A new age of frugality

A couple years ago I conducted an extensive research study that examined consumer behavior. Specifically, I studied the link between a consumer's overall level of happiness and their penchant for frugality, stinginess, or overly economical behavior. I surmised that people make themselves less happy by certain choices they make as consumers. Based on the visceral reactions from friends and family members, I was about to embark on a highly contentious study.

Prior to this study, I would casually observe how it seemed like the people that were constantly chasing bargains never seemed to be satisfied. However anecdotal this may seem to most people, I suspected the people that would drive across town to get gas at Costco (where it might be 20 to 30 cents cheaper per gallon), were actually chasing their tails because they weren't really saving any money when you considered the extra gas to get to the Costco across town or the lost time they could have applied to more productive uses.

Anyways, I hypothesized that people make themselves less happy (and, dare I say, miserable) by being overly frugal. To test this hypothesis I surveyed a panel of more than 15,000 consumers and assembled a small research subject group of 45 people to measure their epinephrine level response to a variety of images and phrases. Hooking people up to a biometric machine helped me determine how they would respond and see if people generally get excited by finding bargains. In sake of brevity, I found a direct correlation between frugality and negative associations with a person's well being and satisfaction. Frugal people were generally less happy than self-described non-frugal people. My hypothesis was supported.

Fast forward to today and I think something has really changed in the psyche of the American consumer (perhaps permanently). Citigroup released the results of a survey on Friday that showed that 63 percent of Americans polled said the way they spend and save has "forever changed" due to the economic downturn. Eighty percent of consumers making less than $50k said they would most likely cut back on everyday expenses while 68 percent of those earning between $75k and $150k said they would make such cuts. Thirty-four percent said they were saving or investing more money, while 60 percent said they would invest or save more going forward.

This is an earth moving change from where our consumer driven economy was just two years ago when I conducted my research into consumer behavior.

Despite the dramatic shift in spending habits, Smith Travel Research has reported that they expect leisure travel to begin growing again next year. My take away from the convergence of both research reports is that people will begin to travel more, but many people will be seeking new alternatives that are more cost effective. In short, this new era of frugality will drive consumer behavior in the direction of bargains, discounts and deals.

These seemingly disparate trends are actually highly correlated and this is exactly why we are building the a fully functioning market niche for Home Exchanges. Given the rise of social networking and the propensity for all age groups to network with friends, family and strangers online, we believe that the next big revolution in travel will be driven by this new era of frugality and social networking. This is exactly where house trading (aka home exchanges) comes into the picture.

Greater desire to travel combined with higher levels of social networking & increased frugality = Latent need for home trading as opposed to booking expensive hotels. Sherpa will make the latent need manifest.

We are creating a secure social networking driven marketplace for people to find other like minded people around the world who want to travel to each other's cities and avoid expensive hotels. Sherpa's home based lodging platform will feature proprietary matching technology that will connect you with other homeowners that want to swap homes for a few days, a few weeks or even a month or more.

Would you swap homes with someone for your travel lodging if you knew it was safe and secure?

I'm interested in hearing your thoughts.

Russ


Russ Hearl
Head Sherpa & Co-Founder
Sherpa Travel Exchange, LLC
601 Van Ness Ave, Suite E-208
San Francisco, CA 94102
415-601-6244 mobile
russ.hearl@staysherpa.com
Stay Smart. Stay Sherpa.

Follow Lucky the Sherpa on Twitter: sherpatravelx
Check out our Facebook page: www.facebook.com/home.php?#/pages/Sherpa-Travel-Exchange/123269124279?ref=ts

Creepy roommate stories

Renting the typical one bedroom apartment in San Francisco will put you back about $2k a month, so it’s no wonder so many people opt for a two-bedroom pad and a roommate. After having lived in London, New Haven, Tucson, Dallas, El Paso and Cleveland, I can tell you that I’d gladly pay $2k a month for a place in San Francisco. I’ve got nothing against those cities, but there’s just nothing like a balmy climate where you’d be hard pressed to find more than a few days a year when you break a sweat and you don’t freeze your ears off. In any case, living in San Francisco does have some disadvantages, not the least of which is the cost of housing.

