HIP E76 Tim Hubbard - 4M Bet on Colombia Boutique

[music] The Hotel Investor Playbook. Your guide to building wealth and freedom through hotel and hospitality ownership. [music] Welcome back to the Hotel Investor Playbook. I am Michael Russell, founder of Meloma Capital and your host. On this podcast, we talk story about everything you need to know to make money investing in hotels and in hospitality assets. My guest today is Tim Hubbard. Thanks for being here, man. I have been looking forward to this one because you're in the middle of something that I think a lot of our listeners dream about, but I've never actually seen the real version of you're building a Batiko Hotel from the ground up in Columbia. And it's your first one. And you've been pretty open that, you know, hey, look, you don't know exactly how it's all going to turn out. And I love that honesty, so I want to get into it. Welcome to the show. You're not pleasure to be here, Mike. Looking forward to it. Yeah, so why do it from a high level? Why don't you just walk us through what you're working on? Yeah, so for the hotel, it's been about three years. Now I got into real estate about 16 years ago and around halfway through that journey, had had some early successes that gave me some financial freedom, so I was traveling around a lot. And Columbia was one of those places I kept going back to. And eventually, I planted some roots there. I got a place and met a bunch of people, a bunch of friends. And one of those friendships turned into a partnership in this Batiko Hotel that we've now been working on for a few years. Really beautiful lot within the city, but in like a very tranquil place, very close to the airport, you can take Uber. So it doesn't really feel like it's in the city. And it was an agricultural lot, but it had a license for commercial development. And so we jumped on the opportunity and here we are fast forward three years where we've got our hotel license. We had some hiccups along the way with permitting, but grand scheme of things. It's a 20 unit, a boutique resort with a license for a restaurant. And we're doing it in phases. We're done with the first eight units and the entrance building reception, everything like that. So just about to open the doors on the first units. Awesome. Where in Columbia is this located? It's in Medellin. So the second biggest city in Columbia after the capital. Okay. And you are not Columbia, correct? I am not Columbia now. I was living there pretty much full time, although I've always kind of traveled a lot. But then over the years I was going to Brazil a lot. Eventually I met my lady and so we spend a lot of it down in Brazil now. So kind of going back and forth now, but don't live there currently. Okay. Well, this is fascinating from my perspective. Because look, I've been to a lot of places that we can't help it. We visit and we don't want it to be amazing to build something here, to own something here. Whether it's a short-term rental or in this case, a hotel. And then of course, the reality sinks in of all of the logistical obstacles of owning property and the business abroad. And you have taken this challenge on full steam ahead. I know it hasn't been just completely easy. You've mentioned that it's taken three years to get to this point. So I know I'm kind of paraphrasing here when I said that you don't exactly know how well this project is going to do. But that is something that you don't hear from developers very often. I love that honesty and I want to understand what made you say that. You said on another podcast that stuck with me. What keeps you up at night about this project? Columbus is different than the US. I mean, a lot of people, it's much more developed actually than a lot of people might expect. Like Medellin is a very modern city. And some of the architecture there is really incredible. And they've been growing just tremendously as far as tourism, which is one of the things that attracted me to the investment. And you'd be surprised. They're licensing and permitting and zoning is all very structured. I mean, you can pull up parcels and see what it's zone for and see how high you can build and all of those types of things. But the actual permitting process is handled by sort of like private organizations. And they have several spread throughout the city. And so you end up working with one and they're the one that helps you through the process. And they change officers, you could say, sort of like in government. And so partway through our initial licensing, they changed. And the new people came in and they, we were modifying existing license when we bought the, when we bought the lot. And the new person that entered the office said that we couldn't modify it basically. And we had almost made it all the way through the process. From what we understand, they really just wanted more fees. Like if we started over the licensing process, we didn't pay all the fees again. So unfortunately that happened. And I don't think that's something that would happen in the US, right? I mean, that just doesn't exist. It's much more straightforward. So that was a good learning lesson. But now fast forward, we do have a license. We have been building. We have our hotel permit. And we're pretty much ready to open the doors. I stayed in some of the units recently. But that all took a lot of time. And, and you know, of course it took a lot more money. And so, and I was living there at the time. But when we started that project, so things were much easier. And I'm like, now I'm, I'm not there as much. But yeah, that was that's some of the challenges I just didn't for seeing. And, and to be frank, Mike, I would have never gone down this path. Had it not been for my partner who does live there full time. And who does operate another hotel and another restaurant. And has worked a lot with local contractors and local architects. And so our architect has completed some other Bucci hotel projects. And he's managing all the construction. And so if it weren't for my partner and if it weren't for our architect, which is mainly all the construction, I wouldn't have had the courage to move forward on it. Yeah, I mean, there's a lot to unpack here. So I'm spinning a little bit. But from high level, you said 20 units total, right? These are. Correct. Cabana style units. I've got kitchens and things. Is that right? We do. Yeah, there's actually three different models. The first eight units are full kitchen, laundry, jacuzzi. Basically, like little apartments in their individual units. And then the other 12 are that up in two six unit buildings. Okay. And