HIP E6 Neil Shah - Branded or Independent

If you're considering purchasing a hotel as an investment and you're wondering whether or not you should operate it independently or go with the branded or flagged route, then this is the episode for you. Our guest is Neil Schell. He's an expert in the hospitality industry. He's got over 25 years experience investing in hotels with over 13 hotels and a total of 471 units purchased. He's got experience with six different hotel franchises, including some common ones like the best Western, the Hampton Inn, the Howard Johnson, and several others. So in this episode, we're going to talk with Neil about what are the advantages and what are the trade-offs of operating your hotel as a brand-new or flagged chain. This was an awesome episode so many good take away so you're really going to enjoy this. Let's dive in. Welcome to the hotel investor playbook. Your guide to building wealth and freedom through boutique hotel ownership hosted by Mike and Nate. Get in the game. Welcome to another episode of the hotel investor playbook. I've got Neil Schell with us today. Neil, welcome to the show. Thanks for inviting me. I'm so happy to be here. Nathan and I were just talking and we when we decided that we were going to start this podcast, you were one of the first people that we recognize that we we wanted to invite on the show. So you know you are an extremely successful hotelier. You've been in the game now for I believe more than 20 years and you've got a lot of valuable information and I think our listeners are really going to benefit from. And so let's start right off the bat. I want to ask you how many keys do you own? How many doors? How many keys? Whatever you want to call it? How many units do you own? 471 total range. 10 hotels currently. Let's go. Let's go, Neil. 471. That is a lot. Now, and how many properties did you say? Currently 10. Well, I know you've got a couple more that are spinning. Is that correct? That is correct. One is in the in the contract right now. Yeah. This is we don't have the opportunity usually when we're speaking with guests there in in the game, they're in the but they've they've not gone for full circle. You have also gone full circle on hotels. Is that correct? That is correct. Yeah. We have purchased hotels. We have refinanced hotels. We have sold them. I have done least to purchase option. Yeah, pretty much everything you can renovations design branding. In the Benin hotels, boutiques, soft brands, franchise hotels, rebranding of the front and one brand of the other. So yeah, all of those things we have done over the last over 20 years. Awesome. So where are most of these hotels located? So we have six in Sedona, two in Tucson and two in California. Wow. So what I really am excited about digging into is I'd like to really dive in like what is it about branded hotels that you've gravitated towards as opposed to predominantly going to independent route? What are some of the advantages of branded hotels? So I'll start kind of from the beginning. Why and how I ended up there. I started working in an independent hotel when I joined the hotel industry. I didn't start at a branded hotel. But eventually after the first job at a hotel that was independent in Alaham, California, then I got my proper general manager position at a days in inflex staff Arizona. That was my first branded hotel job. And this was 2000 and this was 2000. So during that time, nobody talked about independent boutique hotels. In those days, independent is independent motels. Right. So there was not a lot of pride in only independent hotels. The pride was only nice branded properties. Right. And I was just a GM. So I'm just learning how to operate hotels, you know, how the company that I worked for manage and oversee multiple properties, what kind of system supports and training to provide so on and so forth. So I was doing that. And then eventually, of course, because how things were in those days, my fortune was also in a branded hotel. It was the best Western inflex staff. So because of how my journey happened on its own, I ended up in the branded hotel. To begin with, and then I learned everything about the business in branded hotel. And then you used to go by and then re stumble upon a deal in Sedona. The first deal was soft brand. And that's when my eyes were like, whoa, this is amazing. I love this. Keep me in mind, I still have not done or owned independent property yet. My very first job in I was completely new to this country and to this industry was independent hotel. But this getting into soft brand hotel kind of made me realize, this is the best of both worlds. I am not fully branded. I'm not fully independent, but I am in between. I have a lot of freedom. This was we call it time out there, Neil. Because yeah, can you describe like what specifically is the difference between when you say branded and then you say soft brand, what makes something a full brand or a soft brand? I'm just wondering what different sheets are to. Yeah, so branded or franchise hotel is basically you have a building and you're putting a brand on it. What you get with that is a brand recognition and trust from the guests that are traveling that might be considering where to stay. So think about Hampton Ains comfort streets, Sanasov worth, Marriots, Hilton's. When somebody chooses those hotels, they know what to expect. They know their loneliness standards. They pretty much even sometimes know how the hotel is laid out. You walk in the lobby. They probably would know where the breakfast room is. They know where the fitness room would be. So, Sanasov was right. So it gives them the little bit of comfort and confidence in kind of getting a good stay for the money. The other benefit the owners would have is it's a proven model. If somebody that is a non-hotelier coming into business, when you buy a branded hotel, you have so much support. It's a proven model. So it works in so many different ways. One, because of their support, they're going to help you how to run your hotel in a set. They don't want to come and tell you how to run it. But they give you some guidelines. Because it's a branded hotel, the lenders or the banks, they also feel more comfortable or they feel it's a less risky to finance these deals because backing from the brand. The brands have been in on for decades. So it's not like you're just opening a brand new building or buying a building where there's no brand, there's no history. They have a lot of confidence in financing those deals. So you end up getting better terms. You might even put less money down, which increases your return. The other thing that also helps is most, if not all brands, they have loyalty members, millions and millions of loyalty members. So as a hotel that is branded, you can rely on some of that business. If a brand has 15 million or 50 million members that are loyal to the brand, they're not always there. The brand, but you know, these are pull-off guests that you are going to count on. So much of a business is going to come from those guests because they are loyal to the brand. So that kind of helps you generate more business. The other thing is the brands are also connected nationally and globally to a lot of travel agencies, wholesalers, large institutions. They have the reconnection