So, many people deal with the high cost of living finding a roommate – often by posting a roommate wanted ad on classified sites like Craigslist. I always thought there was something a bit strange about a site where you had roommate wanted ads near casual encounter ads. You just hope that your possible new roommate is not also an active user of the casual encounter section as well. Eeew, weird.

The so-called Great Recession is driving more people to cohabitate. According to the U.S. Census Bureau’s American Community Survey, over 228,000 “family households” in California cohabitate with a non-family member as a roommate. Moreover, the Census Bureau reports that 674,000 “non-family households” cohabitate with a roommate in California. Clearly, lots of people in California and our country live with people to which they are not directly related. The Great Recession has contributed to a 9.7% rise in the number of American households that cohabitate. When facing the need to augment your income and offset your expenses with a roommate, millions of Americans are already comfortable living with relative strangers. For a proof point, just look at http://www.couchsurfing.org/. Couchsurfing touts more than 1.2 million members who crash on the couches of other members to avoid hotel costs.

A few years ago I was in search of an extra 500 bucks a month to help defray the cost of my rent and I entered into a short stint with a roommate who was probably a super user of Craiglist’s casual encounters section. Needless to say, after a nearly two months of constant strange women visiting my house at all hours of the night, I asked the guy to move out. As a follow-up to that movie-of-the-week special presentation, there was this roommate who thought it was great to have fondue parties at my house every weekend with 10 of his closest friends. Oh, and I can’t forget the roommate who drilled a hole in my bedroom wall, presumably for ventilation. Yeah right.

Not all roommates are sociopathic or party-animals, but there’s one thing you can say about at least 90% of roommates, it’s a full-time invasion of privacy. Sure, some people really like sharing their living space for social reasons, but if given the option, most people would rather live on their own.

This is why we came up with the idea to establish a viable homestay market in the U.S. A homestay is a pretty simple concept that involves an ordinary homeowner or tenant entering the hotel business by taking in lodgers on a part-time basis rather than taking in a full-time roommate. The homestay business has been around for centuries. America is full of people that augment their primary income with part-time jobs. Just look at the ongoing (if not utterly surprising) growth of direct selling/multi-level marketing companies like Amway or Avon as a microcosm of our entrepreneurial spirit here in the good ole US of A.

We think that many people, if given a properly functioning and safe marketplace, will opt to earn extra cash by taking in lodgers instead of a full-time roommate… especially if you can make more money in less time than sharing your home every day of the month. We're creating the first efficient online marketplace that provides homeowners with the tools that will enable them to compete with hotels by offering lodging services to travelers.

It may not be a solution for everyone, but it sure beats trying to recruit your cousin to become an Amway rep, and it certainly beats selling all your stuff on eBay or Craigslist to make ends meet.

What do you think??

Russ

Russ Hearl

Head Sherpa & Co-Founder

Sherpa Travel Exchange, LLC

601 Van Ness Ave, Suite E-208

San Francisco, CA 94102

415-601-6244 mobile

russ.hearl@staysherpa.com

Stay Smart. Stay Sherpa.

Follow Lucky the Sherpa on Twitter: sherpatravelx
Check out our Facebook page: www.facebook.com/home.php?#/pages/Sherpa-Travel-Exchange/123269124279?ref=ts

Becoming a hotel operator in your own home

We partied like it was 1999.

Problem is, we partied hard for five long years from 2003-2008. Our party favors consisted of copious amounts of low interest adjustable rate mortgages, McMansions, Cadillac Escalades and $25k limit credit cards. We visited Home Depot more times than many of us care to admit as we pursued yet another home makeover project idea inspired by one of the 45 TV shows depicting the transformation of a modest 3 bedroom home into a castle fit for a king.

