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Welcome to Defining Hospitality, the podcast focused on highlighting the most influential figures in the hospitality industry. In each episode we provide 1 on 1, in depth interviews with experts in the industry to learn what hospitality means to them. We feature expert advice on working in the industry, behind the scenes looks at some of your favorite brands, and in depth explorations of unique hospitality projects.
Defining Hospitality is hosted by Founder and CEO of Agency 967, Dan Ryan. With over 30 years of experience in hospitality, Dan brings his expertise and passion to each episode as he delves into the latest trends and challenges facing the industry.
Episodes are released every week on Wednesday mornings.
To listen to episodes, visit https://www.defininghospitality.live/ or subscribe to Defining Hospitality wherever you get your podcasts.
Dan Ryan: Today's guest specializes in real estate advisory, market analysis, and investment valuations. He has a wealth of experience in hospitality and branded residential developments and mixed use properties. The more complicated the deal, He has an extensive background in helping clients solve complex real estate issues.
He works with institutional investors, family offices, and individual investors throughout the Americas and beyond. He's a principal and managing director at Weitzman. Ladies and gentlemen, Keith Brennan. Welcome Keith.
Keith Brenan: Thank you, Dan. How are you?
Dan Ryan: I'm great. I loved seeing all the beautiful Chicago skyscrapers behind you. So thank
you for joining the Windy, from the Windy City.
Keith Brenan: Exactly. And we have to show off the architecture if we're going to talk about real estate.
Dan Ryan: You do. I wish there was a sign for the Dan Ryan Expressway right behind you because that would be really appropriate.
Keith Brenan: had thought about that in advance. That would have been good.
Dan Ryan: Hey, Mr. Mayor, move the sign over behind my office. Um, but this is another. I'm excited to talk to you because there's been, ever since we had that dinner with Augie at Alice, uh, I just met a whole bunch of wonderful new people as you did, or maybe you knew most more people than I did at the dinner, but just seeing how people in different facets of real estate or hospitality light up and get excited about hospitality.
Um, and it was just really, um, Wonderful. I mean, I know a lot of people who invest in Hospitality as Owners, um, or REITs or just other, I don't know, just larger partnership groups, but It's very rare to like, just to get to peel back the onion and say like, Hey, well, like why? I know this is a, a financial asset and that it needs to make a return and, and, and adhere close to or outperform its performa, but it was just cool to see you light up and get excited about hospitality as an investment class and an asset.
So before we dig into that, um, When you think about hospitality and what excites you about it, like what does hospitality mean to you, Keith?
Keith Brenan: Yeah, sure. No, I mean, I think it's an interesting concept of, defining what hospitality is because it does touch on a lot of different points, but it, the primary view that we look at it, um, and that I look at it is it's a way of welcoming and it's a way of understanding. Uh, it's providing human interaction often in a physical space.
Um, wherein sometimes it's successful and sometimes it's a bit challenging. Uh, but it's really that. ability to welcome someone into your home, into your workplace, into a storefront, um, into a hotel, um, and exceed their expectations in terms of what they expect from the human interaction, right? That you've got a fixed asset in the real estate world that can't change day to day.
But how you welcome someone into your residence, your home, your business, um, your hotel can change. Uh, and there has to be a certain level of understanding that what might be hospital for one person is not necessarily for the other. So, um, it is that welcoming and that understanding.
Dan Ryan: I also was really intrigued by, much in the same way that there's a whole spectrum of investors in hospitality, but to, if we were to, I'm going to go out on a limb here and put end points on the spectrum of hospitality. An institutional investor. So call it a pension fund or, you know, some big institutional player with a lot of capital at, at its, um, at its disposal, um, who may acquire a portfolio of real estate and there's some hospitality in it, hotels, restaurants, whatever. And then they may say like, Oh, okay. We do not like hospitality for whatever reason. We want to
divest. We want to unload and go. Um, and then on the other end of the spectrum, I'm really intrigued because I'm not in my fifties yet, but it has been a dream of, well, let's take me out of it. A couple or a person in their fifties who was an entrepreneur may have done well for themselves, always loved travel and.
The hospitality experience, both receiving, but also I'm sure giving. And then they say, you know what? I'm 50, I'm in my fifties. The second half of my life is just starting and I want to do a hotel. It's been a dream and I want to get it done. So does that sound like two good bookends to kind of
Keith Brenan: It does.
Dan Ryan: far as a spectrum?
Keith Brenan: Yep, for sure. And, and we are on both sides of those bookends.
Dan Ryan: Yeah. So, and it just seems like. Such a completely different set of players on both, a different set of priorities. Um, but you as a, as an expert in hospitality within real estate and finance, like, how do you approach those bookends? Like, they're so different. How do you deliver for both of them? Um,
Keith Brenan: a good question because they are very different objectives. They have very different timelines. Um, they have very different viewpoints about what actually is a hotel or what actually is a restaurant or a bar concept on that end. So, but at the end of the day, you know, as a consulting firm and as an advisor, uh, as the role we play, you know, we're there to.
Do two things. Effectively answer questions that they may have or come up with questions that they might not be thinking of, but it's creating and giving them the comfort and the knowledge that they're able to either move forward as an institution or as a mom and pop developer. Uh, with as much data and, um, clarity as, as possible at that point in time.
And that varies very significantly, right? In some cases, the institution is trying to figure out if they actually want to get into the ownership of real estate with a hotel, or if they want to go through the development process, whereas in the mom and pop and the more entrepreneurial, developer already has that vision and they already know pretty clearly what they want to do.
They don't know if it's possible yet. They don't even know if it's financially feasible, but, um, it's to kind of guide them down that path. Now, timelines and budgets and, um, oftentimes size of square footage and land change institution versus mom and pop, but it's really guiding them down that same path.
Is this hotel going to be marketable? Is it going to be financially feasible? Am I going to be able to physically construct the building? And then what's often overlooked, which often causes quite a delay, is is this even legally possible for me to build a hotel or a resort or some form of hotel? of hospitality real estate in that particular location.
Um, and some cases they have the space and in some cases they have the idea. They just don't know where that can physically go. So it can go in a variety of different ways.