with those companies. So when, let's say for example, a caterpillar or Microsoft or Google, when their employees travel for business, there are agreements between the brand and those companies where sometimes the employees are required to stay at certain brands. Or they are given guidance as to you between these brands. Once again, what does that do? That gives the owner a little more peace of mind that I'm going to get that business because I'm affiliated with this brand and the brand is now connected to all these different channels. If it's an independent property, you have to do all the stuff and nobody's going to talk to you if you call Microsoft. They're like, "What are you? You don't even know who to call by the way." So that is another benefit of being a brand-of-property. The franchise will be- Okay, and then what? So, and Neil, so what's the, this is awesome. You land it out. What is the cost? What's the premium that you pay to have that brand to fly that flag? Yeah, so the cost comes in a variety of ways. So when you have an independent property and you want to put a brand, so you talk to them and they're going to be application, which could vary from $25,000 to $75,000. then they will give you a list of things, which is called a PIP property improvement plan. They will give a list of things you have to do to meet that brand's standards, in terms of what they want in the rooms, in the lobby, in the breakfast room, extra years of property, all that stuff. Once all that stuff is done, you are now part of the brand. Then you end up paying, anywhere from 10 to 15% of the revenue, as fees to be associated with those brands, with that brand. Wow. That seems like a lot. 10 to 15% seems pretty steep, is that when you're running your calculations as far as, doing a pro forma, whether an investment is going to work out, and you pencil in 10 to 15% of fees, do you also then have to include maybe 10 to 15% fees for like, let's say, OTAs, online travel agencies, expedients, such, that are going to be in addition to that. Yes. That's. So I would assume when you're weighing this. Yeah, I assume when you're weighing this out, then you're really looking at, okay, that 10 to 15% branded fee, what does that do to my revenue, what does it do to my ADR, and what does it do to my occupancy, because ultimately, if you run that, and you know that, or you're going to get this additional occupancy, you're going to be able to drive based on that flag, you're going to be able to drive an ADR. So in your. You probably have a pretty good feel for, hey, if I go and fly the marry out flag here, versus if I'm on my own, I'm going to minimize a bunch of risk, and I know I'm probably going to generate this additional amount of revenue to make up for that cost. And that's what you're banking on, I'm assuming. That is totally correct, yes. So, look, the fact remains that are more branded properties than independent properties. If the branded property structure or the fees didn't work, it would not be the case. So I'm not trying to reinvent the wheel here. It's just how it works, those are the fees. And as Nate mentioned, yes, there are benefits of being associated with the franchise, because you get much more business. You could probably push your rates higher, right? You also have a piece of mind that you are going to do certain amount of revenue because you are a fee a bit of the brand. So, yeah, those are. There are some given takes, and then there are. There's one more benefit. Because you're part of a large brand, they might have thousands of hotels under their umbrella. They also negotiate bulk purchase agreements with different suppliers. So, a lot of times your operating costs could be more. a little lower than it might be as an independent property, right? So, yeah, there are some other benefits of being part of the brand as well. Yeah, no. This looks really insightful information because, you know, I first take, being an outsider, you know, I focus on the fees, right? I just gravitate towards, oh my gosh, that's an expense that I want to avoid. But to Nathan's point to your point, what if you look at overall the advantages in terms of potential for increased revenue? But not only that, but credibility. Right now, financing hospitality is incredibly difficult. And when you were speaking towards, not only towards lending, right, but even specifically with like, training and processes and the value of having proven systems in place that work, there is a lot of room for error. So, if you're new to this business, and you don't have a track record, you don't have years of experience, it is justifiable for a bank to look at you and go, wow, this is added risk. But when you tag on a brand with, you know, these PIP requirements that you've communicated, those have value because what the bank knows is, okay, if they're going with a brand, then they're going to implement these, you know, cat-back expenses accordingly. Yep. They're going to have training modules, they're going to have processes in place, they're going to have a proven method to be able to run this business effectively. And so, you know, that franchise model, in a sense, it's proven without, you know, not just in hospitality, but for all these different businesses, you know, when you look at like the restaurant model, right? You know, restaurants have such a high ratio of failure, but there's a lot of reasons why people join a franchise and pay these fees because of the added value of, just reliability, credibility, credibility, and then to your point, that the lending piece to me was just eye-opening because I didn't really think about that. But going through it as an independent operator, we know firsthand that it is challenging, particularly when you have to explain a business model that banks aren't even really familiar with. Yeah, I mean, when I think about what's the, what's the interest expense cost of a one-point difference on a $6 million loan? And then you look at, well, by, by flying that, and then I'm, you know, I'm going through and I'm looking all, well, what is the percentage of, if I'm, I'm just saying Marriott because they're like the biggest brand, but if we look at, well, what does that deliver of direct bookings of clients that are booking through Marriott versus going on Expedia or booking.com, they already have a map. So you start to kind of add up and each one of these little areas, plus ADR, plus occupancy, and I can see where that really, that really could make sense. I'll add a couple more things. So think about, when you talk about lending, you might get better interest rate, but you might also be able to acquire this property for lower down payment. Think about putting 20% down versus 30% down. On a $10 deal. What did that just deal to your return profile? Instead of, so I did, at a $10 deal, if you had to put 30% down in UI, well, no, if it's an independent property, the bank is going to want to do 30% to 30% down, no doubt. So instead of putting $3 million down, you can probably do this deal for $2 million down. If you are revenue profile and financials that remain somewhat similar, now your return is based off of $2 million instead of $3. So I mean, these are big levers somebody can pull. Yeah, that's how the franchise model works. I want to say a couple of things. There