How This Husband-and-Wife Duo Scaled from 5 Airbnbs to 2 Boutique Hotels (Without Burning Out) | Mitch & Katie Ehly E57

Michael Russell 0:03

Welcome to the Hotel Investor Playbook, your guide to building wealth and freedom through hotel and hospitality ownership. Hosted by Michael Russell. Get in the game. Welcome to the Hotel Investor Playbook. I am Michael Russell, co-founder 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 in hospitality assets. Today's guests are Mitch Ely and Katie Wanzer, the husband and wife team behind the Refresh Collection, a fast-growing boutique hospitality group in Door County, Wisconsin. And they've gone from running short-term rentals to operating not one but two beautifully reimagined motels: the Fresh Coast Motel and this and the now open Spruce and Shore Motel. So we're going to unpack their journey from STRs into hotels and how they're using automation effectively to run lean and profitable without losing that guest touch. And also, I really want to get into what is it like building a business together as a married couple? So we're going to find out the good, the bad, and the ugly. Mitch, Katie, welcome to the show.

Mitch Ehly 1:22

Thanks so much for having us. Super excited to be here with you.

Michael Russell 1:25

So, what's the simplest way to describe what you've built and why it works?

Mitch Ehly 1:31

So basically, what we do is we take these historic properties and instead of changing the footprint and building fancy new stuff, we take them and try to breathe new life into them. And that started with Fresh Coast Motel in downtown Fish Creek. And obviously, now we have our second place, Bruce and Shore, which is actually just about six blocks up the road from Fresh Coast.

Michael Russell 1:51

So, real quickly, for someone that maybe is not as familiar with Wisconsin, geographically, where are these properties located?

Mitch Ehly 2:04

Quaint, cozy towns. And then uh Green Bay is kind of the closest landmark, and that's about an hour.

Michael Russell 2:10

So I kind of want to set the stage here because what you're describing with these historic buildings, it's not just the building itself, but it's really the whole setting. I mean, from your website, it really just oozes this quintessential Midwestern town right there on the lake. I can imagine during 4th of July, there's people out there, perhaps lighting fireworks off and they've got the little sparklers, and there's families all about. It just feels like a really walkable, fun, small town feel. What's the feeling or experience that you want a guest to have the moment they arrive?

Katie Wanzer 2:43

I think from a guest experience perspective, we try to pull in that small town Midwestern feel. Door County is really nostalgic. It's all mom and pop, home run family businesses. There's not a chain store in sight, but it's also just in a breathtaking setting. So when you arrive at Fresh Coast, it's right across from Fish Creek Public Beach, which is a huge public beach that has swimming areas and it's right off the harbor. So there's sailboats everywhere. But if you look across from the parking lot in our fire pit area that like overlooks the beach, you're looking at like a beautiful state park with like bluffs and pine trees and maple trees right now. So obviously with the trees turning, it's it's like an unreal sight and scene. We really worked hard to take that ambiance and that setting and really bring it into the motel rooms. We worked with a professional interior designer. Katie, our business partner, shout out to her. She's got an eye for design. And so making sure that the look and the feel of the furniture, the paint colors, the wallpaper, everything really kind of blends in to what is outside the motel and the scenery that you have and have that same guest experience on the inside.

Michael Russell 4:05

This is so important because I think that what's driving people to want to stay here, it's it's not going to just be, oh, it's it's conveniently priced. This is a destination people want to go to, but you're painting this picture of the experience ahead of time that people have something to look forward to. What's one thing that you feel that guests consistently notice that tells you that, hey, this concept, it's it's landed.

Mitch Ehly 4:30

For us in our market, a lot of the properties that are available from a lodging perspective just haven't necessarily been invested in a ton. And one of the things that we felt was really important to us was to deliver a super high-end experience in these properties because we're investing a lot into what the properties look like, what they feel like, what they smell like. The number one thing we get is that people think we have the most comfortable bedding they've ever slept on. And I think that's something that, you know, really positively affects people's mood and how they feel about the stay. The other thing that I think stands out too is our self-check-in model. It's actually one of the most common things that that people tell us is that they love the model that we that we have because they don't have to go to a front desk. They they show up and we serve them up with a custom video that says, Hey, you're staying in room 15. Here's a custom walkthrough video of how to get to room 15. Where do I park if I'm in room 15?

Michael Russell 5:33

So, what's the feedback from the guest on that particular amenity?

Mitch Ehly 5:37

They love that they can just arrive and walk right to their room. They don't need to feel like there's this elaborate check-in process where they where they go and talk to somebody and wait for 15 minutes to get their credit card scanned and their ID scanned and all that stuff. And they just love that they can just use their code, come and go, don't need to worry about a key, check out when they're done.

