Constantin Schröder, Co-founder at Arbio: How Arbio built an AI-enabled rollup machine for holiday rentals

0:00Hello and welcome back to the Scaling Europe show presented by ZL. I'm Sir Johnson. Today I'm joined by Constantine. Constantine is one of the co-founders of Arbio, which is a full stack AI first services company in the property management industry that is absolutely flying right now. Thank you for joining me. Thanks a lot for having me, Seb. It's my absolute pleasure. For those who don't know, can you give me like a one minute quick pitch? What is it that you've built? Yes. So with RBO, we're building the AI First property manager for holiday homes. And we do that by acquiring portfolios of managed holiday homes from mid-scale property managers across Europe.

0:38There's 140 ,000 of these property managers that we think we can give a far better service to property owners by using the latest technology. And we've done 30 acquisitions so far. We're based in Berlin. Most of our portfolios across Germany, Austria, just launched the UK. Currently around 2 ,000 homes that we're managing. And we're a team of around 60 people here in Berlin. Plus, we have a small office in Vienna, which is always nice for a good kind of trip down there. Amazing. So there's 140 ,000 kind of of these companies out there. You've acquired 30. There's a lot more to go after, right?

1:16Yes, yes. There's a lot more to go after. and also the size of the kind of the deals has increased a lot over the last kind of two and a half three years so we started out with really kind of small portfolios and now they're growing but yeah there's a lot more to go after and especially Europe is the focus where there's around 70 ,000-80 ,000 of them so we'll stay here in Europe for now. Amazing and what do you look for you know when you're making an acquisition how are you assessing the opportunities? Yeah so we We have quite an easy job because we see all those property managers on the large platforms like Airbnb and Booking.com.

1:52So it's not so hard to find them, actually. The difficulty is actually convincing them to sell because the really good kind of property managers sit on positive cash flow assets, which they've grown over the time, which they're emotionally attached to. So our difficulty is really convincing someone that we can do a really good job in running their business and then taking over. so that has evolved a lot over the time and how we partner with these companies actually but we source them through airbnbbooking.com where we have scraping tools that help us to find all these really really cool property managers based on their reviews so we really look at how what are they ranking on the on the platforms where are they based are they good locations and how many properties do they have and that's typically one of the yeah the the things we look at to approach these property managers.

2:43And now you've done over 30, you've built a well-oiled machine at acquiring these companies. What was it like acquiring the very first one? I imagine that was quite a novel experience. What was that like? Yeah, so in German, you'd say we were very green behind our ears. So we had little experience. I came straight from university when starting this business and I remember back then it took us quite some time to acquire the first company. I think we took three to four months because we had no website, we had no credibility, we had no investors and so we're basically contacting all these hosts around Germany and none of them responded to us and I think we came up with the idea around Christmas when we started sending handwritten Christmas cards to every single host in Berlin and I think three people replied from all the 200, 300 messages we sent.

3:38And one of them was a really, really beautifully run kind of small host and property manager in Berlin that was ranked really where kind of all criteria were perfect. And we'd agreed on a buying price over the kind of first couple of three meetings. And I remember when we showed up to the actual meeting to negotiate the buying price, the wife of the seller opened the door and she was like, we just decided to not sell the business anymore. And we were really kind of gutted and thinking, what's going on in here? And then during the course of that meeting, we found out that the price of the sale had changed, not that they weren't interested in selling anymore.

4:17And so they basically proposed the new price. We on the spot agreed, although we had no money to fund the whole business. And we came out of that meeting afterwards and called all our friends, our family, anyone we could find to basically support us in financing that deal. and that's how we started and then basically took over that business quite quickly with the people running it we were doing kind of all the pricing we're doing the guest communication we're doing cleaning i remember we're sitting in the bathroom scrubbing the bathroom tires with toothbrushes to clean the apartment so it was a real journey from kind of that first acquisition to a nearly kind of fully automated funnel that we're that we're running today amazing yeah that's been an amazing feeling getting that first one over the line what you know when we when you talk about improving maybe the margins of a business like this using the the newest technologies what does that mean in practice you know what technologies are you applying to this industry that makes it much more efficient yes so holiday home property managers are really intense businesses and that's also the reason why they why we've seen them to kind of fail after a certain stage, after a certain size.

5:25And that's particularly because every single kind of property has around six to seven stays per month. Unlike like a residential kind of property manager where you'd have a tenant for two to three years, kind of these property managers have high turnaround. And that means that it's quite intense to keep guests satisfied, to make sure that they find everything in the right place in order to distribute the property as well. And that makes these property managers also so interesting for AI. And what we do is kind of basically three things in general. We distribute the property. So we make sure that it's found on the large platforms like Airbnb, Booking.com, and many others, and our own platform as well.

6:06For that, we use kind of pricing algorithms that we've built. We use revenue management agents that push prices 24-7 that draw important information from event platforms, from kind of economic forecasts. And that's how we do a lot better kind of distribution compared to the traditional property manager. And then the second thing is that we do basically guest management. So we do the guest communication. We make sure that they find all the information that they check in right, that they have the keys in the place and that everything around kind of their stay works. And the third thing basically is we do kind of the orchestration, which means you have a property kind of somewhere in the city and you need a cleaning company, you need a laundry company, a maintenance company, you need all these companies to be in place and to actually clean and do their jobs.

