Buying Hotels Is Just the Start: How to Build a Lasting Hospitality Brand | Keir Weimer E29

Michael Russell 0:00

Ever wondered how you could hold on to a boutique hotel for the long haul, build serious enterprise value, and still pay back your investors without ever selling the property? In this episode, Nate and I sit down with Kerr Weimer, founder of Weekender, a fast-growing hospitality brand with nine boutique hotels across the Northeast. He shares the strategies he's putting in place now to structure his deals for scalability, raising capital in a way that allows him to refinance, return investor capital, and keep the properties indefinitely. If you're building a brand, running a hospitality business, or wondering how to hold legacy assets without hitting the exit button, this one's for you. Let's dive in. Welcome to the Hotel Investor Playbook, your guide to building wealth and freedom through boutique hotel ownership, hosted by Mike and Nate. Get in the game, welcome to the Hotel Investor Playbook. We're Mike and Nate, founders of Malama Capital, and your host on this podcast. We talk story about everything you need to know to make money investing in hotels and hospitality assets. On today's show, we are happy to introduce Kerr Weimer. Kerr, welcome to the show.

Keir Weimer 1:21

Thanks, guys. Great for being here.

Michael Russell 1:23

So, Kerr, you're living the dream. You own a multitude of resort locations. And currently you're on a road trip yourself. You are out from managing or being involved in day-to-day work of operations. You're you're out exploring. You're on the hunt for another location. Your goal is to get another property under acquisition. So why don't you tell us a little bit about where you are and what you're doing?

Keir Weimer 1:47

I am about four weeks into kind of a two to three month cross-country outwest adventure RV trip. So I've got a 20-foot toe behind outfitted to be part office, part adventure center. And I've kind of gotten to a point in my career in life where I've been super grateful for this, been able to fully align my business and professional pursuits with my lifestyle and my personal hobbies and values and goals. So super grateful for that. But there is a little added intentionality behind this trip. So we're at a point now with our young company that's four years old called Weekender, started at the kind of height of COVID in March of 2021. We have nine properties now in three states in our portfolio, centered in the northeastern United States, New York, Vermont, and New Hampshire. And we're at a point where we're ready to expand to different regions, different parts of the country, and eventually in a few years, probably internationally. And that's for a few reasons. That's one, a function of the market, valuations, deal flow in the Northeast, two, seeing the upside and the growth for our brand in other regions and Western markets. And three, getting ready also to launch a third-party management division in our company and wanting to test our operational skills and extend supply lines before we go on approach and really work with other hoteliers, asset owners, and brands to potentially manage under the weekend or brand some of their assets. So, yeah, that's kind of in a nutshell what I'm doing. I'm about four states into it, about four weeks into it, probably another four or five states, and probably coming home at the middle to end of May.

Nathan St Cyr 3:21

Well, first of all, I freaking love that, but I just want to start back with the Fritz simple part where you said I'm grateful and fortunate that I'm aligned with not just what you're doing professionally, but personally. And before we hopped on, we were talking about you're not just pulling your office behind you. You got toys behind you, you got snowmobiles, you got your sleds. One of the one of the big benefits of investing in hospitality is that you're looking for assets in the places that all of us want to go, right? That's one of the coolest things that Mike and I will be we'll be in a location and we'll be like, well, this doesn't suck, right? We're in Hawaii, we're on Maui, we go and add properties in different islands. So hearing you describe this two-month acquisition process that's not just acquisition, but is also you enjoying your life is I think that's that's a really inspiring point that you we're we're watching you out there do that.

Keir Weimer 4:15

Yeah, well, thanks for saying that. One thing to add too, I give a lot of credit to my director of operations and integrator. Let's see, a year and a half, she's been with us, and we've been running on EOS for about that same time, about 15, 16 months, going on a year and a half. And without those two things, without Allison, without EOS, I don't think I'd be able to do this to this extent. So I'm grateful for that as well. I'm now able to move in a little bit of a supported, not forced, but very much supported trip to get out of my own way, to get a little bit more out of ops, day-to-day meetings, decisions, and focus on growth, right? Growing the brand, growing locations, leading into acquisitions, fundraising, culture vision, and let our operational team that's super capable right back home run our current day-to-day operations. So I really do owe a lot to her and to the EOS framework to be able to even do this. Love it.

Michael Russell 5:05

Yeah. We use EOS as well. And in fact, just yesterday we had our quarterly meeting where we went through our objectives and set our quarterly objectives, which align with our annual objectives. And that's a really exciting part because we're we're highly focused on acquisitions. That is our goal. Like we're gonna go out, we're gonna purchase $10 million worth of assets this year. So far, we have, I think it's $1.6 million that we've already closed on. We bought another property recently, but that's our goal. And right now we're having this podcast, and you're located actually in a casino, right? You're recording this podcast because you found some space in a casino, but you're out there in your RV traveling around. You're on a quest similarly to go and acquire another property. I'm very fond of pounding the pavement, knocking on doors, right? Shaking hands, meeting people, person to person. Yes, looking online can be an efficient way to scour the market. But sometimes when you're there in person, that's where you can really uncover the jewels, right? And so um we we talk about this all the time. We've had success by literally door knocking, just going up to properties and knocking on the door and say, hey, I admire your property. Well, the biggest compliment you can give a small hotel owner is to say, Hey, I'd love to buy it because no one's gonna want to buy something that's not attractive, right? In just to some degree. At least that's my perspective. And so, can you attest like your experience right now, as you're out there, you're hunting for deals? What are you doing? How are you trying to uncover your next property?