are a lot of things I like that are a lot of things I don't like about a franchise model. One thing that has lately been bothering me and a lot of industry leaders is, you know, when they charge whatever, you know, 8 to 12% fee on the revenue, I feel like when the business is coming from OTA channels, we are already paying them, any of them 15 to 20% commission, right? Yeah. And only reason the brand is getting their revenues because of the connection, they are not spending any or very little amount of dollars to generate those revenues. I feel like they either should not charge their franchise fee on the OTA revenues because it's double-dipping. So as a hotel, so I don't leave $100 room rate, I'm paying $20 OTFE's and I'm paying another, let's say 10% for franchise fee, right? And then all the other operational expenses, it's a pretty big chunk that should not be paid to the brands. I don't want to go into this rabbit hole, but that is one thing that I've been thinking about for the last, you know, a couple of years, and there are a lot of talks about what can be done about it in the industry. Understood. Yeah. What would other cons be? Disadvantages? I mean, they're not disadvantages. It just thinks could be different. You know, they're implementation of certain requirements that may not be. OMS. Seasable for some properties, right? They're expectations from the hotels, things like that. Sometimes they have. What about the PIP requirements? Can you talk about that a little bit? I know that you mentioned initially that, you know, there's some upfront cost, right? When you start, when you sign the contract with the brand, and you've got to bring it up to the level that they require, but then there's ongoing PIP, right? That every few years, every so often, you need to replace everything. How does that work? So it's not ongoing, but like, let's say about a property in 2023, and you spend, let's say, $1 million on your PIP, right? Property improvement plan. You met all the requirements. They're not going to come to you for another five to seven years with a newer design, newer requirements, right? There might be a few things in there. They are also trying to keep up with industry trends, and innovations, and new designs, and trends, right? So there might be a few things, but they're not going to come to you with that kind of large PIP items for at least five to seven years. That's probably fair to say. So it's not ongoing. Let's say you got a plan for that, and you said $1 million, so I assume some of these are pretty extensive, either remodels or you got to purchase furniture and all this, but do they offer any type of financing through the brand or do you have to go to a bank, or do you just have to budget for it ahead of time? Most brands do not offer any financing. So either you bring your own funding to that, you can go to the bank, as part of the loan, you couldn't have renovation financed. Some people go to a separate lender, and do a separate note for FF&E or renovations, things like that. Sometimes when you are putting a brand, some brands actually offer key money. Key money is basically what they do is they give you, let's say for a business throw random number here, they might say I'll give you 4,000 in a row and it's 80 room property, right? So they'll give you $320,000 of front or when you finish the pip. So what they're saying is we'll give you this money for you to accomplish your pip, but in return they will make you sign a longer contract without anything of the windows. So then they got you for, let's say 10 years, for example. Yeah. So it's basically, I know, we're getting worse. I went to go get an iPhone and they tried to do the same thing. Hey, the iPhone's free, but he can't grab the phone for the rest of your life. Okay, so now I'm wondering about your freedom. Let's say you choose to go that brand, full branded route, right? What do you have freedom to go out and hire influencers for your social media, for your direct booking, or is it limited to, do they really restrict and limit your freedom and what you can do? No, you can do all that stuff. They're not going to stop you from doing that, however. Influenza marketing, social media marketing should be used at a specific type of property. I've been spending a lot of time over the last few months to learn about all these new stuff people are, you have your learning from a list of industry leaders and micro-resorts and landscape hotels, wellness, all that good stuff, amazing stuff. But I'm realizing it's not for every hotel. The hotels have some unique characteristics to go out there on social media, one, to justify the spend. You can't go out and spend $5,000 a month, or whatever number that justifies that individual property. You're not going to get the return because you're part of a brand. They're also doing some marketing on your behalf, right? Plus, I don't think a brand-new hotel can have such unique characteristics as the unique stage, in a sense. It's a cookie-threader box. You're not going to have much more uniqueness to it than other boutiques, right? So for that reason, I don't think I would look at that. So what was the other question? I'm sorry. So you're not-- bottom line is you're not restricted, but it may not be beneficial, too. Yeah, freedom wise, you could have your own website. You can try to get general more direct bookings. You can do Google ads. You can do all the social media-- not social media, but digital marketing. You can do all this stuff, but you have to weigh benefits. It costs versus benefit. What kind of ROI would regenerate by doing that? So yeah. Let me piggyback on that a little bit here, because I'm looking online, and there's quite a few of these branded hotels. I'll pick Motel 6, right? There's a Motel 6 for sale. It's X amount of money. And you wonder, OK, well, what's the upside here? How do I improve this Motel 6? It's got the efficiency. It's got the brand in place, it's got the operations, all that stuff's already in place. So I buy this thing, and then what do I do to improve it? And you mentioned to me privately, like, hey, there are a lot of things that you can do. You can improve operations and such. Can we dive into that a little bit? If someone were to look at purchasing an existing branded hotel Motel, what have you? And they're trying to evaluate a way in which they can perform a value ad, or otherwise raise the income. So the property's worth more, and ultimately sell it out of profit. How do they do so? I think it's a couple of things. One, operational efficiencies. Just because it's branded doesn't limit, it's run well. Just because it's branded doesn't mean they're doing a great job with their revenue management. So the upside in those properties, you look at the financials, you can see what the market is doing. Because they're branded, you can easily get the star report. You know how property's performing against a competitive set, as well as the market itself. If you see the underperforming, you know they're the upside. The second upside could be property may not have been well maintained. They may have not done renovations or any improvement in last 10 years. So your upside is you buy this property in this account. You do the renovations, bring it up to standards, make it nice, clean, comfortable, welcoming. So