Mike Stohler (pt. 2): Why he DITCHED Multifamily for Hotel Investing

In this episode, Mike Stohler shares his strategic investment shift and why he ditched multifamily properties for the dynamic world of hotel ownership. Discover how education, a leap out of his comfort zone, and a keen eye on hospitality trends are reshaping his investment approach, promising high returns and diverse revenue streams from international ventures to high end Branded Hotels in Tier 1 US markets. Learn how Mike navigates the complexities of international syndication and hotel management, transforming challenges into lucrative opportunities. Welcome Mike, to The Gould Mine...

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Transcript

•  What's up gold miners. Today we welcome back to the show friend of the program Mike Stohler the managing partner of Gateway. Private Equity Group Mike made a name for himself by absolutely dominating the multif family investing space and then transitioned successfully into Hotel investing and in this episode we start off with Mike sharing his road map from multifamily into hotels and why some people just stop at the apartment level and why some especially recently have gone beyond the apartment and into that next level that next Echelon which is Hotel investing later on in the podcast. We explore some of the International Hotel investing that Mike has been doing recently and going over some of the benefits and the challenges that he has experienced while investing in these overseas properties and finally we wrap up the show by coming back to the States and having Mike share some of the insights that he's gathered throughout the process of building his brand new luxury hotel in Scottdale so whether you're an active Hotel investor or you are someone who's looking to break into the hotel investing space or maybe you're a real estate investor. Outside of the hotel investing space trust me. There is something in here for everyone so without further Ado everyone. Let's welcome back to the show Mike Stoler Mike welcome back to the gold M thank you sir Danny. It's a pleasure uh. We had a blast last time and uh when he reached out to me I was like going man you know. It's my one of my new best friends man and you know we're we're so aligned with you know business-wise. You know it's just like. It's. It's an easy conversation between the two of us. So you know anytime 100%. Now I feel the same way and and I've been follow. I've obviously been observing from the sidelines but catch us up like what's the latest with you with Gateway. Like how are things progressing on the hotel side. I know we talked about the boutique stuff yeah Spain so catch us up yeah. It's uh you know it's exciting it's like you almost get chills because it's like you know. The last couple years has been kind of stagnant um. You know we had the co. We had the great resignation. We had blah all this stuff. You know now inflation all this stuff and so it's like it was like get that it just like man I need to start buying I need to start looking and we were working too much in the business just getting things going making sure that everything survives you know after covid and for some reason it's like you know last part of 2023. 2024. We're now starting to see all this buildup around Hospitality um and it's really exciting you know. Since we last talk I know we talked about the boutiques in Catalonia Spain kasaba area. We just closed on our first one and uh extremely satisfying uh you know. We have a a team that's built up. That is uh based in Barcelona and uh they're just after it. You know. It's just you know. We bought this rural. They're called masas if you didn't listen to uh. The the last podcast. What aasia is it's a very old farmhouse or very old estate. That's what they call the old castles um and you know the one we just bought. Uh I think was 16. It's new I think it was built in 1640. So U it's a newer one. Uh it's fantastic and ladies and gentlemen. You know. It's. It's seven rooms. 24 acres in the Foothills close to the the the Mediterranean um. There around 600,000 you know it's just unbelievable um deals and the one that we're getting ready. We're getting ready. We're I'm about a week and a half out of doing a syndication. It's all the attorneys you know. It's. It's like come on attorneys when you go give me back the paperwork. So I can do this um. But we're opening up a syndication probably sometime in May for Spain um and the ones that we're looking at I think we discussed later uh.
•  In the past one one is a castle that was built in 1610. It's on 107 Acres uh in Rolling Foothills in kasaba and it's going to be um. I it's absolutely beautiful. Inside. It was a boutique prior to co the old man that's in his uh middle 80s just never reopened. It yeah didn't have the the spirit so uh we're getting an extremely good deal. We're working with the banks over there. But it's going to be what we do over. There is just cash buys. We don't. We don't worry about any um type of funding because it's not that expensive and because it's on 107 Acres. What's really big over there in Spain is the van life um glamping so there are these these fields spread out within these 107 Acres where you can open it up to Camping glamping uh the van life uh one. There's one section about you know a mile from the main Castle has a Olympic siiz pool and a community center. It's part of the property. It's like oh you know what let's put in some camping sites. So there's a lot of different opportunities because it's such a large parcel um for several different type of um fundings. You know just just getting getting money. You know we're looking at probably two or three different Revenue sources within just this one property. So that's what we're doing you know. We we opened up the first one. Now. We're going after this estate. Uh we're getting. It tied up. I'm just waiting on the syndication paperwork. Um. We have another hotel. I don't know if it's going to go through cuz. It's it's getting a little wonky uh another hotel here in Arizona. Uh Holiday Express that we have under contract um but whether that goes through or not. I don't know but it's uh. It's an exciting time you know these there. There's a lot of interest. I think I don't know you know. Maybe Danny you know whether it's just the compressed cap rates with the other type of asset segments that people are now looking at Hospitality. But we're I'm getting a lot of interest to invest with us you know. It's it's interesting