Dan Ryan: So, Let's look at those two bookends as well. And let's start with the institutional investor who perhaps acquired a portfolio of real estate and just doesn't know a lot about real estate. And their first instinct is let's just get rid of hospitality. It's too complicated for me to understand. Like I'd rather deal with an office building or, or something, uh, multifamily, something that doesn't have as many operating businesses and complexities within it.
Are there. Do you ever have an institutional investor where their first instinct is to divest that hotel or hospitality asset, um, but then after you ask those questions, you talked about may decide to keep it. Does that happen? Or if there, or do you have to, is that too hard to change hearts and minds?
Keith Brenan: No, I think it's a challenge, but it has happened. Most of the cases where we're involved in the institutional investor world, and our firm was founded more than 40 years ago with that sole focus of largely on the institutional investor. And that's how I've kind of grown up in the business is focusing on that.
And over the last, you know, 15, 20 years, more of the individual investor has kind of come into the program about the services we're able to offer. Um, but that institutional investor is usually bound by a very defined set of, of parameters in which they can invest. Uh, it could be geographic, it could be, um, urban versus suburban versus rural.
Uh, it is often as well by property type. So you oftentimes, unless they're truly diversified across retail, residential, office, um, industrial and hospitality, um, they're already there and they're already playing in that, in that playground, if you will. Um, there are a number of instances though, however, whether it be through merger or acquisition, or just they bought a portfolio because they wanted top 10 assets in that portfolio and the other five they're going to figure out.
And oftentimes that's when the there's a hospitality or a hotel that kind of Slips into there, right? And so in some cases, that institutional investor has to sell, uh, or split off that asset because it's part of their investor mandate and, and their investors expect that. Um, where we like to be involved is where.
Maybe it's a prior career. Maybe it's a prior job. Um, those decision makers had a bad experience with a hospitality asset. And that's usually where that fear and that, um, um, the lack of, of true desire to keep that hotel in the, in the portfolio or keep it in the investment group happens. Uh, and to your point, Dan, you're spot on, right?
It's management intensive. It's heavily, heavily management intensive. Your tenants check in and check out every day. In an office building, they check out after five years, they check out after ten years. You know, you have to sign that lease once. A hotel is signing a lease effectively 365 days a year for every every, you know, key they have.
So, um, but I think where to your point of do they decide afterwards to keep it? I think they do, uh, in some cases because they're able to realize the one benefit that hospitality has is you can go in a variety of different directions pretty relatively quickly. If it's one hotel chain and name on the hotel, that name and that brand can change.
Uh, if maybe the prior owner was struggling in terms of keeping up, uh, the quality of the asset, that new investor can then say, okay, the hotel was failing or not performing as well because they didn't have, uh, the resources to improve the guest rooms and improve the food and beverage experience. And so there's a way to quickly, um, shift, um, The way an asset is performing on the hospitality side a little bit more than you can in office. Um, but also what I think is interesting from the hospitality institutional side is in today's world, every office building is doing, an owner is doing everything that they can to make their office building more hospitable to that employee, to their tenants. Uh, and they are trying to do every trick imaginable to copy and emulate successful hoteliers have done for years and years and years.
And where we find it fascinating is. They have removed the human element of hospitality. They think if they just build these beautiful amenity spaces and employee cafeterias and gyms, that that's all they need to do. Where in fact it's that service level and it's the people that are in those gyms and in those amenities, um, spaces that are what people come back for.
what they want to stay in an office building.
Dan Ryan: I totally agree with you because having been in, you know, visiting friends in the city or different cities where they're in these big multifamily or even visiting other people's offices in these Class A, Class B buildings, you know, you'll, you'll have these hospitality suites, so to speak. Um, and normally I just find them sterile.
Maybe there's someone there working on a, I don't know, working on their computer with like a, Styrofoam cup of coffee or something like that. And just it's totally devoid of the human element. I don't know if you listened, but recently we had 100 episode, 150 with Roy Kim from Extel. And they did this one Manhattan, um, square property down in the kind of Lower East Side of Manhattan. The amenity spaces in this multifamily were like nothing I've ever seen. Not just from the design perspective, but you just got you, I was just walking through them and they just felt comfortable and there were just people relaxing and there was other people who work there walking around and making, and just, there was a sense of community that I felt there that was very different from any other kind of luxury multifamily or office building.
And I went to, and I don't know how they did it, but it was just, it was really awesome. But I totally see the. That execution really well, but, but I think that's the exception more often than not in multifamily or office. When I go into a amenity space or a hospitality space, it's just very sterile. And I don't know what, I don't know what it is.
What is it?
Keith Brenan: I think it's, it's not matching that physical space to what's, what else is in the building, right? And it kind of goes back to the old Vegas hotelier world where, where they wanted the rooms as small as possible and as uncomfortable as possible so that you'd spend more time on the gaming floor. Um, and to your point, what we've seen that mix up, whether it's an apartment or a condominium building, is that if that resident has everything that he or she needs in their home, they have no need.
To go out necessarily and sit in a living room or a study or a, um, you know, a clubhouse type environment, uh, but where those are immensely successful as if maybe the units are a little bit smaller. Or maybe there is something that is central to why people need to be in that amenity space. The same way, why people like to hang out in a hotel lobby.
Uh, it's that human interaction and it's that welcoming component to it. And so,
Dan Ryan: You know, I think if I, if actually, if I think about it a little bit more as you're talking, I don't know what made me think about it, but. Using that one Manhattan Square as an example, I almost got the feeling that, um. The way the space, the footprint of the building and all the different rooms were laid out.
It's almost like you're kind of the line of sight. And it's almost like it's very intentional about what these spaces are, whether it's the basketball court or the pool or the gym or just the fireplace, the library room. It's almost like you're kind of funneled into these experience architecturally.
Whereas I find that in many of the other multifamily Even like with like, I think it was when you said clubhouse or pool. It's almost like they're just,
Oh, let's put that there. And they just, they just plop it there. it's not thought of from the very beginning. And I just felt like I was almost funneled into these other places there and not a traditional hospitality space.
