October 29, 2024 • 32 mins
Why it matters: Kasa Living, led by CEO Roman Pedan, is revolutionizing hospitality with a tech-centric approach, enhancing profitability and guest experience.
Key Points:
- Tech Integration: Kasa has developed proprietary systems, including a PMS, trust and safety system, and self-check-in technology, to streamline operations and reduce costs.
- Operational Efficiency: Their labor-light model, driven by centralized services and AI, achieves a 70% gross operating profit margin, significantly higher than the industry average.
- Flexible Living: Kasa addresses the growing demand for flexible living arrangements, converting vacancies into cash flow and future-proofing properties.
- Strategic Partnerships: Trusted by major real estate players like Starwood Capital and KKR, Kasa's model focuses on management agreements rather than risky master leases.
- Gen AI Applications: Kasa leverages AI for customer service, revenue management, and property listings optimization, enhancing both guest experience and profitability.
The Bottom Line: Kasa Living's innovative use of technology and strategic focus on flexible living and institutional partnerships position it as a leader in the evolving hospitality landscape.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
So we built this system that does background
checks on guests, has decibelmeters and marijuana sensors in
the units. We have a predictivemachine learning based risk
score that predicts whether apotential guest will cause an
issue in the unit. Unit. Itlooks at a lot of interesting
things like do you live within30 miles of the property.
Speaker 2 (00:18):
From Hotel Tech Report, it's Hotel Tech Insider,
a show about the future ofhotels and the technology that
powers them. Today on the show,we have a very special guest. We
host Roman Padan, the founderand CEO of Casa Living, who
earlier this year announced the$70,000,000 series c to continue
building their vision for thefuture of a tech enabled
hospitality brand. In thisepisode, we dive into Casa's
(00:40):
tech strategy, how theirorganization looks, what they
decide to build versus buy, andsome of the really interesting
applications of artificialintelligence in their business
that they're looking at today,already accomplished, or looking
at for the future.
Speaker 3 (00:54):
Roman, thanks so much for coming on the show today.
We're excited to have you.
Speaker 1 (00:57):
Jordan, I'm excited. It's a pleasure.
Speaker 3 (00:59):
I'd love to learn about the cost of business in
the quick minute, 2 minute.Where did you start, and where
are you guys today, and how doyou position yourselves in the
market so that we can use thatto set the stage for where you
guys are at from a technologyperspective?
Speaker 1 (01:13):
Yeah. So we're a dinosaur in this industry. We're
almost a decade old. I startedthe business while I was at
Stanford Business School betweenmy 1st 2nd year. Prior to that,
my background is technology.
I have a computer sciencebackground, started a tech only
business in undergrad and realestate. I was in the private
equity world at Walton StreetCapital, large real estate only
(01:36):
private equity firm, and then atKKR where I helped start the
real estate practice alongside 6others. And so in many ways,
Casa melds those 2 in our DNA.Above the surface, what many see
in Casa is the industry leadinghotel and apartment hotel brand
and manager. Our goal is tomaximize the profitability of
(01:57):
hospitality operations whiledelivering exceptional guest
experience.
And, really, fundamentally, wemaximize the profitability by
lowering the cost of operatingproperties. We've automated,
centralized, or eliminated partsof a hotel p and l
systematically to make them moreprofitable. We operate across
(02:17):
the US. We have 85 propertieshosted well over a 1000000
nights in 40 cities. And we'rereally proud to be trusted by
some of the largest and mostdiscerning owners of real estate
like Starwood Capital, TPG, GreyStar, KKR, Morgan Stanley.
It's a long and formidable list.We're proud that they work with
us, they trust us, that we'reconstantly expanding with them.
(02:40):
But we get a lot of joy inworking with the local
developer, the entrepreneurwho's building their own brand
across the country. That's whatfolks see above the surface.
Happy to delve into kinda what'skinda underneath the surface,
but that's the quick background.
Speaker 3 (02:55):
What does the average typical property look like from
a amenities staffingperspective? No property type?
Is it like service apartmenttype of buildings? And is it a
whole building or a part of abuilding? Are there any
amenities or outlets?
