Transcript
Speaker: Middle market companies continue to express concern about customer engagement and relationships as well as their own talent management capabilities and culture. What should middle market leaders be doing to address these issues and how has technology and digitizing the customer and employee experience enhanced the success of a real estate company located in the outer banks? Listen, as I talk with Clark Twitty of Twitty and Company.
Speaker: Welcome to The Market That Moves America, a podcast from the National Center for the Middle Market, which will educate you about the challenges facing mid -sized companies and help you take advantage of new opportunities.
Speaker: Hi, I'm Doug Farron, Managing Director of the National Center for the Middle Market at the Ohio State University Fisher College of Business, where the nation's leading research organizations studying mid -sized companies, which account for a third of private sector employment and GDP, the lion's share of economic growth.
Speaker: It is truly the market that moves America. The National Center for the Middle Market is a partnership between Ohio State University and Chubb. And today, I'm happy to welcome Clark Twitty, president of Twitty and Company, located in Duck, North Carolina. Hi, Clark. Doug, thank you very much for the opportunity. It is a pleasure to join you today. Well, why don't we first start by telling us a little bit about your company and your background? I think it's really interesting. So if you could just start there, that would be great. Sure.
Speaker: Let's start broadly and contextualize where we are for your audience. We are in the very northeastern part of North Carolina, about three hours east of Raleigh, Durham, in a place that is famous now for the Netflix TV show Outer Banks, but for many years it was more famous as the birthplace of flight, the Wright Brothers.
Speaker: And over time, the Outer Banks has become famous as a vacation destination. So our firm is a second generation family business founded by my parents, Doug and Sharon in 1978. And our job is part asset management because we manage homes on behalf of homeowners.
Speaker: And we take those homes to a broad market of travelers. So we're also a hospitality company. And if we create a great guest experience for the traveler, we think that translates into a superior home ownership experience for folks who own a vacation home on the coast.
Speaker: And then if we do both of those things, hopefully we're also a great place to work. So I grew up here on the Outer Banks, actually went to school just up the road from where I sit right now. I joined the Navy for 10 years after college and have been very fortunate after school and different careers to be able to come back to the family business and work.
Speaker: right alongside and serve, frankly, about 150 full -time staff. Seasonally, we're up about 600 or 700, as you might imagine, in the summertime. And we are just here to hopefully make everybody's lives better in some small way. Doug, I hope that was a good, short, concise summary.
Speaker: Yeah. What can you share? What attracted your family to kind of starting this business? I mean, they've always been natives of the area, but what kind of got them involved in this real estate and hospitality area? Sure. So the Outer Banks first began to take off in the late 70s, early 80s, and my father sold real estate. And as you might expect in the early days, if you couldn't necessarily get a consistent income stream through sales, boom or bust,
Speaker: He had the idea to rent or manage some homes on behalf of absentee property owners, kind of as a favor to his clients, but also as a way to flatten out some of the bottoms of those market cycles. And over the years, we have gone from what dad started with at four companies or four homes rather under management to today about 1100. And that's taken place over about 43 years.
Speaker: And today, the rental component of our larger company is, by and large, the proof in the pudding of what we do as a firm. So dad started it almost as an accident. Mom was our first housekeeper. Dad would rent the homes. Mom would go clean them. Yeah, sure. And here we are.
Speaker: Sure. And so, yeah, 40 years later, you're still here and growing. So what has been the biggest driver of that growth? Has it just continued growing interest in the Outer Banks? Or do you think there's been other things that have helped contribute to that? I think you nailed it. I think over the past 30 or 40 years, the Outer Banks has continued to grow as a vacation destination. I like to think we're America's seashore. We are connected to, for example, the big DC metro markets.
Speaker: 60 % of the US population is about a day's drive from the Outer Banks. We are very famous for being family friendly. We have a greater share of single family homes than any other vacation destination in the United States. So we think we've got a really good combination of a wonderful natural environment that is very proximate to a population center that has really grown over those 40 years.
Speaker: Sure. Yeah. And who would be people that you compete against? I mean, are you seeing like Airbnb and some of the bigger, you know, rental companies have started to kind of come into your space or what do you see out there? Absolutely. We've got worthy competitors in every direction. We never run down our competition. I think that's a self -defeating prophecy. We have for many years, for the great majority of the history of our company, we have had local competitors and they're in many cases excellent.