Um, and I, I don't know, it's like the, uh, at a, A nice multifamily, um, condo building. You know, they might have the rooftop deck, but it's just kind of like plopped there. It's like, Oh, let's do that and check that box.
Keith Brenan: Right. And maybe not everyone's elevator can get that to that deck, right? So they have to make an effort to get there. And there's, there's a lot of examples where that's struggled, but there's many, many examples as where, where, location of that amenity space, whether it's residential or office really, really helps and helps define the whole building.
Uh, in fact, just a mile or so away from where I'm sitting now, there's, there was an article, um, describing a office developer here in Chicago that instead of putting office space on the top two floors, they made the conscious decision to keep that open and full amenity space. But what that also does is given its prominence on this on the skyline, particularly when you're coming up the aforementioned Dan Ryan Expressway, you look and you see this jewel box that's glowing at night and there's a full size basketball court.
It's tall ceilings. Uh, and that has helped that owner and developer kind of fill up the lower floors, um, at rents higher than they probably would have had otherwise. Uh, and I'm sure they did them where they said if we get, you know, 5 percent or 8 percent more, On the lower levels, because there's more of them than just relying on one, um, property or, you know, one tenant coming into that upper floor and paying that penthouse rent level, uh, the ability to provide a gym with a view, as opposed to sticking the gym in the basement.
Being able to show off, you know, that physical space and market it on a daily and nightly basis because it's prominent on the skyline and visible, uh, has helped that developer, um, put the, um, the building on the map and it's doing incredibly well in its lease up and very well regarded by its tenants.
Dan Ryan: That's so incredibly counterintuitive. Like if I look at those, like the John, John Hancock building behind you, I don't know what the other one is. What's the other
one? place.
Oh, and water tower. Okay. So if I look at those, the higher you go, the higher the price per square foot. And that at the one way in Hatton square, I was also blown away that they had in Manhattan, a full size, freaking basketball court.
I've never seen anything like that in a, cause you're, you're trading dollars.
Keith Brenan: For
Dan Ryan: For some, it's a risk. You're trading dollars for some perceived amenity, but you're, you got that building. You're talking about what's the building.
Keith Brenan: Uh, it's in the West Loop.
Dan Ryan: okay, but it's got, it's almost like it's putting a gold crown up on top of it. That idea of warmth and, and the amount of dollars that they're trading off. I mean, they must've measured the ROI to do that,
or maybe they just took a risk
Keith Brenan: No, they, they, they're a very sophisticated group. They for sure did take that risk. And they'll even admit that, you know, there were unexpected benefits because it was so visible on the skyline people inquired about it. And so Wow. lot of the teams that are visiting on the NBA side that are visiting Chicago and maybe not have, don't have access to the practice courts as much are choosing to go there, which has created even more of a, of a marketing buzz for that.
Dan Ryan: Oh, wow.
Cool. that's, that's part of the fun of, of what we do is trying to maximize that experience, but also maximize the investment return. Very
So, so that was, you gave an example in a roundabout kind of way of basically the institutional one that wanted to divest it, then you had them rethink it, and maybe they decide to keep it because once they understand the complexities and the nuance, um, if you were to take an institutional investor and look at a hundred deals or portfolio deals that they were doing out of the hundred, how many would decide to actually keep generally speaking, the hospitality.
Projects that weren't mandated to do so. I would assume it's a small number.
Keith Brenan: few, and, and it's to no fault of their own because they know what they know. And, um, they, most of the time they've been only focused on a particular property type or a particular geographic location. Right. And so if you kind of put something in there, that's a little bit different. Um, and that's what they're paid to do.
is properly invest based upon their skill set, right? So, um, now that said, a lot of other investors love the opportunity to buy a hospitality asset
Dan Ryan: yeah, That's my next question. So if you, let's just say it's two or three out of a hundred, decide to keep it for whatever reason. It's like you, you help them. You, Keith and Weitzman, help them understand Why this is a jewel and it can actually be improved and hang on and sell it later or something.
But in the 97, 97 of those, of those hundred times, they're just like, it's just not in their mandate. They know what they know. How do you and your company come in and analyze this and help them get divested or sell it? Like walk us through that process at a high level.
Keith Brenan: And so we aren't, uh, a broker, but what we do is help make sure that, uh, that owner in that particular circumstance is educated enough to make sure that they're finding the proper brokerage path to take. And they're also educated enough that they understand what all of the other opportunity, all, what all the other buyers would be looking at this, right?
So what is the length of the management agreement or franchise agreement that's in place? Um, you know, what's the status of the physical plant, the actual building itself. Um, and you know, it's just helping that, um, owner at that particular time, that's looking to divest to understand how the market's going to react to their sale.
And oftentimes they'll hire a broker. The broker will do a perfectly fine job, um, and that there'll be a transaction, but oftentimes as well, during that initial process, Uh, we might be working with that owner to help them understand exactly how all of the different buyers are going to look at this. And one of the fun aspects of our job is To a certain extent, an office buyer is an office buyer, and a retail guy is a retail guy.
But there's such diversity within the hospitality world, whether you're talking from, you know, extended stay to limited service to the best of the best luxury, each different investor looks at things differently, even for the same property types. So, um, it's much more disparate on the hospitality side than it is in retail, residential, or office.
Dan Ryan: Oh, yeah, I can imagine. And then going back to how I think when I introduced you, I was saying, like, the more complicated the deal, the better. So for where you and Weitzman sit, when they're trying to divest these things, your help, if it's a super complicated, or they haven't considered, you're basically helping them ask those questions about who they should, what team they should build around, you know, to try and re look at this and maximize the exit from it.
Keith Brenan: Yep, and it's, it's not only is it keeping the asset as it is, but you know, for years and years, there's always been this conversation of, do we, Can you convert a hotel to residential? Can you convert an office building to residential? Uh, can you convert an office building to hotel and residential? Right?
And there's a lot of initiatives now, particularly Um, the urban cores in the U. S. that are focused on this obsolete Class C and Class B office building. Right? And so part of it is the physical plant of how can you convert it? And how else would you look at it? But also it's the neighborhood and it's the location.