Keir Weimer 6:35

Yeah, I think that's a great point. I agree with that. We've acquired probably two-thirds of our nine hotels with off-market transaction parameters, relationship development, building those in-person relationships and doing it often cold without any actual connection. So I think that's actually a big value driver. And I think that's a way for a lot of your listeners, anybody starting out, to really get good at that, right? Which is just bottom baseline relationships, sales, getting out there, putting yourself out there, not being scared to hear no, and developing rapport, right, with front desk managers, GMs, and owners. That's how you start to understand the business better, the industry, and unearth opportunities for people that may not even be thinking about selling until they realize maybe I could sell. Maybe there is an offer here, right? So I think that is great. The one downside to that is that it doesn't scale, right? It's it's hard to do that at scale and at a level with speed that may match growth vision, right? So what we're trying to do is pepper that core competency we built through my days as a broker first, then an owner, principal, investor, and couple that with also a public outreach on market strategy with developing relationships like we do with sellers, but doing it with good brokers, right? Doing it with good market experts, doing it with good investment advisors, attorneys, et cetera, in markets that we want to be in, because that's also how you unearth off-market opportunities before they hit the market. I've done that now with several brokers that know that we have an ability to close. We close on our terms, we don't retrade, we're fair with sellers. And as a result, we're getting deals before they even go to market, which is awesome. So they're originally going to be listed, right? They're in a suicide right to sell with a broker, but they're giving us a further first by the apple, which is awesome.

Nathan St Cyr 8:23

That's was that was going to be my follow-up question. Is as you've been growing now, and as you've created this reputation that you can close deals, that you do have experience, that you are growing, are you finding deals coming to you? And how often are deals being brought to you?

Keir Weimer 8:43

Yep, good question. I would say in the last year, year and a half, we've definitely now gotten more deal flow that's inbound, which is awesome. So it's again, it's brokers, it's network, it's friends one or two degrees away, it's sometimes direct owners, and it's also people that are adjacent, right? Other investors. But yeah, I would say our inbound is increased dramatically now. And I would say we look at at least three to five deals a week that are kind of flowing our way that are meaningful, that hit a lot of our kind of acquisition criteria buy boxes. But as you know, this is like an imperfect, often quantitative meets qualitative underwriting, right? And selection, like no property unless you're building ground up in your ideal location, is gonna hit all your boxes. So it's a very careful, like high-level analysis. Does it hit the big ones? And then are we willing to trade off some of the others and find margin or find a strategy to be able to be comfortable trading those off? So yeah, that's kind of how we've been doing it. I think when you do build your brand through PR podcasts, being at events, getting a certain level of critical mass so that there's not just talk, but there's action to back it up. All of a sudden, people start to take you more seriously. They start to know there's credibility there, and then things just kind of the universe like wants to send you stuff, right? You just start attracting.

Nathan St Cyr 9:57

I love this. You're picking up your own universal momentum.

Keir Weimer 10:00

Yeah, exactly. Yep.

Michael Russell 10:02

Yeah, so from like a high level, you're out there communicating to anyone that will listen to you that's relevant to what you're trying to accomplish. And how do you communicate concisely what you're looking for? You mentioned you have a buy box. Is there like a quick script that you give someone so that they can conceptualize what fits your parameters?

Keir Weimer 10:21

Sure, yeah. At a high level, our acquisition criteria is really this. So we're an independent owner-operator of boutique, outdoor-oriented assets that are located in really iconic outdoor leisure markets within 20 to 30 minutes of really durable forever demand. So by that, I define that as state and national parks, world-class skiing, hiking, mountain biking, on or very close to water for all things water sports, and being also then within a two to three hour drive time, not flight drive time, to millions of people in several different diverse MSAs, so that's super accessible and easy for people to get away with low travel costs driven, not flying. So for us, that's like high-level market. And then once we identify those, we get down to our shorter list, we start to look at region, we start to look at properties within it, identifying it using technologies such as CoStar and other things on the web just to get our physical property list of what may fit, you know, weekenders' physical requirements. And that's generally physical appearance of a motel, hotel, motor lodge kind of cabin county that's like 30 to 90 keys. Let's say 100 keys somewhere in that range, pretty broad, right? But our average key count right now is about 35. And over the next two years, we're trying to double that almost to 50 to 65, somewhere in that range, just to get some economies to scale, but not lose the intimacy and the personality of smaller properties. And then we look for things that ideally don't have a big core FB component, but we realize as we look at larger properties, a lot of them do have that. And it's more of an amenity, not really a profit center. So we're trying to develop a better core competency in-house to manage FB and group sales and events well. We have two restaurants now, a couple of ours in our portfolio, and we do a lot of weddings and corporate offsides at a few of the locations, but I wouldn't say it's a core competency or passion for us, like hotel stays and adventure and experiences is. So we're trying to work on developing that. And then the other thing is we look for obviously a good basis. We look for hotels that already have a local brand, ideally that are reviewed well, but are under-capitalized, under-renovated, under-operated. Usually mom and pop owners, kids that moved away, don't want to take it over, and they're kind of at a point where they have to invest a lot of money to grow revenue rate and occupancy or sell. So those are the types of ownership that we also try to identify. So we kind of filter through that large macro top of funnel on region market. Then we go to eligible properties, then we go down to the short list of like really eligible properties, and then we start outreach kind of from there. And that's for the off-market approach, obviously, not necessarily the inbound on market.