why specifically, like what attracted you to me? I don't even know how to pronounce it. Medigene. Is that correct? Medigene is perfect. Yeah. You nailed it. Okay, great. Like, there's a lot of opportunities to invest in hospitality. Obviously, we're traveling. There was some sort of connection. Your business partner you met there, but as an American, considering investing anywhere abroad, to me, that means a little bit tricky. It just seems like there's some uncertainty there. This development in general can be uncertain, but you chose to power through the uncertainty and the risk factor. And you said, you know what? I think we've got opportunity here. What was it about Medigene that you felt like, hey, I've got a product that will fit really well here and I want to bring it to market? Yes, several things. I mean, so one is just the growth of the city. I mean, the first time I went there over a decade ago, it was a way different city that it is today. And I've been to hundreds of cities around the world. And I've never, I mean, it's just grown tremendously. If you go down there, it's constantly on like South America's top tourism destinations in terms of growth and all that. So that was one aspect. It's close to the US. You can take direct flights there all day long from Miami and Florida for three hours away. And the cost of living is much lower, right? So that's brought a lot of people that are actually moving down there more permanently and paying in US dollars. And of course, we buy the property and we pay for our expenses and our labor and everything in Colombian pesos. And the dollar is like a historical high yet actually dropped quite a bit over the last year. But when we first purchased the property, I mean, it was at a historical high exchange rate between Colombia and the US. So that was another incentive. So low operating costs in terms of labor, a high exchange rate, and then a good opportunity in terms of the actual lot and the fundamentals of the city. The city actually has a lot of regulations as well. A lot of the existing buildings are sort of high rise condominium buildings that have lots of long term tenants or owners in there that have passed regulations where you can't operate short terminals there. And so this property having a commercial license, being in an incredible location in a city, it's at a big valley and a lot of it's already developed. And so prices are going up. I mean, just since we've owned a lot, it's appreciated quite a bit. So I just say from the fundamentals, demand coming in, supply shrinking a little bit, although lots of people have caught on to this and there are lots of other hotels that have gone in. I think another thing that gave me more courage to jump on it. One, I just, I'm a real estate guy. And so I, and I bought property in Medellin before. So it wasn't like, this was a new, a new thing in terms of acquiring property. But we also have a lot of friends in the space that have already built hotels. And a some of them have earned all their money back in four years, you know, so good potential returns. Understood. So, okay. So you mentioned that you had, there's a little bit of a competitive amount there because of regulation. But at the same token, there's a lot of development because Medellin is becoming more popular. It's becoming more open. And as it does, and it gains more popularity, more development, development means more competition. I'm curious to know what is your unique competitive advantage? I mean, you're kind of describing more of a resort style vibe and it's in a city. And that's kind of unusual. Can you maybe describe what makes your product distinct and why that is a good fit for this market? No, that's exactly right. It's like a resort vibe in a city that doesn't have it. Like there are literally no direct comps between our property. And I've been in the short terminal space for over a decade. And so we of course have access to all the data and we can feel that. But most of the properties are traditional type hotels. You know, they're high-rise hotels. The rooms look pretty similar. This is a really good location that's quiet. It's a little bit of wave from where you find all the other. hotels, but yet it's still close enough to take Uber, you know, to jump in a taxi and head to the airport. And so it's just different. The location and the setup is. And then because we have the licensing for the restaurant, my partner's got another successful restaurant that he runs, we think that that's going to add a lot to the property. And it's like there's an amazing view there too. So a really location and the style that you know, that's what we're banking on. Yeah. Well, I mean, this is the real deal hospitality development. This is not, I mean, I know you've got 10 years of experience in church rentals, but this is the hotel. This is a real deal ground up development. I guess I'm curious to know what gave you the confidence to be able to make that leap? Having a partner that already had a, it was already running a restaurant or is in the process of building it, which is now complete. And having friends in the space that are already gone through the same process. And then also just the opportunity, like, you know, I looked for quite a while for other potential opportunities. And there was nothing that I found like this lot. And then we also got some seller financing terms from the owner, which made it a lot easier because they're, it's not easy to get a loan as a foreigner in a foreign country. It pretty much just doesn't exist. That's, that seems very interesting to me. So first of all, let's talk about this capital, so you're doing a ground up development. And I don't know what a thing's costing Columbia. Like, what's the total capital outlay for a project like this? Yeah, so we're, we're about two million in. And we probably have another two million to go to 2.5. So it's, it's quite a lot. The lot itself was about a quarter of that, you know, a lot of licensing fees, which that ended up being a lot more. And then there was a lot more infrastructure that we weren't anticipating. There was no sewer connection. There's no electrical. There was no water. Any of that. And there is a natural spring that pops up on the property, which is, is really cool. But it's also a challenge in terms of building infrastructure and things. And so we had, we had some more expenses on, on that end when it comes to materials, labor's much cheaper, labor's much much cheaper. But materials are not that much cheaper. Unless you consider the fact that you're converting dollars at a really high exchange