Michael Russell 5:58

Cool. All right, so now you're getting ready to open up your second property, the Spruce and Shore Motel, which is nearby. I want to know how does this second hotel build upon what you learned from the first?

Katie Wanzer 6:09

When we bought Fresh Coast, it needed a lot of love from a design, a guest experience, a structural perspective. So I think with Spruce and Shore, when we went into it, we were like, it can't get any worse, right? The beauty with this is the fact that we we had our reps in. So we kind of knew what worked really well last time, what didn't work well, like where the gaps were. Luke really did a great job of managing all of the contractors and us learning from pastimes of like, you can't paint the walls before you put the flooring in. Like also just from a timeline, like we kind of knew how things would flow better. We had a Rolodex of contractors already ready to go. So we kind of, I felt like walked in a little bit more prepared and know how to go with the unexpected. The great thing is with the second property, it was really well maintained structurally. It just really needed um a really big bear hug from a design and interior perspective.

Mitch Ehly 7:09

And I think too, like the second one between Katie and myself and our business partners, Luke and Katie, really did a good job of like understanding the feel of the property. The two properties, like I said before, are only about six blocks apart, but they have very different feels when you're on the property. Fresh Coast, you're forward-facing, staring at the water, right across from the public beach. It is legitimately right in the heart of downtown Fish Creek. Spruce and Shore is is tucked just a little bit off the main strip, and it's right across from the marina. And it's a totally different vibe. When you're on the property, it's very quiet feeling, very secluded feeling. And so I think we we tried to lean into the feel of the property with Spruce and Shore. A lot of what we did with the branding there was a lot more earthy tones and leading in, leaning into the landscape side of Door County as opposed to the water with Fresh Coast. And I think both of those tie back to the vibe and the feel that you have when you're standing on one of the properties.

Michael Russell 8:10

Did you learn if there were any maybe things in concept that were cool from a design perspective, but then operationally speaking were difficult to implement?

Mitch Ehly 8:19

Yes. I know we ran into some issues with like design concepts not matching up dimensionally with like how the functional how the rooms functionally worked. A good example would be designing in benches that sit at the end of the beds. And then like functionally, when you stand in the room, being like, ah, it just feels really tight with that bench there. With Fresh Coast with the branding, we went with a lot of whites, and white on the walls gets stinged up very easily.

Katie Wanzer 8:47

And I would say the other thing, too, last year, just at Fresh Coast, like we did all of the laundry in-house, and I think we learned how much of a burden that put on our cleaning team. We went with the STR mentality of three sets for every bed and then four sets of pillow for every pillow. And last year we went through way more linens than that. And it was like we were constantly buying when we have no rooms free and we're turning 18 rooms a day. So linens, linens are a tricky thing.

Mitch Ehly 9:21

To listeners out there, like those that are investing in kind of traditional vacation markets, whether that's STRs or hotels, motels, whatever it might be, one of the trickiest parts that we went through was just shipping. We live about three hours from where our investment properties are, and it's almost impossible for us to ship anything there.

Michael Russell 9:42

Yeah, no, I can relate. I mean, in Hawaii, when one of our properties is located in a submarket on an outer island, it's like the post office didn't even recognize us for six months. We had to battle with them to convince them, like, no, we are actually here. Definitely got to deal with that if you're in these smaller markets. I want to shift gears a little bit because I've heard you mention now a couple of times that you've alluded to your partners. Tell us a little bit about your partners and maybe what the relationship is and perhaps what each of your individual roles are in this partnership.

Mitch Ehly 10:12

We're very fortunate. We have two great partners, Luke and Katie Nelson. I think it kind of stemmed from we were both doing similar things in the STR space. Luke and Katie have some short-term rentals in Smoky Mountains. And Luke was actually the first person that I ever talked to about actually getting into short-term rentals as investment properties. And so him and I met, frankly, because I posted in a Facebook group and he was like, hey, I live in the same area. And so we just kind of connected and and kind of naturally grew a friendship from there. We started to go some to some conferences together and travel together. And that's kind of what sparked the conversation about potentially moving to the next level of getting into the hotel space. Should we consider doing this together? We could have a lot more power with four of us than we can with just two of us. And eventually there was a property that was available in an area that we were interested in. The four of us went and looked at it.

Michael Russell 11:06

And can I pause real quick? I really want to know. So, to recap, you guys met through basically networking online in a Facebook group. You nurtured this relationship and you gained trust in each other, and then you recognized you had alignment in your goals. And so you made the determination to partner. But in doing so, I think it's important within a partnership that at some point you have a real conversation where you sit down and you acknowledge and recognize okay, who's bringing what to the table? Number one, where is someone's zone of genius? What are they good at? And then number two, what do they like to do? And so maybe you can like unwrap a little bit about your partnership in this situation, who's responsible for what and how that works.