Michael Russell 13:01

That's so good. That is great. Like the fact that you've been able to really drill down and have a central focus, it cuts out so much of the noise to help you be able to see exactly when there's an opportunity in front of you. You know, because you have a clear vision of what you're looking for.

Keir Weimer 13:16

Totally. We can sift through that stuff quickly, right? If we're getting a lot of deals for working and stuff, it's easy to say no. And that's the thing. You could be really good at saying no in this business, right? Because it's easy to say yes to stuff. And we've said no, obviously, at a 10 or 15 or 20 multiple to what we've said yes to. The other thing that I think is unique, worth mentioning if you're listeners, is a lot of firms, young, mid-size, mature, really focus on like top of funnel acquisitions. They build a process, a department, and a throughput that's all about numbers. We're like the opposite. If you look historically at the amount of deals we've looked at to the amount we've closed to get to nine, it's insane. It's probably like three to one. Like we look at three deals, and out of three deals, we're closing on one. Now that's gonna change as we move into new markets where we have less intimate knowledge and familiarity with. So these are in markets that I know right the back of my hand, the Northeast I grew up in, right? So like I already intuitively have this like qualitative sense of what's gonna work, where we're gonna do well and where we're not. And I can kind of get there really quickly. And then maybe we've gotten a little bit lucky with developing the rapport and the terms that work with sellers. But I think we're a little unique in that, right? We're not looking at 100 deals to close on one or 50 deals to close on one. We're not underwriting at that velocity or pace. We've just gotten really good at what we look at, where we kind of focus our site, and then how we take things through that. But I do know that that has to change, right? Because that doesn't scale also. So we're working through building our acquisitions department out and building some things into that.

Nathan St Cyr 14:50

So when you say the three to one, what you look at, what are you defining as we look at three and we we close about one? Like what is you you kept saying we'll look at three, but what does look at mean?

Keir Weimer 15:02

Yeah, so good question. So let me zoom out. I would say we probably look at more like five or six. We underwrite three, we close on one with one offer. So high level to a full underwrite to LOI an offer that's acceptable to a seller to closing.

Nathan St Cyr 15:15

Yeah. So I'm guessing that as these deals come through, you've really identified what works for the weekender profile. It's really easy for you to say no to a lot. So it breaks it down to okay, this one is worth looking at. You can tell, okay, this fits a lot of these check marks. So now let's go and look at this and actually do a deep dive into it, underwrite it, and ultimately make an offer.

Keir Weimer 15:42

That's exactly it. And it also keeps resources contained and cost, so we're not having to employ a big kind of department with a couple of full-time people running through dozens of deals a week, right? But because you're looking at visionary CEO founder, but also I wear that hat in the seat of acquisitions head and head of capital markets, too. So at some point, I'm gonna need to get out of those seats probably in the next 12 to 18 months. So I'm starting to like work on what that plan framework departmental kind of strategy looks like right now. I'm really just supported by a very part-time intern at NYU's real estate uh graduate school where I went for my master's in real estate and I get probably 10 hours a week supporting mostly on model underwriting, but I'm mostly leading that effort and the outreach effort. And so I think at some point, like I mentioned, to marry the vision, the velocity, and the key count acquisition goal with markets that we're not as familiar in, we're gonna have to do things a little bit differently. Like our goal this year, like yours, is 10 million in acquired assets. We do it more on like key count because our big like EOS tenure B Hag target is really focused on serving and inspiring over a million guests per year. And to do that, we can literally calculate it down to like how many rooms we need to have in the portfolio based on just average occupancy, room nights, et cetera. So our goal like as a minimum is 150 keys this year to bring into the portfolio now that we have about 200, just under 250. And we're shooting for 200 and doing it with three to four properties of just a higher key count, you know, than we've done kind of historically.

Michael Russell 17:10

Yeah. Can you can you repeat that again? You said B HAG. I I've heard this before, I understand what it is, but can you walk us through that?

Keir Weimer 17:16

Yeah, I actually hate the acronym. It's just our 10-year target or 10-year vision, but it stands for big hairy audacious goal, I guess. And it's kind of like what is something that's so crazy, it's like scary, but still reasonably achievable that is distant enough that it's gonna make you think differently. And so for us, it's how can we literally inspire a million guests per year through personal growth to adventure travel and what we do in our business? So right now we're inspiring about 70,000, 75,000 a year. So we it's a lot to do to get there. And it is kind of scary, but it's like super quantifiable and it's relatable to even down to part-time like housekeeping team members or maintenance versus a revenue goal or a key goal or an asset goal or a hotel goal. Like hourly housekeeping team that's coming in, like they don't care about that, but they can actually relate to serving over a million people is like so scary, but also enticing and exciting. It's like, wow, like that's really cool. I can get behind that.