rate and basically getting more for, for your dollars, which, you know, my partners, American as well. And so that's where a lot of our, our capital came from. I see. Okay. So you're about two million dollars in. And what, where do you think you're ultimately going to end up? Like what is this thing in a cost total? Probably between like four and four point five, I think. Well, okay. So a couple hundred thousand dollars a unit. I mean, we're talking now comparable to what American prices are. I would assume new construction too. I haven't seen the drawings and renderings. But I would assume that this is quite nice. So it's probably going to be much less than what comparable property. But couple hundred grand a key is surprising to me for, I guess, a country like Columbia. Including the restaurant. Oh, I see. Yeah. Which is a standalone. Big infinity pool and stuff. So that the restaurant itself is probably around 500,000 or so. I sure 400,000. Yeah. What they meant furniture and all that. Well, let's talk a little bit about kind of ADR and occupancy then. So, I mean, this is so fascinating to me. But like in Columbia, what do you expect to get in terms of ADR for each one of these units? I wish I had like a pinpoint answer, but I really don't, because there just aren't any comps. You know, we know that there's like the closest comp to our concept is like an hour or so outside of the city. And their ADRs are from 250 to 400 dollars a night. And they're occupied. Yeah, they're very occupied. It's very similar setup to ours. It's a friend of ours that built a hotel outside of the city. He runs a restaurant there, the restaurant, and the pool concept draw a lot of people there, because it just doesn't really exist out there. And so nothing like this exists in the city. So really hard to say, Mike, like I think we're probably anywhere, maybe from 200 a night, but it could be as high as 400 dollars a night. And they are nice units. They all have private jacuzzi's. The other units will have private jacuzzi's. And then the restaurant concept is quite luxurious as well. Okay, cool. So there's not a lot of comps out there. This is kind of new to market, but you've got enough experience in the short-term auto market to have a good hunch that, hey, this thing is it's going to do okay. You mentioned that financing is difficult. So I didn't quite catch it for this project. Did you obtain some seller financing? Did you obtain any bank financing? What did the capital stack look like in regards to lending? Yeah, no bank financing. There was some seller financing for the lot purchase over it was supposed to be like 18 months, but she actually drug it out or as our licenses weren't approved. She allowed us to expand it a little bit. But we paid a minimal interest rate for I think like the last 12 months or so and paid it off now, but outside of that, yeah, it's just been my partner and I funding it. So gotcha. Why isn't that there's no financing? I mean, there's obviously banks in Colombia. What is it about? Is it just that because there's a foreigner you can't get financing or really just there's not a large lending institution in general there? So we're exploring some financing options now that we have part of the project already complete. We've just gotten a commercial appraisal, but with a lot, a raw chunk of land and two foreigners that don't show income in Colombia, it's not really enticing for a bank just like in the US, like if they want to see your personal financial statement, they want to see your income unless you've been you've got a track record of doing it to where they're just going to do it based off the asset. But yeah, right now in Colombia, if you're a foreigner and you don't show income in the country or not just Colombia, really from my understanding, like any country, if you're not showing income there, then it's challenging. Gotcha. Yeah, that makes sense. You talked about not having experience necessarily, but you've got a partner who does. Let's talk about that a little bit. Your partner is a foreigner, but he's been living in Colombia for a while. What does your partnership structure look like? Is it 50/50? Who handles what? Let's unpack that. Yeah, so it's 50/50 currently and he's an American. He's probably lived down there for like 12 years and the Colombian style of things is very laid back. More than I'm used to and I feel like he's ingrained himself in that culture. So he's pretty laid back. I have no restaurant experience. He runs a nice restaurant, but I do have a lot of experience operating short-term rentals or would take property small multi-unit properties. And so we're using an architect to run the whole construction and all the project management and everything. So him and I aren't aside from the design and those and funding that aren't in that management, but really the partnership is that I run the hotel units and he runs the restaurant. There's definitely some things to figure out, but we're still still a ways from opening the restaurant. So we've got some things to work through for sure. Hey guys, if you're getting value out of this conversation, do me a favor and take 30 seconds right now and leave me a review on Apple podcast or Spotify. It literally takes half a minute, but it makes a huge difference in helping other hotel investors find the show. Okay, now back to the episode. Dude, I love this, man. Like what you're describing here is like, look, we don't get all figured out. We're just kind of going along and we're smart dudes and we've got some experience in complimentary areas and we'll figure it out. And you're just, you're kind of gunslinging a little bit out there. I love it, man. To be honest, I wish it was a little more organized, but that's just kind of how it is now. I think the back of the napkin numbers to us looked good enough to where we weren't super detailed with every single little thing, but we'll see how it goes. I want to add some context here because we kind of skipped over a major layer of who you are as a person and a business owner and kind of your career background. You've referenced a couple times now that you have experience in STRs, but I mean, not a little experience. I mean, you've managed, you've got a company, of course, Lee. Correct me if I'm wrong, Tim, but I think you're currently managing over like 200 short terminal properties across 40 different cities. I mean, you've host like 60,000 guests from what I read in your bio. I guess I'm curious to know like having experience in the short terminal market. Like at what point did you look at all of that and say, okay, I need to