Speaker 1 (03:09):
We actually have a range of property types. We cut
our teeth in the servicedepartment world, and that's
where we really became theindustry standard to some of the
largest apartment owners. 10 ofthe 20 largest apartment owners
partner with us eitherexclusively or kind of 1 of 2
partners. And in those formatswhere either the entire building
or a few floors of a largerapartment building. So about a
(03:33):
third is where a portion of alarger apartment building, a few
floors of 1.
About a third of our propertiesare full building apartment
hotels. They're apartment hotelswith kitchens, living rooms,
ones, 2 bedrooms that we operatethe entire building. And then
about a third are boutiquehotels that we are either the
soft brand or we're poweringsomeone else's brand in those
(03:56):
properties. And our apartmentbuildings have luxury gyms and
rooftops and communal space, butthose are part of kind of
apartment style communities. Inthe hotel side, we will have a
typical hotel, either rooms onlyboxes or f and b.
We have a property that has a1600 person theater, a rooftop
(04:16):
wraparound pool with kind of awine bar concept and a lobby
bar. We typically partner withthe best of F and B operators
and focus on what we're best inis which is delivering
exceptional hospitalityexperiences to guests and then
really profitable operations tothe owners.
Speaker 3 (04:34):
And from a multifamily perspective, when a
multifamily owner comes to you,what's the job to be done or the
problem that they're solving? Isit lease up time that and they
want or they wanna, like, kindadiversify their asset into 2
different asset classes to be alittle bit more durable in
different market conditions.What do they come to you for?
Speaker 1 (04:51):
So apartment owners are recognizing the shift in
consumer demand that's kind ofunderneath the surface, been
consistently happening for thelast decade, accelerated in
COVID, which is the push towardsflexible living. People's jobs
are more flexible. Their officearrangements are more flexible.
So they want living to matchtheir job and their office
arrangement and its flexibility.And so activating within their
(05:14):
building a set of inventory thatcan match the growing demand
segment for flexible living isreally important for owners long
term.
If you pull an apartment ownerand ask them, will the future
apartment building just serviceunfurnished 12 month leases?
They'll almost all say, no.It'll have an ability to service
multiple forms of demand.Unfurnished 12 month, furnished
(05:36):
5 month, but also furnished 3night, 5 night, 10 night. We're
making their buildings futureproof.
That's the long term kind of clevel strategic thing we're
solving for. What we're solvingfor the developer, the asset
manager, the property manager iswe're converting vacancy to cash
flow. It's most obvious in alease up. A lease up will take,
(05:58):
developer 18 to 24 months. Ifyou miss the window, you're
exposing yourself on the backend as concessions expire and
are sort of stuck in 80%occupancy purgatory.
What we'll do is we'll generatecash flow earlier and more cash
flow at stabilization. So whenyou're just leasing up, we'll
fill the property with furnishedinventory, and that furnished
(06:22):
inventory generates cash flowday 0 and quite a significant
amount of cash flow on day 0.And then at stabilization, we
generate more than market rentfor the owner. And, typically, a
building will have vacancy aswell. And so in existing already
stabilized units, we can takethat vacancy and convert it to
cash flow for the owner.
(06:42):
And so the value proposition,the problem we're solving short
term is we make the buildingmore profitable. And long term,
we make the building moreresilient, diversify demand
sources, and allow for it to befuture proof to a consumer
that's increasingly seekingflexibility.
Speaker 3 (06:58):
I imagine when you guys started, and correct me if
I'm wrong, that you started moreon the multifam several floors
of a multifam building and theboutique hotels came later. What
was the pivotal moment? Was itopportunistic? A hotel deal came
up and you're like, we know howto do all of the things that are
required for this. Or how didyou guys get there, and how did
that grow into becoming, itsounds like, a third of your
business today?
Speaker 1 (07:19):
Yeah. And in many ways, the apartment hotels are
also a form of hotels. So 2thirds of our inventory is,
hotel building, either apartmentinventory or typical rooms
without kitchens and livingrooms. But it happened very much
a lot of the things in thebusiness, you have a good plan
and then things happenorganically, you adapt to
conditions, you solve a realneed for your customers that
(07:42):
they're banging on your doorasking about. And as long as
that customer need andopportunity is in the direction
of the overall mission andvision of the business, we've
been willing to adapt ouroperations, I think, to our
benefit.