Nathan St Cyr 18:12

Well, uh, yeah, and call the time out right here. I mean, this is like this is a differentiator between anything that I've heard anybody else say. So I want to, I want to, I want to start by just complimenting the hell out of you for saying, okay, from an organizational standpoint, if we make our goal based on the feeling that all of us are you're creating this cultural alignment, even from this, from like you just said, from an acquisition acquisition and a company success standpoint, all the way down to to the person that's cleaning the room is like, hey, we this is a this is more than than a number. This is about a mission and a vision to provide something that's beyond ourselves. And that's really what hospitality is. So the fact that you have your your B HAG as this million people served, that dude, dude, I dig that.

Keir Weimer 19:04

Well, you know what? It it per doesn't it? It personifies it, it makes it relatable, it makes it understandable and exciting to everybody in the business. But it here's but here's the thing you can take what you how you define your goal, guys, and then make it into a relatable like sub goal that feeds that. So like you could have an internal ownership set of goals, like that million people, I can easily quantify that back up to how much revenue, how much keys and properties that looks like, but I just don't do it that way. I want to do it in a way that everybody can get excited about.

Michael Russell 19:37

Hey guys, quick heads up Malama Capital, our investment arm, is full steam ahead on finding our next hotel acquisition this quarter. If you know of a deal or you're working on something yourself and want to partner up, we'd love to hear about it. We offer a generous finders fee, or if it's a fit, we can bring you into the deal for a slice of the equity and give you a front row seat to the whole project. Process from A to Z. There's a short form linked in the show notes. Just drop your name and a few quick details. And if it looks like a fit, we'll be in touch. Now, back to the show.

Nathan St Cyr 20:10

Yes, that's that's the genius part of it. I love that.

Michael Russell 20:13

Yeah, and on a broader level, like one of the attractive aspects of this hot this asset class is the fact that we're serving people and it feels good when they have a great time. And so when you align that with your staff, they're like, oh man, like we're serving all these people. We're growing, especially in our hospitality business where it's hostels, like the hostile community is all about just connection, right? And so that aligns the staff with the guests, where there is a direct connection between their efforts and the result in terms of how many people are getting to experience this amazing opportunity to come to Hawaii or wherever we have a location. So I really like that. You've built this brand, The Weekender, which it's more than just a collection of boutique hotels. It's this whole branded experience. It's got this clear identity across every property. So from the start, was your vision to build a lifestyle hospitality brand with enterprise value, or did that strategy just kind of evolve over time as you grew?

Keir Weimer 21:14

I think there was a bit of the original goal there, but it's definitely grown, the ambition, the vision's grown, right? As we've gotten traction. So where I had this big idea to go from one location to a brand and a portfolio and a platform was really when COVID hit, it changed the world, changed travel, changed my personal compass of like what I wanted to do with my life and my career. And it was such a calibrator that I literally started to transition out of all my other businesses that I had started. And I just went all in on weekend. And the reason was is I saw a big shift in leisure travel demand, in prioritizing unique independent brands over the same old reward program, cookie cutter, big national flags, multinationals. I saw people moving to the grid outdoors more and experiencing getting back to nature, activities, and memorable experiences. And I saw this happen like right before my eyes. Like I kind of saw what we were already doing at the one location I bought in 2015, which is our flagship resort on 600 feet of waterfront at this epic setting in the Adronic Mountain of Uxate, New York. 30 rooms, two restaurants, weddings and events. Bought it in my early 30s when I was still a broker. It was really the listing broker for it. Couldn't find a buyer, recused myself, recruited two of my friends from Manhattan to be day-to-day operators, three people in their early 30s with not a lick of experience in hotel management, restaurant management, events, or construction management. We figured that shit out and off to the races. Tough first two years, but then we got into a groove. We started winning a bunch of awards, we started making good money. And that, before I knew it, was a key part of this inception story. Fast forward to 2000, I was doing all this other stuff, right? Getting distracted, typical ADHD entrepreneur. And then COVID hit. Boom, and it like shook my world. And I was, I bought us our second asset in May of 2020. Lenders called me and said, You sure you want to close? We don't have to do this. I was like, no, we're we're doing it. I can see around the corner, it's gonna be fine. First two months, crickets. I was like, oh shit. I made a mistake here. Then it was off to the races, August 2020. And that was one of our, and still is one of our best performing assets. And quick little case study for all you asset managers out there, investors. This is just so inspiring. It's got to be mentioned. Water for 1.25, guys, 150 capex was already recently renovated, just not operated and performed optimally. Four years later, this last December, appraised for 5.2. We literally 3x the NOI in four years, 5x the value, was able to take out two and a half, still own the asset, and only lever it up to like 55%. So like that was inspiring too, because that was one of now three full-cycle case studies we have. But anyway, I digress. COVID then changed it all. Fast forward to 2021. That's when that vision, the original enterprise idea, went full on. So I started weekend as a brand. I bought the IP around it in March of 2021. We bought our third property in May of 21. And then we acquired like three more assets in the next 12 months, and then kept going in pump the breaks a little bit when interest rates forced us to. We don't want to get over our handlebars. So we've only acquired three hotels in the last 18 months since rates really got kind of out of control. But now we're starting to get back into growth mode for a number of reasons. But what people don't realize when they think about how to get into real estate investing, right? We all know the freedom that you create, the cash flow, the net worth gains, the tax efficiencies, the utility, the lifestyle benefits and hospitality. What they don't realize is that if you build a brand, a consumer brand, a front-end brand, in addition to your asset management side of your business, you're creating a level of enterprise value, of scalability, and of saleability that you don't have without that brand. So most investors are not building a brand that sits on top or in front of their assets. They're either hiring somebody else to manage them, largely brandless, or they're managing them in the dark or white labeled or however. But I would strongly recommend going deep on why a brand could be so powerful because what it does, it creates efficiencies, verticality, closeness to the consumer from renovation to operation to fulfillment of your service, your brand promise to actual dollar enterprise value. Because now for every rich guest profile you have, for every person on your database and list, it's worth on the low end 50 bucks, on the high end 100 bucks. Now we've created an eight-figure asset just with the management company or the brand, in addition to the team we've amassed, the tech stack, our unique proprietaries weekender way, right? And that's like totally separate from just valuing based on a cap rate on the NOI of our hotels, right? So the enterprise value is multifold and it really starts and ends and is amplified by a consumer brand, by something that ties together an ordinarily disparate set of assets. You guys get that. You've done the same thing. A lot of investors and operators and asset managers don't fully understand that. Operating company and asset management company.