that's one aspect that automatically is going to allow you to run higher occupancy and probably charge higher rates. Second is the property may not be mismanaged. They're not focused on operations as much as you might be. They might be out of state investors and they're running it just with a GM or whatever that may be, right? So there is another opportunity in improving operations, which should relate into controlling expenses. So now your control expenses, your increased revenue, occupancy, you DR, your NOI has now increased, and now your valuation has gone up. So that's the upside. Second thing you can do is you can buy motels fixed and use, of course, when you do it, do diligence, you find out what else can I do? What other brand can I put at this place? What if you take motels fixed and put it comfort suites, for example, or a best wester? It's a next higher tier brand. So once again, you do the renovations, you put a bit of brand, you are now going to automatically, well, nothing's automatic. You still have put time and effort, right? But you have high lightiness of bringing the revenues up and the valuation up for the property by doing that. Yeah. And what you're describing all makes sense that there's definitely always ways that an operator can improve the effectiveness of their operation. But also too, I've heard you mentioned that people are really important. That leading a team that is going to remain motivated and provide guest satisfaction, can we dig into that a little bit? How do you inspire your teams to continue to innovate and stay motivated, especially in an industry that is known for high turnover? It is not an easy answer or is a solution. We all know since gold with everybody, there's one common fabric in all the conversations, how hard it is to find employees, find them and retain them. That's the biggest challenge. I can note that all of our properties are a full-staff with the perfect employees. It's not. It's an ongoing thing. We are constantly working on that. What we are trying to do is we are trying to create a good work environment. We are trying to offer them opportunities to learn and grow with us. We want to treat them with respect. That's my basic thing is everyone deserves respect. I don't care who I'm talking to. So that's what the first thing. If you want to treat them well, we want them to wake up every morning and want to come to work. And so we can like us, shit, I got to work. That is not what I want. If that happens, either for me or for any employees, we need to walk away. They need to find a better job for their better life and we need to find a better employees for our success. But it's a good way to work with the team, give them opportunity to grow with us, teach them more new things. That's when, and it takes time, when you hire somebody new, they aren't going to be loyal to you and they don't understand what you are trying to do in the first week. It takes a few months for them to understand who you are, where you come from, what you're done to accomplish. We want them to be part of other vision. Right? For example, if I'm doing your renovations, I ask my GM's their opinion, what do they think of what I'm visioning? Because the day of the day, it's not about me. It's not about my GM's. It's about the guest. It doesn't matter if I like green color on my X and wall. Oh, here's what I like, right? What matters is what the guest is going to like, what the properties don't look like, right? What is it going to do to the guest satisfaction? But it isn't going to discuss this information with our GM's because they are the boots on the ground. They talk to the guest, they in and they out, I don't. So they have more insight about the local area, about the individual property itself, and what the guests are looking for. So when you ask for their input, they feel like they are making a difference. So we try to do that in every possible situation that we can. So some of these things are important to me. And it's been working. I mean, we have some employees that are amazing. We are very lucky to have them. And they have been with us for a long time. - Yeah, I know that. - I know that. - Did that so good? And Nathan has done an incredible job with our team. He's been a long time leader of people. He understands what makes people tick. And just recognizing sometimes, like, I operate really well in my own little world, where I dig into operations and things. But sometimes they're really lean on Nathan to understand you're describing, like, look, you can have your opinion about how things are. But at the end of the day, it's, well, what do the people feel? Because they're the ones that are interacting with the guests. They're the touch points of the guest. And I've noticed just in Nathan's leadership that he is constantly recognizing people for when they're doing a good job. But he's constantly reminding people that their work is meaningful, that they are providing value not just to us as from the business owners, but to the guest and the guest experience. And that when the guests come and they stay with us, that they're having a tremendous impact on their vacation. And so, something that's critical for them, like these people work all the time, they go on vacation. This is a really important moment in their lives. And so just constantly reminding the team that that's front and center that their work is valuable, their work is meaningful, whether that's the GM of the resort or if it's the house cleaner, they are all having a tremendous impact. And so listening to you reminds me a lot about how I've observed anything to a tremendous job in building the culture of our own team. That is so good, man, I love it. I've been a big back on that really quick. You were speaking my language by the way. And so the reason we appreciate the staff and we want to thank them is because anybody can show up and do their work and go home. They have done their job, right? The reason we appreciate them is because they are not just there to do their tasks and go home. When we see them genuinely care about their job, the guests, the property and other team members, they don't have to do that. So now they're going out of their way to do more than what's basic requirement of the job, right? For that reason, we will appreciate what they're doing. And it's important to show their appreciation. And sometimes we take things for granted, man. We have to remember every little thing matters and they are the face of the property. They are the ones who are talking to the guest every single day. If I'm getting great reviews, it's because of them. If it wasn't for them, I wouldn't be getting to do that. I'm not cleaning rooms, right? So the other thing I also think about is when I have to be the GM on property, I have a lot of control. I have a lot of one on one with the guests, with the team members, right? Every day, all day. I have no longer on property all the time. So how do I make a difference? I make a difference by making decisions that are going to make our team members lives easier and more efficient. When we do property improvements, I am making more difference in our guest experience, right? And creating basically their well-being, right? So I get a lot of joy in making decisions that are going to make our employees and our guests