The Modern Hotelier #254: Building AKA & Leading Luxury Residence Hospitality | with Larry Korman
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David Millili: Welcome to The Modern Hotelier. You're the most engaged podcast in hospitality. Don't forget to follow, like, and subscribe, and let us know in the comments what you think about today's episode. Steve, who do we have on the program today?
Steve Carran: Yeah, David, excited for this conversation. Today we have on Larry Korman. Larry is the president of AKA hotels and residences, and also co-CEO of Korman Communities. Thanks for joining us, Larry. How are we doing today?
Larry Korman: Doing awesome. Thank you. Really appreciate you guys having me on your incredible podcast.
David Millili: Thank you. So, Larry, we're gonna jump into a quick lightning round. We're gonna get to know you better—your background, your career—and then we're gonna jump into some industry topics. Sound good?
Larry Korman: Awesome.
David Millili: All right. What did you want to be when you were growing up?
Larry Korman: Growing up at the youngest age, probably a designer or architect. I lived in a Lewis Kahn house. It was the last thing he had designed. And I remember at age 10 meeting some of the most renowned architects—designers—just found them to be super interesting, compassionate, intriguing.
And I learned at a very early age the importance of design, the power and impact of great design. So it really started with me at an early age—design and architecture.
David Millili: What's something that you wish you were better at?
Larry Korman: Listening. I'm not a great listener. My mind's constantly going. I wish I could listen better. My kids are great listeners.
David Millili: Alright, that's good. What's a luxury you can't live without?
Larry Korman: When traveling, my iPad and my speakerphones—earphones—a luxury I can't live without. I would say my family number one, and my doggies number two. And sunlight.
David Millili: You got it. Alright. Who's a person, dead or alive, you'd like to have lunch with?
Larry Korman: Oh boy. I haven't seen my dad for a while, so I'd love to have lunch with my dad. I just had both boys here. I see my daughter a lot. God—maybe Louis Kahn. I just mentioned Louis Kahn. I'd love to ask him a bunch of questions. I met him once when he first came out to the house and asked him a few questions, but, oh boy, would I have a lot more questions for him today.
David Millili: Alright. If you could have a superpower, what superpower would you like to have?
Larry Korman: I'd say seeing through things, but I'm in Miami—you don't need to see through much right now. So I guess the superpower would be to lower my A1C.
David Millili: Okay. Alright, and what's something that's on your bucket list?
Larry Korman: So my bucket list was really my—early on—test of hospitality and engagement was in London and Torquay for Tru House Forte. And my bucket list was at age 60 to go to Japan, which I did two years ago. And it just opened up a whole world to me of hospitality to another level. So that was really my bucket list for many years.
I attained that. I guess my next bucket list really is to travel farther and deeper into the world and see other forms of hospitality and learn more about the nuances and nature and evolution of hospitality. It's part of my DNA, and I guess that would be the bucket list.
Steve Carran: Well said, Larry. That was one of my favorite answers for bucket list that I've heard. Well done. So, Larry—now we're… did you grow up?
Larry Korman: So I grew up outside of Philadelphia, in the suburbs, modest home, with very loving parents. Two younger brothers. Great neighbors and friends. Fun high school. And really lived within a provincial setting. I went to Duke University in North Carolina because I knew I'd move back to Philadelphia, and really had this idea—having met global people—to want to create something through design that could engage people globally, create a global community. And AKA was always envisioned to be that global community.
Steve Carran: That's great. Where outside of Philadelphia? David probably grew up around you as well. He's outside of—
Larry Korman: I grew up in Rydal, right by Jenkintown, and then moved at age 10 to Fort Washington. Not too far from Valley Forge and King of Prussia. So right outside Philadelphia, but I spent a lot of time in Philadelphia—in the city of Philly.
David Millili: I was born in Abington Hospital. A lot of people lived in Glenside, and then we ended up moving to Doylestown, so—
Larry Korman: Glenside had that great Rizzo's Pizza. I was born at Albert Einstein in Philly, but all three of my children were born at Abington, and Dr. Steven Shapiro was their doctor, and his son now is the governor of Pennsylvania—Josh.
David Millili: Wow.
Steve Carran: Small world. So how did growing up outside of Philadelphia really shape you into who you are today?
Larry Korman: I think there was something about a tree-lined neighborhood—and you know this from Abington and Rydal and Jenkintown and Abington Park—this idea that you could engage in a community where you could go outside your door.
We really were doing a lot of this stuff well before Airbnb, which is why Brian Chesky and I all got along, because they were explaining to younger people the advantage of a residence rather than a room—the idea of a neighborhood rather than being on a city block.
So I think just being part of a very normal neighborhood—this idea of engagement and feeling like you're part of living like a local—this idea to bring that spirit to hospitality, which had usually been a Marriott or Four Seasons on a city street—this idea of engagement of a community, I think, really emanated from a young age.
David Millili: You had mentioned you went to Duke—graduated from Duke. What led you to Duke, and what did you get your degree in?
Larry Korman: I'm gonna be honest and say, when I was in ninth grade—or starting ninth grade—my cousin's best friend was the captain of the football team. Straight-A student. He could go anywhere. He had all the ladies flocking around him, and he chose Duke. And that set a spark in my head. Okay.
But when I actually went there, it was the smell. I loved nature and there was a smell of pine trees. And when I wrote my report as to why you want to go to Duke, I started with the smell, and then evolved to the Duke Gardens, which I thought was spectacular—was like the DuPont Gardens here in a college campus. I thought that was amazing. And I'm still engaged with the Duke Gardens.
So our 40th anniversary for going there—and that would be my real reason for wanting to go back, just so I could see those gardens.
Steve Carran: That's great. That's great. So you are part of the fourth generation of the Korman family, and your real estate roots go back over a hundred years. Can you tell us a little bit more about the history of the Korman family? And I guess I personally, I'd like to know what it's like being that fourth-generation family member.
Larry Korman: I'm actually waiting for the sixth generation because my daughter and my brother's son both have babies.