build a hotel. I want to scale from short terminals into hotel. What, what caused that trigger? Well, a lot of my personal units are small multi-family properties, eight, 12 units. This is a 20 unit building, which is pretty much going to be operated like a multi-family building. So it's not like it was a really big leap for me in terms of operations. I mean, it's pretty much set up that way. And really, I mean, I'm just always looking for opportunities. I'm an entrepreneur and I had been looking and managing for quite a long time and this came up and I know that there are not a lot of opportunities like this. And so I jumped on it and wasn't scared of the operation side of things. And my partner, I've known for years and years and so kind of just pulled the trigger and then moved forward. Where are your other short terminals though? I mean, they're spread across the United States, is that correct? They are, yeah. So I'm from California originally. I started there. So I still have some property there in Sacramento. And then I went to Tennessee and then I went to Oklahoma and then eventually I went to Columbia and then eventually Brazil. So I'm spread out in five different cities. And yeah, along that way, I started a podcast called Short Terminal Riches. And in the beginning, I was just talking about how I was operating my property. My properties virtually and of course, it was growing a team and doing all that. A lot of people through the years were asking if we could manage their property. And that wasn't the intention at the beginning. So I just continued to manage mine. But my team got bigger and my portfolio got bigger and we had extra capacity, you could say. And so we started managing other people's properties a few years ago. And Now, yeah, we do manage a little over 220 now. And because we come from this virtual approach, we're spread out all over the place. So yeah, we are in over like 40 cities, and every week we're a rad new ones. So we use all the data resources to help us manage our properties effectively, but our name Coresly comes from this idea of us being this core set of operations on the back of all of our partners properties. We're handling the guests, we're handling the revenue management, we're handling the listing setup and all of that. So it's a virtual or a virtual management company. - Yeah, I wanna unpack Coresly a lot more before we get there. I just can't help but just think about what you're saying. Oh, okay, look, you've got these short rentals that you're managing virtually in. Some of them are yours and many of them are others. And you've got this confidence in the US market, but the US is the market that you know, the financing, the regular journey environment. Why in the heck do you go international for your first hotel? Other than just like, hey, you like the city, like why go, and I'll go domestic? - Well, I was spending most, I've spent most of my time for last eight or nine years outside of the US and prices had gotten higher and it just rates had gotten higher and I kind of just stopped looking in the US, to be honest, for I'm here in Florida, I just acquired my first property out in the US after like four years or five years. So I wasn't really looking and I was also just figuring out the best ways to operate my portfolio that already had. And then this opportunity came up. So I guess that was it. I just really wasn't focused on the US because I was spending most of my time outside of it. And I loved Medijín and I loved the story and the opportunity came up and jumped on it. - Yeah, well, certainly you combined lifestyle with your passion and a lot of people that are looking at investing into hospitality, that's exactly what they do. So it is a lifestyle driven investment for many of us, myself included. I am curious though, are there any advantages that Columbia offers maybe that the US does not or is there anything specific to Columbia that sticks out as why it is a good place to invest in? - Well, I think their growth story is impressive. And I've seen the rates for the price per square meter. I mean, they've tripled maybe over the last decade or even more, maybe quadrupled. And I've got a lot of friends in the space. I think that the low expenses in terms of labor is enticing. And then the high exchange was a big one for me. Yeah, I think it's just some of those fundamentals, more people coming in. - Do you think that after this hotel is built that you're gonna sell it or are you gonna hang on to this for the long term? - That's a good question. We don't have plans right now to sell it, but I wouldn't mind. It depends on what our financing options are. So after we're fully up and running and we go back to Colombian banks because we've got a Colombian business now but showing income coming in. If I could take some of my equity out at a decent interest rate or take some of our investment back just on a cash out refinance, I'd probably go that approach before selling. But we've thought about after it's up and operating and you're selling small percentages to passive investors as well after we have data. So I'm not sure. I think I would probably explore the cash out refinance options first. - Yeah, I mean, I think this is something that we all go through, right? Because the amount of work and bandwidth and effort it takes to go and build something like what you've done, sometimes it's hard just to go and turn and burn. I mean, that's like a whole part of your personal being has been invested in this thing. So sometimes it's not always just about, how do I make the quickest buck? Sometimes it's like, look, this is a living organism that I created and I don't necessarily just wanna sell it. I wanna be part of it for a while. So that that's a constant, something that we just contend with as hospitality investors that I think all of us struggle with a little bit. - I think I wanna pivot here a little bit because we've kinda been talking around this idea of what Corsely is and I think that this is critically important. Like we just let the cat out of the bag. If you haven't heard of Corsely, this is this incredible virtual management business. I was blown away when I learned about what you do and how you do it. I wanna understand if we were to hire you guys like to do this virtual management. What changes for me? Like how does my life differ by hiring you guys? - Yeah, so our mission is to help all of our partners earn more with less headache and by less headache, I mean basically all the core operations behind a short terminal or boutique operation and that's everything from creating listings to put in