Nathan St Cyr 26:14

Okay. So here's here's where I get like this the question then, because that was easy for us to conceptualize as we were bootstrapping, right? We used our own capital. We boom, everything we own to this date is just it's ours. We can choose then what direction and what we want to go. But now all of a sudden we go out and bring in investors to a single syndication, to a fund. Where is there separation between what the investor owns? How do you structure that with Weekender?

Keir Weimer 26:46

Great, great question. And this is super important to understand. There's obviously a few different ways to do this, but I would look at it this way. This is how we've done it. Not to say it's the right way, but I I think it's a really good way. Weekender Hospitality LLC is our management company, right? It's like the mothership. It's now reporting for tax purposes as an S-corp. And then each hotel has two individual LLCs. One an operating company that operates it, one a holding company that owns the real estate and the assets. On three out of the nine hotels we have, we have outside investors, a few friends and family. And those are only on the holding company level. They get a K1, they're not exposed to the risk of the operation, they're getting a PREF return and a principal and a promote at ReFi. Now, the other six are wholly owned by myself, self-funded it with other money from my pre previous career. Then weekend or hospitality management company is 100% owned by me as well. Now, I highly recommend when you're going to really syndicate at scale beyond a few friends and family at a hotel single asset capitalization, I would be promoting, positioning, and selling an investment into either a fund that will own a basket of assets through holding company ownership from that one weekend or fund one LLC, for instance, which is what we're launching now in the next month, that will own seven or eight assets. And each owner in weekend or fund one LC will pro rata own a portion of each of those assets. And then the way that you interplay the brand, the management company, this larger operating company, did then that then provides services to the fund or services to the hotel as any third-party management company would. Obviously, full disclosures for your investors, it's an affiliate company, there's common ownership. You're going to have ownership in your fund or your assets alongside your investors, whether you do it through a vehicle like an LLC, like a GP vehicle. But the brand andor management company, they're two things that are one and the same, but they're also distinctly different in a way, needs to charge the hotels or the fund for its services and its property services. So you could raise money on one of two. You could raise money just to go acquire assets, the down payment LP equity you want in a typical capitalization of a single hotel or a fund strategy, multiple hotels. Or if you need the working capital to scale up team, IP investments, whatever, then you would raise money over here in your management company brand, whether it's an S-corp, C Corp, LLC. But that long term is going to be very dilutive to the principals and the original owners. And unless you really, really need to, I would all recommend finding alternative ways to finance that early startup capital. For us, you know, it's not been insignificant. It's a big budget to grow a big team, to execute on a big BHEG envision. So we're at a point where we're starting to now get economies of scale with defraying the center brand management company costs over more assets and more revenue streams.

Nathan St Cyr 29:37

Yes. Got it. Understand all of that. So when I think then to exit, this is where I get like, okay, so now you got this fund, right? It's capitalized the bulk of the underlying assets. Yep. And the only way to pay the investors back is to have some sort of event. So are you looking to then want to buy out? Or are you looking to just exit all of those properties so the investors get paid back? And then weekender still stands alone on its on its brand and you go and and grow in other places in other ways. Because what what happens then when you go and sell the bulk of the portfolio? Because you have to repay investors.