And is this somewhere where someone would want to visit and stay somewhere they would want to reside? Um, so it's understanding how the institutions might look at it, but also how the more entrepreneurial folks that might be the buyers of that asset from the institution are looking at it.
Dan Ryan: So one of the things I was, I was intrigued by in COVID, or maybe not intrigued, maybe perplexed by, you know, obviously in COVID, hospitality took such a beating. And it was like, if you were betting, that was the easy bet because you're like, okay, no one's traveling, airlines, hotels are going to get slaughtered.
And. Again, I'm just speaking more as a, as a fan, not someone in the know, but I heard that a trillion dollars of dry powder or cash was on the sidelines waiting to pounce on these assets and it never materialized for whatever reason, because they were able to work out with the banks, the government stepped in.
Banks, you know, even if they weren't performing, the banks didn't want to take hold of them because they're so complicated and they have management within management, within management and operating businesses. So if we fast forward to today with the higher interest rates and just the whole work from home and the hybridization.
Now, in the same way, the office spaces, office buildings, especially in cities like San Francisco, and I don't know how bad it is in New York, but in major metros, They're really getting pounded, but I feel like there's been all this other smart money or smart talk about converting office buildings to either residential or hospitality.
And a lot of dry powder has moved over to the sides to do it, but there's a lot of difficulty around converting them. What do you think? Am I correct in my comparison of the two different events? So COVID and now with office, hospitality, and now office. With in the higher interest rate environment and work from home.
What's preventing that money from making these conversions happen? Is it? I have no idea.
Keith Brenan: Yeah. And I think the biggest issue is when you look at the floor plate of an office building, it's so different. You know, the cores are in the center, similar, somewhat similar to a hospitality experience, but. You start laying out guest room keys and or studio in one and two bedroom apartments and you start to get these really dark spaces in the middle of the of the buildings.
And so that's one thing is just the physical, um, Ability to do that. And many of the urban cores as well. Uh, you also have the issue of zoning and land use and what's permitted. Uh, in some markets, it's easier, uh, to adopt that zoning or to rezone that property. In other markets, like a San Francisco or New York, it's incredibly challenging and may even be not even legally possible.
You've got different windows, you've got different floor heights that you would do otherwise, right? And so, there's a lot of challenges to that. Um, and I think the other aspect of why we haven't seen a lot of these 500, 000 square foot and larger office buildings convert to hotel is that that's a lot of hotel keys.
And I think one of the bigger asset classes in the hospitality world that's struggling are the large CBD, big box hotels. Uh, that are more convention and conference oriented, right, and they're north of 400 keys and in some cases north of a thousand keys. Those are struggling more than maybe that resort or maybe even the suburban off highway type asset, right?
So there's a competitive impact of what the CBD large big box hotels are struggling with. Compared to adding in more supply there. But, um, and it's not any different from hospitality or residential. That conversion of a big box, uh, and having to drill plumbing through steel and or concretes multiple times, uh, becomes a big challenge for kitchens and bathrooms and the sort, and you think about the mechanical systems of an office building and convert that to residential or to convert that, uh, to hospitality is quite the challenge.
hospitality world has, you know, everyone was waiting for their failure. Um, I think the most fascinating aspect of the hospitality world in a post COVID environment is that Americans discovered their backyards again, and the whole drive to destination and the whole fact that, okay, we can't fly to, from California to New York, or even from New York to London.
We can get in the car and drive for three, four or five hours and we can kind of go explore. And so I think one of the. Trends that I think is more trend and has some staying power than truly a fad is the fact that you can travel quicker, you can travel more often, and you might not be taking that two week trip to Europe, but maybe you're taking for long weekends, uh, to the mountains or to the lake or to the beach.
Uh, and you're doing so in a way that's a little bit more closer to home. And I think the hospitality markets have figured that out. Um, the real estate folks have figured that out and the operators and the brands have figured that out that, yeah, we can put a certain type of product in the location that maybe you didn't quite think of a few years ago, because you do have these sources of demand that would back kind of more of the 1950s and hop on the interstate and, and go travel.
Dan Ryan: Yeah, I think one of the drawbacks to that trend, and I do see it as a trend, is I have three smaller roommates and they tend to behave better when we're at an airport and in public than when we're on a road trip in our own private car.
So I do like
the shared community parroting in public. It just, it helps rather than them yelling and screaming and throwing things at each other and me when we're on a road trip.
But I do appreciate the drive to, and maybe that's just my own issue.
Keith Brenan: Well, it's very fair. Although there was a few meltdowns in airports earlier this week that I witnessed firsthand as well, so
Dan Ryan: so in speaking to some people at Marriott, um, they're, who are heading up the, the kind of that office conversion, um, to hotel, extended stay hotel or hotel condo. I don't know if it's a hotel condo. It was whatever they're doing for hospitality with office conversions. They're seeing it really grow.
Um, so for all the obstacles that you mentioned, um, With the floor plan and the plumbing, drilling, core drilling and dark rooms at the center of the plate. And you don't have to use Marriott as an example, but they are having success and seeing a lot of growth there. What type of an office building and floor plate do you think could make a successful conversion?
Keith Brenan: Yeah, and we're working on several right now where there, there is the potential, right? But if it is your stereotypical 25, 000 square foot floor plate, 20 stories, and it's a box, that's where it's a challenge. where you've got more of the wedding cake and the various tiers and the various setbacks as you kind of rise up in the building, that allows for a lot of opportunity.
Um, the other, a lot of those projects that we're looking at are keeping a portion of the office space intact and they're either converting the, in most cases, they're converting the upper floors to some other use. And so that works well as well if, if you are a bigger box and you have very separated out elevator lobbies and multiple.
Elevator lobbies, so that you do have various rises and runs going up and down the building and you can separate them out. Um, so we're seeing that where you've got, you know, some of the older buildings that, uh. Have multiple entrances to them, and you're able to separate out an office entrance versus a hospitality entrance.
And we're also seeing it where there's that wedding cake set back. That allows for, you know, maybe it's 25, 000 square foot floor plate at the base of the building, but on the upper floors, it's. 16, 000, which tears down to 12, 000, which tears down to 8, 000. And those can become tremendously efficient, uh, and well laid out floor plans for hotel rooms.