Mitch Ehly 11:54

I think we all bring a unique skill set and unique pieces to the puzzle that make this whole thing work. Um, myself, I'm a uh a technology guy. I've been in a technology startup for the past 11 years. And so I have a solid working foundation of technology, how things work, how systems play together. Because I I think a lot about our tech stack. I think a lot about kind of the the financials, thinking about how are we operating as a business, what what else could we do to maybe improve the overall operation of things. And then Luke brings a totally different perspective where he's super knowledgeable when it comes to construction and when it comes to making improvements and thinking through the process that we have to go through when we are making uh additions to a property, when we're making changes or renovations to a property. So he's he's super, super talented with that. And so that's a a big part of uh of his skill set. Like Katie talked about the two Katie's.

Katie Wanzer 12:49

Yeah. So we coined ourselves. Katie and Katie. Yeah, so we call we call ourselves sells the Katie's and then the tag-alongs, a K, Mitch, and Luke. But you know, Katie Nelson like brings, she's got an eye for design and the patience of moving things together. Katie's Katie's so good with just like looking at a room and being like, okay, like we should put this here because of this mix and matching pieces together to kind of create like that feel in the room. Katie is also just really good, like with finances. She's got the left brain patience that I wish I had, but yet the right brain creativity. My background for me is a lot in PR, marketing, brand strategy. So I really gravitate towards things like our blogs, our websites, getting a lot of like earned media, free earned media. So, you know, reaching out to newspapers or local TV stations, like to really kind of help spread the word and like start to help build the brand of you go to Spruce and Shore website, you go to Fresh Coast website, and now you go to the refresh collection. And what is your brand saying about you? How is that reflecting in your guest experience? I think we each just bring such different skill sets and different backgrounds that it kind of really does make, as I like to say, a whole brain between the four of us.

Michael Russell 14:09

Yeah. Now that makes a lot of sense. So you guys have a nice balanced approach there where you've got operations and construction and marketing and then design aesthetics, a little bit of cost engineering. The way I see things with hotel investing, I say this all the time, but there's really four pillars of hotel investing: there's acquisitions, there's operations, there's financing, and then lastly, there's marketing. And so can you walk us through when purchasing this property? Did you guys borrow money from a bank?

Mitch Ehly 14:38

We did. Yep. We did kind of a traditional small business loan for both properties.

Michael Russell 14:43

So to be specific, was it an SBA loan?

Mitch Ehly 14:47

It was not an SBA loan. We worked with a small local bank, so it's not not a traditional SBA. It's it was more of a commercial loan, but uh, it took a lot to to find the right finance partner. And we've actually been been super fortunate. We've had nothing but a great experience with working with them, but it did take a lot of work to find somebody that was interested.

Michael Russell 15:08

Well, hey, you you guys are describing you've got these historic properties. So I'm gonna play conservative banker guy here. We're gonna role player for a minute. You guys say, Hey, we have this vision. Now we have experience with short-term rentals, we've had a lot of success. I think maybe it's 20 short-term rentals that you guys scaled up to managing and operating. But either way, you've you've had the success. So you go, hey, Mr. Banker, uh, we've got this vision to take this old property that needs a considerable amount of work, but we haven't done this before. And we'd like to borrow some money. And here's our vision. And I'm Mr. Banker, so I go, okay, walk me through exactly how you guys are gonna do this and why I should loan you money. Is that kind of how the conversation went? And I guess if so, how did you overcome that and convince the bank, like, look, we can do this?

Mitch Ehly 15:58

Yeah, it's a it's a good question. And yes, that's exactly how it happened.

Katie Wanzer 16:02

Yeah.

Mitch Ehly 16:02

We talked to between Luke and I, we talked to a a bunch of different banks, and really there were only a few that were even interested in talking to us on the phone. But we kind of grew that relationship naturally after we found some people that were interested. We offered to take them out to breakfast and we went out and talked about kind of what our idea was, why we think it can work, why we thought an elevated property in a market of properties that are super cool and nostalgic, but maybe a little bit outdated on average, why we think that's gonna deliver a strong return. And then ultimately what we did was between Luke and myself, we ran a million scenarios and we basically just showed them the detailed performers of every scenario that we think is realistic. And for us, because we were converting that into a short-term rental, and Katie and I own and manage short-term rentals in this market, we were able to confidently show them, hey, we're already doing this right here, right? So we obviously knew we were gonna do better than what the numbers were before, but that was kind of the floor. And we just presented them with all these options and said, like, hey, we're really, really confident we're gonna deliver this, but like we think it could be as good as this. And fortunately, it was better than all those scenarios. So worked out great.