because I think everything's like cyclical right like when when hospitality is super hot. It's because some of these other things are not and then so on and so forth right. So you start to see these ups and flows. I think a couple things you know people that are well actually let's just start here. I think that the internet has actually made hotels seem more accessible over the last 5 years because before 5 years ago like who was talking about buying hotels like you thought people thought that Marriott and Hilton owned all the hotels yeah. Reit re you know the stock market and people. It's amazing if people tell me they're like I didn't know PE regular people could own a hotel exactly well. Most of them are actually you know the the mom and pops and you know that is true. It's uh when you don't have the podcast you know when I first started in multif family single family. I'm like I never even dreamed that didn't know it was possible on a hotel yeah yeah. It's it's definitely one of those things that I think have become more accessible because of the access to information right. The information's out there now and so people are understand it and they see the high returns or the the potential for the high returns and you're right like the compressed cap rates across the other asset. Classes make Hospitality very attractive right because they C if they're run properly they cash flow very well. They they do and there's less competition because you know it's for the regular investor. The cyclical nature of the investment that they think in their mind is like well. I'm going to start with maybe a Fix and Flip yeah. Then I'm going to have a rental. Then a fourplex and their dream really stops at multif family and maybe they go from a a SE to a B their dream is an A and they don't realize as they build up. In those type of things. The the compression of the ceration returns gets lower you know because you have a 200. A 200 door C-Class is going to make more money than 200 door a class possibly possibly because of the ad amenities the cost the area. So no one even thinks about hotels um. They kind of stop at that multi-level part and they say well. I'll just own a 200 key or or 300. You know they just go up in in multif family and send theate there so when I tell people and plus you know what I found. It's funny with my investors. They're like I just want to tell my friends that I own like a hotel. It's it's sexier than it is sex. It's sexier and I have these people like Mike. I don't want to invest in anything I want a hotel yeah you know and and plus and that's another group that wants that that I'm looking at with the investment in Spain they're like oh that's even sexier. I own a boutique high-end Castle in in outside of Barcelona Spain and then I tell him I said you know. What's even sexier is how' you like your European Vacation to Spain be possibly deductible because you're going to go overseeing a business asset and L like on okay. How much money do you need you know it's yeah and I said I tell you what you give me enough money. I'll let you stay there. You know a couple times a year for free. You know so. It's it's so funny with the the the emotional drive. Also with these different assets yeah absolutely and and it's interesting that you you touched on a couple things that I want to that I want to explore so the first one being you know. Everyone thinks all right fix and flipped and get into multi. You know like small multi-unit like duplex. Triplex fourplex and we get into apartment buildings and I think that there's a certain Comfort level there and when you go into hotels you're really you know running a business. It's it is not a necessarily a real estate play at all. It's not. It's not a real estate play. It is well if the government looks at it as a small business. It's not real estate. It is. It's It's the Best of Both Worlds. I have a small business that sits on real estate exactly. So. The real estate will also appreciate and I have some hotels where it's. It's in really good areas and it. The land appreciates more you know in 10 years probably just going to mow down the hotel and just build something on the land because the land is more valuable. That's the real estate part. The other part you have a small business that has 20 employees with 20 different vendors that you're dealing with the pnls. The it's it's nothing like and I I keep telling this people uh to this to people like if you're big in a multif family don't just think you can go out and get a hotel yeah it's it's really nothing nothing like it's. It's not the same so how did you do that Mike like is how did you make that transition and how did you get yourself educated to the point where you were able to make that because Le because you did it right you were in multif family before and then you went over to Hotel. So what was your what was your uh road map yeah and you know. This is a great story everybody that don't be afraid to go outside of your box as far as assets you just have to do it. The correct way so what I did is. I had this group. I had this portfolio of multif family and I had this group. I think out of Idaho that had this really big 1031 exchange and unannounced. They just uh emailed me somehow they got me. You want to say we want to buy your apartments.
•  I'm like no I'm making a lot of money. I'm golfing three days a week. I'm I'm happy you. Know. I finally have um you know the life that I want so but anyway short story. They finally gave me this price that I'd be full. You know not to take uh it was just crazy money. But then I was like on what am I going to do. I'm going to now be someone else's fool you know or a crazy. Guy is like I'm going to make someone else a lot of money and and buy another apartment complex at a four cap and I was used to buying them at eight or nine and now they're they're down to four yeah. So what I did is. I found a guy and it's all about networking ladies and gentlemen always always always Network get involved in different conferences lot of business cards talk you know grab a drink talk to strangers. You never know who you're going to uh get introduced to I got introduced to a guy. God had 25 years of hospitality Hotel experience and he just happened to come across excuse me one of my email chains and I was like go oh. I want to talk to this guy about hotels. Well. I had the money he had the experience so what I did was I said I want you to find me a hotel here in Arizona. You're going to teach me everything that