Dan Ryan: And then, did I hear you correctly that in those ones that are successful, they're putting the hotels on the higher floors?
Keith Brenan: Yeah,
Dan Ryan: And is that, is that similar? Cause I see that. in Asia a lot. You'll have these crazy new class A buildings and they always put the hotel on top. And I'm like, wow, that's, I would think that they would do better selling those as condos, but what's the
thinking? but maybe it's the same as putting the basketball, uh, putting the basketball up on the top floors as well.
Keith Brenan: and if you're going to add residential, 100 percent correct, you're going to put the residential on top. But if it's just an office building with a hospitality use above, That hospitality use is going to want to be up there. And I think there's there's some very, very good examples of Sky lobbies, and there's some other examples of Sky lobbies that don't really work that well.
So the other challenge with the conversion of an office building is how do you get the guest in the door? And if you don't have the proper space at grade to welcome that guest, whether it be through the front desk or the concierge or what have you, how do you get them in a welcoming manner up the building to that lobby that might be in the middle, or in some cases, the lobby is the roof.
And you're taking elevator down to your, to your guest rooms.
Dan Ryan: So that's actually interesting because there are those times when the entrance is at grade and then I have to get in an elevator to go check in somewhere. And it can be disorienting more often than not, but there are times I know when I've stayed in a property like that where it's not and it just flows.
What do you think it makes that difference? guest transition from grade to check in to room more successful. Recently, I was staying at the Andaz in Tokyo, and you went up to the 54th floor or something, and then the rooms were below it, and that was weird, but it worked. It was beautiful. But like, how do you find that transition works when you're doing a conversion or partial
Keith Brenan: you're doing, So I think it's making sure you're providing enough physical space at the entry point. So you don't feel as if you're walking into a elevator lobby and you're shooting straight up, but rather there's a path to the elevator lobby. There's the opportunity for hotel staff to greet you as you come in off the streets.
Um, and then make sure that it's not just a sign with an arrow. But actually making sure that there's a way to get there. And then that path from the street into the ground floor, back to the elevator bank, wherever that may be, has to have that welcoming design and the architecture and the interior design has to be presented in such a way where you don't feel like you're moving through a cattle pen, but rather you feel like you're being welcomed already, right, right after you walk off the street,
Dan Ryan: Mm.
Keith Brenan: which again, it goes back to some do it well, and some it's a challenge.
Dan Ryan: Yeah. Yeah. And I think oftentimes of the challenges I would think if I, if I go, I can't like think of the times where it's just been well, because that's the unfortunate thing for me is when everything flows really well, I don't pay, I don't notice it. It's only when there's a pro, it's like signage. I only, I only notice it when I can't figure out where I'm going.
And then I, when I don't notice it, I just appear where I'm supposed to be that it's like the unsung thing. Beauty and elegance of great and well thought out signage. So I guess it's the same thing. If it's done well, you're not going to
notice.
Keith Brenan: If you don't notice it, you're not going to worry about it or have a problem, right? I mean, the best played baseball, basketball, football games are when the umpire and the referee never even thought about them yet, uh, throughout the whole entire process, right? So it's, uh, and, and that's an important aspect to it, but it, that's where we often like to get involved as well, because that's the, another intersection of, um, design and architecture versus design.
Revenue expenses and bottom line and where do you kind of draw the line to say, okay, from a to make this project financially feasible. We can't spend all the money. Uh, through that process, we've got to make sure the money is allocated appropriately on the on the development side. And so it's making sure that the hotel operations team and or the brand is understanding and aware of that, you know.
Of that importance to have that guest come through that mixed use environment. Um, and also make sure that the hospitality team can staff it properly. Uh, that the physical space is built out appropriately, but you're not killing the bottom line because you're putting all of your eggs in that transition basket to get them to the hotel.
And then it might be underwhelming or overwhelming in a different way as well. Once you do get to
the hospitality space.
Dan Ryan: I want to go back to the bookshelf and look at those bookends again. So we talked about the institutional side and thank you. I appreciate that. Now on the other side, which actually is a little bit more exciting to me because I just feel like it's closer to home. You take a couple who are in their 50s, do they have a family and they want to get into hotels?
Do they have a family office? Are they selling all of their worldly belongings to do it? Like, what's the type of person or couple or people that are in the entering the second half of their life? What, like, what kind of people are they? And I loved how you said you sometimes, you know, Like your, your secret power, if it was, is to like, be able to help them ask the questions they don't know how to ask or something.
You said that way. So like, who are they and what questions do you help them ask and answer?
Keith Brenan: Right. And it's fascinating. I mean, I would say. If we were having this conversation 10 years ago, 90 percent of our clientele would be institutional, and 10 percent would be mom and pop, entrepreneurial, first timers, if you will. That has shifted to probably 60 percent institutional and 40 percent wow, real estate sounds like fun, let's go build a hotel.
Um, but one of the things that we like to focus on is we're not, we're, our job and our position, the reason they're bringing us in is to make sure they're avoiding mistakes. Make sure they understand what the potential pitfalls are, but also helping them come up with a path and a process to make sure that this works. in a timely manner, but often also in a manner that maximizes the revenue. And, and part of that is helping understand what are their true intentions with this, right? And this, we've been talking about this a bit, uh, you know, you and I at that Alice event, um, as well as a few other spots, but you know, they have this idea that they want to build something in the hospitality world.
They're, they're well traveled, they're sophisticated, they're usually successful in other, Aspects of their life and business and career. And maybe they're more on the creative side. Maybe they're, they've been just a numbers person and they're more focused. Um, but in many cases they've always had this dream, but they're not quite sure how to execute on that dream.
And I would say of those clients of which we now have several, uh, you know, we do two things, we make sure they understand upon engaging us that we might come back to in a few days or a few weeks. And say, no, this is not going to work. Um, we say no more than we say yes. And it's purposeful. Uh, we don't want any of our clients to go down a path where they may be unprepared.