them on the technology platforms to distribute them to the correct listing sites, to pricing them properly and studying the market and the competitive sets to make sure that it'll pricing is good. And then the guest message and the communication and to do all that at industry low fee. We're investing a lot in technology. We love AI, but it's definitely not perfect. There's some things that does really well and there's some things that's getting better at, but our goal is just to handle that core operation and also alleviate someone from hiring all the people to do these specific things. A lot in the short terminal world or boutique hotel depending on where it's out in the market, it can be very seasonal. And to have a staff on hand throughout the whole year, it gets tough during the slow season depending on how big the hotel is. With the smaller ones or first smaller short terminal operation, a lot of times that means if you're kind of trying to find things for people to do and so we help take out the seasonality, that whole process on the back end. So, can you be very specific here? I really want to get into the nitty gritty. If I'm a boutique hotel owner, I've got 25 rooms, I call you tomorrow. What exactly are you taking off my play? Walk me through a function, my function. What does your service do? Well, we do focus primarily on short terminals, but a lot of the operations are the same in the boutique hotel space. When we launch these first units, obviously we'll be managing all of them. It depends on where someone's at in their journey. If they're just getting started, then we're going to go in, we're going to create all the listings. We're going to bring them on our software, but we've got owners, portals and everything like that. So, you don't have to handle any technology. We get everything from getting connected to the locks to getting it distributed to bookin.com and Expedia and then setting all those prices, monitoring all those prices, and then handling guests as they come in. And then when guests leave, there's the turnover part. So, you got to make sure that the housekeeping goes smoothly. There's any sort of maintenance. All those things were tracking on the back end and then repeat. Okay, well, this just sounds crazy to me because whether it's a short-term rental or a hotel, I mean, it's same similar function, particularly if it's a smaller hotel, but there's a lot of nuance to this. And if you've got folks presumably, they are on your team that are outsourced, maybe they're on the Philippines, maybe they're in Pakistan, I don't know, they're all over the world. And these guys aren't in Hawking Hills, Ohio, where they're talking about what the local weather is, and the things that do see and do around the community. And when someone asks an Airbnb person, or goes on to Airbnb and ask a question, and is expecting a response, and the person responding doesn't even know where Hawking Hills is. Like, how do you actually communicate effectively? How do you really represent your clients in the best manner if the personnel are not local to that area? Great question. So, first of all, we experimented this with my own portfolio. And our team is virtual, right? So, yeah, we do have a lot of staff in the Philippines, Eastern Europe, a lot of our developers are from Pakistan, South America. So, it depends where someone's at in their stage. If someone's starting with us and they've already been operating, well, then they have tons of data. They have all of their message threads for years or however long they've been answering questions for guests. And so, one of our first processes build a knowledge base for every property, or every unit, which answers all those questions. That's during our onboarding process. And we do use a lot of AI. I think we're probably like 50 to 60% automated across the guest experience. For all of the things that we can't answer, then we have escalations built in. So, there's a certain thing, or maybe it's emergency or something like that. Our AI is trained on the back and just to route that automatically to a human. But most of those questions, like area, location, those are pretty, they're really easy. I mean, it's stuff that we learned during the onboarding and we learned from our partners as well. Of course, when we go into a new market, we're gonna do our study, but we wanna take all the information that's come from our partners as well. We've been operating there for a long time. So, it's a combination. All right, well, let me ask you a different way. What do you guys not handle? Like, what still has to stay local? Yeah, so, good question. We don't actually hire you're on the ground team. So, we don't hire your housekeeping. We don't hire your maintenance. We do help coordinate all that. We track it really well. We use software for that. And we don't handle the expense side of things. So, we wouldn't be the ones paying them or handling your accounting. Although, we do have a accounting partner that we integrate with that makes it a lot easier, but integrates with Airbnb and some of the listing sites to help with your bank reconciliation, everything like that. So, essentially, we don't hire you on the ground team. Although, we do do a really good job organizing them. We don't pay them and we don't handle your accounting. And we don't set up the property to begin with, right? When someone joins us, they've got a property that's already furnished and they've got the photos and then we take over from there. - Gotcha. So, virtual management, if there's guest communication, they'll handle the messages. You've got to have communication with cleaners, maintenance staff. And I think if some just curious, something goes wrong at two in the morning, how does that chain of command work? Is someone constantly available in the Philippines 24 hours a day and gets this message and then they somehow con. Like, how do you set all this up? Man, this sounds like really difficult for me to come. - Got it a lot. Bye. - Thick skull here is not understanding how this actually works. - Yeah, no, there are a lot of pieces. I mean, I think we've probably got over like 125 SOPs on the back end. We have a giant list of normal type procedures that we're trying to automate. But if something goes wrong, first of all, if it happened before, then we already have an answer for it most likely, or we know who we need to go to. And so hopefully we can answer it or direct the guest or whatever happens to be without reaching out to one of our partners. When we onboard someone, we have their contacts, right? We have their housekeeping, we have