6:57And so we sit kind of here in our headquarter, but we have to make sure that all these things on the ground run really well. And that's also really nice where you can use kind of agents to orchestrate these people, to do quality assurance, to do autonomous scheduling. So these are kind of the large things we do. And then there's a couple of other things like liquidity and kind of payments. So handling all the payment flows in between these people, these different stakeholders. So that's kind of generally what we do as a property manager. And we try to use AI in as many pieces of that as we can because it's just such a heavy coordination task where there's so many different pieces that have to be kind of kept in mind and so many changes that also happen during a daily schedule.

7:41So imagine a guest checking in and not finding the keys. And so you have to call that guest. You have to kind of give that guest all the information. And at the same time, there's another guest that wants to check out earlier. So the cleaning provider can actually go into the apartment earlier. So all these kind of different bits and pieces that happen throughout this very manual, operationally heavy business. That's what we try to automate with AI. And when we chatted before, you mentioned that you've been turning 15 % margin businesses almost into software companies with 70 % EBITDA, which is an amazing feat.

8:15So you're seeing it work, right? Yes. So we can show across all these acquisitions that we're turning these kind of very manual businesses into automated agentic infrastructures and more like platforms. And that's what really excites us about the whole industry as well, because our big dream is to turn this very people-driven business into a business or an industry where hosts can actually focus on the nice part of the job. And that is basically hosting, thinking about how to build really nice guest concepts, how to do interior and how to expand as well and to focus really on the hosting part rather than the operational part.

9:03That's what we think, you know, hosts should be there for and our owners of holiday homes and not taking, you know, all the time to communicate, to go back and forth, to write kind of with service providers and WhatsApp. And so we think that's what we want to take out of the business and where agents are perfect. And we've shown that across these 30 acquisitions. And now we've started to kind of open these services and these tools we've built also for other homeowners to use because we just see them working so well for us. Amazing. Amazing. And look, you raised a Series A, I think it was beginning of last year and that's at the end of last year.

9:39How's it been with investors? You know, like this is it feels like in the last three or six months, this whole industry has got a lot hotter. right the idea of like ai roll-ups and ai first services how has it been in the industry you know have you seen more attention are you seeing more companies or competitors crop up how's your view on the ecosystem especially because you've been building this for a few years now and now it feels like it's the hot thing so what's it like look i think with like it's with every business it's a roller coaster it's a journey it's a it's a story and when we started the whole business um i remember that FBA aggregators had a really hard time and investors were quite burnt with the model of all these kind of Thrasios raises out there and their claim to synergize portfolios.

10:26And that made our life really hard when we raised the first rounds. I remember we were talking to all the BCs out there and we got rejected by every single one. It was Atlantic Labs back then in Berlin that believed in us and did the first round and and kind of pushed us also to think big and to move to where we are today. And then many different things have kind of developed. I mean, how AI has developed over the course of the last two years, how agentic systems have developed. And at the same time, the travel market, which bounced back from COVID really well, has become a market that investors have more belief in, which has been growing and which is projected to perform really, really well in the next five to 10 years, because people just recognize how important traveling is to their well-being.

11:21And then suddenly there were a couple of kind of companies that have shown how impactful actually acquiring customers through kind of acquiring companies can be, because there are markets where it's really hard to penetrate with AI and new technology. So some companies have realized it makes a lot of sense to actually go in and do inorganic growth by acquiring very sticky customer portfolios. And that has helped us a lot as well. And so I think the whole notion of what we do has changed, but also of what we actually do as a company has changed over time with the development of technology and with the travel market kind of being really interesting.

12:08And now I think we're at a really interesting time where it makes a lot of sense to engage with investors, to see how they look at the market, to understand how we can fund this really big ambition that we have as well. And yeah, so I think it's up and down and I'm very much enjoying the moment that we have right now because I know things will change again. that's almost certain. And so we're riding the wave, yes. Yeah, right now you're up for sure, right? The ecosystem and the heat is up. You know, this is the hot area. I also, you mentioned you're in the offices of Dlangdok as well, right? Yes, they're here.

12:49So we're starting to build out this kind of, we're in Berlin, Prenzlauer Berg, and it feels like we're building out kind of Prenzlauer Valley or something, like more and more kind of really, really ambitious founders, young teams that kind of are really changing how the industry runs. There's Buena just across here. There's really like a really vibrant kind of atmosphere in the area where we are right now. And it feels good. Resurgence of Berlin tech, are we going to see like it's 2026 is going to be like another, you know, lots of people talk about Munich, there's like Deep Tech and Defense and Proxima and all these great companies building out of you know, the technical side.

13:27Do you think there's going to be a big resurgence of maybe like AI native companies in Berlin? Is that what you're seeing? Yeah, I prefer kind of to do my kind of forward thinking and forecasting on what I really know, which is kind of building AI in the short-term rental industry and see where it goes. But I really like kind of how it feels right now. And I never was part of that kind of tech ecosystem, which was here 10 years ago. So I can't compare really well. but I can just say like it's going well and I feel like investors are realizing that as well doing more trips to Berlin to talk to early stage companies and that's I think a really good development and kind of development taking place here in Berlin.