Michael Russell 17:17

If I can, I'm gonna try to maybe summarize it into a few key takeaways. For someone that is considering maybe scaling up from short-term rentals into buying their first hotel. One of the key components is they're gonna need to acquire some debt. What it sounds like to me is the hardest deal it's ever gonna be to finance is gonna be the first one because it's just a kind of a concept at that point. Yes, you've got experience, but really you don't have the track record yet to provide that evidence. So what you did is you identified, well, what are the guardrails and you continued to refine those guardrails until there was clear upside and there was clear downside, and you put it into a package that someone could interpret. And I feel like this is so critically important is sometimes people put in their pro forma all these lofty goals, but they fail to put in the downsides risk. I think that the best thing to do if you're going to a bank is to provide three kinds of scenarios. There would be base, there would be full, which best case scenario, and then bare, right? And let them come to their own conclusions. But what you don't want to do is you don't want to have someone come to their own conclusion on the bare scenario and have it be way lower than what your projected scenario is. Nurture relationships, particularly with small banks, local banks, I should say, because those tend to have a vested interest in the community and have more understanding of the nuances of that market. And then I guess the other thing that I heard you say that that I res that resonated with me was uh seek validation from others. And I don't mean just like, hey, what do you think of this? Like, have people that are in the market really provide critical feedback. Like, are we out of our minds? Or is this realistic? Give me like your real opinion. Like, am I a crazy person for thinking we're not this stressful? Yeah, if you get that validation and you build in relationships and you provide the scenarios, those are three takeaways I think that can put you in a position. Now, I want to take that concept and I wanna I wanna bridge into a subject that could be a little sensitive to people, to you guys, which is the idea of going into purchase a property with the intent and the execution and the effort and the mindset and all the work that goes into buying something, and then it doesn't work out for whatever reason. I want you guys to walk us through prior to the success you've had with buying these hotels. I read you guys had originally explored purchasing a commercial property, and at somewhere in the process, it fell out. I want you to walk through what happened and what what did you learn from that experience?

Mitch Ehly 20:04

So the first property that we looked at with the four of us, we toured it in person and ultimately we had a bunch of conversations about it between the four of us and just kind of decided, okay, this one's probably not the one for us. But like it really did the the thing where it just piqued our interest enough to be like, okay, this is this might not have been the property for us, but like this validated that like we are very interested in doing this. Thereafter, a few months later, the property that's now known as Fresh Coast Motel, it was not previously called Fresh Coast Motel, hit the market. Luke and I saw it and basically said, Hey, we got to go look at this right away. Went and looked at it, kind of fell in love with it. So we ended up getting the property under contract. And coming back to your question, a lot of the strife and the struggle that we went through actually was when we were under contract on Fresh Coast. We had done a ton of work on it in terms of the deal, in terms of prepping to take over a hotel that was in the midst of a season when we'd be closing. You know, no proper hotel management experience. And we're we're talking about closing on a property while there's guests staying there. Well, long story short, close to closing, we ended up actually essentially getting kicked out of the deal. And it was unfortunate. Both couples were gone on kind of couples' weekends away when this went down. And so both of our weekends kind of got ruined. But, you know, we had to really put our heads together really fast and figure out okay, how bad do we want it? Because if we want it as bad as we think we might, we're gonna either have to come up with something different or we're gonna have to figure out how we dig ourselves out of the hole of essentially getting kicked out of this deal.

Michael Russell 21:54

Can you share what how you got kicked out?

Mitch Ehly 21:56

I think they basically thought that because we hadn't purchased a hotel before, potentially that we would not be capable of closing. And and our belief at least was that there was a uh competing cash offer that was maybe not as high as what we offered. I don't know for sure. I don't know those details, but um essentially they they told us, hey, we're gonna we're gonna go with this other offer. We were under contract.

Katie Wanzer 22:19

We were under contract when it has this that it was two weeks before closing.

Mitch Ehly 22:23

Um, and essentially it tied back to some asks that we had in terms of some concessions based on things that we found from the inspections. Essentially, they had an out for that, that they were they were willing to say, we're not gonna do anything. And essentially, what ended up happening is after some conversations with our attorneys and things like that, we kind of found honestly a bit of a loophole in that, like we essentially before between the four of us decided that we wanted it bad enough that we were willing to forego the things that we were asking for. And so we basically kind of told them we were gonna skip all that stuff and just close. And that fortunately got us back in the deal.

Michael Russell 23:02

You had to make a decision, okay. Are we willing to sacrifice our original negotiation stance? And in a sense, it's economic, but it's also pride. You get attached to result, and if that result has to change, you got to make a decision. But hey, you got to be flexible. This business sometimes is about calculated risk, and you guys made that adjustment. I I want to spend some time talking with Katie about the marketing side of this. Let's talk about Fresh Coast, your first motel. Let's talk about launch day. From what I understand, that you had a flood of bookings that that came in like maybe within 24 hours. You were unexpectedly uh successful right out of the gate. Can you take us back to launch day? How did you open the booking calendar and and what happened next?