their maintenance person. And it depends on the size of the property. Like if it's a larger property, then maybe the owner has like a general manager or something. Doesn't have to be someone that's there physically and we would reach out to them. We use Slack on the back end. So we do have our team on the back end. They're 24/7. But I mean, someone, one of our partners can literally message us 24 hours a day. And it doesn't mean our whole team's working on their prop. Everyone on our team's working at the same time. But there's always someone working on their properties are available. And so we use Slack on the back end for questions that we don't have the answer to. And then we reach out. Of course, we have phone numbers. We've got the phone systems, everything dialed in. So yeah, hopefully that-- No, it does. I'd answer that. I think a service like yours could be very valuable. I'm curious, what does this actually cost? Yeah, it depends. So it depends on the number of units. It depends on the ADRs. But it's between 5% and 10%. And of course, our goal is to get in there. And there are a lot of roles. Our role is to optimize things. And so we have a boutique hotel operator and Costa Rica that we brought on like a year and a half ago. He's American, bought it down there. Sort of, I guess, similar story to mine, you know what I mean? Like going there a lot. But he still spends most of the time in the US with his roofing business. He had an on-site manager. And we took the same property, same units, same-- same staff redid a lot of his listings because they just weren't set up well. Like actually deleted them and restarted. And he's-- I mean, it sounds crazy. But he's earning double what he was. Like same property is same staff. And you know, with a commercial property when the value goes up or when you raise your NLI, you know, the value goes up substantially, right? Well, what is he doing very novel? Like what is the specific advantage that he is utilizing? Well, he had a lot of listings that just weren't set up well. I mean, they had bad reviews. His pricing was also not right. He was charging way too much. So we redid, we analyzed all of his listings, completely deleted some of them, redid them, went through all their photos, updated things, got them on new listing sites. So he wasn't on bookin.com that time. If you can believe that as a hotel operator. So we got them on new listing sites. We got them new listings. And we changed this revenue management strategy. And then I believe that the operations got a lot better like they have an on-site management but it wasn't necessarily the most guest experience forward. And because we're handling everything virtually and a lot of the reservations were taken, happened before they actually show up to the hotel, then it made the guest experience better. And so the combination of those things, just he's had really good results and we have his historic data. So yeah, it's always a combination of things. You know, it's never, I mean, everything that we can optimize adds to the overall impact. That is one of the unique things about hospitality is there's a lot more levers to be pulled. So every asset class has its advantages, multi-family, definitely advantages, financing, much easier to get a place financed. Hospitality is cash flow. If you do things right, you can really be cute, especially because you operate basically a one night lease. You're not tied into perhaps under renting or renting your units at less than market value. You can make improvements and immediately adjust it. And so those levers are describing are highly tied to revenue management. You kind of referenced that you had a role in that. I'd like to know beyond just guest comms and virtual management, like what role does your company actually play in revenue management? That's when we manage the day-to-day prices. So, you know, we do a market study of the market when we bring on new partner, we create a comp set similar to theirs. We use some of the industry leading tools. We like to use an average of them because the reality is, they all say slightly different things. And then our prices are constantly changing, obviously on a dynamic basis based on the day, but one of the things we found has made a big difference is a lot of these tools, you create a base price and then your price changes based on seasonality or day of the week or events or whatever happens to be based off that base price. But sometimes that base price isn't correct. Maybe it's too high and that was the case with John, this guy in Costa Rica. And so we adjusted that down and then we consistently compare his performance against the market. That's how we tell if we're doing a good job, if he's beating the market, then things are ahead in the right direction. We look at occupancy, so if he's getting booked ahead of time, not necessarily a good thing. If he's getting booked too far ahead of time, it could be that we're just not charging enough, but then opposite's also true, right? If he's not getting booked at all, but the market is, that's how we're adjusting our prices and we do that on a regular basis. - I see, so you're using tools, you mentioned that, but what tools, price labs for one, beyond. What are the tools that you guys use? - Yeah, we use price labs, we use key data, we use AirDNA, those are the main ones. - All right, well revenue management is a full project all on its own. I just had Jasper Rivers, and I mean, he was describing the complexity of revenue management. You guys are doing all this stuff. - My virtual management. - And revenue management is such a critical aspect, particularly for short term rental operators. - How often is one of your team members like actually going in and manually making adjustments to the revenue management software? - Yeah, so we used to do it three times a week, but a lot of what we were doing was adding overrides. Property wasn't getting booked, or maybe it was getting booked too quickly, and so we're adding a premium, or adding a discount, these are all things that the price labs can do on its own. And we've worked with revenue managers. What we found is that there wasn't like a really good science to the way they were doing it, and so my partner, he actually handles all of our revenue management, which is why I'm a little flake in some of the details. - Dude, I'm with you. I don't handle the revenue management for our stuff. My partner does, and so I just kinda coast through some of the discussions about it, 'cause I'm not an expert in revenue management, but I know it's important, and I think that having a partner