Keir Weimer 30:17

Good question. Just by nature and by my goals for this brand to build a generational, international, multi-million person year inspirational hospitality brand. And to also by doing that, if they execute in that like a billion-dollar brand, is we're not a buy, renovate, stabilize, sell business. We're a buy and hold. So the only way we can achieve liquidity for investors on principal, promote, and things beyond like an APREF that we pay monthly out of cash flows is to do periodic refinances, right? So those are going to happen every probably four to five years. The first three case studies have lived to that time frame. And what that allows investor to do is to get out their principal, to be then in the deal in a forever hold situation, playing with house money, getting then their pro rata share of cash flows, getting the tax depreciation, and in any subsequent refines, also getting lump sum checks literally in perpetuity with a mechanism for weekend or two have a right, but not an obligation to buy and repurchase shares of people that want an earlier off-ramp or want liquidity elsewhere, and we can find a vehicle or a credit facility to execute on that if we want to. But that's how we're doing it. We don't plan to sell. We don't think we need to sell assets at cash flow streams. We have seen now historically our ability to drive revenue, RevPar and NOI, so that we can actually add additional debt and have it not be dramatically different as a percentage of revenue. So we can still lever at a same within, let's say 10%, right, of the assets value and a new appraised value because we've grown the financial performance that much. So that's kind of our thesis and our our model.

Nathan St Cyr 31:55

And your investors understand this. So you're attracting an investor that says, Yeah, I I dig this model. This is a model that, okay, cool. I dig this model, I can get behind this model. And then one of the things that as I'm hearing you speak this out, and I'm thinking about economies of up and down and challenges that you have a COVID for a year, and it's like, okay, but our investors are in it for the the long haul. We're not having to try to hit some cycle within a certain amount where then we're having to recover.

Keir Weimer 32:25

I think while we're not a recession proof business, obviously, what I was encouraged by is our business. We got a little bit lucky, but I also think I was pretty intentional about going all in on this when I saw the exodus out of urban areas and cities and I saw the drive time properties that were reasonably priced being like really, really popular and filled up. I was like, that's when I went all in on it. And so COVID actually was the wind in the sales, right? That helped our company be born and to grow like it did in a pandemic when for hospitality on its whole, it was a very tough time to operate, especially with urban, group focused, flight-dependent markets. So I think a little bit of luck there, but also a lot of intentionality and just calculated risk that kind of go all in on that. The other thing I want to say is I think the demand for our product, meaning your guys' hours, leisure travel, if it's reasonably priced, it's not as elastic as you would think. Meaning when people's confidence, income, or broader like asset-based portfolio takes a hit because of a macro recession headwind. What we've at least seen in COVID, and my thesis is it will play out largely even in a more normal recession, but maybe not to the same level, is people trade away other stuff first, like the home renovation, like a new car, like finishing the basement, buying a new house. Like that's the stuff that's like, okay, maybe, maybe we ought to chill. But like if COVID did anything, it reset how important life is and how important memories and experiences are with those we love. And that's something that a lot of people are not willing to trade off. Now, will they go down the price ladder in a $5,000 trip with a flight attached to a $2,000 trip with a two-hour car drive? Maybe, but I think we're well positioned to be able to capture that with demand.

Nathan St Cyr 34:12

Yeah, you've really set your business up to capture that demand where when people are gonna so maybe they don't take the international trip, but instead they take the two hour drive, and you're well positioned for that. I think we've looked at the similar thing as hostels out produced from an occupancy standpoint, then hotels, because look, we're down, it's down the ladder. People still want to have experiences in their life and they don't want to give that up because man, life is short, and you don't you're not starting to tomorrow.

Keir Weimer 34:41

So COVID taught us that. I think we're both in a position where we also, if we're good, we can leverage technology and expertise on dynamic yield management and pricing, like we do, like hourly sometimes with our revenue management department and our AI-driven kind of rate scrape strategy where we can literally just prioritize occupancy room nights to drive RevPAR over ADR. Or sometimes we have such pricing power where there's just not a lot of supply in the market, we'll just really push rate, we'll get it, and we'll get a ton of pickup.

Michael Russell 35:08

What you're describing is there's a certain investor avatar that's gonna have an appetite for this, and not everyone is going to, because the reality is this is a longer run. Sure, you're gonna be able to refinance. There's gonna be an event so that investors can get their money back. But compared to let's say multifamily or industrial or something where it's more of the buy and and really flip, you're gonna create some value and then you're gonna sell it. And you might leave a little bit of a little meat on the bones for the next person, but there's gonna be this cycle that's repetitive with those types of assets. But you're talking about building enterprise value to where the unique thing about hospitality is it's not just a real estate investment, it's investing into an operating business. One of the unique things about hospitality that has an advantage over those other assets from an investor's perspective, right? If we're thinking about the investor avatar, we can quickly see how the downside might be the length of time. And well, what happens if someone doesn't want to have their money tied up for this quantity of time? But the unique thing you just described was with that property that you bought and then you refinanced and you basically doubled your money.

Keir Weimer 36:18

It was like a five, it was almost a six X on equity.