Katie Wanzer 23:43

Yeah, so the motel that is now Fresh Coast had just a decade-long following of people who have stayed there since they were kids and now they're adults and they're taking their kids there. So I think for us, it was one really starting the pre-marketing already of we we had one of the buildings off the ground, and it's like, all right, we're gonna hit the ground running, newspapers, TV, social media, like how can we get the word out there? So it was everything was done with pen and paper there. So it was literally hundreds of index cards and taking people's email addresses and phone numbers and my goodness, and and addresses themselves and writing a letter. And Katie and I, I have videos of it of hours we spent at one of the picnic tables, her and I just stuffing envelopes to prior guests, letting them know the property had been sold. It's gonna be under new ownership. Check out our website. Like we hope you return. And then it was also two, okay, then how can we convert these people to looking at our website to booking online? We decided that to show some good faith with the people who had who had the prior guests that had stayed there for decades on end. We did offer them a 10% like return guest discount to try to entice them a little bit more, just knowing that we were raising our prices compared to what the the previous establishment had done. And also, too, just like trying to get new people to join us, like to want to stay with us. Luke and Mitch did an amazing job of like posting on social media, really getting the word out there. It was like a little HGTV. The day that we went to go open, we had just like the standalone website up. We had the booking engine ready to go. And then it was like we opened our calendars and it was just like the floodgates had opened. We we had not hired a single front desk person at the time. So it's literally the four of us just taking call after call after call after call because people who had stayed there who had always called and booked on the phone or booked in person for the following summer were calling to book the new place. And it just kind of like took off because then on social, people were seeing it. So then they were booking online. But I think the biggest thing I'm gonna say the PR blitz that we did of like talking about this old historic motel. We're not changing anything, we're refreshing it, we're making it something better. We're trying to bring in the modern traveler, but we're also trying to bring in the people who have stayed there and have that nostalgic experience. And I would say from there, it just created this like unbelievable hype where people were just like, yeah, I want to stay there. Then the weekend we opened, we had a big ribbon cutting ceremony. We invited the tourism bureau up there, destination door county, and they've just been phenomenal partners for us. And we opened to the public and we were sitting around the fire pit all of us that night, like, wow, we did this. Like we were kind of all in shock. We were very tired, all of us, but like we were in shock of like, wow, we did this. And people just being like, oh my God, I've been following you guys on Instagram for like the last eight months. Like, I can't believe I'm staying in the building that was like legitimately falling over when you bought it. And we actually we get that a lot still these days of oh, I stayed at Fresh Coast last year. You guys opened Spruce and Shore. I wanted to check it out for myself, etc. So it's actually been an awesome journey of how we've gotten a lot of our guests in the door.

Michael Russell 27:14

Yeah. I mean, I think the takeaway there is you guys you recognize that you needed to document early. You didn't want to wait until there was the hotel was was finished. And I think at the end of the day, what what occurred is like people want to root for the underdog? You know, you guys are it's a family-run business, you've got your partners, but it's it's fun to root for folks in a small business from a high level with where you are now. How in alignment is that with what you projected originally? Are you guys exceeding what you originally expected, or where do you fall in that regard?

Mitch Ehly 27:48

Yeah, it's a good question. I think we were overly conservative, even with the best case scenarios, not because it was on purpose. I think we just didn't necessarily 100% know how to translate from booking one unit through STRs to booking things where there's SKUs, there's multiple of the same unit, and how that ADR and occupancy is going to play a role in that because there is there's so much more of a connection between occupancy and ADR in hotels than there is in an SDR. From a 30,000-foot view, like, yeah, Fresh Coast outperformed our highest projection in the first year, and this year has continued to beat that significantly over even last year. But then over time, as we saw not only the bookings come in, but also the reviews, what we hear from people when we're on property, you know, what our staff hears from people, and we just kind of heard the sentiment over and over that this was really delivering. And then obviously financially it's it's doing well and everything like that. And that kind of really opened our eyes of like, I think we're really onto something here. And that's ultimately what led to the second place was that hey, we this went far better than we even thought was possible.

Michael Russell 29:05

That makes sense. I want to transition into your contactless check-in model. So, how do you keep that uh lean efficiency with the contactless check-in? Um, but still maintain that uh sense of connectivity with the guest, that that that certain guest touch where people feel really like welcomed. How do you marry the two?