What happened was in COVID, alot of hotels struggled to stay
open. And in a bunch of thosehotels saw how efficiently we
(08:04):
were operating within anapartment context. We have a
very labor lite by necessitymodel that we've built the
technology and the operations tosupport that drives really high
margins by hotel standards. Ourapartment units run as
hospitality are running close toa 70% gross operating profit
margin. And you look at a hostreport from STR Global, and you
(08:27):
see the average US margin forhotels at the same kind of
apples to apples line as in thethirties.
And so we're running anextremely high margin and a low
fixed cost model. In COVID, whenrevenues dropped, owners were
really worried about their fixedcosts. They couldn't do anything
about taxes, insurance, debtservice, but they could adjust
their labor model to fit theneeds of the moment. And they
(08:48):
wanted to adjust it both for theamount of fixed cost as well as
both the margin, overall margin,and the amount of that that was
fixed. And so the first hotelwas a hotel in San Francisco
where the owner, kind of out ofdesperation, came to us saying
we need a different solution.
And we said we believe ourproduct can work for you. We
(09:09):
haven't tested it. But then veryquickly after operating the
property for 9 months saw reallygood results, which led to the
second property, which, again,we delivered strong results on,
which led to the 3rd. And today,we're close to 30 hotel
properties across the US.
Speaker 3 (09:26):
When you think about reorienting a labor model, there
has to be some processes orusually technology or digital
tools that enable that. Can youtalk me through day 1, you guys
launched Casa? What was thetechnology strategy, and how has
that evolved to today where youhave these different types of
properties in the portfolio?What have you guys built? What
(09:46):
does the team look like?
Everything like that.
Speaker 1 (09:49):
Yeah. So we started the business trying to solve the
problem of delivering, you know,unique profitability to owners
and an exceptional guestexperience in a, at the time,
format that was not in greatsupply in the United States,
which is apartment stylehospitality. And we endeavor to
do that by building the leastamount possible and using the
(10:12):
most off the shelf tooling.Obviously, it's really expensive
to build new technology. It'sexpensive to maintain new
technology.
My background is half realestate and half technology. So
we knew we had that as asuperpower if we needed to, but
we tried very hard to avoid itgiven its difficulty. And so we
decided we'll only build newtechnology if it's core to our
(10:34):
competitive advantage and kindof our goals that we are seeking
to really optimize for for ourpartners. And if it doesn't
exist on the market or doesn'texist in a way that will deliver
on our goals effectively. So weused off the shelf PMS to start.
We tried a couple of PMSs. Weused kinda off the shelf systems
(10:55):
across the board. And then wefocused on building only the
things that didn't exist orcaused the most problems and
were required most by ourpartners. The first thing we
built was a trust and safetysystem. We don't have as many
on-site folks.
These were in these apartmentbuildings where they're long
term residents, and our partnerswho are these institutions who
really treasure the fabric ofthe community. Amly Residential,
(11:16):
for example, is one of the topmanagers of apartments in the
world. And they are an owner andoperator, and they have no
tolerance for causing any issuesfor the long term residents. So
we built this system that doesbackground checks on guests, has
decibel meters and marijuanasensors in the units. We have a
predictive machine learningbased risk score that predicts
whether a potential guest willcause an issue in the unit.
(11:39):
It looks at a lot of interestingthings like, do you live within
30 miles of the property, whichisn't higher risk indicator of
your likelihood of throwing aparty, and it takes different
actions. And so we built thatfirst. It didn't exist in the
market. It was extremelynecessary to our successful
operation. And we did that overand over and over again over the
years, found things that didn'texist, built them.