They don't understand all of the financial risks. Uh, they thought they could build a hotel on that piece of land when in fact, you can't for zoning or other legal or regulatory reasons. Um, but when we say no, we just don't necessarily go away. It's also to pivot or if they can mitigate, right? And so, um, we want to make sure understand they, they understand the very, very early onset of why we think this might work and it's not just myself or one of our partners or one of our associates telling them, no, it's giving them the rationale and the reasons why, and it's pure data driven,
Dan Ryan: Well, I actually, I'm going to push back on you. I don't know if it's pure. I'm sure the data plays a big role in it, but just getting to know you, I think it's also an element of caring. And I don't want to say that you care about your individuals rather than your institutionals, but I would imagine, and again, I'm going out on a limb here, But I would imagine that as an individual, even if they have a family office, that one hotel that's their dream project is a much larger percentage of their net worth than let's say the one or two properties in a portfolio deal that some big institution wants to divest.
Like you can't, you want them all to be successful, but I think there's like a heavier gravity around trying to help this person or couple navigate it. Even if they have You know, tens or fifties or hundreds of millions of dollars in their family's office. Um, there's a certain, it's a lot, it's a lot heavier if it, if it doesn't go right, if it doesn't go right.
Keith Brenan: and I would, I would agree with that, uh, we care equally about our employees, but there's an emotional connection that, that you have when you're working with. Um, a group of buddies or, or a couple or a family, uh, there's a different emotional connection there that you don't get from the institutional side.
Uh, and I think that's where, where we really enjoy that, that avenue. The other thing that we try to focus on and try to bring value to the table is that it's not just hospitality, but we've, we can bring in a residential partner, we can help make sure that the retail environment that surrounds that hospitality is appropriate from the design and cost and, and, you know, Site planning side.
And so, um, but it's also getting a better understanding about why do they actually want to build a hotel. Um, and once we've learned why, or we've learned how, and maybe it's the land has been in their family for generations. Um, and they never really got around to it, but now they can. Or the building was in their for many, many years.
Um, it's, you know, an archit said I always wanted to b or the restaurant business and it's helping guide th Important for us is making sure that they have the right team that's built around them. And sometimes they have the financial capability, but they don't have the design team and the engineering team.
And other times they're very technically astute and they've got the team put together, but they need a financial partner to come in. And that's in many, in most cases, there's always the introduction of a financial partner, even if it's just a lender. Uh, you know, it's. Unemotional. Um, but there's always that addition of another partner, uh, of a design team, of the operator in the brand.
Um, and so how do we help them go through that process? And in some cases it's bringing in, helping to bring in the money and attract the right capital and position the property so that it will attract that right type of capital. And other times it's. The money is not the issue. The land is not the issue.
It's who is the architect and who is the development team that can help understand what Mr. and Mrs. Smith's vision is and help them execute on that vision. Um, and that's where I think we tend to have a lot of fun. Uh, and it's wildly enjoyable as it is working on both the financial side of things as well as the development team, the operations team, and the design team.
Dan Ryan: So I think it's fascinating over the past, I think you said 10 years, it grew from 10 percent of your clients to 40 percent of your clients. That's amazing. Um, That's actually incredible. So if you look at that 40 percent of your, of your clients in that individual, we'll call it individuals. So I heard you say group of buddies, a couple or individual, let's just make a triangle out of it for simplicity's sake. For what is most of them? Do they already have the land or do they have the capital or do they have the vision? Like which one, if you were to like. Which, which one is the most?
Keith Brenan: The most is they have the land or they have the space. Um, and for whatever reason, they may have been in some, in some cases, this idea and this vision came to them because it is a fantastic relocated property, whether it's urban or resort or what have you. Um, and they've been approached by people over the years to build a hotel or to sell the parcel and let us build a hotel or something along those lines.
So there's a, there's a natural reason that a hotel would go wherever that piece of dirt is. Um,
Dan Ryan: Okay. would say half the instances, they have the financial capacity and the other half are saying, Keith, we need, we have the vision in the land, but we don't have the financial, right? So usually they have two of those three between land, vision, and vision.
Keith Brenan: And money. And we're there to help figure
Dan Ryan: okay. And are they, do they tend to be land, vision, and money? Okay. So they'll have the land and the vision. They may need the money or they have the vision and the money, but they don't need the land. Oh, wow. That's interesting. Okay. So if, and does that group of people, does it tend to be an individual, a couple, a group of buddies?
Keith Brenan: What's interesting is it, it usually is an individual, but what, over the last few years, what we've found, um, and you alluded to this earlier, we have multiple clients now, uh, whose kids have grown up, have left the house, gone through college and are off on their own, uh, career journey. Um, and they have two of those three, the vision, the land and the money.
And now they've always had that bug. And. It's a bit cliche, but, um, you know, COVID did a lot of things. It'll, it allowed some people to sit on their, um, couch on a Wednesday afternoon, when they wouldn't have been sitting on a couch on a Wednesday afternoon and think about a few things. Um, and so within that group of those, that new type of client of ours, um, you know, some of them are industrial developers that.
Built a career over 25 or 30 years building industrial properties all throughout the country, did really, really well. And their response to me is Keith, four walls and a roof is not exciting. You know, I don't care about clear height or dock doors or truck turnarounds anymore. I, all I think about is that vacation I took to name it, the island, you know, five years ago and how I could build my version of that.
Right. So, um, it's, it's those types of folks. Um, and. You know, and in some cases, it's not a real estate person that's getting into the hospitality industry. It's someone that's been in medical supplies, or it's someone that has been in the, the marketing and branding community, and they understand, uh, you know, what the appeal of a particular hotel or resort or a destination can have.
And in some cases, it's helping them figure out what that vision is as well, right? Um, we've got a few of these clients that say, I want XYZ brand because I love, um, the brand. I love the locations that they're in. Uh, I love how they treat their guests. I've always had a good experience. And in some cases that works really, really well for that particular piece of land or their, or their vision.
And on other cases, we have to help them understand why that might not be the best brand, but you know, you could go down this path. Right. Um, and that goes from brand to, I want deconstructed villas that are spread out around the land, or I want a central core building, right. It's helping them kind of really flush that out.