Speaker: More recently, perhaps more familiar to your audience, is the boom of the home sharing space, whether that's Airbnb or Verbo, Vacasa now on the national scene as well. And those national level groups, we compete with directly locally, but I'm also very thankful for what they've done because I think those huge organizations have taken what for many years was an alternative travel channel.
Speaker: and turned it into something that's very mainstream. So I think those of us in the professional vacation rental community owe Airbnb and Verbo a big debt of gratitude. So while we compete, I'm also thankful for what they've done. Interesting. And what would you say differentiates your company from them? Is it the experience that you provide? Is it the service? I mean, how would you describe that?
Speaker: That's a great question. And I never want to say anything bad about our competitors. So I think Airbnb does a great job of helping people find great places to go in our market. And I think all markets are hyper local. The outer banks is a particularly interesting destination because it has a group of homes that are very high end, in some cases renting for 10 or 20 or even 30 or $40 ,000 a week.
Speaker: And with those kinds of expectations come a very high expectation, and rightfully so, for service delivery, for concierge services. On the homeowner side, so that was a guest comment on the homeowner side, investment at that level is typically from a sophisticated investor who are looking for an asset class interpretation of the performance of their home. And I'll say that a little bit differently.
Speaker: In our region, we see a lot of folks who treat their rental home not as a home, but as an operating company, and they're seeking to maximize revenue and minimize costs. And in that sense, we become very much an operational advisor in terms of how to tweak these homes. So in many ways, we sometimes say we have 1 ,000 homes under management or 1 ,100 homes, we really help
Speaker: homeowners operate 1 ,100 operating companies if we think about their homes as a company. Right, right. Interesting.
Speaker: So depending on who you talk to, we're hopefully at the light at the end of the tunnel in terms of the pandemic. But I would have to ask, what was your experience through this whole 19 months or whatever it is we're on now? I mean, I would assume that there was a pretty significant impact, especially at the beginning. And I'm sure you've made adjustments and changes along the way. Could you describe that experience a little bit?
Speaker: I would be happy to, I hope to do it quickly and then I'll leave plenty of time for questions. I had an old friend of mine once who was actually a fishing boat captain locally, tell me that he thought there were two ways to go out of business. One would be a lack of business. You just didn't have enough cashflow and you went out of business. The other way was that you had too much business too fast. We had both over the space of about a year. And I'll tell you why.
Speaker: When the pandemic began to break broadly across the United States, we go back in time now a little over a year. Dare County, which is the northeastern, again, part of North Carolina where we are, actually closed, physically closed the bridges to the outer banks to non -residents. So our cash flows literally went from positive one day to zero on the next.
Speaker: Now add to the positive one day zero on the next, the next day, the regulatory real estate body in North Carolina determined that we owed a refund to all of the folks who had planned a vacation during that timeframe, that we weren't able to then meet, fulfill our contractual obligations because of an access issue. So now we began to refund a lot of money. So, and that lasted for about eight weeks. And the analogy I so often use is a runway.
Speaker: We were very quickly running out of runway as a firm as we began to just see significant refunds, which has allowed obviously cashflow going in the wrong direction without any revenue stream to put against it. So that's one bucket. Now the other bucket.
Speaker: When the bridges were opened after about an eight week period, we saw as a region and as a firm demand for small family vacation homes that we simply could not have predicted. And that demand has continued until the present day. And we saw, for example, phone call volume. We saw a demand for digital engagement. I'm sure we'll talk about that.
Speaker: in ways we simply didn't think possible, or if we did think possible, would think about those things perhaps a decade down the road. I'm sure you've heard people say they evolved more in 90 days than they probably would have in the 10 years if barring the pandemic, and that was certainly true for us.
Speaker: So we saw both ends of that spectrum in a very rapid timeframe. And I think that experience really shook the foundations of our company and caused us to act and thank and do very differently than we had for the 40 years leading up to that.
Speaker: Wow. That's really interesting. Yeah. I mean, cause we see that a lot in, uh, you know, in a lot of our survey data and the companies we talked to, I mean, certainly there were some industries that fared very well throughout. I mean, they were able to pivot, um, others like your story that you just told, I mean, really it was kind of outside of your control that those bridges were closed. Your, your revenue stream was quite literally shut off.