(12:00):
One day, we woke up and we hadbuilt a PMS by necessity, not
by, like, that was our plan. Andso now we have our own property
management system as our brainthat really is focused on
optimizing the profitability ofhospitality while delivering a
great guest experience. And thenwe've partnered with a lot of
third parties that integrate viaAPI into that brain, but at the
(12:23):
core is our own system. And Ithink it's unique that we have
the operations and thetechnology and the feedback loop
is really powerful. We can veryquickly solve for things that a
PMS provider may not realize isas important or may not be able
to activate in the right waybecause they don't control the
operations themselves.
Speaker 3 (12:43):
Have you guys built your own guest tech? Like, what
is the check-in to servicingwithin stay, whether that's to
someone on property to getsomething as basic as a towel or
whatever or to customer servicecentralized? Did you guys have
to build that because you havethose two things in tandem?
Whereas with Marriott Bonvoy,I'm not reaching out to their
central customer support peoplefor stuff and stay usually.
Speaker 1 (13:06):
Yeah. So we've built our own booking engine. And the
reason we built that is it needsto really tightly integrate with
our pre arrival checklist, whichensures that before you arrive
to the property, you've uploadedyour ID and selfie. You only
need to do that once with Casa.But for the 1st day, we need to
verify your reservation muchlike a person at a front desk
would need to do that.
(13:28):
We built that pre arrivalchecklist flow. It's very core
to us. That's also the placewhere the hotelier can upsell
for early check-in if they wannacharge for it. They can offer
room upgrades. They can addparking.
They can ask for specialrequests. We also from the ID
that folks upload, we pull outthe information that's useful
(13:49):
for understanding what segmentof demand they represent. We get
everyone's age and his date ofbirth, obviously, and age and
ZIP code and anything that's onan ID or use OCR to pull out and
then make sure that we canservice the guest more
effectively and understand theguest more effectively. And so
that flow, we've builtourselves. And then the virtual
front desk, which is partiallyhelpful tool to help you get
(14:12):
into the unit when there isn't afront desk person physically
there.
It guides you with photos andtext from your Uber or your car
to the inside of your unit in afew steps. And we have keypads
on the exterior of the buildingand on your unit. We have a code
(14:33):
setting service that ensuresthat a unique code is set and
securely and is wiped post yourstay. We know when you've
unlocked different doors, so wecan send you a welcome message
when you've arrived kinda thing,and all that is very tightly
integrated. And the hard partabout self check-in and why most
of the brands offer it but stillstaff essentially a full front
(14:55):
desk, and as a result, it's anice feature but not a cost
savings to the owner.
And frankly, in many cases, isdone in a clunky enough way that
it's not even a good experiencefor the guest. The reason why
that's the case is they're using10 different systems that don't
talk to each other effectively.A lot of legacy systems are part
of that. And 2, there's thislong tail of issues that are
(15:19):
really challenging to solvearound self check-in. You know,
there's people who book throughthe GDS and you're not able to
get their email addresses aseffectively.
There are people who put in, youknow, their assistant books on
their behalf. There's just amyriad of these issues that
we've gone 1 by 1 by 1, and it'slike it was easy to get to 90%
(15:41):
self check-in effectively. Itwas really hard to get to 98%,
and we're probably at, like, 90we're not perfect by any stretch
of the imagination, but Ibelieve we're the most
comprehensive solution to selfcheck-in. So, yeah, we've built
the booking engine, we've builtthe pre arrival checklist, and
we've built the self check-in,system. And then there's a kiosk
(16:03):
at the property for folks whoneed it.
And that's an option for theowner, but we think that for
most properties, it makes sense.It allows for people, you know,
who are confused to very quicklyget to their room even if they
didn't do it ahead of this day.
Speaker 3 (16:15):
We haven't really talked about the org structure
at Caso. Maybe we start with howis the tech team organized? And
then just more broadly, whatdoes your org structure looks
like? And how is that differentfrom, let's say, a traditional
hotel management company, inyour opinion?
Speaker 1 (16:30):
Yeah. So we're fairly I think, we're not reinventing
the wheel on the tech side noron the organization around hotel
operations. Although, we areprobably more centralized in
hotel operations, generallyspeaking. On the tech side,
we're an agile kind of shop. Wehave kinda self sustaining pods
(16:51):
that have every person that theyneed to ship finished code
within them from product toengineering to design.