you know along the way I have the money you don't have to put in a penny. But I want you to run the hotel and I'll give you something on the back end it. So he's basically. That's I kind of bought a mastermind right yep yep and an asset. So that is how I did it and then we still have that hotel and he is running this act. This guy is actually running my Barcelona um oh wow portfolio that we're going to have cuz. He has a an apartment in Barcelona and he spends half the year over there. So he's running the team and but that's how you do it. You know it don't do it on your own because you you most likely fail but and some people are like why would you give him. You know a portion of the back end. I'm like going because I'm going to make a lot of money and I'm not greedy to not to give someone x amount of percentage of the back end to teach me everything they know and also there's alignment there too right like you whenever whenever you incentivize someone with you know shared profits if they're and everyone's wired differently right so I've learned the hard way that you can't you can't incentivize every employee or every person. The same way so some people you giving them that that would fall on death ears. But if he's uh financially driven and he's competitive and he's got that Ty a personality or she he he yeah you're going to yeah but yeah he's going to. He's going to. He's going to be very incentivized by that and so you have to kind of figure that out absolutely and and he was. It's like oh look yeah you're going to work your ass off with this brand. New asset you get paid when I get paid you know and it was. It worked out and now we've we have this partnership and he's partnered with some other assets and now he's running the Barcelona. So it all it all worked out it's great so would you would you say then because you've never had. He's been your manager. The whole like your your operations guy the whole time at that. No just one okay gotcha ju just that one um and then as I learned. I was like you know what I'm GNA take a shot raise money do a syndication by another hotel and then uh did it on my own asked him. Questions. You know um as it went on then another one and then uh just kind kept going and then what I realized is. If you bring in. It's kind of like with multif family the property management. It got to the point where I needed help on the day-to- day so you bring in a very very good Property Management Group and that alleviated um all my other headaches. So now uh we we finally are to the point where it's like okay. Now I can start buying because now I don't have to in any of our stuff. I don't have to worry about any of the day-to-day stuff. It's just. It's now happening yep and I would recommend if anyone you know contacts me outside of the group outside of this podcast if you want that Property Management Group their name and their contact information highly recommended just like my gods the godsend when you finally find that group so. This is when you say Property Management. You mean like a like a hotel management company that specializes in Hospitality yeah think of your your um multif Family Property Management Group yep they run it and this this group only does hotels love. It love it and they have like 30 35 years experience yep a lot of experience and honestly that's so just as a just as a tidbit for anyone who's listening here. And it's like hey. I'd love to get into the hospitality game. I'd love to get into hotels. You know Mike Mike the way that Mike did it. You you obviously like there's check Equity. There's Sweat Equity right so you did it the check Equity way you're like hey. I've I've got a a ton of cash. I I want to deploy it and come work with me and I'll give you a little bit on the back end. That's great if you you could also do the same thing like with a third party management company um in a lot of ways because for example one of one of the hurdles that you might come across as a new owner is not every brand is going to be on board with you as a new owner well that's the hardest part Danny that is the hardest part. What people don't realize is when you have a franchise when you want to buy a franchise. Hotel y there's an interview process with franchise okay there's number one before you even do the interview they're going to want $50,000 $75,000 just application fee non-refundable dude Marriott's like 200 like 175 200 you do Hilton Marriott. It's um you know just to see the PIP you know it cost you 10 grand just to see the PIP yeah property Improvement plan. I'm like going wow okay. You know welcome to the franchise um. So do you go through the application process because what they don't want is Mr Fix and Flip that made a lot of money embarrassed the franchise by running it into the ground. You know so they yep you have to have and I ran into this with that that very first um hotel if is. Even though I got the loan I had all the money they required that partner to be on the application for the franchise and even on the loan for the bank because they're like Mike you don't have any experience um. You're too much of a a risk yeah. But this guy's not yep yep you know so that's very important yeah and and that's interesting that they had them be on the line because a lot of times you can circumvent that by saying hey I'm going to hire. This third party management company that is already approved by X brand right. So a lot of brands have property man or hotel management companies that they've already designated as hey. If if you partner with these people then you don't have to worry about you know the franchise approval process because they've they've already been approved that being said you know there's obviously cost to that and every management company is different. There's great management companies there's horrible management companies and everything in between right. There's they're going to take a three to 4% fee typically right on the management fee on top at 3% yeah and some of the smaller hotels. It's four so like I've seen some some management companies on like the you know the the lower producing ones take four but yeah three to four and yeah or or they'll do a uh a minimum. Uh you know instead of like a three like a percentage on some of the smaller properties will say look yeah. You know it's not worth us doing all this sort of stuff. It's a minimum of 5,000 a month or minimum 6,000 a month whether you make money or not yep yeah. So there's there's different ways that they go about it 100%.