Speaker: Yeah, Derrick County, I think was the first county in the United States to shut down access, even to non -resident property owners. So we very much saw something out of our control go to zero to your point. Interestingly, from a business case study perspective, you begin to rely very much on trust because everyone loses in that scenario. The homeowner loses, the traveling guest loses, and the organization loses, each through no fault of their own.
Speaker: And that was a pretty interesting laboratory, for lack of a better phrase, on how to conduct yourself as an organization in light of a situation where there literally is no win. I mean, if you're a Star Trek fan out there, this is the Kobayashi Maru. What do you do? And that was pretty interesting for us. And we could talk more about that too, but you're right.
Speaker: Yeah. So what were some of those things that you did to engage your customers? You said kind of phone volume was off the charts, but what, what were some of the things you were forced to do to actually maintain that level of trust, maintain that engagement with people who, you know, quite frankly may have been a little skeptical or hesitant to absolutely forward.
Speaker: Absolutely. So let's put that in two different categories. Let's say during the time during the bridge closure and then we'll say post bridge closure while the bridge was closed and trust was such an existential issue for us. I think broadly we did just a handful of things. Number one, we made a commitment to ourselves and our staff and our all of our stakeholders. We don't know what tomorrow will hold. We don't know what kind of organization will look like when we get there, but
Speaker: we're going to do the right thing and we're going to do the best we can. And that's our covenant at 9 a .m. at 5 p .m. and at midnight. And then as we went about doing that, we were completely, you've probably heard the book reference, radical candor. We were candid with our stakeholders in a way that we simply had never been before for a hospitality organization. We typically exist to please people and to make people smile.
Speaker: We didn't put that as the first priority. So we actually came out of character a little bit and we're very candid with both good news, with bad news, for things we knew, for things we were doing, but also for what we didn't know, for what we couldn't do. And we did that very regularly through a series of virtual town halls, podcasts, weekly videos, emails, website updates, like just, we talk about consistent communication. We think we know it.
Speaker: We communicated every 15 minutes and we found through that if you don't communicate, that's how misinformation converts to what is perceived as credible information in the absence of a countervailing piece of information. That's how misinformation goes to be credible. And we recognized that we had to fight that.
Speaker: literally every 15 minutes. So in terms of a communication rhythm, it was very compressed and very, very candid. And then that's bucket one, bucket two. And McKenzie did a great job articulating this broadly.
Speaker: We did four things for all your listeners out there. Obviously, as we saw this huge demand signal coming our way, we tried to rapidly build capacity while apologizing to our long -term guests that they were having what frankly was not a great guest experience. We obviously had to really rapidly digitally innovate. I know we'll talk about that because our business for 40 some years was rooted in personal interactions first.
Speaker: Northwestern up at Kellogg, they say trust before transactions. And that was my model as well. That was our model as a team. That was completely disrupted. Obviously, I think we had to learn as an organization, you know, in a really candid way, because none of us had ever been in an environment like that. And we made a lot of mistakes. And then I think that that was really important for us to learn in a candid way. But then also, we had to obviously, and I know a lot of your other business folks talk about this, we really had to work to engage customers at a new way.
Speaker: So those are the two things we did on either side of that big pivot point. Yeah, let's drill down into that digital experience and technology a little bit. I mean, you described some of the tools that you picked up to communicate with your clients and your customers. Can you talk about some of the other areas that you've
Speaker: maybe heavily invested in or had to totally rethink in terms of advancing or upgrading certain parts of either your internal operations, the way you engage with customers or even for your own employees. What are some of those areas? Well, I think you nailed it. First and foremost, it starts with people. Dad always said, this is first and foremost and will always be a people business. So we started with our own staff and we were able
Speaker: Luckily, through some strategic planning that when the pandemic disrupted what we were, we were able to send everybody home with a laptop. And we literally did that one afternoon and the next morning at nine o 'clock, we all logged in on our laptops.
Speaker: through a secure network and were able to answer the phones and work with homeowners and guests and each other. So I thought our ability to rapidly shift our physical location but still be connected and effective was a huge driver of effectiveness and resilience. And then we broaden that up. So now we've got the backbone to be effective. And then I think we did a couple of things.
Speaker: Low and behold, we learned, and I think we knew this already, that people are very responsive to text, where they are not as responsive, for example, to perhaps a phone call or even an email. And we invested heavily in the ability to drive big levels of text, text -driven customer engagement across the organization. We worked with a firm out in California called Avachato. Avocado is the rhyme, but the company is Avachato Chado.