I really think breadth and company matter, and I sort of compare it to Las Vegas versus Macau. Las Vegas evolved to where it is today. And there's an ability and an advantage to have that breadth and depth of experience during tough times like COVID—to pivot, know how to do those things. Not overreact, not underreact, not have your head in the sand.
So I think that, in and of itself, being a fourth or fifth or sixth-generation company is an advantage, but for us it really emanated with residential real estate.
My grandfather—his father were farmers—so this idea of cultivating the land, building the land. When he was working, my great-grandfather first coming over from Russia—what would be Ukraine—got a job sweeping floors in a dress manufacturer. Moved to Philadelphia when he met a girl from Philly. Got a similar job, and to make ends meet, it was really my great-grandfather—about 110, 120 years ago—renting out the farm, sort of well ahead of Airbnb, and bought the farm.
And my grandfather, who was cultivating the garden on his spare time, and the sons decided to start building some homes for other neighbors. And my grandfather and his brother went to Drexel in the evening, got degrees in architecture and engineering, and they started to build homes. And they built about 30,000 homes over about a 50-year period.
But it was really basically row homes in Northeast Philadelphia. What was at the time Roosevelt Boulevard didn't exist back then. And this idea of developing homes led my dad's father and my dad to developing apartment communities. So as they would build these developments with homes, they also recognized the need for apartments—schools, firehouse, baseball fields. So they did planned communities.
And it was really, I guess, when the interest rates went up to 20% that it was time to get out of the home business. And what they still had standing were all the apartments. And my dad really took over that aspect of the company. He had been involved in Frankfurt Supply, which was really creating the materials—the brick, the wood—which is why he had such a fondness for Louis Kahn for the home building, which my uncle and other cousin were doing.
So it was really championing the apartment at that next stage. And by accident, 60 years ago, in 1966, when building a circular pie-shaped apartment in Philadelphia—the first high rise that we had done—he and his father… nobody wanted a pie-shaped apartment. And the building took a lot of time. It was 1960 to 66. The church and Exodus wanted to dig by hand to go down. It was more expensive, but it was the right thing to do. My dad and grandfather absolutely agreed to that, and everybody as a community came together to try and help sell these pie-shaped apartments.
But it was really an individual who came in and said, "I'm here for three or four months. Could I stay in the model? I'll pay you X amount." And my dad recognized an unmet need between the daily stay of a hotel and the annual lease of an apartment, and so born was the furnished apartment.
And wherever they had overbuilt or had more interest and they could swallow through the operations of an apartment community, my dad would add some furnished apartments because it helped bring up some of the revenues. Compared to a hotel, $100 wasn't expensive, but compared to an apartment at that time, that at $3,000 was very high.
So the simple messaging was: when I graduated in '86 and we wanted to take this to that next level—twice the space of the hotel at half the cost. So we really decided that the one name we could use and trademark for all 23 apartment communities was Korman Suites. So my dad and I introduced Korman Suites nationally.
And this was before there was cable TV. There was no internet. So we really did station domination. We got all the good billboards. We flooded the newspaper. We recognized this need to get these guidebooks. I had seen when I was in Dallas and Atlanta, brought them up there, guaranteed them to create like centerfolds. We started doing television commercials with NFL Films when they were on strike.
And we hired a relatively unknown Howard Stern because my uncle was doing a spot in New York and said he did a great job. So they said it was $80,000 for 80 commercials. I wrote the script, gave it to him—he ad-libbed it. I was upset. They said, "No, no, no, you want that. It's more authentic. It'll work well." And we really became the name brand in a very provincial setting of Philadelphia. We had properties in Montgomery County, Bucks County, Chester County, Delaware County, and Center City Philadelphia.
So we were able to really—everything that I learned at Duke in the business school was synergy—how the whole could be more than individual parts. And I spent a lot of time at the properties—walking make-readies, working in sales, helping management—and saw 23 properties sort of buying things on their own, and created a vendor service guide to bring everything together.
And the last—I flew to Whirlpool and met with them and became a million-dollar account where we lowered the price by 35% and they would uncrate and upgrade.
So it was really, at the end, the marketing—seeing that everybody was sort of doing their own thing and bringing that all together and seeing that we'd get a lot more bang for buck—which my dad was very big on—by bringing it all together as Korman Suites. And we really were the nation's first apartment.
And then from that, Ave—short for Avenue—which my brother and I, when he graduated from Wharton, he and I started our own company. And the idea was, it was at a time when Vegas was trying to attract families—which I thought was funny—and Disney was trying to attract adults—which I thought was funny.
I said, let's create our own Main Street and we'll call it Avenue, and we'll get older people who shouldn't be in a home and younger people who can't afford a home, and we'll have them live together. And it's exactly what happened. And it started as Korman Communities. And then Korman Communities became the parent company in 2004.
And we created ARK—which was the original residence—its by far performance suites. We were managing those. Ave—short for Avenue because we couldn't trademark Avenue. At that time there was Avenue One in San Fran. So we did Ave because if we walked on Fifth Avenue, it didn't say Fifth Avenue, it said Fifth Ave.
And then AKA was a seven-year name game, which was really short for a Korman Accommodation. But for these tall, skinny, historical buildings, you couldn't do Korman Communities. It was too horizontal. It didn't mean anything outside of Philadelphia.
So we played this name game and the double entendre that I was looking for besides starting with an A was "also known as"—your home away from home. So it had that double entendre.
And that was sort of a quick synopsis of the four generations. And really the mindset of my brother and I with the fourth generation was: take my dad's concept of the furnished apartment and take it to its highest expression. And that's what I think we've done with AKA.
Steve Carran: That's incredible. And, like, you mentioned Airbnb a few times. Did you collaborate with them as they were coming up? Did you work with them at all?
Larry Korman: Yeah. So what happened was, I heard my kids talking about it, and you'd think that the one group that hurt the most—where we had AKA Suite place, we could only do 30 days—and here, all of a sudden, every apartment condo could offer daily, weekly. They didn't have Local 6 union, they didn't pay hotel taxes, but I just saw it as an interesting new way to look at hospitality.