We have really 2 main pods. 1 isfocused on revenue and channels,
and 1 is focused on hospitality,although they really deeply
interact. One of the thingsthat's really unique to us is
(17:14):
that we control and haveoperations in addition to
technology, and we use that as asuperpower where our operating
teams are deeply connected tothe technology team. And if
something comes up that can makea material difference, either
the guest experience or theprofitability to owners that the
tech team didn't think of butthe operations team highlights,
(17:36):
that will go to the top of ourlist in terms of what we
prioritize on the road map. Onthe operations side, where we
have different regions that haveportfolio general managers who
oversee those regions, theyreally have full P and L
ownership.
They work in pods with revenueand accounting and themselves as
the manager portfolio generalmanagers who ultimately owns the
(17:58):
p and l to ensure that we'rethinking about revenue
management and guest experienceall in one thought. Those
portfolio general managers aresupported by centralized
services, which is a robust setof services that allow for them
to really focus on the guest asmuch as possible. That includes
accounting, centralizedaccounting, that includes
(18:18):
centralized customer service,revenue management, corporate
and group sales, as well asleasing. So kind of the gamut of
things. So we take off as muchoff their plate so that they can
focus on the guest and on theproperties and the owners.
Speaker 3 (18:35):
I know you guys have 2 different models. So you've
got your properties that youguys operate, and then you also
have a powered by Cosworthbusiness. Can we talk about when
did that come about, and wasthere a specific customer that
drove you guys in thatdirection?
Speaker 1 (18:49):
Yeah. So we're super excited about this. Because if
you zoom out and ask yourself,what is Casa truly? What are we
really best at? You'll kinda seethat we're at the cart and
operating system.
Like, an operating system in thetrue sense of the word operating
system where we have anoperating component and we have
a technology component. And thatoperating system, fundamentally,
it improves the profitability ofkinda overlooked hospitality or
(19:13):
concepts in hospitality thatotherwise are not well served by
the traditional brands and whichneed kind of a solution in terms
of technology, infrastructure,and centralized services. And so
that is what the operatingsystem is. It is technology
infrastructure centralizedservices. It's our PMS, and it's
connected systems associatedwith it.
(19:33):
It's the centralized services ofaccounting, revenue managements,
corporate sales, and groupsales, reservations, etcetera.
What it does is it powers kindof hospitality for brands and
owners for whom the traditionalsystems are not a good fit, the
traditional brands and managersare not a good fit. Maybe
(19:54):
they're too small. They're tooniche y. Apartment hotels are an
example.
The traditional systems are justnot a good fit. So our offering
to the apartment community andto apartment hotels is a subset
of this operating system, but sois our ability to operate and
power other brands. How it cameto be is just like the hotel
world, kind of a naturalexpansion as a result of pull
(20:14):
from our customers. Thatcustomer was Starwood Capital,
which was seeking a differentinfrastructure layer for one of
their apartment hotel brandscalled Tucker. And we had worked
with them in other context inthe past.
They had seen our systems. We'vedone demos of our technology to
them. And they made the commentsaying, hey, this technology
would be useful, and centralizedservices and infrastructure
(20:37):
would be really useful to usbecause it allows us to focus
all of our attention and thenwhat we do best and where we
believe we're differentiated increating value. For us, that's
the site selection. That's thebrand activation.
That's the creativity behind theguest experience. We know we
have to do accounting, but we'renot gonna be paid for being
(20:59):
better than the next companythat's building a brand at
accounting. We know that we haveto put together a tech stack,
but we're not gonna be paid forfirst off, it's not our
expertise. Second off, we're notgonna be paid for putting
together the 10 systems and thentrying to make sure they talk to
each other. And then thecentralized services,
reservations, and guestexperience.
As long as you're able to tailoryour approach to our brand
voice, we don't wanna hire 50people in reservations. One, it
(21:23):
won't be economic. And 2, thatis just isn't the thing that we
will differentiate our brand on.And so we started operating with
them. They had a different setof systems in place.
