How Boutique Hotels are Revolutionizing the Hospitality Industry

Okay, so welcome to the new episode of the Boostly podcast. This is the podcast that gives hosts the tools, the tactics, the trainings, but most importantly, the confidence so you can go out there and get more direct bookings. My name is Liam Carolan and I'm Mark Simpson's co host. Today we are going behind the host. This is the mini series on the Boostly podcast where we dive into successful and interesting short term rental hosts and their business. So we can ask lots of questions, extract all those juicy answers that you may be able to take and implement some of these ideas into your own business as a host yourself. So today we're going behind the host with Rich Summers. He's from excelsiorstays.com and his investment arm of his business is summercapital.com so you can go and check those out. We'll, we'll dive into Rich's business and yeah, we can, we can sort of chew the fat. So Rich, welcome along. Thank you for joining me.

Liam, thank you for having me on the show. I'm excited for the, the conversation today. It's a pleasure to be here.

Thank you so much for being here. So if you wouldn't mind introducing yourself where your business is in the world and really how you operate, what sort of model that you use.

Yeah, absolutely. So I have a multifamily background. I was buying multifamily, still own a lot of multifamily. It's probably accounts for about 80% of my portfolio today. But while I was investing in multifamily, I backed into my first short term rental here in San Diego. It was a two bedroom condo that I got on a no money down mortgage and that thing was just humming along and so pandemic started and I thought, wow, what if I go and buy another one and let me see if I can get another no money down mortgage through a local credit union. And I was able to, so I picked up another two with that mortgage out here in San Diego. And while I was still investing in multifamily, I thought, man, these things are just cash flowing like crazy. Why don't I do some more of these? And so actually sold an apartment deal a little while back And I actually 1031 those proceeds into a luxury rent splat in Scottsdale, Arizona, which is a big vacation destination here in the states. And it was a $2.4 million property and did a full renovation, about $800,000 into a full renovation. It's a really, really cool, unique place. We did a basketball court, full court, we Did a beach volleyball court, we did a putting green, we did a speakeasy. I might be one of the only, well, it's the only short term rental that I've ever heard of that has a speakeasy inside of it. We got a fitness room, we got a gym, it's eight bedroom, eight bath, 7,600 square feet with a guest house and a pool and relaunched this thing and was able to refinance it. Took it from 2.4 million to 4.9 million evaluation, refinanced it out and now we're, you know, cash flowing as a short term rental. And then I also have, as you mentioned, Excelsior Stays, which is a hospitality brand and a management company to where we manage not only my short term rentals, but also boutique hotels and also short term rentals for third party clients. With a special focus on boutique hotels. Right now we're really trying to scale the boutique hotel side and how that came to fruition is I thought, man, we already had the systems and process in place. We're managing short term rentals in about nine markets around the country. What if we bought a boutique hotel and you know, basically use this arm to manage the boutique hotel remotely free of on site management, allowing us to bring the manager's unit online for additional revenue and then we just do kind of a self checking, self checkout model with the guests and so bought the first hotel about six months ago up in Northern California. It's beachfront, we did a full renovation, we just relaunched it and we're actually managing another hotel in Oregon for a third party owner. And we're actually under contract right now in a 24 unit boutique hotel here in downtown San Diego, about six blocks from our office. So that's kind of my story in a nutshell.

And what we do, that's amazing and I mean we'll go off piste a little bit and just say why, why boutique hotels at my, why boutique hotels so popular? What is the, why are guests loving them and what is the attraction from an investor's point of view?

Yeah, well, I think right now in the US you're seeing a lot of heavy regulation in a lot of different markets around the and how it pertains to short term rentals. And so as these markets extend or increase their regulations, it's going to bring more demand to those who can legally operate. So boutique hotels are going to benefit from this model. But also when you go buy a single family house here in the states and no matter how you operate it, in terms of short term rental income, you're not really increasing the valuation of the property because it's not valued like commercial real estate. So on the flip side, boutique hotels is commercial real estate. So they're valued based on the income approach. So I know if, if we can go in and buy a tired but well located boutique hotel and renovate the entire property and bring in good management operations, we can really drive or force the appreciation, which I love, which allows us to refinance money out or sell for a profit. And it gives us a lot of different options that you don't get with the single family model.

That makes sense. That definitely makes sense. So I definitely want to dive into some of the management and operations. But before we do, take me back. What did you do before you got the hospitality bug or the, I should say, the real estate bug? What did you do before and what you do now?