And I saw them doing what Apple did for my kids. As graphic designers, kids loved Apple and then they grew up and got more sophisticated and bought— they were committed, they were hooked on Apple. So I thought what Chip and Brian were doing was really educating the young people, 'cause for real estate, you have to be in it for the long haul. This idea of partners where they're three to five years, but real estate is a long-term business. And if you're committed to the long term, good things ultimately happen.
My dad had a saying: property either gets a day older or a day better. And my dad always treated capital like investment or technology—you always put capital back into the property. So I was thinking more about, this is interesting—these kids are gonna grow up learning the advantages of a residence in a tree-lined street, in a neighborhood, rather than a room in the middle of Main Street.
So I was intrigued. I put a call in through Alana, who's our marketing director, to Chip Conley. He was coming in New York. He told me he was a huge fan of AKA. He said they were looking to do a partnership either with Aman or AKA.
And I said, well, we can't compete with Aman—I'm a huge Aman junkie. He said, no, no, no—Aman are resorts, AKA are residences—we're residences. So we did form a collaboration.
I met with Brian. I remember bringing an AKA robe and he wore it all around the office giving me the tour. But we talked about this idea. I said, look, AKA stands for something specific and special. Airbnb is everything to everyone, which is fine, but wouldn't it be nice if Airbnb—now that you got to this, let's say it was 10 years in—wouldn't it be nice if we collaborated on something?
We—the code word was Airbnb Select. It became known as BB Lux, and we were the founding member with them on that. Brian and I became really good friends.
We really connected on the idea of wellness and lifestyle, and he was intrigued by our 22-year-old program called Live It. The idea really emanated from a show that I'm sure you guys loved also, Fantasy Island—this idea that you're leaving your family, your wife, your husband, your work, and you're going to this new city and you have two weeks to three months, and there had to be some things you wanted to do and they sort of dissipated once you had a family, got married, all started working.
So the idea was: anything you dreamed of wanting to do, let us know what it is. We have all these resources within our cities. We can bring those to fruition. Whether you want to learn to cook—our first partnership was with the NYU School of Sleep. So Brian loved this idea and we talked about that a lot.
And I wasn't doing it because of experiential or lifestyle, like the buzzwords today. I was doing it because somebody staying with us was there for a long time. And how many cable TV shows or going to the bar and drinks could you have? Wasn't there a better way to use that time? You had this time on your own.
So each one who was staying with us was leaving some chaos and coming to this calm of AKA. Let's do something you always want to do. So that's how it emanated.
And we shared that passion of that which now has been termed—even volunteerism. My dad's very involved with Manna and Project Homeless, and we said, if somebody's staying away from their family at Thanksgiving, why not go over with all of us and our team members and do something to make yourself feel good about it? And then it got tagged volunteerism.
So a lot of these things we were doing just because we had our fingers on the pulse of what a longer-term guest wanted and needed.
My buddy Ricky Korman, who did all the TED Talks, just did one last month called Shoulders. And whose shoulders did he stand on? So I definitely stand on my father's shoulders. This was my father's idea. I'm just very proud to take his idea to that next iteration, that next expression. But he's the one—and people I've worked with for a long time, like Kathy Bragg and others—it really was trial by error.
So I think it's organic and there's a level of authenticity. If you listen to what the people who are staying with you are telling you, they'll lead you in the right direction usually—especially if it's a lot of people saying it over a long period of time.
And I think there were people that really wanted something different. I'm gonna give you an example. A lot of female people early on told us—our whole company was run: female managers, female vice presidents, female presidents of each division—and they would tell them, "I don't feel comfortable going to a seminar for a week having a hotel room, and if I want to invite somebody to come over, I'm inviting them into my bedroom."
They loved the idea of Korman Suites—that they had a living room, a kitchen. They didn't want to go out every night. They could cook a meal.
A lot of the hospitals like CHOP—I'm on the board of CHOP—and a lot of the parents tell us this idea of having to be in different rooms and go, damn, when your son's not feeling good, we're not feeling good. The idea that I can make a meal and sit in the living room, watch TV—there's just people who wanted a residence. There's times where a hotel isn't the answer.
And we say, sort of like HBO: it's not TV, it's HBO. It's not a hotel, it's AKA. There's a time and a place. We're not trying to be everything to everyone. We're trying to stand for something specific.
The pandemic was a great example. People were seeking self-sufficient sanctuaries. They wanted a high-end, ultra-clean residence—private residence—where they could cook or dine in a kitchen, work or relax in a living room. So I think you have to be aware, and we immediately adapted.
All the students that were staying working with us, where we were helping them learn hospitality, we made them technology concierges so they could have the guests do Zoom. Nobody knew what Zoom was back then. We added podcast booths. We added Zoom rooms. We added pet spas. People started getting pets. We embraced getting pets. We just created the world's first private membership for doggies—the Canine Club—the AKA Canine Club.
So we really didn't have our heads in the sand and we could adapt. Unlike the big brands like Marriott or Hilton, who do have their heads in the sand because they're monolithically big, we could react.
And I think as long as you're listening to what your customer's saying, you'll know that something else could be in favor.
So I think my dad is the ultimate listener. I said I wanna be a better listener. My dad would ask any resident what they were looking for.
And a lot of people wanted flexibility. They were starting to change this idea of home. The idea of home today—home can be in a lot of places. My son, after graduating Penn, lived three months in West Hollywood, three months in Florida, three months in Copenhagen, three months in Brooklyn. This idea that you can work virtually and have many homes.
And I remember West Hollywood saying, "Hey, you can only offer annual apartments," and it created a groundswell saying, "West Hollywood is my home, but I work in the industry. I'm only here four months a year. I wanna have AKA as my home." And we won because of that groundswell.
So I think my dad, at an early age, got the impression from people staying with us… Early on, he put refrigerators in. They didn't have refrigerators. Washer and dryers. Carpets. So when you went from the forties, the fifties, the sixties, seventies, he was constantly evolving the term apartment and this idea that this could be the new American dream.
An apartment with resources and resort-like amenities—pools, tennis, fitness—you wanna have at home that you don't have to take care of. And this idea that you can do a one-year lease. With AKA, you can do a one-month or a one-week lease. The idea that an apartment or suite could be fully furnished and accessorized by some of the top designers really resonated and became relevant after 2008—this idea of being under the radar and value affordability.