•  So it's interesting that you you know had that partner you've kind of gotten um to where you're at and you've. Worked so well together for how long has it been now that you've been working with this guy eight years. I feel like that's pretty rare to find someone that quickly right and and and get along with them that well and and work together. What would you say are the the secrets or the recipe to to the success of that relationship. You know uh man you know. I mean it's almost like what's what's the secret to marriage. You know it's uh. It's compromise. It's knowing your lanes. It's nothing happens without the two of us getting together um. It's it's a common what he and I both saw is that this is going to be the beginning of a much larger company. You know even though he's not a partner on all of my deals hotels. Uh. He's just he's always involved in some way or the other and it worked out to be. He's the one that kind of got me into the Barcelona and the Spain thing he you know come on over. You should see and you know. We can discuss if you want to sometime like why why Spain why Europe. What's the difference between why not you know the us or what were the advantages of going over to to Europe. You know with labor and construction and uh taxes grants you. All that's a whole other conversation um. You know difference between capitalism and socialism and you think it's like oh. You know this sucks and this is good. It's like yeah depends you know uh that's a whole other topic you know. It's just crazy um. The labor demands like in a more of a socialist country um because the people don't expect anything they don't strive to be a boss yeah um. They only want to make certain amount of money. They want a lot of time off and they don't strive to do anything else because if they do anything else to get raises they get taxed more. They just want to have enough money to go to the beach and go to the Disco and they're happy. You know they don't strive to be anything better than than what they are um a little bit different from the American labor force right and we talked about you know the the higher Returns on the international deals. Specifically the ones in Barcelona are R Barcelona which by the way Mike the next time I go to Barcelona. I'm dude like I'm calling you like we got to make that I'm staying there brother I like I really I'm I'm really hoping I love Barcelona. I could I could live there. Honestly. I'll probably end up getting an apartment there. Yeah. U because now it's a right off. It's it's like listen everyone. Once you get to a certain level of Investments. I don't do anything unless I can make money off of it or it's like and how I want to live here. I want an apartment here. How can I deduct it. How can I write it off. What do I need to do. You're all always churning in your brain on how can I get something for nothing or for free for less and it's uh how' you like and then you get the golden. What's it called the Golden something residency in Spain. If you spend x amount of dollars for an apartment. Then you don't you you get this Visa where you can stay there as long as you want. It's kind of like residency Visa um oh interesting. I think if you spend half a million dollars in an apartment. Let's say in Barcelona which should be a beautiful apartment. Uh they give you a certain type of visa and uh CU right. Now. I I can only see they you know 90 days. Then I have at a time at a time then I have to go home for you know SE. Several months then come back you show that you're investing in the economy you get a certain type of Visa that allows you to stay the entire year. If you want there's no there's no rules and regulations um. But what we found out with the Barcelona real quick is. It's really hard to do comp sets. It's really hard to to look at competitors yeah because they just don't divulge that information you know it's none of your business. What your neighbor boutique's doing um. But we found a way you know our our assistants and things what they did is. They just looked at their calendar you know for April May June July and just looked at their bookings and how much it was to book it and what what we realize is all of them were booking. Basically they're renting out the whole they're not doing like a u a nightly rate very very very often. It's either you know on these. These 9 10 6 to 10 room boutiques people are just renting the whole place out you know whether a couple or up to 18 people um. They um weddings corporate events. Uh the yoga stuff is really big. There you know you get the little Shaman and what what will happen is this Shaman whoever Yogi person will rent out the entire thing for a week yeah and then they will sublet. Then they will bring in and say hey for three grand. A person you can get my Yogi retreat in Barcelona up in the and you can do whatever Yogi people do um. I don't care as long as someone gives me a check um you can dance around. You can go. I don't know. I don't care what you do um. It's All About the Money uh so what what we're realizing and they're they're booking about uh some of the comps sets that look really good. You know kind of like the castle that were getting ready to Syndicate. It's about $3,500. A night fully booked and uh it'll be up to like 18 people well. You divide that you know within you know let's say five or six. You know uh four couples yeah. It's a regular up upper end hotel but you get you get a whole you get a whole castle. So if you're all in you know for not very much money you can see that the returns of 3500 night you know you could be. You can discount at 10 122,000 for a 5day period um. You can you can make a lot of bank for your buck because you have no debt every time they want catering. They tours everything everything's add-on U when you get to that type of Boutique um. So the returns are. They're phenomenal. You know this I think this deal all in all in with the renovations. Everything's um let's say with for the castle 107 Acres I'm going to raise $2 million no debt that's it that's it for a castle. That's already Boutique places for Cabanas 107 Acres. All this stuff that we need to do 2 million all in and it's just you look at the cost. I can't build a hotel here in the United States for less than 200,000. A key you know if it's a nice hotel. I'm getting a castle in Spain. You know and and the taxes. The the grants um. All that stuff is is is no big deal a very few employees you need caretakers. It's just like. It's it's mindblowing and there's there's no one in Spain that wants to buy them because then the country will go well. Where'd you get the money. Do. We need tax. You more you know um. No no one wants to do it so they're actually incentivizing the Americans and if you look at if you look at news like the black rocks and the and the people that are like pumping billions of dollars. In real real State worldwide yeah look up an article on Spain and um Italy Portugal. They're all coming in they're buying the the big stuff. All these investors all these syndicators. All these reats are starting to go into Europe starting now just because of the labor BS. Here uh construction cost interest rates and they're just going over and just buying stuff for cash um yeah. It's amazing well. It makes a lot of sense you know uh given everything that we've discussed you know there's low lower operational costs over there and the price per room. Key whatever is going to be usually less than it is here. Like the the acquisition cost is less um. Even the renovation cost is going to be less because labor and supplies are less money. So overall. It's it's less expensive yeah and it sounds it sounds. You know just the numbers that you're telling me is like $3500 so$ 3500 uh a night that's you know effectively um. You said five rooms. Six rooms nine nine rooms so like yeah that's 350 three 400 a room that's pretty much you know what a what a you know Hotel could generate here in like a like a midscale hotel and like a like a tier a market. You know that's what you're getting or do. You want a castle in Spain and the and the castle is is. It's 12 minutes from the Mediterranean. Oh. Wow so it's it's a big cycling hiking area. It's it's kind of in the in the woods Northeast Jona so you have Barcelona Jona and then towards the med. Northeast is are these properties that we're looking at um and basically. It's you you get the destination weddings you get the corporate Retreats. But what you get is the it's an hour and a half in Barcelona. So you get the weekend getaways right from sure people from the city yeah. That's beautiful so that was actually one of the questions I was going to ask is how are you coping how are you underwriting these deals so it sounds like you have a team that has access to data for other Boutique properties in Spain uhhuh and they're they're kind of using that as a baseline yeah to to comp it out yeah so they comp it out and it's it's just so weird.