that understands all this is really important. All of this can be done by the operator themselves. The question is whether or not that is the best use of their time. I think the biggest selling point of a virtual management service is the idea of delegating tasks that I guess have a lower return on the personal investment, right? From an owner's perspective, where do you see an owner's best? Say their time is best spent. Like what should an owner be hyper prioritizing? Obviously, like things like bookkeeping and things, like if I don't want to be delegated from your perspective, where what should an owner be focused on? - Yeah, so with the back operations handled in good way, then we have to make sure that the ground operations are good. And so we're really transparent with all that. Like if there was a cleaning issue, or if there's a maintenance issue or anything like that, we're passing that all back to the owners. And if it doesn't get fixed, it affects the reviews, which as we know that drastically affects their pricing, which is a key element that a lot of the pricing tools actually leave out. We've added that on the back ends, we're accounting for reviews as well, or a brand new property that doesn't even have reviews. I know we've built that into our algorithms, but with the back operations in a good place, then we need to focus on the guest experience. And there's some things that are just out of our control being virtual. If the property needs some updating, or if it needs some amenities, because we've seen other properties in the same market with everything else being basically equal, they're outperforming, then really focusing on the actual property, the physical property, and the ground team getting things fixed if they break. - Yeah, that makes sense. I know you're like most of us, the big proponent of implementing AI into our operations. I'm curious to get your perspective on the state of AI and hospitality operations right now. Like what can AI actually handle today that saves real time and real money? - Yeah, we're really excited about AI. One of the challenges I have with my personal portfolios we're growing is that we do have lots of team members, and they are from different places, and they have different tones. They have different ways of responding to guests. And so AI takes that away. We can create one concise tone, no matter who's on the other end. And so it's really good a guest messaging, like that initial knowledge base that I referenced in the beginning, it can easily send over the Wi-Fi password of someone asks. It can easily send over where the, how to operate the jacuzzi or whatever it happens to be. But where it's still not quite fully robust is what we find in workflows. So workflows you could think of is like a multi-step AI process. For a short terminal or for a hotel, let's imagine someone wants to check in early. Basically everyone always wants to check in early, right? Or stay late. We have to check multiple things there. So we need to check that the property is gonna be available. We need to check that it's going to be clean. Depends on how early they wanna check in. Maybe it's just a couple hours in which case, or AI would say, yeah, you're welcome to check in, create a great guest experience. But maybe they wanna check in at 7 in because their flight got there at 5. And we wanna charge them for it. And they're happy to pay for it. Well, then we need to calculate how much we need to charge them for it. And then we need to actually process that payment. If this is all being done virtual, I know in a boutique, I'll tell a lot of this would happen when they're paying their person. But just to give you an idea of like a complex workflow that we are building with AI. We're building lots of these. And that's where a lot of the actual work comes in and managing short terminals is these complex. workflows when something goes wrong or when the reservation needs to be changed. It's not like just answering the simple questions about the property or the area or something like that. So I think right now where AI's at does a really good job handling the basic questions. There is the capability for it to do a good job handling the complex operations, but a lot of us use different software programs for different assets of the business. So we have to connect with all those, which is another another element to it. But I mean my partner and I both see future of hospitality as is AI one person behind what we call our course the command center or something that someone else builds running like hundreds or thousands of units with the ground teams of course. I mean that's what we see. I know that's where it's going. It's just that we're we're ways from that still and there's lots of escalations that need to happen where AI can't handle it and it needs to go to human right away. Yeah, if you had to pick like one form of AI that would really pay dividends for someone like where would you tell them to concentrate their time. What should they try to work on either learning or developing with AI? One form of AI? Like what do you think would provide the highest return on their time of like investing in implementing AI? I think in the beginning it's just the general messaging because it's the easiest and it's the most accurate and there's there's quite a lot of tools out there that already available to handle some of the basic stuff. So that's what I would do. You know, and it's like, is there a particular chatbot that you say, hey, plug and play this, just put it in and this one works? There's quite a few in the short terminal industry. I mean, of course they have to be really well monitored and a lot of the quality from your AI, you can call a chatbot or message response or agent whatever you want to call it. A lot of the quality comes from your details on the property. And so before you use one of those tools, you have to make sure that your your knowledge base is very, very accurate. You know, otherwise the AI is going to, you know, if you've running a property for a couple of years and something changed with it, but the AI's got the old data, it's possible it can send that out. So I would start with messaging because that's where it's the most advanced right now. You know, in the long-term rental side of things like there's AI running really large apartment complexes and all types of things. And so the support element for AI, it doesn't get mad, you know, it doesn't, doesn't go on vacation. It always has the same tone and it can do a really good job if you give it the right information and it can also help you eliminate having