We assuage their need for location, luxury, all those elements. But instead of paying $995 for a suite, you could stay for a week and pay $695. If you committed to month, it was $395.
So I think it was those elements of value and evolving the apartment—the home. So to us, hotel, hotel residence, serviced residence—it's all a definition and an evolution of one's home, and home is where the heart is.
So we put a little heart into each one of those suites or residences, but it really has evolved over time. It was my dad who had his fingers on the pulse and knew that there was something different. And he was always encouraging me and my two brothers to try things.
He used to always say, "Anybody can kick down a barn door, but it takes a lot of hard work to build that barn door." So he said, "Build those barn doors. Don't knock them down." So he was very encouraging.
Steve Carran: Well—
David Millili: So I was very fortunate. I had a woman who had worked for me when I ran hotels in New York who worked at your downtown Manhattan property. And I got to visit it. See it. I was blown away. She was like, "You gotta come check—"
Larry Korman: Was it Jenna?
David Millili: No, her name was Giselle. Yeah. So she worked for me when I ran hotels and she was there, and I thought it was incredible.
So I guess when you and your brother really came up with the luxury flexible-stay residence, was there something—was there one moment that really just kind of led to you guys saying, "This is what we have to do," when it comes to really being the first when it comes to luxury in that—
Larry Korman: Our very first property was Rittenhouse—222. And it was actually called—the address was 222 West Rittenhouse Square. It was student housing for Penn. And it was 95 one-bedrooms. It was 1997. It was a sad property, and we had no budget to really… I think we bought it for $8 million and our budget was $3 million, and it became $3 million.
The first $1 million—I went to the sub-basement and it was disgusting. So I had all that cleaned up—new sump pump—a proper place for the team members to have lunch, rest. I spent a whole million dollars on the sub-basement. They said, "We're giving you another million dollars, but you have to spend it on the asset."
So we did the lobby in the basement, and they said, "You gotta do these residences." And we started to morph these residences—not with a lot of money, but with a lot of good taste.
Nicholas Cardone had joined us 40 years ago with me. My father had met him and brought him in. And it just showed that good taste—again, good design—really resonated because it wasn't Penn students staying with us. It was Amy Gutmann, the Penn president, who wanted to stay with us. We saw that if you build it, they will come.
So we took something that was really ratty. It had a ton of bikes and students and dogs, and it was dirt. We didn't spend a lot of money. We really did it tastefully first and foremost.
And again, this came from my father: the money spent early on wasn't for the guest experience. It was for the team member experience. And the people who had been there—who we kept on—and the people we brought on appreciated that we took such care.
If I showed you the before and after of downtown—I just showed it our 25-year anniversary—we color-coded everything. We wrapped everything. We were energy efficient before it was in vogue to be energy efficient, but we made it clean and crisp, smell good.
My wife, who graduated Penn at Wharton and started the first aromatherapy spa, made synergy blends for all the properties. So every spring we'd have special blends made, and we had diffusers in every—this is back in the Korman Suites, it's been 35 years—we were the first to have all these pure essential oils wafting into the lobbies and models and amenities.
So just this idea of doing something different and creating something that resonated to both your team members as well as the guest.
We—it was an old quote I saw, I think it was by Hal Rosenbluth—he said, "The customer's always right until they're wrong." So if you treat your team members well, they, in turn, will treat your guests well.
And we always got raves for the way in which our team interacted. They respected their privacy, so it was unpretentious, but they were there three-dimensionally when needed.
And they were encouraged to do it, but the encouragement wasn't, "Oh, you'll get a bonus," or, "Oh, you'll do this." They saw how we treated them.
We had the same front door people at all four hotels in New York City. Everyone's there from day one—18 years, 16 years, 14 years. Flavio, Ramel, Larry, Jorge— they're all the same people. That matters because if somebody comes back each year and that person remembers their name or remembers how they like their coffee, there's no AI for that. That's hospitality.
And if you treat your team well, they, in turn, will treat your guests well. So some of those early lessons in doing that first property—we didn't have the name for AKA at the time, but I knew I wasn't putting Korman Communities across it.
So that's where the name game started, and it took about seven years to come up with AKA.
Steve Carran: That's awesome. That's awesome. So AKA has had some great growth over the past few years. Can you tell us a little bit about that growth and what's next for AKA?
Larry Korman: Well, I'm gonna tell you that the big growth we experienced over the last four or five years emanated out of COVID, but well before COVID. And sometimes you do growth—you recognize, "Oh my God, this is great," you continue with it. Or you recognize, "Oh, you know what, this isn't who we are. It's diluting the brand integrity."
So I will end by saying that we're stopping that growth because I really want to continue AKA to stand for something specific and special.
But the idea a year before COVID hit was: it's very hard to find whole condominiums or really overpriced apartments to buy. So our growth—we were able to do one property every one or two years, and we had partners that wanted to grow the portfolio respectfully, thoughtfully, not fast.
But I said, well, what if we were to acquire iconic hotels, repurpose them, reimagine them as a vertical version of AKA? So we bought the Smith Hotel and we went through the process of reimagining.
Jennifer Post was our designer and architect, and we built a new lobby. We brought NoHo Hospitality—Andrew Carmellini—in to do the restaurant. We created a private membership club just for the guests off to the side. And NoHo also operated that bar and lounge.
We did the first three floors with Nicholas in-house, creating wet bars where you could still grind and brew coffee in the morning and mix a martini at night. So it might not have assuaged somebody staying for two or three months, but it certainly would assuage somebody staying a week or so.
So we started marketing that as Hotel AKA, different from AKA Hotel Residence or AKA Serviced Residences. And within the first year it hit, we went from the property before… So the company before was averaging $250 ADR because we cut the supply in half. We raised the rate to $450 and we said if you stay a full seven-day week, it'll be $350.
And in that first year we had 43% weekly. And because we had a deal where we weren't paying OTAs because we were generating our own business, 84% of our business was generated ourselves.