•  It's like there's really no inspection process you know it's like um. They're like dude. This is built in 1610. You know it is what it is but what you do is. You go look at the electric panels. You look to see you know if what what's been updated um right restrooms yeah. It's you know still have the ouses you know what's the moat you know what do you you know but so you cop it out. And they they do have Brokers and real real estate personnel there. And they this is. This is what it's worth. This is what you're getting but it's just because it's out in the mountains. It's. It's not like you. You'd pay a lot more for a hotel in Barcelona because that's the touristy yeah. It's like going to New York City. You know I mean that's Chicago um just prices are high when you go up and out um. It's just I just it blows my mind. You know this we're we're fighting for this other estate and lost it and my God. It looked like this malamu estate and this Hollywood estate overlooking the Foothills and this with these fields 72 Acres um six rooms and it was 1.4 million. All. In I'm just like oh man you know now you know these. These are long-term St as everyone and Danny can tell you hotels are a lot longer uh syndication. The investment is these aren't we're not putting lipstick on anything. I don't all of my hotels that I Syndicate that I own. These are longer hold periods unless you really go in and say you know what I'm going to Rebrand. This ref Furbish. It get a new franchise and then try to sell it. Uh and Danny you know your hotel deals and these aren't twoyear threee things um yeah. You know the Scottdale one that we're getting ready to do 10 years. You know I mean these. These are um long-term holds um Spain why would I sell them very fair you know uh. I want to own a c. I want to be 80 years old and go to my castle. You know hell yeah dude dude you know Martini in my hand. That's so epic and uh you know they all have bars in them because they don't have the liquor license crap that we have here oh God I know but and and the labor you know you go to the The Village next door and say hey I need a carpenter and they say go down. The street go down to the street and knock on this door. You knock on that door and these PE. These people are like sixth generation carpenters in the small town. You know their last name is Carpenter. This person's last name is plumber you know it's. It's what they are you're not dealing with these big companies that overcharge you and say hey I need someone to build this they come over and say yeah this many euros and him and his buddies. They just do it. There. There's no these you just go to the village and grab these Masons that do wonderful absolutely wonderful jobs because they have pride yep that's so interesting man and you know it. It feels like a totally different game but at the same time uh where the rules are more written in your favor. So it's like why why wouldn't you want to play a game where the rules are more in my favor. You know and I get to vacation in Europe for free man deduct it. I'm going first class this time baby hell yeah. Now we obviously put the rose-colored goggles on yep. The on the audience right now yeah. No no investment nothing is perfect right what what have been some of the challenges that you've experienced so far uh with these deals over overseas over in Spain. Yeah I would say the biggest deal pro issue is not knowing how to ask for permits properly okay uh and this is kind of funny. It's um I found out that I I need to have €800 my in my pocket. CU. I was like I was trying to figure out with this. This one deal that we we just closed on. It's like on does. It have the hotel and here's the thing is um. There's different types of you have the hotel license but with the Masia an old farmhouse like this if someone's living on if you you have like a caretaker you can R the rooms you don't need the hotel license um. So it's learning the different types of Licensing and whether or not you even need it or not. But I couldn't figure out do what does this building have um I know could tell me so we went over the the city council had a meeting and she goes you know um. The town has a charity event coming up. I'm like okay well. How much is it to sponsor something like oh you know 300o and I'm like okay can I give it to you. Here's. Here's charity reach in stamp has a license. I'm like going oh my God. I just okay I could have had one of these things four or five months ago if I'd have just asked for the local charity. Oh my gosh but um you know the the other thing. Danny is because these buildings are so old yeah. It's really digging into um cuz. You can't. The castle is like my God 4 foot thick Stone and concrete walls. You know you can't get into anything um. It's so on our team. We have two architects and they go in to each of these. These assets and go they just look at you know the roof um the foundation they know what to look at. I don't you you know. I don't know what to look at with these. These types of things sure um they look at and and they look at the um. The zonings and what's nice is because these are all built everything around it. You know is so old um. What we found out is like around that castle. The 107 Acres no one can go in and buy land next to it and do exactly what we did. You can't do it it. It is um you can't like tear down a new house and say I'm I'm going to put a hotel. There cuz. It's not you can't do it cuz. It's. They're so picky about oh you know this Castle was a Hospitality thing back in you know the 7 whatever it was an in. Therefore it's allowed to be an in now um. So you have to really you have to pay attention. Get the Architects and the history I mean they just don't keep paperwork and things like that. A lot a lot of times. So there the risk are um finding the right person to say yes I can do this. Or I cannot do this at this particular location um and then there's the drivers you know. It's the same thing um. Why would people go to this place and that's what you have here in in the United States and our drivers you know have changed here in the United States with the type of hotels that I buy and and and build um what brings someone to this hotel. You know to stay right U what what kind of traffic um do I need truck driver parking. You know um do. I need like in in Spain do I and and here's the thing also with Spain. So you don't have a Property Management Group. I only need a caretaker and a maintenance guy you know husband wife. They live in this shed behind you know the little CA uh. What you have is event planners over in Spain instead of property management groups yeah um and then it's all marketing PR. Our our goal ladies and gentlemen is to have a website and you're going to have a click down and it could be the boutiques of Europe. It could be whatever um and then you go Spain Portugal. Italy. You know we want several to choose from boutiques of the world. Type things um but so it's it's all PR. It's all it's it's maybe the get getting influencer groups to go stay. You know in Spain so they can do their little selfies and things like that. You know um so. It's more of a PR thing and event planning thing instead of property man putting things on Travelocity booking.com. It's a little bit different. It's it's more of a event thing that makes uh that makes sense and actually that was one of my my questions is like you know it sounds like there's a lot of and we were talking before the show. There you you're like hey. There's there's like four or five different Revenue generators for this one piece of property outside of the hotel business and so my head starts to go to like well who's managing all of those different ancillary. Revenue sources because like that's a lot of management and there there there's a lot of knowledge that goes there uh that you know that that uh that has to be used there in order to kind of like make sure that things are run properly so it sounds like you have different. Now is there one event