We improved revenue by 30%almost immediately. Like,
really, we're excited by thoseresults. We improved review
scores a tremendous amount, alsoin that 30% range. And then
(21:44):
after the doing that, we haven'teven publicized this that we do
it. But we spoke to a fewothers, mentioned it in passing
in conversations, and had a lotof demand from people building
brands or building hospitalityconcepts that want to have all
the best infrastructure, thebest centralized services, and
the best technology all given tothem with an easy button, and
(22:06):
it's been exciting to deliver onthat.
Speaker 3 (22:09):
So it's obviously a sensitive subject, but there's
been some kind of, call it,service apartment hospitality
brands that have popped up overthe years, and there's been some
turbulence in that space. Whatdo you think sets Casa apart
from some of these other brandsthat have kind of run into some
roadblocks from a strategicperspective. What are the
(22:29):
turning points or pivotalmoments for your business that
you feel puts you guys on adifferent path?
Speaker 1 (22:34):
Yeah. So when we started the business, this was
the hottest sector in theventure world. We were probably,
like, the 16th company that wasfunded in this sector. There
were probably, like, 25 of usowners. We're excited but
confused why there were so manycompanies in the sector.
Today, we're really the leadingcompany. Unfortunately, a lot of
(22:56):
the businesses that had greatpromise ended up running into a
bunch of problems and wentbankrupt or disappeared. The
reason for that there were someand obviously, we've gotten
lucky along the way, so Icertainly wouldn't chalk it up
to strategic brilliance on itsown. Though our team has worked
exceptionally hard, and I thinkwe've made some thoughtful
(23:17):
choices in how we've architectedthe business. A lot of these
businesses, there was a greatflood in the pandemic, and two
things came together.
1, revenues dropped by 80% forour industry for a relatively
short period of time, but thatcan be a death sentence for
companies that are still intheir embryonic stage. But they
also most of these companiesworked in master lease formats.
(23:41):
So they similar to WeWork, theywent to owners and offered to
pay a fixed rent. And and thenif they were making a profit
above the rent, they'd pocketit. But if they were making a
loss below the rent, they wouldbe on the hook for it.
These are often not verysustainable contracts to begin
with. But in COVID, that wasaccentuated because their
revenue dropped, and that led toa lot of companies not making it
(24:04):
through. And, certainly, you seein the news, Saunders, today,
that the base of their businessis these 10 year contracts that
are not profitable at the unitlevel, at least according to
what I can tell from theirpublic filings. And as a result,
that creates a not sustainablebusiness long term. It's perhaps
a subtle point, master leasesversus management agreements or
(24:27):
revenue shares.
But it's actually an even moreprofound point than just the
economic arrangement between theowner and the company because it
also is a signal of productmarket fit. In a lease, you're
paying your customer who is theowner. You're going and saying,
hey, maybe I can pay you tooperate the building. In our
context, we are charging a feeto deliver our services. And the
(24:47):
reason we charge a fee isbecause we can deliver more
profits to the owner than theycould make without us and a
better guest experience.
But we'll only grow in ourcontext if we're doing
delivering on our promise. Andwe'll grow with the same
partner. We'll expand to otherpartners because they'll talk
to, you know, references. Andwe've been really excited that
we've grown mostly through samepart a lot of our growth has
(25:08):
been through same partnerexpansion. In a lease model,
you'll grow if you can pay yourlease.
And so Casa's model is the oldschool model, frankly, the
Marriott, Hilton, Hyatt, Wyndhammodel of either management
agreements or powered byagreements which are more closer
to kind of the franchiseapproach and not leases. That
(25:28):
was the kind of level 1 of whatwe did different. Level 2 is
we've focused on institutionalowners as well as the local
owners. Most of the othercompanies in this sector focus
just on local owners. Why?
Because as a venture business,local owners are faster to close
versus Starwood Capital and TPG,they have deep compliance
departments. They're verythorough, and to earn their
(25:50):
trust requires a lot of data.And so some of these are 2, 3
year sales cycles, which, youknow, you're trying to grow as
quickly as possible in some ofthese companies, and you don't
have the patience for those. Butthey can be really powerful in
terms of the scalability of theplatform with those partners.