Speaker: And then we're also invested heavily in our phone system. So for example, we as a company were used to taking about 800 phone calls a day, some days in the summertime, the height of our season. And last year we had days where we would take four or 5 ,000 phone calls in one day, which is a good problem to have. But as you can imagine, if you're one of those folks waiting on hold, it's infuriating.
Speaker: Right. So we worked on a highly intelligent phone system that allowed us to do a lot of tracking across the organization and model what kind of engagement we were having. In the background, we rapidly deployed Salesforce across our organization. We had that on what I would call an off -ramp plan for the future. But when we saw that hit, we knew we needed to move much more rapidly. So we essentially sprinted our way through that. But those are
Speaker: for good examples of things we did differently, beginning the day the bridge closed, and then leading through what is really the past 18 months. Yeah, you mentioned being able to kind of track and look at the results of all that effort. What are you doing from, let's say, a data analytics standpoint? Who's responsible for kind of looking at all this and figuring out, oh, this is working, this isn't, or we need to shift, change, and so forth?
Speaker: Absolutely. What a great question that is. And I'm sure a lot of folks are talking about it. So now let's take a step back for a moment and broadly contextualize what's going on nationally across the real estate market, across the United States and many places in the world, but certainly here on the outer banks. When the bridge opened, not only did we see demand for vacations go off the charts,
Speaker: We also saw the real estate market go off the charts. And I bring those two together because I say, what we learned was the ability to be agile in pricing because all of a sudden value changed. Obviously, if supply remains the same and demand goes up, prices increase. We've used a lot of data analytics to understand what the real value is of, for example,
Speaker: an operating company or, conversely, a week at the beach. And I've introduced the idea of latency. We're used to latency in financial markets. And latency, in short, is the measured gap in between an input into a system and the capture of that input in the same system. And obviously, the faster
Speaker: the financial market moves, the more important latency becomes as a competitive advantage. That's true in our business too. So we have used a lot of data analytics to try to understand pricing, not just understand it, but predict it in a short amount of time as possible, and then obviously as accurately as possible. So we have a data science team. That data science team leads
Speaker: What is the biggest corporate meeting we have all week? We call it our research and development team. But that team is the hub, effectively, of our biggest and most collaborative meeting across the company. And we think the focus on data there enables speed critically to the front lines. And then we, in turn, obviously empower the front lines to use data.
Speaker: I think one of our lessons learned has been, as we consume data, we so often think that people like me who sit in a fancy office and read reports are the best users of data. I'm actually wrong in thinking that over time. The best consumers of data are the people at the front counter, in the maintenance trucks, the individual homeowners as they make reinvestment decisions, even guests as they make their own decisions for travel and when to purchase and when to
Speaker: not purchasing those kinds of things. So I think we made a big commitment to get data out there, get it to the front line. But first and foremost, we use it to understand pricing in a very dynamic market.
Speaker: Sure. So if we had been having this conversation two or three years ago, we may not even be talking about these types of things. And my next question would be, if you were to look ahead, you know, with all the things that have changed over the last year and a half, what could you predict? Like, what do you think will be some of the biggest things that you may or may not be doing in the next five years that are going to help you continue to deliver, you know, a great customer experience?
Speaker: Sure. I think it's actually really exciting to think about. And I think broadly it falls into two categories. Number one is technology. Clearly, I don't think a revolution goes backwards. So I think this new way of what we call digitizing Southern hospitality will not go back to what it was before the pandemic. So we will be very much technologically focused in terms of being top of smartphone.