planning uh person for the property or uh do you hire like a conglomerate or a group. It's a group that okay. That's what I thought and then they have different event planners for different niches or different um concert. Rue generating sources um you know like what they're thinking about with this the the glamping part thing what's really big in Europe. All these kids go around it's called vanning. You know their little pict little VW buses and they just go out and bring their bikes and they dance around have little bonfires um do whatever they do um. I don't care um. But they do these touring things you know and and you give them a reason to come and and and do their magical concert thing um. Then they they do it and you know and they're spending. You know $100 $150 a person per night times 50 people yeah and all of a sudden you have a resource. Another Revenue resource um and then what we're going to do is um on other parts of it. We're going. They're like kind of tiny homes. Luxury tiny homes. We're going to put 20 or 25 of those up in the woods in this area. So you know the the castle only has nine rooms but now for 300 a night. A little bit of a discount you can stay in these luxury pods. These little uh tiny homes that look like a luxury hotel room um yeah and we can put uh right. Now. The cost is to manufacture and put them in was about 40 to $50,000 per tiny home over there again. I can't have here in the United States. I can't do anything at you know less than 150 200,000 a room I can put these little tiny homes up. In Europe for about $ 45 to $50,000 per pot um and we have a manufacturer. We have someone that wants to actually be an investor and say hey we'll give you all the ones you want um.
•  So it's just like it's just God. It's just a lot cheaper because the rail passes. It's it's kind of. It's just cheaper to do business there. Um. There's no unions you know there's no nobody. They just do the here's what it costs you know um. So. There's just a lot of different. Revenue sources for this particular place because it's just the acreage is just so big. It's really good that you know it. It seems to me like because when I think of of the states and I think of like these full service hotels which by the way it's funny that you said I I I jot it down earlier. The 200 room Class C property is going to make more money than the 200 room class a property because of the amenities and yada yada yada well. I think another thing that people you don't really realize is that from a profitability standpoint uh limited service like you know the holiday and expresses and like the courtyard of the world. Um Motel 6 and the Best Westerns yeah yeah and the economy like Motel 6 is and extended stays like residence inss and those things blow full service like you know Marriott Hilton's with you know they've got the pool and the the breakfast dinner and lunch and the bars and the conface more employees uh you know. It's not that we're not doing that you know this new building. Scottdale is going to be a luxury soft brand Buon um so you need those inner portfolio and plus again. I want to go to my luxury hotel. I have a drink at my own bar in my own hotel. You know have that thing and I'm not going to go to our Motel Six and look around and okay you know. Where's the donut um. But those are the ones that make ladies and Gentlemen. The Limited service Extended Stay even in the expresses they're those are the money makers um higher cap rates if you do the cap rate thing um. Uh less a lot less expenses. Uh our limited service you get free breakfast free internet that's it um 150 a night you know um not a lot of expenses. Less uh you get uh housekeeping on demand um no bars no restaurants no conference rooms. Just there's not a lot of expense but you do need some with the with the 120 room that we're going to build conference rooms. Rooftop Bar Lobby Bar. You know it's just a lot of expense to build and because you're dealing with a a $25 million project instead of a $10 million project. So now your expenses are higher your loan is higher um. It's just it starts out expensive you know and then you have to upgrade constantly a lot lot quicker because now you have an expectation on the you know from the guest that it has to be luxury you know or nice yep so instead of every five to six to seven years redoing something at the limited service. You're portion of your budget has to be allocated just to keep stuff up yeah 100%. And and typically that that Reserve amount is is usually 4% right like the the replacement. Reser you're you're putting aside about 4% a year yep to to keep the hotel um yep. You got it to make sure that you to make sure that you have enough money that keep the upkeep the hotel right yeah um now how does how did you go about selecting which brand to slap on that hotel in Scottdale like walk us through that process because I think people underestimate how important how critical that that step is it. I would say that is the most important when you do a franchise um if you're in the boonies. They don't. They don't want Hilton. They don't want Marriott. They don't want whatever give give them a quality in a Red Roof. In um. You know give them what they want but so ladies and gentlemen what you have to do. Is. You spend a lot of money and I spend a lot of money on on a market feasibility studies okay um. There are uh companies out there that are topof the line and they do a 40 45 page market analysis feasibility study on the size that it needs to be because I'm like going you know do I do a 100 room do I do 150. What does the market dictate. They go out and just analyze all this and then they say Mike. What are you thinking I said well it needs to be. The developer wants me to do more of a luxury um. Not five star. You know. I we're not talking W's and and you know the the rich Carlton type things but more of a full service higher end and they're like okay. Then they look at the comp set. They look at everything all the different franchises all the different locations within 10 mile area and they come back and they say you know what these are the three that's going to give you now. They said do you want a franchise. What kind of franchise do you want and here's something was very important that I did not want. I did not want a Hardline franchise model that's that in this area I wanted to have the Scottdale Vibe is this um Southwestern Vibe. If you went with a Hardline franchise. It's like nope uh. We are now on our blot program gen five and and every room has to look like every other room in the entire world with this Gen 5 thing so you get a look that has nothing to do with Arizona so what you do is ladies and gentlemen. There's this newer concept. It's called sof Brands um and then within that soft brand there's kind of like a boutique soft brand lifestyle soft. Brands now you know they've kind of brought it down into these different genres. Basically what a soft brand is is. I get to do whatever I want with uh the hotel as far as the looks. They just have a standard of of a look. You look at the marot autograph collections you know um. The hotel may be called. You know a Vador and not even see marott. But it's a Marriott autograph soft brand MH and uh we're looking at like you know like a tapestry collection uh by Hilton. What that means is they it's called an urban lifestyle soft brand. So I can they want you to bring in the vibe of the city. They want you to uh if it's near Native American if it's on the the tribal bring. In all these different looks and all it has to be is a C Class. You have to have a bar. You have to have certain things for it to be an upper scale. But they don't say that couch has to be blue. This painting you have to have this you know the all this crap that's marked up 150% um sorry. I'm going through a pip right now and I'm like going what are you talking about. I'm not paying five grand for for a chair yeah you. But oh my gosh um don't give me started on the Pips but so what we did is.