happy. That is what I do. I work for the staff, honestly, right? People, they go about titles, they're like, "Yeah, I'm the general manager, I'm the BOS, I'm the all-percent manager." I don't care what your title is. And they know that we actually work for the staff 'cause they need something who are they going to call? They're going to call me, or the GM. When that shift happened in somebody's mindset, they would automatically do a much better job and be much more successful instead of thinking I am the boss. Things happen the way I want them to happen. So again, a little bit around here, but this kind of thing is a lot of work. No, it's the different. Look, that is the difference maker. I mean, for you to have that, you're instilling a culture that every one of us from the top down is responsible for really serving our team so that they can serve our guests and ultimately create a field. This all comes, it's so nuts to me. Hospitality is, in essence, it's very simple. It's about, okay, I have to create a feeling. I'm creating a feeling for a guest. Now, to get there, there's a tremendous amount that has to happen and occur and go right, but everything focused from the top all the way down, from the down all the way to the top should really revolve around. Are we doing everything that we can to execute that feeling that we've sought after to create? Yeah, you don't need to talk about interwinsers. Sorry, let me finish one more thing really quick before I forget. You know, we talk about influencers, right? The social media people, they come to their property, they show the property really nice and destination, all that good stuff. When you look at guest reviews, when somebody takes time after their stay or during their stay and write whatever, a nice 5, 10, 15 line review that is glowing, right? But they just had the best time of their life, best experience of their life at this one particular property, right? What we call them, we call them promoters. Because that person is doing that because we have done such a good job that they felt compelled to take time out of their day. What are 15 minutes, 20 minutes of their time to write this wonderful things about the property and the staff and the location, whatever else they like, right? That review, you don't know how important reviews are. You can talk about Google reviews and typical browser reviews, how to get more, how to get five-star reviews. The best way to get good reviews is to run the property more efficiently, right? Clean and comfortable, re-engaging, outstanding customer service. Easier said, very difficult to do. So when we do that, create, help you guess every single day, and then over the time, you will accumulate thousands of thousands of positive reviews that automatically increases demand for the hotel because there are so many positive things people look at and they will choose to stay at this property. They will pay $20 more versus the property next door because what they are seeing from the guests themselves, there is no influence from the property at all. I love them from the promoters. That's a cultural name that we're going to start utilizing just from this. We're going to, hey, let's go and make sure that we are building up promoters and then to have that gratitude too, because you're right, the most valuable thing in their life is their time. They take 15 minutes out of their life to go and do that. There's nothing more valuable than that and then they are the ones that drive your occupancy and your ADR, they become your promoters. So let's focus on promoters. I love that. - Yeah, I love this. - And then I want to take a minute to acknowledge like so often I've listened to so many podcasts and much of the emphasis is always placed on the idea of getting started in real estate or in our unique niche to purchase your first hotel, but very little time is often spent on the minutia of these operations, these operational excellency. And so sitting here speaking with you with someone that has over 20 years of experience that has crushed it in the hotel game that has over 400 keys and is growing and is looked at too as a mentor for a lot of people. It's amazing that you're really hyper focused on these details when it really comes down to it. This conversation to me, I'm gaining so many takeaways. I just want to acknowledge I'm really enjoying this. And I do, so I want to zoom out if we can for a minute here because I really want to dig into your personal story a little bit if that's all right, just because I find it to be so inspirational and I feel like it epitomizes in many ways, the American dream, right? You know, you immigrated to this country more than 20 years ago, originally from India. You moved here, I believe, to Los Angeles. Somewhere around the year 2000, is that correct? - I moved here. - You didn't get it. - You had seven. - Okay, so you didn't have from what I understand, a lot of family or a lot of resources here. And you really, in a sense, kind of bootstrapped your way up and went from, you know, without a huge support system built in here, you created this, you know, in a sense, empire, right? This real estate empire. And so your story is inspirational. Can you take us back to your first introduction into hospitality? You said you were working for an independent hotel and this was, was this in Los Angeles originally? - This was in N.I. and California, two and a half blocks from Disneyland. What a place to be. How lucky am I, right? How lucky am I? Like I ended up, from India, I come to the UK and US, I get a job at a hotel walking this from Disneyland. It's freaking amazing. - Yeah. - So you were working-- - Two other questions. - I brought home. - Where I go? - Yeah, so you were working at that hotel and you progressed then from your transition went from working at the hotel at the front desk. You ultimately became a general manager and then from what I understand, you met your business partner, right? And the business partner helped, your business partner introduced you to the world of investing. Can you kind of walk us through that experience, that sequence of events that ultimately led you to start investing in hotels? - Yeah, sure. So when I came here from India, the plan was to continue studying electrical engineering. But more importantly, to get back into business, I didn't want to just have a job for rest of my life. And I realized I was gonna be a very long journey before I can start a business. So somehow I ended up at one of my uncle's friends' hotels in Anaheim. And because I had just come from India about a month ago, I have no idea how things work here. I am still learning how to speak proper English. So I'm like, I'm just at the hotel. They're like, you can stay in room 200. If you are sold out, you sleep on the sofa in the back office. And besides that, you just get up, get ready and come to front desk and be whatever that needs to be done. Like cool, I don't mind, I don't care. I'm here. So I lived in 200, I worked my days. I don't get asleep until night holidays, which is like, whatever, two o'clock in the morning, then I get up and start all over again. But what I remember is just within the first couple of weeks, I'm not interacting a lot with the guest yet, right? I'm still trying to figure things out. But once I was able to start