Like any good party, the after effects are usually just as memorable as the party itself, if not more so. Today, large swaths of the American population are suffering from a massive credit hangover that has been made even worse by rising unemployment/underemployment, rising monthly mortgage payments, and foreclosures.

In late August, the Mortgage Bankers Association reported that the number of Americans who are in serious delinquency on their mortgage rose to a record 9.24% during the previous quarter. They also reported that 9.24% of homeowners were at some stage of the foreclosure process. In a country of roughly 65 million homeowners, that means nearly 6 million homeowners are in the process of losing their home or coming pretty darn close to it. This doesn't even address the 13% of American homeowners that are at least one payment behind and risk foreclosure.

The "American Dream" of home ownership has turned into a nightmare for many well-intentioned, hard working people. The great thing about this country is that, at the core of our DNA, is an entrepreneurial spirit. It's this spirit that has lead America through and out of several recessions and has driven GDP growth for our country and countless countries beyond our borders. We pull ourselves up by the bootstraps and do something to make our situation better. We don't expect a corporate bail-out, we just put our nose to the grindstone and come up with solutions.

Case in point, consider the emerging trend of home monetization. I know, you're probably asking yourself, "what the hell is home monetization?" Good question, because I pretty much just made it up.

Actually, it's pretty simple, homeowners facing foreclosure, layoffs or unemployment are realizing that they can run a hotel business out of their own homes. Forget about stuffing envelopes to make extra money or hawking some Amway products to earn a few extra bucks, these enterprising homeowners are recognizing that the most valuable asset they will probably ever own is their home, and it is woefully under-utilized and, unfortunately, is depreciating in value in many markets across the country. Instead of whining and complaining, many Americans are mad as hell and just don't want to take it anymore. Okay, maybe they're not mad as hell - but I assure you they're not willing to take "it" anymore... whatever "it" might be.

On September 3, in an article entitled "The Reluctant Landlords," The Wall Street Journal reported an increase in the number of Americans who are opting to rent out their homes or extra bedrooms within their homes to make some extra cash. In effect, many of these homeowners are becoming not just landlords, but part-time hotel operators. Renting your extra living space in your home to lodgers is not exactly a new idea, but it's one that many homeowners and tenants have discovered on their own.

Driven by financial necessity, unemployment, opportunism or a myriad of other reasons, many homeowners are deciding to get into the hotel business rather than finding a full-time roommate to bridge their gap between their income and monthly expenses.

We've all been spammed by countless work-from-home schemes that promise yachts, endless riches and beautiful women - if only we are to stuff a bunch of envelopes in the comfort of our own living rooms. Most people know that which sounds too good be be true probably is.

Running a hotel out of your home to deal with the financial crisis is perhaps the only legitimate home-based business. After all, you're using your home to propel you into your own service business, even if only for a 3-4 nights a month. We've been hearing reports of homeowners charging $100-150 a night to take in lodgers in their extra bedrooms and making an extra $750 in income each month. I talked to one of my neighbors who made $1,000 this week by hosting a business traveler on assignment for a 2 week project with a major consulting firm here in San Francisco.

These stories were the impetus for my home based lodging concept. Home based lodging is home monetization for the masses. It's giving regular homeowners the ability to compete with hotels by tapping into their entrepreneurial spirit and using their assets (their homes) to make extra money. However, before you can scale this concept for mass adoption you have to give homeowners a marketplace to find travelers and, perhaps most importantly, make sure that the traveler isn't some psychopath, criminal, sex offender, or all three.

We're working on addressing these issues with Sherpa Travel Exchange. Stay tuned and let the home based lodging revolution begin!

Hotel industry - you're about to get a whole bunch of new competitors!

Good Luck,

Russ

Russ Hearl

Head Sherpa & Co-Founder

Sherpa Travel Exchange, LLC

601 Van Ness Ave, Suite E-208

San Francisco, CA 94102

415-601-6244 mobile

russ.hearl@staysherpa.com