•  We went. I want soft brand. I want to be able to do my thing bring give that Scottdale Vibe give a Native American southwest Vibe. So you go with the soft brand and then within the market study. They say um. These are the best three franchises based on the cop set um based on they they even go uh within that area. You have this many reward members and and just the travel you know and it's crazy. The the the am amount of they give you and then it came down to these three and then what what I did is. I contacted the the development the luxury lifestyle Hilton guy so let's let's have lunch. Uh let's tour some of the other type of ones in the area. I did that with three different ones and I said okay now what are you going to give me how bad do you want me to have a Hilton. There. You know y or or a a Marriott or a Windom um and you have this conversation and you find out who really is on board and ladies and gentlemen. It's a lot harder to get I don't care if you have experience in in hotels. Once you start knocking on like a Hilton or Marriott door. It's whole other ball game don't expect your first hotel to be a Marriot or or a Hilton. They just the demands and and the the expectations of the ownership as it should be you know. These are the the luxury. These are the big boys. It's it's harder um so to have Hilton say you know what we want you your group to come in and build this. This massive place um it. It was a win for both of us but so that's what I did is you know I just kind of looked at the market study uh who had the best soft brand um. How many did they have in the area you know the comp set um am I competing with uh how many hotels in the area have conference rooms. Do I need conference rooms um are there any in the area have a rooftop bar. There. The answer is no so guess what I'm G to have a rooftop bar and have it to be a destination place that you'll see me every night yeah with my own special little whiskey glasses as the boss oh man that is so awesome that is so awesome well you uh. We are coming up on time here. Mike and and obviously we we haven't covered everything that I wanted to cover but uh in that in that same line of thought you know we. We just talked about soft Brands and and that being one of the I would say emerging Trends in the hospitality space. What are some other emerging trends that you're seeing that investors should be aware of in the Hospitality space. You know in the next 12 to 24 months. What are some other trends that you're seeing right now yeah uh this. This is load a question. It's a lot of it's great one of the newest trends is called what's dual branding dual branded hotels. It's really starting to uh get traction and what that is is um that same the same group that I'm I'm going to build the Scottdale hotel with they're they're wanting me to build another one in the next year or so two years. In this other area more kind of a rural Industrial Area off the highway though yep and they're like going what are you thinking with Concept and you know I started talking with some franchises and there's this concept of a dual brand what if half of your hotel was limited service the other half was Extended Stay. One lobby same Lobby same front desk same maintenance guy but now you have two hotels sharing the same resources and you get the best of both worlds so that's kind of a lot of if if you're doing groundup builds. That's kind of the hot Trend right now is to do these dual Brands because why not get the extended state people and The Limited service people on the same building um the other thing that's really really really trending is technology um and I hate to say this but you know here in the United States. It's like you I just had housekeepers come to Mike I want 20. I think it was $20 an hour and Friday's off and we can only clean one room every 25 to 30 minutes. I'm like oh what are you smoking you know. It's you know you hate to say this. But you're just like what you know. It's like well. I go to McDonald's for 22 an hour and I'm like go you're going to smell like greasy french fries at 2 o'clock in the morning you know and and you're going to think that housekeeping is not that bad you work from 9:00 a.m. to 2:00 p.m. you know so yeah that's another story um technolog is really really big folks um and and that's why we really like uh the new builds right now is I can build in Kiosk. Uh the wireless rooms you don't even have to go to the front desk you just check in on your. Uber ride your share ride in from the airport. You check in I tell you that you're in room 302 bypass everything go up put your cell phone right up against the lock and you're in you never need a room. Key you never need. Anything don't need the front desk. If you do want the front desk you can go to the kiosk punch in I have iPad setting up. There's no business centers with computers anymore. I have a couple iPods here and there you can check in on your flight. You can check the weather um if you do need anything. You you text on your app um if you need TOS if you need anything and then someone will come up. There's there's no need for you to ever really communicate with anyone and that really Cuts our expenses as far as payroll and but that is probably the biggest biggest thing um is technology yeah and and honestly. I think that we're at the precipice of a of of a massive change in the operational structure of hospitality in general. Given all of the you know advances that we're seeing on the technology side of things. Also like you know the last year at every conference that I was at every hospitality conf. Conf I was at there were like half the show half. The the thing was about Ai and how AI was going to impact the hospitality industry and I think that we're still maybe a few years away from from really. Seeing that um you know manifest into anything that's that that is noticeable or Tang you know tangible um for the consumer. But it's definitely something that should be on our radar and um and these are all changes that I think are that are are welcome you. Know I I think you know when people think AI might have like