Fifteen years ago, Jonathan “JP” Parrish left a Fortune 50 company to build a venture in the Hawaiian paradise of Kauai. The Parrish Collection Kauai is now the island’s largest independent and locally owned vacation rental company. Rather than trying to satisfy the entire vacation rental marketplace, JP focuses on offering premium management services for Kauai’s finest properties.
As many entrepreneurs experienced, February 2020 was one of JP’s most profitable months, with record revenues. However, by early March, Kauai was under a mandatory lock-down, which shuttered non-essential businesses and implemented a fourteen-day quarantine for all arriving in Hawaii, which (so far) has made Kauai a safe haven from the onslaught of COVID-19, but has also left many businesses, including JP’s, reeling.
From Garden Isle To Walled Garden
Many people in the COVID-19 economy are struggling to pay their rent and put groceries on the table. Of those workers who are fortunate enough to be employed, most don’t have the luxury of working remotely, as they have to be “on the job” to get the job done. However, for a fortunate few, working from home can mean working from virtually anywhere, including an island in the Pacific.
John Greathouse: JP – great to connect with you. Many people fantasize about building a career or venture in a tropical locale. Unlike most people, you’ve actually done it. How did your entrepreneurial journey start and what led to you to build Kauai’s premier vacation rental company?
Jonathan “JP” Parrish: Thanks John, great to chat. My journey to Kauai starting in 1986 when a close friend offered me the chance to join her family on a vacation when her brother could not come. Back in those days, the airline just changed his name to mine and off I went to Hawaii for the first time.
Kauai is a magical place and over the years, while visiting all the islands, I kept coming back. In 1999, I made my first investment in Kauai, which I ultimately sold and then invested in another, which introduced me to Grantham Resorts, the property manager I used for my rentals.
My life prior to Hawaii included more than fifteen years in various real estate-oriented roles from facility and asset management to lending and investment management. Post-MBA from USC, I was working for Fannie Mae, flying 150,000 miles a year across the country and starting to get antsy to do something on my own. A close friend was going to travel the world to figure where she wanted to live, settle, and then decide what to do. That inspired me, and on the long flight home from Washington D.C. to California, I thought, “I know where I want to live (Kauai), but what can I do to get there?”
Stimulated, I thought about the growth in Kauai real estate, why I loved island life and why Kauai captivated me. Loving to travel myself, I thought bringing my experience to the vacation rental marketplace which would provide an interesting opportunity to join the two things I love… travel and real estate.
In March of 2006, I sent an email to Nancy Grantham, then owner of the company, about a partnership or outright purchase. The timing was right for her and we met on Oahu. We spoke about the future, the company, the value of the employees. Later that year, I closed on the purchase of the company. In short, I bought a job in paradise.
We are now the largest privately owned and independent property management company on Kauai, with over 300 properties. We focus solely on property management, including short-term vacation rentals and private estate management, and now long-term rental management. My most recent related endeavor has been building a brand-new commercial laundry facility… but that is another story.
Greathouse: Wow, good for you. You did what I often advise, if you have the flexibility to do so, first figure out where you want to live and then figure out how you can make that location work.
Parrish: I am certainly validation of the viability of that advice.
Greathouse: Many economists have said, “The U.S. economy is not a light switch, you can’t just turn it on and off.” They are correct, with respect to the mainland economy. However, Hawaii’s economy is so tourist-centric, the light switch analogy isn’t too far off.
What are your thoughts regarding the timeline Hawaii will face as a state to get back to pre-COVID prosperity levels, once travel reopens? Do you think the timeline will be different for Kauai?
Parrish: You are correct… the floor fell out from under us and as you say, the light switch on tourism was turned off. We went from the best months for Hawaii to practically zero visitors in a matter of weeks. Quite catastrophic for most everyone on our island.
I feel Hawaii has a long way to go given we must rebuild tourism in an unknown post-COVID world with yet-to-be-seen economic impacts from the pandemic. On top of this, we need to work with local politicians and residents to help diversify our economy so that tourism is a smaller part of the overall Hawaiian economy.
After the Great Recession, it took ten years for tourism to climb up from the bottom, and that was from a base that was half of what the best years had seen. Now we are practically at zero with unknown headwinds.
While rebuilding tourism may take many years, short-term vacation rentals, especially homes, are poised to rebound faster than hotels given their separation, seclusion, and privacy and because they provide a more affordable option for a family than a hotel. That, combined with our stringent adherence to best practices in health and hygiene, offers us an opportunity to come back faster than other segments of tourism.
However, we have a big political hurdle. Despite short-term vacation rentals being part of the Hawaiian experience for years, there has been a movement across the islands to suppress them. Kauai put regulations in place back in 2008 to curb the growth of short-term rentals outside designated visitor destination areas. However, illegal operators continue to operate under the radar. These illegal operations have created animosity towards all rentals and companies like mine who offer safe, legal, well-managed properties.
When the pandemic hit, one of the state-wide regulations put in place by Hawaii’s Governor is that short-term rentals were deemed “non-essential” and were ordered to shut down. Even after Hawaii partially re-opened, short-term vacation rentals were ordered to stay closed to anyone subject to the 14-day quarantine. We now can only host owners or new residents committing to a lease of at least six-months, or a local on-island resident. This regulation has had a damaging impact on our business.
Greathouse: What do you think the recovery timeline will be for your business specifically?
Parrish: From a company perspective, it is quite disheartening. We were on target to have the best year ever and forward bookings were growing at a very healthy clip over 2019. However, since mid-March, we have seen close to $10 million in cancellations and that does not include lost business for the months since then that would have booked for the same period.