Mitch Ehly 29:32

That's a really important part of what we do, right? We're contactless, that doesn't mean you can't contact us. Ultimately, we wanted to make it very clear through the journey of the messaging that, like, just because you're not grabbing a physical key from somebody in an office doesn't mean that we're not here to serve you. We we expect to get back to every single guest, which most of our communication is via text at this point within five minutes.

Michael Russell 29:56

Okay, can you walk us through the more specific tech stack for your communication methods?

Mitch Ehly 30:02

Definitely. We did a good amount of research before we decided on our core system, our PMS, and that was between Muse and CloudBeds. And ultimately we decided on Muse. We knew our target audience was a lot of a lot of the folks that visit or county are older. And so ultimately, our our biggest test was we sent it to all of our aunts, uncles, parents, grandparents, everybody. We said, Hey, here's here's a website for somebody that uses Muse. Here's a website for somebody that uses CloudBeds. Tell me which one's easier for you to book. 100% of the people said the Muse site was easier for them. So we we started working with Muse, and they were actually with the rep that we were working with, was actually friendly enough to connect us with a person that was running a very similar business model to a contactless property down in Florida. Katie and I actually flew down there to go stay at her motel and meet her and just pick her brain. The system that she talked to us about that really like moved the needle for her, is a system called Akia, which is the texting and guest messaging and guest satisfaction platform that we use. And the technology makes it easier, where with Akia, for example, we do our guidebooks and all of our resources for our guests allow us to serve up custom content for them, for each of the guests that is specific to the room type that they might be staying in. We film these videos to say, okay, welcome to Fresh Coast. You're pulling into our driveway. I want to show you how to get to room one.

Michael Russell 31:36

How is this messaging being delivered? Is it a text message or is this an email they get?

Mitch Ehly 31:40

It's a text and email.

Michael Russell 31:42

I think the main takeaway from your story about how you're using technology is if you use technology and you you just use it as it comes out of the box, it's not going to have the same effect as if you really pour intention into it. You really customize it based on their individual room. So you're recognizing, like, okay, from the perspective of a guest who perhaps hasn't been here before, they're uncertain about what to expect. And people, as human beings, they they love certainty, right? And so especially when it comes to vacation, there's always uncertainty, which on the flip side of that coin, people love variety. That's why they travel. I feel like there's this really important balance of systemizing the technology to produce the information, but doing it in a really personalized manner. I also want to know well, what happens when things break? Inevitably, technology breaks. There's challenges. Can you give us a maybe a story or an anecdote of like when something went wrong and how you guys handled that?

Mitch Ehly 32:47

Yeah, I mean, our very first guess, the code didn't work.

Katie Wanzer 32:49

The same thing happened with the next person. At the time, not hilarious, but looking back at it now, like absolutely hilarious because it was like, okay, like what can we do better? I can't even remember what the issue.

Mitch Ehly 33:02

It was it was legitimately just a technology failure. It just so happened to be the first guest that we had checking in that it didn't work for. But ultimately, it led us to understand it's only as good as how often it works, which isn't 100% of the time always. And so you have to be prepared for when it doesn't work.

Michael Russell 33:20

Do you guys have a uh VA team that you outsource to so that there's someone always on call 24 hours a day? I imagine with a smaller hotel, labor is it's a juggling act, right? When you're a big operation, money can fix a lot of problems. But when you're smaller, you got to be lean, you got to be creative. And so, what are some of the ways in which you're creative in using technology to offset or reduce costs?

Mitch Ehly 33:43

So we we use VAs for our what we call our reservation team. We have a couple that are here in the US that handle essentially like our daytime hours of everything. And then we use a couple people in the Philippines overnight. So we have essentially a day shift and a night shift that gives us 24-7 coverage so that we can get back to guests within five minutes, no matter what time of day it is, right?

Michael Russell 34:07

I gotta ask though, I am watching the dynamic between the two of you. And there are certain subjects where Mitch, you light up, and then Katie, you light up when I ask other stuff. So you guys have different personalities, and that's that's great. But working as a couple, how do you guys meld your business, your marriage, your your your different mindsets on things?

Katie Wanzer 34:27

The biggest thing that we've learned it clashes in the busy, like in the throes of busy season. So, like, because we're such a seasonal market, and it's like at the end of the day, we're both going two different directions, and then we come together. And I want to tell you all the things that happened today. And he's like, I don't want to talk to like corporate Katie right now, I want to talk to like my wife, Katie. I personally really appreciate Mitch because he brings a perspective that I simply don't have. And so for me to be able to look at a situation from a different lens, a different avenue, a different way of like working through things, and especially to where I will sometimes bring emotion into it when I know I shouldn't.