We had to deal with the union that if somebody was staying weekly, it would be one housekeeping. So we really optimized the cash flow.
That's changed in New York a little, but at that time, COVID hit. Our partner died. We lost that property, although we operated for them, but they wanted to operate as a traditional hotel. We said, we'll do it for a year till you can replace us.
But my brother and I had a model now that works. So we went out there and we found a group from almost immediately. We actually were working with Jamie Asaul to come up with an idea for Barney's Hotel. But then we met this group from Tel Aviv that—with Abraham Accords—had raised a lot of money to do hotels, and they loved our idea of what we were doing.
They thought we'd raise about $300 million. Brad and I did the dog and pony show with all the different people from UAE, Dubai, all over the Mid East, and we raised about $750 million and stopped them. We said, we don't have the bandwidth to do that many, but we bought about seven hotels. We looked at about 483. Gabe would tell us we probably bid on about 40 or 50, and we were disciplined on respecting the cost basis.
And the idea was to breathe new life—buy dissipated hotels—really reimagine, repurpose them through the renovation. We worked with Pierre-Yves Rochon—mostly the Rochon team—but also Michael Gabellini and a few other really great—Annabelle Selldorf who had done the Frick Museum. We wanted people who had not traditionally done hospitality because they brought a different mindset to it.
So we started to reimagine these properties, and some of them were really bad. There was a Holiday Inn that had been shut for two years that you would not believe.
And interior design—we knew we were winning the award for best renovation because it was their invitation, or Frank Gehry light picked over the bar was their invitation. So we had a pretty good feeling.
But NoMad—we had some hotels that really took a lot because when we bought these hotels, interest rates were low. They immediately, in a six-month period, jumped up, yet supply chain issues, yet inflation for the first time in 40 years. So it was sort of a perfect storm against us, but we really transformed these properties thoughtfully.
And we learned lessons about traditional commodity hospitality—that it's not who we are. It's not where we're relevant. It's not where we revinate. We're used to generating our own business. Much more transient.
We didn't realize that the rates that you have to give for groups and all these other groups are a lot lower. And when you hire all these people for a hotel, your expenses are much higher. And then you find out your rates are a lot lower because they tell you what the other 17 hotels in the comp set are doing.
And while you need to be at this, we were always—my brother and I—we bought something, we knew what it cost. We knew what it was gonna cost to transform it. We knew what the cost of the operations would be. So we knew what revenues we needed to generate.
And we always said, all right, if our partner needs 18%, we're gonna set the rates here. We'll be 80%. And it was a very easy business—Beverly Hills and New York City—but traditional commodity hotel was not of that ilk.
So we are starting to work with our partners—because we're a 25% GP—to bring groups in that are better suited for commodity hotel like Marriott, Hilton, Hyatt, some of these groups, and support them as a GP, but really get back to where we revinate.
And I think it was so highly proven after the pandemic because when all these hotels shuttered, we kept all our doors open. BlackRock, Brookfield, Brandy—they all allowed us to keep the doors open not knowing what would happen, and we resonated anew.
As I said, travelers were spending more, staying longer, and seeking these self-sufficient sanctuaries, and we assuaged all those needs at that time.
So we've really, in the last two years, generated about 50 to 65% margins, whereas hotels in general are 25 to 35%. It's not a good business. And I had to look myself in the mirror and say, am I doing this for the right reasons?
It was a design thing, but is there an ego to being in the hotel hospitality? There probably was. So it really was—I'm using this year, and when I say me, I'm talking about we, our team—are really using this as a reset, to sort of take a step back, to go one step back and really go two, three, four steps forward.
And we've met a lot of potential partners globally that love what we're doing, want to be a part of it. And we've probably never had more resources to buy new properties.
And now the call after this podcast is with my acquisition team. It's finding the right properties that really will be relevant and revinate with our audience and what we're trying to accomplish.
And it doesn't mean we won't do construction or renovation or—for the first time—build new. For Ave, we build everything new. It's like a spaceship in the suburbs. They've got everything—the nucleus ultra—of what people want in the new American dream.
We've never done that with AKA. We've always renovated existing historic landmarks, which I loved personally. But we will start adding some new in addition to that so we can really tailor it.
When we talk about the saunas and the wellness and all these things, you almost need to build what you need. So that's our new adventure going forward—taking one step back to go two, three steps forward.
And we have a lot of great, great global-minded partners lined up to help us in that pursuit to upscale the brand and expand it globally.
Steve Carran: That's awesome. Exciting times, and some good foresight there. So now we're gonna dive into some industry thoughts and the thought leadership section of the podcast.
So when I think about luxury accommodations, I think a lot about leisure travel, but they're really evolving to more than that with business travelers, remote workers, and kind of like what you were speaking about earlier—those experience-driven guests.
How is AKA kind of redefining that flexible luxury hospitality space, and how do you combine the hotel aspect with the residential comfort?
Larry Korman: It's a great question, and everybody within the hotel industry has had their fingers on those pulses because long ago, especially if they were staying longer, people who were traveling for business wanted personal pleasure. People who were going for personal pleasure—when I went to Japan, I needed my Wi-Fi. I needed to stay connected.
So people always— they call it "bleisure." Again, these names come out years after everybody's been assuaging those needs. But you have to have your fingers on the pulse.
For us, if somebody was staying for two weeks to three months, we couldn't just have a little closet with a treadmill and call it a fitness center like a lot of hotels do. We had to have a full-on fitness center that was like a mini-me version of Equinox, because they're not gonna give that up. So wellness early on was important to us.
All those elements—experiential—were always important to our guests staying with us. But I just think that in today's world, luxury isn't just a really expensive stone. First of all, they're building great porcelain that you couldn't even tell is marble, but it's not that.
It's really having your fingers on what people are looking for today. And when the pandemic hit, there was this new normal and there's certain companies that shifted.
We always had a pet policy. We didn't want a lot of dogs. Same with us. We had to change that, and you embrace it. So you have not only a pet policy that you encourage, you have a pet spa so you can take care of them. You have different elements—yappy hours. You make it, you embrace it.