14:12Amazing and look you've done 30 acquisitions I've read that you've 4x the number of service properties that you've got since series A there's a lot of tailwinds have you got a target of where you want to be by end of year either revenue, properties, acquisitions? Yeah, so we're at around 2 ,000 properties right now. And then ambitious target for Ennevisia is to be around 12 ,000 properties that we actually manage. And so we do have some really big ambitions for the property size or property portfolio size. And then I think it's really delivering on the key elements of our technology that empower hosts and homeowners to deliver absolutely stellar and exceptional service quality to their guests.

14:57I think at scale, that's where probably the whole kind of system and formula would be most prone to breaking, is to show can our technology actually not only deliver kind of cost uplifts, but also kind of deliver kind of exceptional service quality to the ultimate beneficiary, which is the guests in all the holiday homes. And can we empower more hosts to become really, really good superhows? And are you able to track that like a before and after of guest experience after you guys have made an acquisition? Yeah, we do that. So there's multiple different kind of KPIs that we track. And obviously, the most important one is how is the review score on the platform on Airbnb and booking.com.

15:38We also do NPS scores. We look at cleaning. So subscores, cleaning scores, communication scores, quality and value scores. So we look at all these and we see that we are around 25 to 30 percent better than the previous host. So across all platforms, we're ranked at roughly kind of a nine out of 10. But I think we can become a lot better. And keeping that score at scale, I think, is where we'll be really happy as a company. That's what really drives us next to being more efficient and next to running a lot of properties. I think that's where we see we're actually delivering value as a company. And how do you, what's the pitch to a potential acquisition owners?

16:19You know, when you go to a business and you say, look, let us take it over. It's a strange sales process, right? Because as you say, it's like inorganic growth. It's not a classic like sales motion. We're trying to buy someone's business. How do you manage that? You know, what's the pitch? Yeah, so we have one kind of mantra as a company. Let's add a second one to that. We have one big one, which is like at Arbu, we're selling the dream to these sellers, to these business owners. And that means that many of these owners have built that business over 10, 15 years, have been really successful at doing that.

16:55But deep down inside of them, there's this kind of little boy or little girl where they've pictured themselves being old and doing some kind of passion that they've always had. That mostly doesn't mean running a short-term rental property manager. So in the whole process, we try to really become very close allies of them and try to understand what it is that has driven them to build these businesses and see if we can support them in getting to the next stage and getting to really that point where they can follow their dreams, they can follow their passion. And so we're selling them that dream, essentially.

17:32And I think that's something that we are always very kind of aware of finding out across that process and really building that rapport. And the second thing we say is we never lose a deal, which means we don't have to close a deal right now. We just want to be the right partner at the right point in time to actually take over and partner with these people. and not push it right now. If the moment feels right and if they're in the process of thinking about leaving their business, that's great. If they're not, we won't be the one offering huge valuations or pushing them or putting outside pressure.

18:11We'll be the ones to call in two or three years when they actually start thinking about the business. So that means never losing a deal for us. So it's never a no, it's just a not yet. Exactly. Yeah, amazing. and uh i mean you guys are crushing it and how are you looking at the ai roll-up space more generally you mentioned brenda there's dwelly you know when you look at these other companies that are doing similar things but i guess in slightly different spaces what are you seeing across the industry are you seeing more and more people getting like taking it up doing more of it yeah so i i think there's a only a handful of companies that are proven at scale that kind of kind of the whole thesis works.

18:51And I feel very kind of much motivated and inspired by what Dean at Buena and Dan at Tweli are doing, and Dan at Ilia. I think they're absolutely kind of pioneering that whole thesis and doing a fantastic job. And there's always a reason for us at Arby also to work hard and push in our industry. At the same time, we see many kind of seeds being planted and many new companies coming out that are finding verticals that I'd never thought about where they are applying this thesis. And I think we'll see a lot of great companies coming out of that. I think what's really important that acquiring companies is not kind of the means to an end, is only the means to an end.

19:37And it's not the key kind of value you're delivering. It's not the key product. Acquiring companies is just a tool that you should use to grow faster, to get access to customers quicker. and you should always have that kind of really product-led organic growth kind of motion in in the heart of your company as well and that's what we're really focused on as well is growing next to all these acquisitions and not just uplifting a single acquisition by 10-15 % but actually having a very independent growth and sales motion that enables us to grow even if we don't buy a company and even if many other sellers are not ready to sell their business yet for whatever reason.

20:18Amazing. Well, look, thank you so much for joining me. I'm super excited to see your journey and to hit 12 ,000 properties managed and to see your revenue skyrocket. It's such an interesting space and it's one of the real clear places where you can see AI adding value, you know, and I think it's super interesting. So yeah, best of luck with this year. Thanks a lot, Seb, for having me and also best of luck to you and what you're building here. Very great to see more people pioneering the media landscape across Europe as well and wishing you all the best. Thank you very much.