Michael Russell 36:20

Yeah. What's unique about hospitality is there's way more levers to pull. When you buy an apartment building, you can slap some paint on the wall and you can make some general improvements. But at the end of the day, you're locked into these longer-term leases, relatively speaking. With hospitality, you can change levers on a daily basis that can dramatically impact revenue.

Keir Weimer 36:43

Because you have a 24-hour lease. You have a 24-hour lease you're working with versus 365 or a five-year with a commercial where you have no flexibility, right? That's the beauty of our business. And in the event of a total catastrophe, we could also, in many areas, be able to actually reposition the entire asset and go extended stay or apartment if you needed to, or workforce housing, right? So they're like, there's outs, there's ways to still monetize and save an asset or get through a really rocky time with our model and with our type of real estate.

Michael Russell 37:14

Absolutely. So there's more opportunity from a revenue generation perspective to sustain this model of refinance because there's just there's the potentially is more upside. If you buy right, you've got the ability to factor that into your underwriting that you're gonna the the investor profile is gonna be a little bit longer, but there's the opportunity, at least at minimum, get their capital investment back and then have a decent yield for a period of time.

Nathan St Cyr 37:39

Well, and I also like I also like what you had said earlier, one of the other areas of growth that we're going, because hospitality is a business and it is an enterprise, now you've got vertical lines of revenue. Now, and when I look at, you know, weekender and things that you're doing and providing, it's like, okay, well, no longer are we just the asset in the box, like multifamily or what have you. But now we can incorporate, all right, what are the experiences, whether it's through partnerships, whether it's our team doing it, whether it's economies of scale of man, we got we're buying 200 ATVs across the whole board to have all of our property, snow, whatever it is, and now we're providing experiences that are unbelievably valuable that people will pay for. And your your value has significantly increased without doing anything to the asset.

Keir Weimer 38:27

But you've pulled different levers. Right. And that's the other cool thing to mention, too, on the investment offer is surely no offers for everybody, right? You have to really understand who is your profile, your ideal investor, right? It's got to be somebody you want to spend time with too. You want to hang out with. It's like one of your people. So for us, it's somebody that already has an interest and an understanding of travel, right? Already has an appreciation and a love for the outdoors, some sport, some passion. And then it's somebody that financially almost kind of toes the line of having their foot in two ponds. Now, one is an income investor who buys cash flow streams, buys a return, right? Whether it's a coupon with a bond, something that pays a dividend. So for us, we achieve that with the 8% prep paid monthly, like religiously, just like our loan payments go out. We never missed one, never been late, never will. So we get that investor, but we all which tend to be a little bit older, a little bit more risk-averse, but we also get the other investor that has their foot in growth, exit, expansion, multiple. What can this turn into that doesn't maybe necessarily need or value the you know $600 payment a month, which is eight grand or eight percent of $100K a year, right? Like, so we kind of are straddling that a bit, trying to appeal a little bit to both. And then the thing on top of that is we're getting pass through bonus accelerated depreciation up front that helps people on their 1040 return, which juices the return as well, because now they're paying less tax on their other passive income. And then two other components that I think are unique one is they're getting with this fund approach to Diversification, right? So it's got to be somebody that also appreciates that. And it's somebody that knows how traditional PE or funds work, right? There is going to be a tie-up period. This is not like short-term 30-day or 24-hour liquidity. You need to make sure that you can part with that money for the return on the back end and do it for X amount of years. But what comes with that is this awesome offer, right? You're getting income, you're getting growth, you're getting a forever asset that you can literally gift the interest to your heirs. You're going to own this thing, literally a piece of this thing forever. Like we are a long-term hold player looking to disrupt the market for decades and generations. And then the other cool thing, lastly, that we provide investors is access, which is a cool lifestyle benefit that you don't get with investing in self-storage, because who's going to want to go hang out in a self-storage unit? We literally allow investors access to our whole portfolio and to do it with their family right now, free of charge at some point at scale. That'll have to maybe just be at cost, right? But like 50, 60% off rack or retail rate that day. But that's like a really cool lifestyle component. Then now it becomes like a nine hotel, then it's 14 hotels, then it's 20 locations, and now all of a sudden it's like, wow, I'm not just investing in this like multifamily or mobile home park I'm never going to see, use or or want to visit. But like I can actually go see what I'm investing. I can experience it. I can create memories of my family. I can enjoy it. It's a lifestyle play and benefit too. Yeah.

Michael Russell 41:22

Love it. Yeah. I want to dig into something that you said a while back where you were explaining the way that you've got it structured with the two entities where you've got an asset entity. So someone might invest into a specific asset. Then you've got your operating company, which manages the resort. And then above that, on top level, you've got an S-corp, right?

Keir Weimer 41:44

Yep.

Michael Russell 41:45

Can you explain what is the purpose of the S-corp?