So I think a boutique independent company can be more organic and authentic and a little faster to react than the monolithic giants like the Marriotts and Hiltons, which is why we generate a much higher rate and return on investment.
So I think you have to be very aware today that, just like we did with the Live It program about 10 years ago, we created Tiller—AKA F&B—and our first partner was Jean-Georges because we were gonna do a whole bunch of stuff together. But then he did a deal with Howard Hughes, so we brought Greg Vernick in.
We have people like Wolfgang Puck, Ellen Yin, who are the restaurateurs at our properties. We hired some other people. David Fields took a leading role in that, and we were very aware three-dimensionally of what people needed with respect to food and beverage that complemented their experience while on-site.
It's not the Hershey bar or the Diet Coke. It's working with Pascaline, who had Racines and then Chambers, to create a really thoughtful wine list, so that when somebody came back home there was something that was well curated for them.
If they wanted something that wasn't alcoholic, we created an elixir bar at AKA West Hollywood—the first one—and partnered with people. David Meyers, our chef at Adrift, created a matcha for us.
So we're trying to really three-dimensionally think about how food and beverage interact. No seed oils. Being the first at doing all this stuff and not doing it for buzzwords—we were doing it for the health and wellness of our guests.
So we were at the forefront of a lot of those things.
We've created a Tiller Health and Wellness, and just as I was a guinea pig and a lot of our leaders are guinea pigs for the Live It program doing things that we weren't comfortable with, I took opera lessons because I was scared to sing Happy Birthday as a kid because I had such a bad voice. Alana never liked public speaking—she took stand-up comedy.
So we encourage our team leaders to interact in these Live It programs each year. I took—you name it, we did it.
So with wellness, we just created a Tiller AKA Health and Wellness. My wife's very involved because of her 35-year background in wellness, and she really evolved her business from 3000 BC, which was a day spa, to Body and Beauty Labs, and partnered with Jefferson Health in Philadelphia. So she's gotten really involved with integrative health.
We're working with Dr. Baan at Jefferson, Scott Greenberg on functional medicine, B-Cell Song Lasers, this guy Dr. Todd in Carlsbad, who works with Dr. Horvath at UCLA, the biological father of that whole side.
So we're really introducing to our guests in a three-dimensional manner—whether they just want to learn about it or actually interact in it—these new ways of living longer and living better.
So if they have two weeks to three months, they really do have the ability to not only learn about it, but partake.
And I was just at our hotel AKA Brickell—they can put on their AKA robe, like Brian had, go down the elevator, down the escalator to the second floor, and we have VET, which is a private club for really expensive technology that only NASA has where you can spin for 17 minutes and have an eight-hour sleep or you get things hooked up to you.
I mean, it's amazing. I had this one treatment called V Cell with the Song Laser where they take your blood, spin it, put it back in, and use this laser that Dr. Todd created and it's supposed to take you back three years.
So there's all this crazy technology now and knowledge as to how you can live better. And we want to impart that as part of our program, as part of the DNA of AKA, is wellness.
And how do we evolve that each year to take it to the next level? There's so much thinking about gut health and how you sleep and how to sleep better and how to eat better and nutrition.
While I think some of the stuff RFK Jr. is doing is crazy, look at what's happened to nutrition and diet from when we grew up in Abington—eating Rizzo's and Pop-Tarts and Continental Pizza and all that. It was bad food, but it was healthy food. What's in there now? It’s all changed.
So this idea that we can use food and beverage and health and wellness as part of that DNA of AKA, I think, is a powerful tool. And at the end of the day, that's the ultimate luxury—time—is living longer and living better. So we've really made that an important part as we grow forward.
David Millili: So I'm gonna change this next question up a little bit. You've touched on architecture, design, wellness, kind of the aroma—how do you make sure all those things work together? Because I know each one can be so specific into itself, but how do you make sure all those things come together to really impact the guest experience?
Larry Korman: So much is subliminal, and you have to make sure it's consistently applied. So continuity is an important part, which is why we haven't grown quickly. We've done one at a time, and we have a team that's been with us a long time—20, 30, 40, 50 years. So they really three-dimensionally have it emblazoned what AKA experience is, and that certainly helps—many hands, many hearts, as Disney said.
But think of when you first—if you never had been to New York—and you get to New York and you have the screaming and the beeping and the trash piled up and this person yelling and there's chaos, and you've already got chaos in your life.
You're either starting a new job or you're getting health treatment or you got severance—whatever it is—you already have some chaos in your life. Now you end up in this urban jungle, New York.
That experience of opening the door to AKA and what we call the calm of AKA is all about taking you back.
So the original theory of AKA, before we had the name or the concept—I had two stones: tranquility, serenity.
So the idea was when you walked into AKA—tranquility—this calm. And the way in which you do it is subliminal. There's less people living there. There's less people working there.
We chose minimal contemporary design because it's quieting. It's not a lot of stuff, hodgepodge like Ian Schrager's—that is shock value. We're all about the slow well.
So this idea of minimal contemporary, really thoughtful lighting—not blasting lighting—it's really nice, dimmed lighting. Halogen lighting. We have some Kelvin 2700 LED to be energy conservative, but that's the closest to ambient light.
We have pure essential oils that change seasonally that—again, subliminal—you're smelling this, you're feeling it. Ultra clean. We keep everything very clean. That goes hand in hand with minimal contemporary architecture.
So all these things come together, and you might not be aware of the low light or the soft music or the pure essential oils or the way in which a guest is greeted by the doorman or the front desk, but all those things come together and you feel really good, relaxed.
So then you go upstairs—it's all about serenity. A good night's sleep. We always say at the end of the day, it's still about a great night's sleep.
So having really good mattresses—and the only way we could afford really good mattresses was to meet with Sealy Posturepedic and Stearns & Foster, which were the same company, and say, we like these elements, we like that. And they're like, well, these are $2,800 beds— we'll commit to.
What we did is we were able to buy them for like $600, sell them to guests for $900, but they're $2,800 mattresses and they have horizontal and vertical support. So you go to a hotel that's maybe a little older and the bed's like caving in where the two people were—this doesn't happen.