Michael Russell 35:13

Yeah. Yeah. What you're describing is how important it is to set boundaries. And it's particularly difficult to set boundaries when you're in close proximity to your business partner at all times of the day. In preparing for this episode, I I heard you guys talk about this bookkeeper as a marriage saver. Can you walk us through this story?

Katie Wanzer 35:33

I personally want to give a shout out to Kristen, our bookkeeper, because man oh man, if you want to talk about the times that we clash, like two spending a beautiful Saturday, like the the very few we get in the north where it's not 30 below zero and snowing, and we're sitting at the kitchen counter fighting about how to invoice this guest on QuickBooks because we didn't do it right last month. A lot of people who own a business and you want to take the next step, like you gotta talk about your time as currency. Because quite frankly, my currency should not be spent trying to figure out how to QuickBooks when I am nowhere near a subject matter expert on it.

Michael Russell 36:15

Well, I want to touch upon that because I don't disagree with you, but I want to highlight you said it's an easy decision. It is now in hindsight, but I think a lot of folks struggle with this because when you're first starting out and maybe you don't have as much revenue or you're uncertain about how things will all align. As entrepreneurs, we often tend to take everything on ourselves initially. And so that decision to outsource aspects of your business that can be delegated to someone else so that you can buy back your time. For me, this was a huge valuable learning lesson. But it it it doesn't always come naturally. It does take some self-discipline to just let go. But there's just one last section here that I feel like particularly because that you guys operate remotely, this piece I feel like is critically important for our listeners because so many people when they interpret or evaluate the idea of purchasing a smaller hotel and operating it with self-check-in and a remote team, they got to find people that they can trust. Maybe you can just give us an overview of your approach to your staff and retention.

Mitch Ehly 37:34

Yeah. I mean, it's it's hard. Our places are in a very remote location. Um so we don't have an unlimited Rolodex of people that can fix an air conditioner when it's broken or people that can clean rooms for us. So we have kind of taken the approach of like, we want to take really good care of the people that we have. Ultimately, for us, I think it was of benefit that Katie and I had been operating our investment properties or short-term rentals in this market for years before the hotels came to be. And so we did have a good number of contractors and a good number of people that we worked with prior.

Michael Russell 38:09

Well, I would say that the cleaners are like the front line. They're not just cleaning the rooms, but they are your first report. It's so important that you have reliable, trustworthy, and cleaners that communicate very well. We've gone through a handful of cleaners here. We're in a Maui is a relatively small market and it's very transient. One thing that I always try to do is, like you said, treat the cleaners really well. We provide a year-end bonus around the holidays, but also spontaneous things. Like last weekend, we had tickets to a comedy show, my wife and I, uh Big Date Night. We had tickets for Saturday and we showed up on Friday by mistake. We were kind of bummed at first, but we ended up buying tickets. We saw the show, it was great, but we had the tickets for Saturday night. And so what we did is we took those tickets and we gave it to our house cleaner, and they weren't exactly cheap, but they went to good use. These little things I feel like go a long way in retaining staff, especially folks that are so critical to maintaining the level of quality that you're hoping for. What I'd like to know from you, do you have any other advice for someone maybe that is considering expanding into their first out-of-town market?

Mitch Ehly 39:20

Yeah, I think I think something that was really helpful for us when we when we were working through the renovation with Fresh Coast, we were working with all these all these systems, right? And we didn't know how well it was going to work like at scale with all these different units and stuff like that. And so for us, we just kind of set out the like, hey, we just need to be there for like at least the first week or two of us actually being open at the motel. Just to be on site, be there in case something goes wrong, in case we realize, hey, there's a piece of technology that's not working the way we thought it was going to, or guests are experiencing something that we didn't think they would or we didn't. didn't know about or whatever. And while that time might seem kind of trivial, it was really valuable for us to just like be there, experience what they're what potential issues are are happening, hear from guests personally. We'd go there and sit at the fire pit and talk to people and just say, like, what are you guys experiencing? How how is everything? And having those first couple weeks to just like get a feel for things. What were we running into was really, really valuable. Past that, I mean, I think it goes without saying that like having a reliable team in that area is like it's everything. Um, I think also the weekend before our pre-launch with the family and friends weekend, we called it, filling up every room and and seeing what our family and friends ran into, that kind of provided that context of almost like at that point, almost like a month of seeing people check into the rooms. What issues are they potentially running into?

Katie Wanzer 40:54

I think the other thing that we did that was also super beneficial is we spent time in the market prior to buying something to understand the market itself. So spent a lot of time like talking and connecting with like our visitors, our tourism bureau, destination door county to figure out like, what do the trends look like? Like, is attendance up? Like, are they getting more visitors per year? Is it down? What what type of demographics does it tend to attract? Going and talking to the people who actually live there, work there to get like a better feel of like what it is actually like to one, not only work and live up there, but then two, like, what are some of the expectations that even they have of an employer?