to have a bigger staff from the support side of things. Yeah. All right. Well, we'll want to shift gears here a little bit because on a zoom out, you've been doing this now. I think you said over a decade, you've built this pretty significant portfolio, a personal portfolio and you started a company, launched a podcast. Now you're building a hotel in a foreign country. So you've really, you've progressed here. You've experienced a lot. I don't know. What are some of the mistakes? I think that like you could share that would be a practical takeaway for someone listening to this. What bit of advice would you give someone who would like to grow into hospitality, whether that's STRs or eventually a boutique hotel? Would you want them to know? I have a good question because then she's changed so much over the last decade. When I first got into it, I was I was invested in properties that in places where I thought there were really good fundamentals in the city, friendly landlord regulations, no short-term rental regulations, demand, tourism, but also business elements. And those are those same markets now are also the easiest markets to get into, like urban areas. And so they've seen a massive increase in supply and with a massive increase in supply, you know prices have gone down. And so that's been a learning lesson. Like fortunately, a lot of those properties I invested in early on have the long-term rental as a backup plan, but they were not unique. You know, they were not unique like the Medigene project that we're doing. And they've suffered because of that, you know, because of that and the supply. And so a lot of where I'm seeing in the industry today, you know, with the properties we manage are in unique properties, you know, destination properties or luxury properties, which are also a little more insulated from downturns in the economy. And so that's one thing I didn't know at the time because it wasn't like that at the time, but things have changed and they're going to continue to change. And people are going to continue to to chase short-term rentals or investments, like or short-term rentals or boutique hotels until those prices go up and the returns go down and the additional work versus maybe investing along to a rental maybe doesn't justify the additional return anymore. And so that's happened a lot in the urban space, but it's not happened in so much in the luxury space for the unique properties. And actually people are still pushing the upper limits and testing prices with some of these unique luxury properties and we see really, really good results. So yeah, as you're talking about, oh, your history, I think from what I understand you started buying basically apartment buildings and converting them into STRs. No, this day and age there's a lot of flak people get for that because you're taking away from local housing. And so it looked, depending on what your opinion is, it's it's a little bit, you know, there's just been some pullback in the market for a variety of reasons. And I'm curious to know, do you still own those original apartments? I think somewhere, like you said, Tennessee and you had elsewhere, are those properties that you bought originally? Are they still operating as short-term metals? They are. Yeah, I still run around like 45 of my own units in the different cities. Yeah, mainly small multifamily, some single family homes in there and this property here in Orlando now, Brazil. So yeah, they're still spread out and still running them. And fortunately, I got in early, and so I have lots of good reviews, which is another thing. I think that's a really big thing on the revenue management side is like we have to account for reviews. And of course, you have different review counts on different channels. So then your performance and different channels starts to change as well. But yeah, still running them. They've dropped, like their revenues have for sure dropped. But I'm also seeing now where a lot of people are exiting the market. And so it's interesting. Like last year, Tennessee, I actually signed an increase in revenue. My reservation count went up and my ADR went down, but my revenue went up like 3%, nothing special. But people are leaving the market. Yeah. In some of these areas too. Well, with all the talk about an Airbnb bust, the reality is the reason people are saying that is because some markets are feeling the pain of a pullback. And so if you're not moving backwards, then you're winning. In a lot of cases. So that little 3% in comparison, possibly could be relevant to what the overall market is doing. It could be testament to some of the triggers and some of the levers that you're pulling that are separating you from your competitors. Yeah, I think that this has been an interesting conversation because you have a lot of your hands and a lot of different things. Before we wrap this up, I want you to answer this honestly because you've been at this hotel now three years. You've talked a little bit about some of the struggles with the licensing changes and some of the challenges you faced. No one would you know now if you were able to see like the future when you started. Would you still have done this deal on Columbia? No. And partly because we're just so excited about Chorzly that I'm like focused on Chorzly. Now, you know what I mean? I was living in Columbia three years ago. I still think it's an incredible opportunity. I'm still excited about it, but I have invested a lot of money into it and we still have a long way to go. And I'm not living. I'm not as involved in as it maybe as I should be because I'm just so focused on our company, Chorzly. So in hindsight, I guess, seems to be no. Yeah, well, I looked. I appreciate you being honest. I mean, I know a lot of people would just kind of plow through that question and maybe not answer honestly, but I'd love the transparency. I know that Chorzly has been a real big success for you. And so that makes sense that you're excited and focused on that. So anyway, I appreciate the conversation. If our listeners want to get in touch with you or follow your journey, how can they do so? Yeah. Yes, I've been running a podcast for a long time over six years now. It's called Short-term Rental Riches. It's on all the podcast outlets. And then our company is Chorzly, C-O-R-Z-L-Y. Be happy to chat with anyone out there that's interested or just get connected. Awesome. Well, thanks so much for being on for our listeners. Thank you for tuning in. This has been another episode of the Hotel Investor Playbook. And we will catch you again next week. Uh, loha. (upbeat music)