Um, yeah, so it can take a I, I want to, okay, so I want to pull on that a little bit. So for anyone out there that had a dream,
Dan Ryan: for anyone out there that had a dream to, to make a hotel, typically they look around, they'd find some land, they'd maybe get an architect. Um, kind of help plan it out, do all that and just kind of go. How, what,
if if that person was to rethink it, right.
So, which happens all the time with some success, with some failure or more heartache than probably necessary. I would think, um, how do you, like, if you found, if, if someone was looking at doing that and then they said. I'm going to go with an architect or I'm going to talk to Keith first. Obviously you would recommend talk to you, but like how do you make that process or that journey better? Like give it, give an example of like someone who was looking at, Oh, I'm going to do this. But then you met them and then gave them a little bit of a different path. And what was the, what was the outcome?
Keith Brenan: right. And so, and it's gone. In two different, very different directions. One where we've kind of put a roadmap together, put a plan together, made sure they understood the timing and the process. And particularly if they're not real estate folks, and they haven't worked within that industry, they might not understand that it might take you a year.
For 18 months or 24 months, just to get approval to do this from the local governing authority, uh, it's making sure they understand the path and the process at the beginning. It's making sure they understand how hotel management agreements work. Um, right. I mean, some of our clients didn't realize until they got into the weeds that hotels aren't largely owned by Hilton and Hyatt and Marriott, they're owned by others and they're managed and, and branded by, by those companies.
So it's making sure that they've got a full set of. Uh, data points and they have as best they can at that particular point in time, when they're deciding to engage with the architect or they're deciding to engage in talking with hotel brands and management companies, that they understand everything that's in front of them.
And we've had a multiple occasions where after a few weeks of this back and forth and working with them and having these discussions, they say, okay, thanks. You scared me sufficiently enough to not do this, which is fine.
Dan Ryan: Yeah.
It's like you said, it's,
it's that
you're saying no, you're saying no more often than not.
Keith Brenan: And we're, but we're also saying, just make sure you understand on a going in basis and we'll work with them. Uh, and in some cases we had one client that, you know, really was gung ho and then, uh, she realized shortly thereafter that she wanted to be part of the process, but she didn't want to be the one that was executing.
So in that particular instance, we introduced her to a developer that we thought would have mutual alignment with her, and, uh, they're now going down the process where that developer is the one that's actually building the hotel. She's contributing the land, uh, and she's thrilled to be sitting on the sidelines and looking and listening in, but she doesn't have to be the one that executes, wherein we have another client, a husband and wife, where they are the ones that want to execute.
Uh, and they're doing an incredibly good job at it thus far. We're still a few months out from groundbreaking, so it's still got a path to go. Um, but we have to be respectful of, of those clients. We have to be able to adapt. Uh, with some of those clients, uh, and figure out what's in their best interest.
Dan Ryan: And then if, if that couple. Or individual or group of buddies. I like it how it all comes down to threes. You make that very easy. Instead of, I'm always looking at bookends. I like the, I like the triangle. It's good.
Um, I need to evolve. Yeah. It's like you've, you're able to triangulate a more precise, um, difference or similarity.
I like that. Um, but, and, and then if individual buddy or couple, If they were going down that road and you, and they were taught and you were helping them build it, approach the project in whatever fashion that they wanted to approach it in, how does that work? Is that a fee to you? Is it a percent of the deal?
Is it like, are you a fiduciary to them? Like, how, how does that work?
Keith Brenan: Yeah. And we're, we're very strict as a firm. We are in an advisory role. We are a consulting firm. There's been numerous opportunities for us to have a brokerage arm or be part of a larger brokerage team. Uh, there's been numerous opportunities for us to co invest. Uh, but we take our role as advisor and counselor very seriously.
So it's, Purely fee driven, uh, whether that be hourly or a fixed fee or monthly retainer, we can be flexible on that as well, but we don't take commissions. We don't take success fees. We're there to help guide, um, that person down the road. And in some cases, going back to the earlier examples, it's a couple of week assignment and we're done.
And we check in every six months just to see how they're doing. But otherwise, you know, that project never got off the ground. And in other cases. We're an active member of the development team, sitting in on design meetings, sitting in on the financial markets meeting, sitting in on the internal meetings and helping them put the deal together.
So it varies, but, but at the end of the day, we are a professional consulting firm and we operate as such.
Dan Ryan: Cool. And, and really it's almost like with the individuals as well, I would assume it's, It's like a, uh, a coach or a confidant as well, right?
Keith Brenan: Yeah.
Dan Ryan: Yeah. It's, Yeah. But I, I also, I think like, I don't know. I feel like a coach that the, the coach hat is more, cause you said it's like, get them down to why help them drill down on why they actually want to do this.
That's. Probably the most important thing. You can always tell them how and, and build the team and introduce them to the right partners. And, but it's, I think the more important question in everything that we all do is just, is why, why are we doing this?
Keith Brenan: well, and, and that's my, one of my business partners, Peter and I chat about this a lot. Um, are we a coach? Are we the conductor? Are we the puppet master? Like what is, what is our role truly here? Are we just quarterbacking this down the side or are we off on the sidelines? And so, but what we've kind of determined is that we can be whatever the client needs us to be.
Some need someone to coach them up and help push them down. And some just need to make sure they're, we're following them so that they're not making mistakes. Um, but it's, it's often a learning process for them, uh, and even, and not For the mom and pop investors, but for the institutions as well that are, you know, looking at a new market, um, maybe they're now looking at the Caribbean or in Mexico, you know, helping make sure they understand those pitfalls.
They've been super successful developing in the U S but now when they go, uh, you know, to another country, it changes. They've been super successful in California, but now that they're building in Florida, things change, right? So it's, our role there is to really make sure that, um, you know, hospitality development process that we're helping them along the path.
Dan Ryan: So with the evolution of your customer base in the ever changing world of hospitality, um, exciting you most as you look to the future?
Keith Brenan: Um, within the hospitality world, I think it's the fact that the residential and the hospitality lines are blurring so much and a residential buyer is looking to buy property in a resort development or in an urban high rise. It's mixed use in nature. Uh, I think the, Understanding now on a going forward basis that hotels and hospitality have to adapt to the new way of doing business and this whole leisure, business leisure trip is important.