talking to the guests, checking them in, checking them out, answering questions, making reservations on the phone. Every time we do something when I'm making a difference in their experience, and you see the smile on their face, and they are appreciating you helping them, they're feeling you get in that moment, that I have just given somebody a suggestion to go do something, and they came from New Zealand, for example, and they're just going to have a freaking blast. That is going to change everything about the trip. It's going to make it so much better, and there a precision in that moment is what drives me. It's the most rewarding thing in the world, right? And I'll get a little more tactical here, but the other opportunity in our industry is not when everything is right. The opportunity also lies when things go wrong. When somebody's in a room and something is not working or something is going wrong, and I will be like, "Oh shit, now this guest is not having good experience." So instead of complaining and not doing anything about it, I actually take that as an opportunity, and say, "Now what can I do to flip this completely?" Because if I flip it completely, and the guests feel like, "Dude, I called," they responded right away. They took care of the problem. They followed up to make sure I'm still comfortable, and then it's something on top of that. So what I just did is actually more important than just a regular event of giving somebody a suggestion. This is now a story, a guest can tell to, now there's social media in those days to the friends and family. This makes even bigger impact than just your typical conversation with a regular guest and just trying to create a better experience. But anyway, that's always started, and that's when I realized, you know what, this is what I wanna do. Because it's a business, I get to make people's days, people create better experiences, and I can make money. So I was like, "This works for me, I love this." Anyways, I can do the working. I eventually went and got a degree in hotel management, and then I got married. We moved to Flagstaff at my first official general manager position at a days in, and then about a year or so later, through another common friend I met my business partner, they ended up buying a property in Flagstaff, and they were kind enough to allow me to invest whatever little money I had saved. So that was my entry into ownership in hotels. Like, I wanna know what you told us a little bit about your business partner though? Can you walk us like, so how is that relationship? What was the dynamic there? - Yeah, definitely. So before I talk about business partner, I will just take a couple of minutes to talk about people in Anaheim, but I work in the beginning, right? So I think I've just been very lucky to somehow meet great people. Even when I was in India, my friends and colleagues and my bosses, everybody had been freaking them, they're five star people, and they're overall great human beings. They're motivated. I just feel very grateful to have met all this people. So when I went to Anaheim, I worked for this guy who owned a hotel that I worked for. He was such a nice guy. The way, and thinking about it, I had just come from India. So I'm just new to this world, new to how people talk, right? There are different ways of saying the exact same sentence to somebody. He has this, Jungling is about him as to, he would be so freaking polite in the way he talks to you. Even in his freaking emails, like his language is just different. So I learned so much from him during that, for a couple of years, working at the hotel, what I learned the hotel business, then I learned all these amazing characteristics as to how to deal with people, how do you talk to them? How do you make an impression on somebody, right? How do we genuinely? So that was my first learning experience about, how to be good human being in a sense, right? When I had to effectively communicate with people. My business partner is a lot older than I am. He's not my dad's age, but he's so driven. He's 75 now and he is still looking to do deals. It's been the same since the day I met him, right? They had been looking for hotels for so many years, until they end up buying a property in Slack staff, and they finally found one. I was lucky to meet them and I was able to help them with that property and then he grew to a second property into Tucson and I moved to Tucson, and they run this property. But him and I connected really well on a personal level. We have a much better understanding between ourselves. We respect each other, but at the same time, I will speak my mind when we talk about business and he will do the same. Because it's really, there's a lot of people. But when you're in this, it's done. - Do you feel like so a couple of things? Number one, it sounds like it's safe to say that he might have been, he might have provided some mentorship, right? At his stage in life, being older than you, he had some life experience. So I think that that's an important point for a lot of our listeners is if you don't have experience, find someone that can be your mentor. And I've witnessed you doing that now. Just you being on the show as an example of the fact that you are finding fulfillment from contributing to give back to serve others. But in terms of your partnership, do you feel like you guys had complimentary skills? I think you're kind of touching upon your differences in your personality a little bit. But like when you enter into a partnership, you know, Nathan and I, we have very, very different skill sets, but they serve each other very well together. And so in this partnership, you know, maybe you can describe like, how did you guys work well together? - Yeah, that's a great question actually. So when we started, I was new to this industry. I didn't know anybody. I can borrow money for myself, forget raising money, right? (laughing) - No, that's just true. I mean, I borrowed more money than my own on credit cards for my first deal. Besides the story, but yeah, he was able to raise money. I can run the hotels, 'cause I come from Upper East Elbegra, right? So I can run the hotel, it was raising money. He still ran the hotel, but I helped him with what I had learned, right? Years go by and then now I have grown and I have learned and I have cultivated new relationships. So now I'm also able to raise money. I'm running all our hotels. And now my job is to make him retire. Like he's been retired. He travels wherever he was to travel. He has to worry about nothing. I take care of everything. That is my effort, my slight payback to what he has done for me, right? But going back to mentorship, right? He definitely gave me mentorship, but a lot of wisdom. Because we don't think about this. He had been doing business 20 years before he met me, 30 years before he met me. I'm just starting into business. So there are times when we are discussing something or decision has to be made about something. And if you feel very strongly about something that I'm not agreeing with, I would just say, you know what, if you feel so strongly, redo it your way. Because you have seen a lot more of business than the world that I have. So I will have that much trust in you that if you feel strongly about this, then that is what we do. And then over, you