean from the big experiments down to micro ones. The small stuff matters.

I can quite happily obsess over a small detail of storage which you might think is insignificant and yet I can obsess over that for days. But we have to. The small stuff matters. So think about the detail. Think about where you can run experiments in your next HMO and in fact even in your existing HMOs.

Think about usability. So remember the kitchen bars and the perching bars. So when you’re thinking of specing out your social spaces or your bedrooms, is it comfortable? Is it useful? Does it work? We know it’s going to look good. Don’t worry about that. We know it’s going to look good, but does it work? Imagine yourself living there. Put yourself in the customer’s shoes. That will help you create a better product. And also ask for feedback from your tenants. Ask for your feedback.

And finally, think about brand experience, all three areas. So work with it all the way through from before when they’re researching, lots of things you can do. talked about brand earlier on. Think about all the way through to the product part and then the living experience in there. It’s very easy for us as developers to just create something that looks good. But what I really want to emphasize today is we know we can make stuff look good. The usability is absolutely key because it drives long-term occupancy.

Stuart Scott (18:26.152)

And that’s a key thing. We want to be smart about what we’re doing, make smart decisions about making sure we’ve got that longevity of the cash flow coming in.

So for those of you that, if you’d like the three kind of concept that I’ve been sharing there, I’ve recently released a book called The Co-Living Revolution. It’s in Amazon at the moment. So if you haven’t had a copy, just have a look on there. And that’s my link into my website as well. Guys, that’s my 15 minutes. Thank you very much.