So we have really good furniture and really good mattresses, and Frette linens and CaTech. So we got the best of everything—bath products, body care—all those things come together to create a very nice living environment.
And at the end of the day, part of that good night's sleep comes from you feeling like you're at home.
And this is subliminal also: when you go to a hotel, you expect your knocks on the door. You expect if you put your pants on the bed or a magazine, it'll all be put back, and you don't feel like you're at home subliminally when you come back home.
Because we have one housekeeping per week—your pants are on the bed, your magazine's on the bed. You don't get knocks on the door. It's your "A-per-ture" on demand.
So when you need something, we're there for you. When you don't and you just want pure relaxation and privacy, you have that to the nth degree.
So these are subliminal elements rather than saying in early English or Duke business—you don't say it, you show it. So we didn't use a lot of these buzzwords. We didn't do a lot of advertising. We did a lot more communicating with our guests, who, in turn—people like Diane Keaton and Richard Gere—fell in love with AKA.
They felt like they were on a silver platter at the Plaza. They felt like they were at home.
They started saying to me, "We'll get out our Rolodex and call people—Silvercup, Kaufman Astoria, Steiner Studios." They said, "If you can create the technology where we could watch dailies in the comfort of a living room, we'll stay with you."
All of a sudden, by 2008, where it was our "oak stay" and we had four properties, we had 80% of the productions—anything being filmed—TV, movie—all were staying with us: producers, directors, stars, because of anonymity but assuaging their need for privacy.
So it really was something that built over time—almost like guerrilla marketing—and people liked that we were under the radar. They didn't know it. It just said AKA—very small, very cryptic. But people knew. They told others. And each year it grew.
And now a lot of people know about it. And I credit our Alana, Florence, our marketing team—Sarah—all them—for just really embracing this idea of referrals and loyalty and all those elements.
And at the end of the day, the best loyalty program isn't coming from a point. It's coming from people having had a great experience and their friend telling them, "If you're going, you have to stay there."
We're doing other things to create loyalty. We have access—AKA Membership Club and the Canine Club.
We're creating conditioned clothing containers where, if you're staying often with us, just traveling with a briefcase is a luxury—having your clothing, your toiletries with us waiting for you.
When you check in, you say, "I need this dry cleaned, this laundered, and can you replace my toothbrush and toothpaste?" And boom—it's there. There's no better loyalty than me holding onto your clothing and toiletries. You're coming back.
Steve Carran: That is great. So one thing that I've been really impressed with from this conversation is how you have adapted to, I guess, new guest trends—and not trends, I should say—but really the guest experience, how it's evolved over the years.
Do you have any advice for maybe legacy properties that maybe aren't evolving or shifting with the demographics of the changing guest?
Larry Korman: The first thing I would say is don't just check boxes for the sake of checking boxes. All right?
"I'm gonna build a hotel. I'm gonna do this, this, this, and this." It's inauthentic.
People bought the authenticity. Whether you like or hate Donald Trump—and we're apolitical and areligious at AKA—he's authentic, right? Right or wrong. Obama—authentic. And they all stayed with us at AKA White House. So whoever was staying with us, we're a global community. We embrace all.
Tina Fey once was staying with us for four months, and we had all of Trump's first administration there. I think she was doing one of her shows. And every morning she'd come down with her little head, get her coffee, and change Fox to CNN and go up—for four months. It would drive everybody in Trump's administration crazy, but we stayed out of the fray.
But my advice would be: don't just do things for the sake of doing it. It has to have purpose and meaning to your property, your location, your guests—who you're trying to appeal to.
We don't have a pool at AKA Beverly Hills. We have a lot of adults staying with us who want the quiet—the tranquility—on the third-floor terrace. And if you had a pool and you had families in it, people splashing around, it would go against the grain of that.
So I think the first thing is not to just do things for the sake of doing things.
And I think the second and most important for a legacy—so many companies die out after the second generation—this is a lesson my dad always taught my brothers and I.
I would just say: treat others the way in which you want to be treated.
So one of the things we did 20 years ago—and it was our first PR story in BusinessWeek—is I didn't put Bibles in the end tables. I did a book that I had growing up: Everything I Need to Know I Learned in Kindergarten.
So I put one of those—I think I bought 10,000 of them—and put them in each drawer, and people would take them and I invite them to take them, because at the end of the day, just treat people on your team, your guests, the way you would want them to treat you.
So that's the most basic lesson out there. And if you really live by that three-dimensionally, your attitude can determine your altitude.
And if you're always telling—and we have a partner that we're… you know, we didn't do 10-year, 20-year term. We have a handshake. It's my grandfather and father handshake.
There's partners where if they don't want you to operate your property, you shouldn't have to operate their property if you don't want to operate with them.
So we actually have a partnership where we don't have alignment of values and vision, so we are asking to make that change—and not in a negative way.
We don't wanna be in the traditional commodity hotel business, but we also want to be super respectful to our team members who we know are working hard, long hours. They're away from their family, away from their kids and wife, and they're working hard.
So I much prefer having a positive, bullish attitude. And generally that has a ripple effect. Your team members pick that up. They pass it on to their team members, they pass it on to the guests.
So we've seen a partner here or there who says, "Everybody's pissed. We're doomed for sure." Well, we just got out of construction—actually, we're in construction—blah, blah, blah. You know, it takes time, time, time, time.
So I think it's really this mindset that your attitude can determine your altitude.
Number one: treat others the way in which you want to be treated. It's very simple. Everything you need to know, you learned in kindergarten. You know how to treat people nice in the sandbox. So do it. Do it and be aware of it.
And then don't just check boxes. It's inauthentic. And people want authenticity, and every place does not need to be the same. Airbnb proved that, we've proved it, and there's other great brands that have proved that.
Steve Carran: That's great. Well said, well said. So for this section, usually we're the ones asking the question. This is where we turn the tables and let you ask David and I a question.
Larry Korman: Well, tell—because I did look at some of the people you interviewed and your interviews are awesome—who were some of the people that you interviewed and what are some of the takeaways from those interviews that really resonated with each of you?