Yeah, so I was always taught from a young age to go to school, get good grades, go to college, and get a job. And for the most part, that's what I did. My mom is an immigrant from Taiwan, and both my parents know the value of working hard and saving your money. And so for the most part, that's what I did. I have a background in sales, so as I was going to college, I sold cell phones, and then I went on to sell cars. And that was kind of my first taste of what it's like to control your paycheck to a certain degree. And so I did really well at sales. I'm of a competitive background. I used to play baseball and basketball as a kid growing up. And so I wanted to sell commercial real estate when I got out of college. But I graduated in 2008, and as your listeners know, the whole economy was coming down at the time. And so I found myself on a car lot wondering, what am I going to do with my life? And I actually backed into a job as an air traffic controller with the faa, which is a government agency here in the states. Did it for 11 years. But along the way, I read the book Rich dad, Poor dad, and I remembered real estate. And I thought, man, I got to get back into the real estate, but I'm going to do it on the investment side. So I just became obsessed. I started studying books, listening to podcasts, I started going to networking events before I even owned any real estate. And about nine months into my education process, I thought, man, I got to take action. So I cashed out my 401k and I used the 401k as my seed money to buy the first deal. And the first deal was 11 unit apartment building in Cincinnati.

Nice. Nice. That is. That book is the classic, isn't it? It is the go to which sparks so many people's journeys, which is amazing to. So how did you find the first one? What did you do? What did you look for? I guess so for people listening, a lot of our audience will be newer, short term host or maybe not quite as far into the journey. How did you go about finding the right property for yourself to do short term rentals? Any anything you used or any.

Yeah, it's funny you say this because like all the multifamily deals that I bought, all the apartment deals, all the boutique hotel deals that I've done, every deal to this date I've put a lot of due diligence into except for that first short term rental. Like I mentioned before, early in the show I had the no money down pre approval from a local credit union here in San Diego. And I thought you know what, why don't I just go use this on like a new construction. I found a new construction, it was an eight plex and they were selling them individually as condos. And the HOA at this complex allowed for short term rentals. And so I thought okay, I can buy a brand new construction two bedroom, two bath condo in a great location here near just outside of downtown San Diego in a neighborhood that I understood and I thought okay, the bank's going to put up all the money. The seller I was able to negotiate for them to cover all the closing costs. So all I had to come up with was the cost of furnish the place. So I spent about $14,000, got it furnished. I wasn't using air DNA at the time, I wasn't using any of those, those third party softwares. And I just bought it and I said you know what, I'm going to furnish it and see how it does. And that thing has been doing about 100 to $110,000 gross every single year since I' own it. And the cool thing is I bought it for like 574 and now the thing's worth about 825, 850, which is crazy.

Wow, that is crazy. And I mean not only that, if you get the first one right, the, the benefit that gives you the, the springboard that gives you is amazing. And hospitality is, is really quite forgiving. Out of all industries, you know, there's not many industries you can set up and, and you know, choose areas and There's a demand in all areas. It's just some areas are better than others, isn't it? So, yeah, let's dive into the management side of things then. So at the moment you manage from afar, all these, these nine different markets across the the U.S. how do you do? So who's on your team and how do they help you and what's your role, sort of day to day?

Yeah. So we have a operations manager, her name is Jennifer, and she oversees a lot of the different functions within the management business. She works with the clients, she works with our accounting team. We use a company called Exemplified to do all of our profit and loss statements for the owners. And then we have another individual, her name's Andrea. And she does a lot of the vendor relationships. She manages a lot of our, our VAs. And then we have two VAs full time in the Philippines who do a lot of the guest communication and a lot of the back end stuff, if you would.

That's cool. What advice would you have to somebody who's looking to manage a market from afar where it's not a local market? What should they be considering and what do they need to know?

I guess, yeah. Honestly, I think the same way that we approach managing an asset in our own town of San Diego is the same systems and processes that we use for any market. If there's a plumbing leak or a repair maintenance item that needs to occur, or a guest needs a key, if it's an asset here in San Diego, we don't just go drive there and take care of ourselves. We leverage everything out. And so the only two things you need in terms of boots on the ground if you're going to manage any assets that are long distance are you need housekeeping and you need a good maintenance arm. And so if you have those two things, everything else can be done remotely in terms of the guest communications, the vendor relations, investor relations, all that sort of thing, and even the accounting, of course. But what we do is we will leverage our housekeeper or our maintenance, a handyman, should we have an issue. So, for example, let's say a guest is like, hey, I really, it'd be really nice if we had, you know, a toaster, for example. I'm just making something up. We'd love to have a toaster or a blender for a stay. We'd love to make some margaritas. We can just order it on Amazon prime that will show up directly to the guest. Or if the guest needed like a key or something physical, we could just leverage our housekeeper or maintenance handyman to go do that for us if you would.

So Rich, thank you so much for for this, for sharing the behind the host journey. Thank you too. If you're listening in on the podc are watching on YouTube, we know there's a lot of places you can put your attention and we thank you for putting it with Boostly. So yeah, that brings it to a close. Was there any last sort of closing thoughts, Rich, just before we we bring it to a close.

Liam, I appreciate you having me on my man. I would just say get out there and take action for all your listeners. Make it happen. And we are put on this planet to do big things. So go chase your dreams.

Love it. Brilliant. Well thank you so much Rich. And yeah that's buy from Rich. That's buy from me.

Having a blast. Gonna get it on the Bruce Lee podcast. Bruce Lee like Bruce Lee cuz it's so hard and the T is loose leaf making up those rhymes don't write it, just do it loose.