different opinions and whatnot but at least for me personally. Mike I'm of the opinion that like you know technology advancements. H like the iPhone was an amazing invention and that just totally revolutionized the way that we do like think about like think about flip right and now the phones flip. Yeah. I know it's just I know it's. It's crazy yeah but yes you and there was even uh I was in uh vas and asked for um shampoo. Yep. I don't didn't need comb or anything um with some body wash and uh a robot a robot came up and delivered no way yeah. They had a little robot and it it uh alerted me on the app and I opened the door and there was this robot with the tray and I'm like going you youve got to be kidding me and I grabbed it and it actually said thank you turn around and wow that's incredible that's incredible never calls off from work doesn't want to raise yes no vacation time no benefits if you watch too much science fiction. One day they will well one day we're going to be yeah exactly yeah time uh that's awesome M well hey. This has been you know awesome and and I feel like we're going to we're going to keep doing this. You know at least you know once a year or still like that. Once you know couple every couple quarters because I always feel like there's there I feel like we could have gone another hour. You know we could have there's so well there's just so many topics yeah of within Hospitality. You know the difference between multif family and Hospitality all the different. There's just the different classes. Within Hospitality um yeah I mean there's even memberships to the pools. Now you know. It's. I there's so many different um. There's a hotel just opened up here that has a club within the club oh interesting and so there's all these different. Revenue sources that people are thinking of um that is always always back in here yeah. That's super fascinating that's so basically like they they have a membership to the pool area. It's a different pool area. They build a different Pool Restaurant. It's on a roof with mountain of views and no one could go in there. Unless you have a membership on that special pool. That's beautiful and it's just like man okay yeah. Just another Revenue Source. You know they're just thinking there and there's just tons of that stuff. It's up floating in my head waiting waiting to manifest itself well. If there you know in traditional Gold Mine. Fashion. Mike you got to share one of those ideas that's floating in your head. What's one final gold nugget for the audience.
•  That's true so I don't know. I don't think we hit on this um. We talked about it prior there's a golden nugget when you get in Hospitality ladies and gentlemen remember it's considered a business sir people right now are worried about interest rates worried about the banks communities. Uh regular Banks pulling in you just like we're not going to loan really tightening the belts yep because Hospitality hotels is a business I'm able to get SBA Loans government banked loans less amount down less interest rates than the banks will give you. I can do Market um. Uh. Basically you know Wall Street type backed loans Insurance. There there's something that's called cmbs and you probably never heard of it unless you've been in hospitality or commercial. But Wall Street through Insurance. Backed funds will give you a loan and they they don't want that much because they're dealing with billions of dollars and what they what happens is. My hotel. Loan is packed into like 10 other different Hotel loans and they sell that as a fund um within this Market there's also USDA loans government backed uh so if you know we're looking really big in like different rural areas off of Highways. Maybe touristy areas up and coming areas and as long as you give back to the community hire. Within the community. You can get USDA. Everyone's probably heard of USDA um y residential loans but you can also do it in hotels. So my Golden Nugget is don't let the banks and interest rates hurt you or or hinder you because once you get into actual commercial loans. There are there's other things that you can do that's that's the reason why I can still buy. I can still build because I'm not going through regular Banks right yeah and and and on that note I mean it. It's quite startling the difference between you know what you can get just like on a cnbs note or lifeco or USDA. You know any of those SBA. Those rates are usually a lot more favorable. You know and right now the regional banks are really tightening up and their their their loan to value has decreased significantly right yeah yeah. If you want to raise if you want to raise half of it yeah it to you yeah yeah. So so. It's that's a really timely golden EGA because yeah. There's there's there's a lot of options that are available not just in Hospitality but across you know the broader commer commercial real estate sector but definitely when it comes to hotels. There are way more there are way more options in what you just discussed versus like the regional Banks. We're we're seeing the same thing you know um. It's almost all cnbs. Lifeco USDA yeah USDA has to be c fit certain criteria SBA or uh or Bridge you know very rarely right. Now are we seeing any sort of Regional Bank step up and saying like yeah. We'll fund it yeah. So yeah. You don't see the 7 30 anymore um straight. Bank. You know that's why people love banks will and ladies and gentlemen watch some of these SBA stuff and USDA some some of the different ones what happens is the government will take a portion of the loan and then the bank takes a portion of the loan sure so the bank who was the one sitting there like I don't want to do this well. They're the part that they're under the hook for is a lot less as far as the whole project is concerned. So that's why that's why you get some of these um. They're willing to do some of these other programs. Mike as always you are a wealth of knowledge and thank you so much for stopping by this was awesome and I can't wait to have you on again. Wonderful thank you much appreciate. Danny awesome see you everyone great.