know, what the time thinks changed, then he started seeing that I am capable. I am proving myself over and over again. I'm gaining his confidence. And so now we are at a point where I make all the decisions. He is comfortable, they trust. And life is great. I'm extremely grateful for meeting him and for him to be my partner. - Yeah, well I think the key word there is trust. I mean that really hits home. In order for a partnership to be successful, you might not always agree, but if you trust each other and you're like, look I'm good, you're good. I trust you. I'll concede this decision or this choice to you. And you trust each other. I think that's just so critically important when evaluating a partnership. So that's just a great point. - Thank you. - So you guys met, you invested in this deal with him. And then so walk us through. You went from working as a GM, investing in a hotel. And then how did you ultimately go from what was a couple of hotels to now you've got, you know, more than 10? Can you give us a brief understanding of how you go and you identify key operational efficiencies and then you scale. Yeah, for sure. So what changed my life besides meeting my business partner is the property we bought in Tucson. We bought the property in 2004. I invested some money and I managed that property. I was a GM. So I ran the property. Very successful. Basset. We doubled the revenue in the first three years and continue to raise it more. My revenues were higher than the purchase price after three years of three or four years of fine hotel. Right. That's incredible. But for the next nine to ten years, we didn't buy anything. We were looking, but we couldn't find what we liked. But during that time, all I did is focus on learning, learning, and, perfectly the operations. Can you repeat that? How long? Nine to ten years. Okay, so I want to just call the time out right here because I think in today's world, no, I think that this is a really important part. Like, seeing where you are right now, when we can fast forward and be like, guys gone full circle and multiple hotels, and then now he's got 10 and he's still adding to his portfolio. But there was a period of time where you were searching and looking for nine years where you did not add a property. And for us that just want to move and move and just for things to happen sometimes, I think that that is an unbelievable point that you were patient through that time. You dug in, you did what you could do, which was learn and get better. And now, fast forward to where we are and looking how it's paid off is like, dang, sometimes we are just so freaking impatient. So I just, I wanted to point that out. Yeah, when I was young, I didn't have much patience, but I learned because of my business partner. And, but just just by growing up, I guess. So here is how things worked out. So by 2005, we have, we have three hotels until 2015, nothing happened. I'm just working, learning and saving money, right? Looking at deals, trying to figure things out. And then 2015 comes from 2015 to 2021 in 60 as we bought six hotels. Wow. 2023, well, one more in 2024, we bought two. So I guess. This is not, somebody should follow these steps. It's just how it worked out for me. And I'm very thankful for that because I prepared myself. I positioned myself for success, right? It should not, it didn't have to take nine years by the right. But if you spend two, three years, four years, whatever, to either learn the business and save the money, right? Because we were not doing syndication, we are raising some money, but we're not raising. You know, we have done bigger deals, of course, but it's not syndication. I'm not calling. I don't have 30, 40 investors, right? We have a small group of, as they've been investing with us for all these years. And then we have more now. But I am very thankful for those nine, ten years. I've learned so much during that time. And that is what prepared me to then say, I'm ready to go. And when the opportunity is getting, we jumped on them and kept doing it again and again and again. But yeah, that's how things worked out. Yeah. I think the key takeaway here is that, you know, you're extremely disciplined. And when you took that time to really prepare, you were identifying, well, what's working, what's not? You were sharpening your sword, so to speak. And then when you felt like the moment was right to strike, you accelerated and took action. Six properties in six years. And where you are right now, I would define, yeah, you are absolutely accelerating. Because every time I hear from you, it seems like you've got another deal under contract. So I guess I'm just, I'm really inspired by what you've been able to accomplish and then where you're headed. I'd like to get an idea of, you know, what ultimately your objectives are. You know, what's, you're at this point now with X amount of doors, X amount of keys. Like you financially, you're in a very good place. But what's motivating you to continue? You mentioned that your partner, you know, was in his seventies and still wanting to work and buy deals. But what's motivating you, Neil? What's your why? Well, there are multiple things. One, I'm part of groups that include people like you. So the whole group and you guys inspire me to keep, keep going to be honest. I mean, it's amazing, right? It's contagious, right? So that's one reason I want to keep going. Second reason I would say is. I want to leave by example for my kids. So, two words come to my mind, admiration and inspiration, right? I would inspire them from what I have achieved throughout, but more importantly, what I do now, right? Because you have done all this stuff, past this past, who I am now, what I do now, I want that to inspire them. And I want them to admire what I have achieved, right? So without thinking too much, those are the two words that come to my mind. And I want to share the knowledge and experience I have gained. I am a little concerned when I get on this mastermind calls, when I talk to, I talk to a lot of people, they call me about the different deals. And I'm a little concerned about them. They are not, and it's not their fault. They're not thinking every aspect of the deal making and then what happens after the deal. So for that reason, I want to guide people. I want to mentor if I care. And I want to make sure I can help somebody from, from, from, from, from making a big mistake. So these are not, you're not buying a house, dude. You're buying a millions of dollars worth of asset. You are raising money from other people. This is serious business. You have to think about everything. You have to know how things work. You people talk about, yeah, find a deal, then money will come. Okay, what you find, they will leave you money also, okay, and then what? Who's gonna run it? Who's gonna make it successful? Okay, you're speaking our love language right now, Neil. Neil just so you know, like this, this is seriously. We, we talk about this all the time. Like, and it may not, it may not, it's definitely, you know, not investing 20 years into, you know, operating. But we dug in and learned, like we bootstrapped. It was our money we put on the line. And then we frickin dug in and said, let's obsess over the guest journey. Let's learn this. Let's understand. Let's create