Michael Russell 41:38

I think what you're describing is relevant for folks. For a lot of listeners that are looking at buying their first hotel, they're probably looking at buying one that is more economically affordable. What that typically translates to is looking in locations that are more remote. The main disadvantage can be finding reliable labor when you need something to be fixed. Like the cost can be prohibitive because you have to bring people in from out of town. What you just kind of walked through, I registered as critically important for folks that are thinking about buying a hotel in a small town, is, for example, go visit the local chamber of commerce. I think this principle applies at the barber shop. It could be at the whatever the restaurant. And the point is, when you have a conversation, don't be shy or bashful to say, hey, look, I'm going to be purchasing this hotel or I'm evaluating purchasing a hotel. What should I know about this town? I had uh an opportunity to look at some properties in Montana. I spent about a week there, just outside of Bozeman, and we were very seriously considering purchasing a hotel there. And that's exactly what I did. I had a little piece on Instagram about this where I walked into the barbershop. I needed a haircut anyway, but when I was there, I didn't hide the fact that why I was there. And I wanted to know ahead of time, like, look, I'm an out-of-towner. If I'm coming into your town and I'm gonna be opening up a hotel or I'm gonna be purchasing a hotel, how are you gonna feel about this? And maybe not you personally, but in general, the community. And instead of getting like stink eye and someone saying, oh, don't do it, the opposite occurs. People were like, wow, thank you. You know, like let's talk about this, especially the Chamber of Commerce in a small town, they're very likely to be willing to lend their contacts to you. They want to refer people that they know that they like and they trust. And so that's an invaluable resource if you're looking for a contractor that's reliable or you want to get information about who you can hire or things you should avoid. In the small town, those steps are very important if you're looking to buy a hotel. It's unlike a city where you're so anonymous. So I think that's a good place to kind of kind of wrap up. And as as we end this conversation, I I guess I just want to end with what do you see in store for you? Is your vision to continue to purchase additional hotels and maybe become maybe like a regional hospitality brand? Where do you guys see yourselves going?

Mitch Ehly 44:03

Yeah, it's a good question. I think that's that's a possibility that we that we grow to that level. I think it's it started with the vision to do this with one property, right? And that vision wasn't that long ago, right? It was a year ago, and so I think for us right now, the the refresh collection, and just just to clarify, the refresh collection is just the hotels, it's just the two hotels. So it's we've built our brands within that, which are Fresh Coast Motel and Spruce and Shore Motel. But the refresh collection is focused on revitalizing, breathing new life into historic properties and bringing this new vibrant experience within the hospitality space to these historic properties. And if in the future there are more places that kind of fit our mold of what we think would be good fits for what we do specifically, then I think we'd definitely be open to that. This year obviously was our first year operating both these two motels together, and it was a really fantastic year, and we're excited to build on that for future years now going forward and and continue to kind of make some tweaks, refinements to to the team, build our team out even further than it is today, and really kind of make sure that we're delivering on everything that we've set out to deliver on.

Michael Russell 45:17

Well, Mitch, Katie, this has been a fun and probably honest look at what it really takes to scale from short-term rentals into boutique hotels. And you guys are building a brand I think guests are falling in love with. And you guys still like each other. So that's good. Where can our listeners follow your journey or or maybe even book a stay?

Mitch Ehly 45:35

Yeah, definitely. So you can check out the refresh collection, the refresh collection.com. Otherwise, our individual brands, Fresh Coast Motel is FreshCostmotel.com, and Spruce and Shore is Spruceand Shore Motel.com. Follow us on Instagram. Instagram's a big part of what we what we do in terms of how we convey what our spaces are like, what experiences are like at our at our properties. Same thing with Facebook. So Fresh Coast Motel is at Fresh Coast Motel, Spruce and Shore is at Spruce and Shore Motel. Um, so certainly follow along on socials. And uh yeah, we'd love to have anybody that's traveling to the Door County, Wisconsin area come check us out.

Michael Russell 46:12

Cool. Right on. Okay. Well, thanks so much for everyone listening. Look, if this episode has given you some ideas about scaling your own STR business into something bigger, send this episode to someone, send it to a friend, someone who's been thinking about buying a motel. It helps the show grow and reach more builders like you and keeps great conversations like this coming. So if you guys want to go deeper into our own deal flow and automation tools and future investment opportunities, I also recommend join our investor list at Malama Capital. You'll get our deal blueprints, you'll get underwriting notes and updates on upcoming boutique hotel projects. So, Mitch, Katie, thanks again for sharing your story and best of luck with everything you got going on with your two motels. Appreciate all of you guys tuning in. We'll catch you again next week on the Hotel Investor Playbook Aloha.