Speaker: in terms of ease of digital interactions, in terms of getting to know our guests, not only as people, but at scope and scale, that will be here to stay. Data analytics, I think, will continue to be the hub of our most collaborative efforts around the company because the data simply doesn't lie, it doesn't have bias, it's not subject to error. If we ask the right questions, it will lead us in the right direction. And then at the same time, we will still have to make sure
Speaker: that what is the single most important word in our business, and that word is trust, we will still as an organization have to focus on human behaviors that build trust every day. And I think a lot about how do we reconcile technology, the transaction of technology,
Speaker: on the foundation stone of personal trust that we would probably think about in a couple of different phrases, personal trust, credibility, capability, capacity, those types of things. But one is a very human thing. Machines don't build trust. Humans do. And we have to reconcile those things. So I think it's really exciting to think about where we'll be five years from now, essentially reconciling a hybrid model
Speaker: that is very much technologically focused, but will always be on a foundation of interpersonal credibility and trust. Right. Let's talk about that a little bit. You said it all starts with people. We've got technological advances, but it's still going to be about people. And in the data that we've been collecting over the last 10 years, for the last five or six, even pre -pandemic, we had heard
Speaker: a lot of companies saying that it's a struggle to either find the right talent that has the right skills. How do you develop them? How do you keep them around? Give them viable career paths and things like that. Everything I see and read, I mean, that's particularly in retail, hospitality, tourism. I mean, those are huge issues right now. How do you approach that with your company and how do you make sure that you're giving people
Speaker: the types of careers that will make sure that they stay around and they're energized every day. I tell you what, it's like you and I just went to lunch because that's probably what I talk about at lunch with our peers and my colleagues here more than any other topic. And I think, number one, nobody has a perfect answer to it because we're all human beings and we all feel relevance and importance and understanding differently.
Speaker: So there's no single one answer. But at the same time, I think we can have covenants with our team.
Speaker: And one of those covenants is you know what we know. So we're transparent about data. So for example, the data systems we use SAS as a head, as a company out of Raleigh, about a three hour drive from here, almost everybody in the company has access to those databases and those dashboards. Everybody gets to see how we're doing. Dad has always said, um, a strong team wants to know the score and they want to be able to look at a scoreboard. How are we doing? And what does that mean for me?
Speaker: And I think we need to be able to have a really tight line between how are we doing and what does that mean for me. And at the same time, we have to understand that we have to be aware of an individual attribution model where one person succeeds.
Speaker: and another person perhaps doesn't succeed based on the same data. And I think we have to make sure that we have a tight team commitment to those objectives that we articulate. To answer your question, we clearly say that data is the future of the company, but more importantly, we know that it's how we use data in ways that are relevant and most importantly, create value. And to your point,
Speaker: What have we learned in the pandemic? Not just for clients and the traveling public, although that's important. It's how we use data internally too. And I think we just have to be transparent about that, but also be able to articulate into the future where we're going. I think so many of us right now, if you're like me, you spend a lot of time just trying to get through the day.
Speaker: And one of my never ending little postcards on the back of my door before I go home at night is what did you do to position the company five years from now, today? Like today. And of course that starts with people and careers. Sure.
Speaker: My last question before we wrap up, Clark, what advice would you give to middle market owners or leaders who are out there listening? You know, they may be dealing with some uncertainty or just not sure what to do next. I mean, do you have like any closing comments or pieces of wisdom to share with other business owners?
Speaker: I'll quote a guy up in Chicago one time who I thought I think of the world of and has written a book. His name was Harry Kramer. And he said, figure out where you're really good. Figure out where you're not and make sure you have people around you who help you in the areas where you're not good.
Speaker: And I think that was a really good way of saying, make sure to be self -aware and self -reflective in your capability and your capacity as a leader. And then obviously we're all sick and tired of people telling us, don't fear making mistakes. I had a leader one time tell me, deliberately go into the mistakes. And if you own the mistake, you have an opportunity to own the solution. But so often we see nobody wants to own a mistake.
Speaker: But at the same time, it's only by owning the mistake that we get to own the solution. And I think now we've got an opportunity across the middle market to own some of the lessons learned from across the pandemic and in turn, own the value creation as we all get better on the, hopefully to use your phrase, the light at the end of the tunnel after the pandemic begins to recede. Yeah, terrific. Those are some great closing comments, Clark. I want to thank you for joining me today.
Speaker: Doug, thank you for all the work you're doing. I love the partnership at The Ohio State University in Chubb. I think that's innovative as can be. And frankly, I think that's the future of a lot of thinking in the market.
Speaker: All right, well, for all the listeners, if you'd like to learn more about Twitty and company, please go to their website, which is twitty .com. I'm also, as I said, I'm holding a copy of Clark's latest book about the outer banks, and that's been an interesting read for me as well.
Speaker: Take a peek at that if you have a chance. And thank you for listening to The Market That Moves America. Never miss a new episode. You can subscribe to the podcast on iTunes, Stitcher, Google Play, or wherever a podcast can be found. You can also subscribe and learn more about us at our website, which is middlemarketcenter .org. Thank you.