processes. Let's implement. Let's really understand. Then let's find out where our weaknesses are. Let's go through this entire process so that when we look at the growth piece and adding that next property that maybe we can't do on our own, but we bring in capital partners that are first and foremost that we are under the mindset of we will protect their capital and grow their capital. It, that protection, we named our actual, our, our business name, our investment arm is named Malama Capital, the Hawaiian meaning of to protect, to secure, right? So, I just, what you're saying right now, we are always talking behind the scenes of there's, this is not just about going out there and being able to acquire something. I feel like anybody with the right action steps can go in acquire something, right? You can go and do that. But when you look at the thesis, the investment thesis of this is where it's at. This is what it's going to take to get it to here. This is why, and this is the experience I'm going to deliver. Those are two, and then that, this is how I'm going to operate it long term. Those are very different conversations than just, I'm going to go acquire a hotel. And I just, I'm super grateful that we have you and that our group has you and that you've looked at that as like, okay, here's some purpose behind, you know, I can take all of this experience and continue to seek to serve. And look like you're just saying that like, I want to help people avoid making, you know, push massive. Massimunding. Yes, thank you. I, in fact, reach out to people when I see they're doing deals and looking at stuff. I don't know why they didn't reach out to me, but I'll like fuck man, I got to call this person like, hey, let's run down your deal. You don't have to do what I say. I'm going to give you my two cents and it's your money. It's your life. So, yeah, I'm just, as I'm a little concerned that I'm happy to help anybody who may need some guidance because I had that party, right? Somebody was there with my business partner was there. We look at deals. Well, he has his own approach. I was young and I'm like, yeah, let's go, let's go. We're like, hold on. Be patient. Look at this, look at this, look at this. Have you thought about this? Oh, yeah. So I had somebody like that. I want to make sure somebody else who wants to, who's aspiring hotel year coming from STRs or long-term rent, or whatever that may be, they should have somebody to guide them, to mentor them. Whatever that they want, right? So yeah, I'm just trying to give back and help people to get on the right path here. So I think that's a great point to end on. I think if we could just summarize then, what you're describing, if you were to, let's say you were to provide some advice for an aspiring hotel investor or entrepreneur, what advice would you give someone to starting out in the hospitality industry today? So there are a few things I want them to really think about when they think about buy box. The most important word that comes to my mind is be realistic in all these different things, right? Be very, very realistic location. How far are you from the deal you're looking at? Are you willing to travel half a day taking a flight or drive? Are you willing to travel entire day together? Right? What does that look like for you? Right? Are there, in the demand generatives in the areas or locations you're looking at? Is there an up and coming market? Right? What's happening in the next five years? What has happened in the last five years? Right? So location is important, right? Price range, this is another thing from the aspect. How much of your own money you are willing to invest? And how much money can you raise? Don't look at a seven-minute deal when you won. You may not have enough money of your own to invest in a second. You have no ability to raise to an half-willing dollars, right? Again, be realistic. Operations, how many rings, what kind of revenue you're looking at? If you're going to buy a 10-room property that's going to end up doing on a great year, I don't know, $300, $400,000, $500,000 revenue, can you run it with full staff? No, are you able to run it? Staff-light model or completely no staff? What does that look like? Right? Do you want to buy a 20-room property? How does that work? Is that enough revenue to justify full operation or proper GM or an outside property management company? Are you willing to go to the property and donate to yourselves? Right? Another important aspect is your own credit worthiness. Are you able to get financing yourself because of your assets or do you have somebody in a parking lot with that allows you to get financing? Right? You're talking to your-- I'm like, "Dane, dude, there's a lot to consider "someone's going to get in the game." This is, like you said, this is real business. And I recognize-- This is what I'm saying. Yeah. You're not just a guy that's done well in hospitality. I'm recognizing that if you zoom out, you're really an excellent business person. And ultimately, you're going through this methodically to recognize, well, what are all the different decisions that need to be made and the consequences of each-- of each thing that you do? Neil, I feel like I've only gotten through maybe half of the questions that I wanted to ask you. But we're definitely-- we're going to have to do a part two. So, audience, stay tuned. We're going to have Neil back on the show again for certain. If you'll come on the show again, we're formally officially invited. [LAUGHS] I'm happy to go on anything. Thank you. You just called on me. Thanks. Thanks for being on the show. This has been fantastic. I've got a whole page of notes here. I've been writing, as I've been talking. And I'm so grateful. I'm excited about everything that you have in your pipeline. So again, thanks so much for being on the show. A lot of-- Absolutely. And Neil, I appreciate-- I want to say one thing. I appreciate just as we went through this, how you really gave credit to others. That always inspires me. You're not just-- always are-- instead of just taking credit yourself because we look at you and we're like, wow, it's Neil. But to be able to give credit where credits do, I thought that that was really inspirational. So, appreciate that. I want to even describe the sufferers, guys. So many more people I have to give credit to. It's not just me, including my wife and my kids. So without them, I wouldn't be-- without my wife, I wouldn't be writing them today. There is no doubt in my mind. Going to have her on the show next time then. Oh, we'll both go. Appreciate you, Neil. All right, guys. Thank you so much. My pleasure. What an incredible episode. Big shout out to Neil for joining us on the podcast. If you want to get in touch with Neil, you can find him on Instagram. His handle is @Neelong007. That's N-I-L-A-N-G-D-O-O-7, or you can visit his website, which is integhospitality.com. Lastly, if you have been enjoying our podcast, please do us a favor. Leave us a five-star review. Make sure to follow us when you leave us reviews. That really helps us to increase our visibility. Ultimately, this will help us attract more guests and higher quality guests so that we can continue offering you all the insights and knowledge about investing in hotels. Thanks so much. Aloha, peace. (upbeat music)