Uh, you can go to a conference for three days, but to use your bookend analogy, you're two days early and you're getting some work done and you're staying two days after and you're spending it more from a leisurely perspective. I think the blurred lines of, of where hotels starts and stops, where residential starts and stops, and where your office starts and stops, Those lines aren't nearly as strict as they once were, and it allows for a lot of opportunity on the real estate side to react to that, but also on the design and architecture side, as well as in terms of how these projects are capitalized.
Um, we have a lot of competitors that do a very good job on the pure residential side, or they do a very good job on the pure hospitality side, where we like to interact is kind of where those lines are a little bit blurred and where it's a little bit residential, a little bit office, and a little bit.
Hospitality or hotel, traditional hotel, if you will. So I think that excites us on a going forward basis in terms of what our work scope is. What I think is exciting on terms of where the hospitality industry is going is there's so many opportunities for those practitioners that do an excellent job, whether it's food and beverage or customer service, or just providing that welcoming environment to take that skill set, uh, and bring that into the office world and to bring that into the more traditional world.
residential world. Um, and that's where, you know, helping those two sides find each other, um, is really exciting for us as well, because that, the ability to curate a hospitality experience in an office building is becoming paramount. And now I think we're in a position where the tenants know that, the building owners know that, and the building managers know that, right?
And, um, it's not just, you know, slapping up a sign on an amenity space and saying we're open, you also have to make sure that that amenity space is welcoming and hospitality. So that's kind of the, those blurred lines of where hospitality starts to seep into other parts of the ethos of real estate, but also about how we're all living our lives now is pretty exciting.
Dan Ryan: Yeah. And to me, I, hospitality just blurs and I touches everything. The more I pay attention to it since doing this podcast and just my vocation and we can all improve and get better by injecting a bit more hospitality or intentionality around what hospitality means to anything.
Keith Brenan: I mean, I think the differentiating factor for Hospitality now is that many of, and it doesn't matter where you are on the price point or the star scale, right? Uh, people will come back to your hotel if there's an experience or an interaction that they remember. Everyone's got thread count and everyone's got beautiful stone surfaces.
And right. But there's some experiences and there's some interactions that keep people coming back. And, um, the hospitality operators have known that for Quite some time. And now other people in the other aspects of the real estate world to say, if we do want people to come back to our store, we need to provide that experience and that interaction that they don't always get.
Um, so that's, that's, I think is, is kind of the next evolution where this can go.
Dan Ryan: So I want to do a little thought experiment. Imagine you wound up in a convention center hall and the whole, and you were, you were the keynote speaker and the entire audience, there's 5, 000 people, they're individuals, they're couples, and they're groups of buddies who want to build a hotel.
What advice or experience share do you have for them to kick that off?
Keith Brenan: I think the advice for them is to take a pause and figure out if this is actually what you want to do. And then if after that pause, whether it's five minutes or five months, you realize that yes, this is what you want to do. Make sure that the team around you that you put in place has your interests at the front of their mind.
Uh, and not other people's interests because there, there is a lot of opportunity, not just in real estate development, but particularly in hospitality, when you think about all the bits and pieces that come into a project, and it even goes into the point of, we've got other clients that are saying, I want to buy an existing resort or a small 30 key in or whatever the case would be.
And I want to put my stamp on it and I want to change it. And I think I can do it better. Great. Maybe you can, but understand how many people and companies are going to be engaged in that, and not all of them are going to have your best interest. in mind.
Dan Ryan: Yeah, there's so many hands in the, in the bucket, so to speak. It's a, it's really crazy on, on, on any large development, but it's also amazing with just from software to construction, to furniture, to design architecture. There's so many more than just a traditional development and, um, and converting legacy systems.
And it's, it's just insane. They're so complicated. So I appreciate how you're helping. Individuals, buddies and couples, um, help their dreams and also the institutional guys, but you know, they're, I don't know, they know what they're doing. I liked how you're like the coach or the shepherd for like the people who are following their dreams as well.
Keith Brenan: And even the institutions don't, they may have been building, you know, office and retail and multifamily their entire careers. And then they look at, you know, the construction budget for hospitality and those kitchen consultants and acoustics and wayfinding and, you know, wet areas, dry areas, you know, it starts to get FF& E experts of every different type, right?
And so you start to get these whole slew of different ideas and it's like, Oh, this is a living, breathing. machine when you start to go down the hospitality side.
Dan Ryan: Totally. Well, this has been super fascinating, Keith. And also I selfishly, a dream of mine is to be an innkeeper at some point. So, you know, you're just helping me learn. And hopefully there's other, I know there's other people listening that have that same dream. So, you know, please, if, if anyone wants to kind of dig in a little bit more with Keith, what's the best way for them to find you or get in touch?
Keith Brenan: Yep. So our website is whitesmanusa. com W E I T Z M A N U S A dot com. Uh, I'm active often on LinkedIn as well. Keith Brennan. I will note it's Brennan with one N, not two in the middle. Uh, but yeah, happy to chat at any time.
Dan Ryan: Great. And we'll put all that up in the show notes for everyone. Um, so Keith, I know how busy you are and I just appreciate our new friendship. And I thank you for investing your time and sharing your experience with all of our listeners.
Keith Brenan: Thank you, Dan. It's been great.
Dan Ryan: And I'd also like to thank all of our listeners for showing up every week and growing every week.
Uh, because without you, uh, We wouldn't be here talking to Keith and learning how to get one step closer to our dreams. So thank you. Also, I started a newsletter. I'll put it in the, um, in the show notes. Please sign up. It's the Friday five. Um, I'll go into that a little bit more detail later, but, um, basically all the learnings that we have from people like Keith and every other of the 150 whatever guests, It's the current episode.
It's the past episode or a past episode with a nugget that I think we'd all appreciate just some other life hacks and entrepreneurial learnings or books that I've read, uh, inspiration and upcoming events where we can all actually meet in person. So, uh, please sign up and thank you. Have a great one, everyone.