Keir Weimer 41:49

So to clarify that, actually, Michael, the S-Corp is not its own entity. The S-Corp is simply how the management company, Weak Energy Hospitality LLC, reports for tax purposes. So it's more of a tax election. It's not like its own legal entity, if that makes sense. So you could just think of it as a almost like a cloak or a holding company that allows us to be taxed more efficiently. And then what happens is what you can do is contribute other entities into that S-Corp shell. So basically, what we've done now is every hotel's operating company is 100% owned by myself, siloing the operational, high operational liability. So investors don't have any of that at the hotel level. Those opcos, we call them, roll up into the larger S-Corp, which is wholly owned by myself and really overinsured for general liability umbrella for catastrophic loss if there were a horrible accident at a hotel. And that's completely siloed and protected from any outside capital that's investing. So that's how we're doing it. To also, I think it's like a risk mitigator for investors, is to know that the operational risk has been so de-risked from any attachment to their investment.

Michael Russell 42:54

Yeah, we've gone through this conversation. Now I'm recollecting. So in Hawaii, there's this unique law where if you pay anyone for a good or a service, doesn't matter, even if you pay yourself, you got to pay almost 5%. It's like 4.75% or close to it. And so when we thought about going that route where we would basically create an S-corp or a management company to operate the business, well, the the rents ultimately get paid to the owner of the property. So we would have to basically double pay this GE tax. We pay the service fee that would go to the operating company would get taxed at that 4.75%. Yeah, it's crazy. We just went in circles trying to figure this out. Yeah. So yeah, rent payment or service payment. If we're a management company, even though we're paying ourselves, the management company has to pay the state this GE tax. So if you don't live in Hawaii, that sounds like a very advantageous thing to do.

Keir Weimer 43:50

Well, you might be able to, that sounds like a horribly ill-conceived law, but maybe there's a way with really good attorney and tax consulting for you guys just on a structural basis to maybe find a way around it, right? Because it's not like you're the only ones that need to do this, that have an operating company and a holding company. Like it's routinely done in real estate and in other types of businesses. And I can't think of the benefit for other than just a money grab revenue play, like why a government would think that's actually good. It's prohibited for growth and investment and development.

Michael Russell 44:23

Yeah. No, it's something we can definitely look into. I want to understand then when you're raising money right now, the idea is investors are going to be investing into the property fund. So it would be a fund of properties, but they're not buying into the operating company or the brand itself, correct? That is a separate potential investment, but you are recommending if you can avoid having to raise money to fund just working capital and things to maybe pursue an alternative route. Have you explored maybe just doing a debt raise to private private money debt raise to fund, like I said, working capital?

Keir Weimer 45:05

We haven't really played with private credit much. There's obviously a growing market space there, right, is a solution increasingly with just where institutional debt.

Michael Russell 45:15

I just mean people, instead of saying, hey, look, you you own a as an investment long-term like equity stake. I just mean like, hey, if you went to someone and said, look, we need $500,000 in capital right now, working capital to go buy furniture and set up some payroll and whatever it is we need to get started for this next acquisition that's that's from an operational side. You just go raise money and say, hey, it's a two-year term, or maybe it's a three-year term.

Keir Weimer 45:36

Yeah, we could definitely do that. That money's out there. Those unsecured short-term loans are there. The problem is they're you pay for it, right? The price, they're really kind of the exorbitant rates, usually on the low end right now, 10 to 11% as much as 15. And for us, our cost of capital, we've been really good at keeping that low. And then we've accessed bank LOCs to handle some of the seasonality. So we do have like several seven-figure LOCs that we can pull on for lines when we need it. So that's nice. I'd recommend doing that traditionally because you're gonna get a better rate. It's really just prime plus spread 200 basis points. So now it's in the 8% versus 12, 13, 14. And that adds up. Awesome.

Michael Russell 46:15

Well, heck, I think we'll end on that note. This has been fantastic. Dropping tons of knowledge here. I'm excited about your journey. I know that you're right now in the process of finding that next opportunity and growing your portfolio. So listen, if our listeners want to get in touch with you, maybe they want to learn about an opportunity to invest with you, how can they stay in touch with you or get hold of you?

Keir Weimer 46:36

Sure. Yeah, best way, guys, is again open book, happy to connect with people. So best would be probably email or Instagram. My email is K E I R at Weekender Hotels with an S dot com. Kier, K E I R at Weekender Hotels.com. That's our website too, weekenderhotels.com, surprisingly enough. And my Instagram is just my full name at Keirwimer. K-E-I-R W E I M E R. Feel free to reach out and connect.

Michael Russell 47:03

Great. Yeah, we'll put all that in the show notes. So if you didn't catch that, you're driving or at the gym, whatever you're doing, check out the show notes when you get a chance. Don't crash your vehicle trying to write this down or something right now. But anyway, listeners, thanks so much for tuning in. This has been another great episode of the Hotel Investor Playbook. We'll catch you all next week. Aloha. Aloha.

Keir Weimer 47:21

See you guys.

Michael Russell 47:22

Thanks for hanging out with us today on the Hotel Investor Playbook. If you got even one good nugget of wisdom about hotel investing, do us a favor, hit that subscribe button and leave us a five-star review. And hey, if you're feeling extra generous, drop a quick line in the review section. Something like Mike and Nate are the go-to hotel investing guys, or best podcast for anyone looking to crush it in hospitality. Or, you know, whatever feels right. Those little shout-outs go a long way in helping more people find the show. And they pretty much make our day. All right. Appreciate you guys. Catch you next time.