You’ve probably heard this before: grow at all costs. Add more properties. Expand to new markets. Scale faster than your competitors. More listings should mean more revenue, but as markets tighten and the industry matures, the wrong kind of expansion can erode profitability, degrade service quality, and undermine the very strengths that made a business successful in the first place.
At the recent GuestyVal conference, two operators who’ve collectively managed thousands of properties across multiple continents revealed a counterintuitive truth: the opportunities you refuse may matter more than the ones you accept.
When growth becomes a trap
Eduardo Mandri, CEO of Angel Host, has started seven companies. Three succeeded, three failed, and the seventh, Angel Host, taught him his most expensive lesson yet about the dangers of unchecked expansion.
His revenue management company was thriving when they spotted an opportunity: acquire a full-service property management operation in Mexico. Overnight, they added massive top-line revenue. The numbers looked fantastic.
“Like most companies, we were obsessed with growth,” Mandri said. “We’re venture-backed, so investors want to see results, and they want to see them quickly. Growth was top of our agenda.” They started adding portfolios aggressively — 70, 90, even 100 properties at a time. Then reality hit.
“We hit a wall when we realized we were losing owners almost as fast as they were coming in because we were not meeting their expectations.” The growth that looked impressive to investors was actually killing the business from the inside.”
According to Mandri, what separates operators who build sustainable businesses from those who flame out is knowing exactly what you actually excel at. “If your strength is owner relationships and you’re good at nurturing that trust, you should focus on that to grow your business. If your strength isn’t math, let someone else do the math for you.”
The aim isn’t limiting your ambition, rather channeling it where you can actually win.
The hidden cost of problem properties
Brandy Canaley, former COO of Roami, discovered this while scaling Roami from 4 units to 800. When COVID created sudden opportunities—competitors collapsing, portfolios becoming available—her team had to develop a framework for which opportunities to seize and which to let pass.
Not every available property deserves a place in your portfolio. One building in particular checked all the surface-level boxes: perfect location, decent size, new market entry. “But in order to match the brand standard of the portfolio, it needed a total gut renovation.”
The owner wouldn’t invest. The property couldn’t command premium rates. The team spent hours in traffic getting there. Eventually, they made the hard call to off-board the building.
The lesson: Ask yourself, are you taking on properties that actually fit your brand, or are you just trying to add doors? When the premium properties run out and you start accepting anything available, you risk diluting the very thing that makes your business work.
The owner relationships that cost more than they bring
Every property manager has dealt with that owner who knows their property is worth $500 a night, regardless of what the data says.
Mandri’s team developed a minimum rate calculator to help owners set realistic expectations, complete with graphs showing fixed versus variable costs. “Seven times out of ten, people look at the data and it makes sense to them – they can understand why you want to rent the property at a lower price during low season.”
The rest, according to Mandri, insist on a specific price and the unit ends up empty.
Even sophisticated investors get emotional about their properties, Canaley says. “I was very surprised throughout my career how emotional people can be about these investments. Even with more sophisticated owners and landlords, sometimes the data doesn’t really get through. There’s still this underlying emotional drive to the decisions.”
Canaley learned to ask the hard questions upfront: “What are your actual expectations? What do you actually need on a monthly, quarterly, and yearly basis?” If the math doesn’t work from day one, it won’t magically improve later.
How smart operators protect themselves with better contracts
Here’s something most operators learn too late: your contracts should evolve with every mistake you make.
Roami updated their agreements at least a dozen times based on lessons learned. When elevator problems created complications, they added an elevator clause. When owners refused to replace failing appliances despite mounting negative reviews, they added language about equipment standards.
“Every time you have a deal that goes wrong and you realize you really should have put that in the agreement, put it in your agreement,” said Canaley. For instance, Roami reserves the right to end agreements with owners who refuse to improve the property. As Canaley emphasized: “The guest doesn’t care that it’s somebody else’s house and that you need to get an owner’s permission to do something. It’s your brand, it’s your name, it’s your people dealing with them.”
The metric that actually matters
As the industry evolves from ‘expand at all costs’ to strategic decision-making, the metrics that matter also need to shift.
“Listing count is a vanity metric,” said Mandri. “Your bottom line should be your revenue and your profits, not necessarily how many units you can count in your inventory.” Five hundred units sounds impressive. But if 100 of those units are barely breaking even, or worse, losing money after accounting for operational costs — you’re not building a business. You’re building a house of cards.
The operators who survive track different numbers:
- Cash contribution per property
- Profit margin per owner
- Return on team time invested
This level of financial discipline becomes even more critical as markets tighten. When ADRs are climbing and occupancy is strong, marginal properties can coast along without dragging down overall performance. But in more challenging conditions, every property needs to justify its place in the portfolio.
Markets that will break you
Not every market expansion opportunity deserves your attention. Some have ADRs too low to support quality service. Others have regulatory environments that make profitable operations nearly impossible.
Mandri learned this the hard way in Mexico, where he says the accounting practices are a completely different game from Canada or the US. Tax authorities wouldn’t recognize certain expenses. Revenue attribution worked differently. What looked like a simple geographic expansion became an operational nightmare.
“It’s very important as you grow to really look carefully into the markets that you wanna get into so that they are actually profitable markets, and there are markets in which you are comfortable operating.
Before entering any new market:
- Can your tech stack, payment processing, and accounting systems work there?
- Do you need local partners for compliance, legal, or operational support?
- Will time zones and language barriers create unsustainable operational costs?
- Can you manage remotely, or does it require an expensive local presence?
Walk away if:
- You’re spending more time on compliance than operations
- Local practices conflict with your core business model
- Your standard contracts and systems need complete overhauls
- The learning curve is steeper than the revenue opportunity
The growth framework that actually works
Before you expand, ask yourself:
- Can this market afford quality service? If ADRs are too low to support your standards, walk away.
- Do you have the operational expertise? Different markets have different accounting, legal, and regulatory requirements.
- Will this strengthen or dilute what you’re known for? Growth outside your core competency rarely ends well.
When qualifying owners:
Have the hard conversation upfront. Use data tools to show pricing reality. Ask what they actually need to make monthly — not their conservative projections, but their real requirements.
Red flags to watch for:
- Emotional pricing that ignores market data
- Expecting premium returns without premium investment
- Dismissing your expertise and market knowledge
For your existing portfolio:
Audit your properties quarterly:
- Would you take on this property today?
- Is the owner relationship improving or deteriorating?
- What’s the true cost of keeping this unit?
Contract evolution strategy:
Make every mistake count. When something goes wrong with an owner or property, immediately add protective language to your standard agreement. Don’t wait, update it before the next deal.
Essential clauses to include:
- Maintenance response timelines (if X isn’t fixed within Y days, then Z happens)
- Your authority to maintain brand standards, even without owner approval
- Clear exit terms that protect both parties
The bottom line
In a maturing industry with tightening margins, the winners won’t be those with the most pins on the map. It will be those who choose profitability over portfolio size, operational excellence over expansion speed, and sustainable growth over vanity metrics.