11/30/2018 RocketBlocks: Structure
Room for rent
Category: Real estate, Investment
2
An NY-based, real estate development company that operates across the US has hired your team to
help them evaluate a new type of opportunity: converting private apartment residences into luxury
vacation rentals for tourists visiting various cities. They've engaged your team to help them evaluate
this opportunity and highlight critical issues to investigate. Where would you start?
Your structure (Time taken: 2 seconds, avg. time: 4 minutes, 2 seconds)
What! No buckets - lets turn up the effort here!
RocketBlocks suggested answer
Problem statement: Move forward with projects
Mgmt. expertise
Manage hotel-like rentals
Bring in expertise?
Gov. regulations
Zoning laws?
Changing city laws
Market landscape
Enough demand in cities
Competitors (hotels, b&bs)
Market prices
Financials
Operating costs
Investment costs
Projected revenues
Payback period
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11/30/2018 RocketBlocks: Structure
Key considerations
Here a good answer will highlight and focus on two of the key issues that a company
pursuing this type of opportunity is going to face: operating a hotel-like business and coping
with city regulations on the hospitality business
Framework strengths
This strong answer does a nice job of diving into those two topics right off the bat,
specifically on the management front probing on how they'll manage rentals and whether
they'll need to bring in outside expertise to succeed
Nice call out on government regulations and highlights the need to review zoning laws and
the nature of influx regulations on how cities are dealing with these new types of businesses,
which has been brought into focus by Airbnb's global success
Finishes with a logical discussion of the financials to ensure that it's an opportunity worth
pursuing for the business
Framework improvements
One area that isn't explicitly called out is how they'll compete with existing leaders in this
space, eg Homeaway and Airbnb. Furthermore, those competitors might be a good sources
of relevant expertise from a talent perspective
RocketBlocks alum, currently Associate at McKinsey & Co.
Problem statement: Evaluate opportunity
Size of opportunity
Demand for vacation rentals
Demand for private apartments
Geographical considerations
Competition
Existing players (share?)
Existing market condition
Existing price level/stability
Financials
Potential revenue
Investment cost
Variable costs
Break-even?
Competency to manage/operate luxury vacation rentals?
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11/30/2018 RocketBlocks: Structure
Intangibles
Government regulations
Marketing?
RocketBlocks alum, currently Project Leader at The Boston Consulting Group
Problem statement: Convert private apts to luxury vacation rentals
Market dynamics
Total size and growth of vacation rentals
# of luxury tourists visiting
# of luxury hotels and market share
Seasonality
Incremental revenues from conversion
Price per rental
Avg. churn for rentals
Cost structure
Fixed costs
Variable costs
RocketBlocks alum, currently Engagement Manager at McKinsey & Co.
Problem statement: Enter luxury vacation rental mkt?
Size of opportunity
Current big players & their financials
Customer need/demands
Profitability
Revenue
Costs
Margin
Feasibility
Vacancy rates
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11/30/2018 RocketBlocks: Structure
Purchase of residences
Payback period
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11/30/2018 RocketBlocks: Structure
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