Steve Carran: I'll go first, David. This is one of my favorite interviews. I'll say that right off the bat. And I'm not just saying that 'cause you're here. I learned so much during this conversation. So thank you so much for coming on.
I think one of my favorite ones that actually happened recently, it was with Bradley Stewart—he owns Caravan Outpost. It's a—they have 10 Airstream trailers and then a mini house essentially.
But I just loved his background. I grew up snowboarding. He was a professional snowboarder, brought snowboarding into the Olympics.
So especially watching the Olympics now—when I'm watching halfpipe and stuff like that—I'm thinking like, wow, this is one of the guys that actually brought the sport to the Olympics.
But hearing his backstory and how it all kind of led to hospitality, and how his demeanor, his personality really goes into Caravan Outpost—you can see that from talking to him. Just the atmosphere of Caravan Outpost—I've never stayed there, but it seems like people are relaxed, they're comfortable, and they enjoy being there.
So that's one of my favorite recent episodes, just to kinda see how it all came together.
Larry Korman: As a total aside, we did a partnership with Airstream, the CEO of Airstream. We wanted to create the world's first mobile AKA, so who better than the silver bullet of Airstream.
And we got their largest one. We had AKA on it. We worked with (inaudible) to make it look like an AKA inside. We worked with Trina Turk to outfit it and make it fun.
We had our (inaudible) and M&M's with the AKA logo on it, and AKA Café coffee and all that. And we started at AKA Beverly Hills, had a big event with Airstream.
And I was the guinea pig. So I told you about my 60th birthday bucket list. My wife's bucket list was to go to Switzerland, but for her 50th, I surprised her, brought her to LA.
We got the lesson on how to use the Airstream and we went to the first couple places and what we were gonna do when we used Matthew (inaudible)—he's out of Malibu—to film it and take all the photographs and play it up and got a lot of PR about this idea that you could go take AKA on the ride.
And you were gonna start with these vineyards in upper California and then work your way down to Vegas and stay at Wayne Newton's Casa de Shenandoah.
So we were the guinea pigs for this. And lesson one—and I should mention this to the caravan—is we went an hour south to meet the Airstream people and learn about stinky slinkies and all that other stuff.
I was talking to the CEO the whole time, so I wasn't paying attention. But then you had to fight traffic and drive this Airstream with it—the largest one in their fleet.
And I remember going eight lanes over—that took me forever. I was dripping wet and my wife saying, "I have to go to the bathroom." I'm like, "You can crawl out of this window into the Airstream. I'm not going back over."
But we went to the first campsite and I had to back up—I smashed the back of it. I went to do the stinky slinky—I didn't pay attention—I burnt my hand. All these other people came in. I'm icing my burns on the (inaudible), which I did freeze.
But I learned the lesson: have these set up and have them go from A to B. So you learn lessons by doing it yourself.
But after the second day, my wife's like, "This is not what I want to do for my 50th." So I called Wayne Newton up. I said, we're gonna—it's not working out. He said, "Just get on a plane. I'll pick you up."
And we spent two days with Wayne at Casa de Shenandoah. He took us out for great meals. We had a blast. He sang Happy Birthday to Korman. So it worked out at the end.
But we love Airstream. It just—we left it there after that.
Steve Carran: Fair enough.
Larry Korman: We'll let them take that again. Everybody stands for something specific.
Steve Carran: You bet. David, what about you?
David Millili: I'll just, you know, real quick, I'll just say that I think it's the—I wouldn't say it's one guest. It's more so our format, because we get to know people outside of the industry—backgrounds, where they grew up.
We get a lot of people from outside of Philadelphia. We get a lot of people from Wisconsin, which is kind of cool for us.
But for me, I like the fact that we just get to know who these people are, not just what their title is, what the company is they work for.
So even like listening to your story in the fourth generation, that's the part of this that is the really cool part, 'cause a lot of the trade shows you go to or sessions or panels are so niche and specific about just something—sustainability or AI or whatever—and you don't really get to know who the people are.
And I think we're in the people business, so for us to get to know you outside of just AKA is the cool part of this.
Larry Korman: I love that. I love that.
Steve Carran: Well said, David. So, Larry, this has been a great conversation. Really appreciate all your insight. Our producer Jon, he's been listening the whole time. We're gonna kick it over to him for one last question before we get you outta here.
Jon Bumhoffer: My last question is, it has been very interesting listening to your background and everything, and we can tell you're super passionate about the design and the intentionality behind the properties.
I'm curious, outside of—you mentioned Louis Kahn and some other things—but outside of those things, what are some other things that really maybe are not hotel-related that really influence the way you think about hospitality or the design? What are things that really have impacted the way you view that and have put into place in your properties?
Larry Korman: One of my favorite things to do once a year with my oldest son is, when we're in LA and we're working at AKA West Hollywood—AKA Beverly Hills—is to drive up the coast to Big Sur and just go hiking. And just this idea of being outside with your son, having these experiences and feeling great.
So just this connection with the environment and with landscape. I always grew up appreciating landscape because it really mattered to my dad. My dad was really crazy with turf and double-edge cutting and spade edges and all those things.
So just to take in the more informal aspects of landscaping and enjoying that and reminding myself that, you know, time spent doing things that are good for you with your family—it is just very healing. It's enjoyable, and you don't wanna forget those.
You know, they say smell the roses. Literally smell the roses.
David Millili: That's great. Well, that—
Larry Korman: I have my two ferns on each side. You know the interview—the two ferns—Zach, Ian—those are my two quasi ferns on each side.
David Millili: We'll see if Jon can work that in somehow. Well, that does it for another episode of The Modern Hotelier.
Larry, this is where we let you plug away AKA—how people can get in touch with you—so go for it.
Larry Korman: dayaka.com. The better way to stay for more than a day. That's not a tagline—I just sort of made that up. But www.stayaka.com.
David Millili: All right. That's great. Well, that does it for another episode of The Modern Hotelier, the most engaged podcast in hospitality. Whether you're watching or listening, we appreciate you and hope to be with you again soon. Thanks for joining us, Larry.
Larry Korman: Thank you guys. Really, really appreciate.