We have gone from over 80 employees between my two companies to twelve. The core of the company is there, but the volume is significantly less. I have rightsized both companies for now, but this is not sustainable nor desirable for the long-term.
While some vacation rental firms in Hawaii have resolved to sue the State to get them to allow short-term rentals, I have worked with another leading management company to develop a program to show the local government that professionally managed short-term rentals are a safe travel option, and can provide an even safer option for those subject to the 14-day quarantine as there is zero physical contact between guests and the community during the quarantine period. It remains to be seen whether we will be able to convince our local leaders to ease the restrictions.
Once we fully open tourism, I do think we will see quick recovery, but nowhere near the levels of 2019. The good news is, from what we have seen on the mainland, most vacation rental markets that have been allowed to resume operations have returned to pre-COVID levels. However, we are a fly-to destination, so we are highly dependent on what the airlines do. My estimate is that it will be at least two to three years before we see a return to normalcy.
Greathouse: That’s a long time, especially for businesses which were struggling or nascent before the pandemic hit.
It’s estimated that unemployment in Hawaii was about 40% and potentially even higher in the neighbor islands such as Kauai, during the Spring (of 2020). June’s unemployment rate was about 14%, island-wide. With those unemployment rates as a backdrop, what’s life on the ground like for you, a long-time resident?
Parrish: I do think the unemployment picture here on Kauai is much higher than the official 14% rate, given most of the large hotels, restaurants, and stores remain closed. Many operations have already stated they will not reopen, or that they will not until tourist occupancy is over 50-60%.
While one would think that this is a great time to be here, I see the islands struggling. Yes, there is less traffic, more space on the beach, easy parking, and no lines at the grocery store, but this is not normal or sustainable.
I see empty parking lots, closed stores, hotels, and restaurants and from a businessperson’s perspective, I see so much that has been lost. I talk to my fellow business owners and leaders and there is worry, despair, frustration, and for some, desperation. To me, it is not a place right now to come to relax or celebrate. Our world survives on people and travel and we are at a stand-still until tourism returns.
The bright spot is the continuous flow of longer-term stays for owners, new residents, and previous guests. Owners are coming to their island homes to work and/or remotely attend school from Hawaii and we have seen many guests just extend their stay indefinitely. Also, we are starting to see some transplants, temporary and permanent. As these number grow, that will help many businesses begin to open and rebuild.
Greathouse: I’ve known you for several years and you’ve proven to consistently be a creative and resilient entrepreneur. Though it has been painful, you’ve managed to keep your operations moving forward, as you shift the focus of your business model. Tell us a bit about the trend toward long-term rentals and what this will mean for your business, as well as Kauai’s overall economy.
Parrish: Thank you, John. I always try to be forward thinking, lead in my market and jump on opportunities. I saw the economics of our business disintegrating rapidly, and knew that such a drastic fall was going to create a vacuum. I also knew that there is a lot of competition in the marketplace, and I needed to act fast. For the immediate future, we only have a few ways to generate business.
Very early, I encouraged my owner clients to think longer term (six-months or more) and tried to strongly point out that revenue streams were going to be quite different for the foreseeable future. A lot of discussion with vacation property owners has been focused on the pricing structure from daily rates to monthly rates. Anyone interested in a longer-term stay can check out the long-term rental section of our site.
Another area of growth is expanding our Parrish Private Program, which is basically “estate management.” We have seen a big uptick in those wanting our boutique style professional management services, but for various reasons, do not want to rent their properties.
Lastly, housekeeping has been an important area of growth. Long ago I brought it in-house, to have better quality control and flexibility. This has proven to be a good source of income. We are regularly cleaning for our long-terms tenants, owners and now realtors, commercial clients, and properties not in our program. While not replacing the business, it all has helped keep us going, particularly since we offer best practices in safe and healthy cleaning services.
Greathouse: Nice job of diversifying, in real time.
What advice do you have for people who are considering a long-term rental in a vacation destination? What should be on their list of considerations?
Parrish: People need to think about what they want in life and they need to do their research. Living on Kauai helped me realize my dream of owning my own business, living with less, and having a superior quality of life. And, I have learned a lot about living in the middle of the Pacific Ocean.
Living on an island means options can be limited. Everything from food in the grocery store to restaurants, from furniture and décor, to home improvement and replacement is impacted. Also, healthcare is also big issue for many. We do not necessity have access to the level of care the mainland provides. There is limited social life (most of my friends are back on the mainland) and certainly no nightlife. While it gives everyone time to focus on Kauai’s abundant natural beauty, one needs to be prepared to be more solitary.
With work from home and school from home merging to create a more mobile family, I do see remote living becoming part of our future for the near term. Time will tell if employers feel the productivity justifies its permanence, but I personally think we are social beings and are better suited to work in groups. A year or two from now, I predict we will be back to a work environment more like pre-COVID than post.
In the meantime, this environment does provide an opportunity for many. Those that may want to own a second home, retire or even move here permanently have a great way to experience Kauai island life as they decide if this is something they want to permanently embrace.
For me, living on an island, working for myself, not commuting, being able to spend time on the water, wearing board shorts and flip flops to work is a dream come true. I hope I can inspire others to follow their dream…
Greathouse: That’s my hope as well! What’s the best way for people to check out potential long-term rental properties under your management?
Parrish: We are currently listing the majority of our options on our main Promotions page. But since the definition of “long-term” varies by each guest, it is best to call (800-325-5701) so our team can offer recommendations suited to the needs of each guest. Finding out what a person desires in a temporary island home is an important discussion.
You can follow John on Twitter: @johngreathouse.