And the third is we've actuallybuilt our own technology, which
I would say is non consensus atthis point.
(26:12):
You always wanna be nonconsensus and right. I believe
we're the only company that hasoperations that also has
technology. And although a lotof companies have tried and a
lot have abandoned their effortsfrom building first party
technology, we believe that itallows us to deliver a unique
experience to guests and aunique profitability to owners,
(26:33):
and we can show that in the pand l's. But that's not
consensus. We believe it's notconsensus and right, but that's
another area of distinctionbetween us.
Speaker 3 (26:42):
What are some of the most exciting applications of
Gen AI that you're seeing todayor that you guys are really
focused on right now?
Speaker 1 (26:50):
Yeah. It's interesting. I've been seeing a
lot of businesses that are,like, basically taking old world
businesses, like accountingbusinesses, old world front
ends, and then the thesis is toautomate a lot of the work that
is heavy labor on the back endusing Gen AI. And I think that's
likely going to be a fairlyinteresting thesis to build
businesses around in the future.In many ways, if you were to
(27:13):
have that thesis for hotelmanagement and services
business, you know, a businessthat's in the hotel management
world automated quitesignificantly by AI, Gen AI, or
otherwise, you'd build Casaalong that road to that company.
And we didn't obviously knowabout generative AI when we
started the business or at leastit wasn't in our plans. There
(27:34):
was a kind of a leap forwardwhen the world awoke to what was
possible. But we lucked into thefact that the tenets behind our
business really fit well withwhat you'd needed the business
to look like to use AI. What arethose tenets? We're very
centralized.
So everything you know, a lot ofthe systems and data are all
flow through including customerservice. You're texting us.
(27:56):
You're emailing us. It'scentralized and digitized. All
of our processes, whether it'saccounting, revenue management,
sales, customer service, we'vestructured and cleaned all the
data about our whether it's thereservation, the guest, or much
more importantly, the property.
So what is the thermostat in agiven unit? You know, we have
the model number centrally kindof tracked, and we can pull up
(28:20):
kinda how to use it as a resultof that. And we also and
finally, you know, we controlsome of the underlying systems,
which allows us to really deeplyintegrate in a cohesive way
artificial intelligence. And sowe're just kind of at the start
of putting it into everythingthat we do. But in theory,
anything that's centralized canbe enhanced in a deep way,
(28:43):
whether it's revenue management,distributions, accounting,
customer service, usinggenerative AI, or trust and
safety, which I mentionedearlier.
Our predictive risk algorithm isa machine learning algorithm at
its heart. Today, the mostobvious use case is in customer
service for us where a typicalhotel, most of the conversations
are analog. For us, it's alldigital because, you know,
(29:05):
you're not going to a physicalfront desk where the information
is lost. For us, you're textingus or emailing us or calling us,
all of which are digital. Andright now, we're answering
direct to guest almost 20% ofthe questions with Copilot
serving as a enhancer for ourexisting team for another 60% of
questions.
So if you're a customer serviceperson on our side, we call it
(29:28):
guest experience. You'll get arecommended answer for every
question that's generated by AI.But for 20% of questions, it
will just go and send directlyto guests, and we're increasing
that every month. The input intothat is that we have very good
data about our properties, verygood data about our, obviously,
every other element of thestate. Super exciting, and I
(29:49):
think we're just scratching thesurface.
It'll take some time to reallyoperationalize these things. You
crawl, walk, run, but the impactand power to the guests, the
profitability of the propertiesis huge.
Speaker 3 (30:01):
And outside customer service, any other applications
that you're really excitedabout?
Speaker 1 (30:05):
Revenue management is another. So some of the
automated steps related toexceptions handling, I'm
excited, but we do not yet useit in distributions in terms of
optimizing our listings, boththe content, the order of
photography, the, like, makingadjustments to the listings
based on data in a recursiveway. And so those are areas
(30:31):
which are both core to the guestexperience, are huge cost
centers in some cases, and alsocan deliver outsized revenue
results.
Speaker 3 (30:41):
Anything else that we haven't covered that you think
makes Casa unique or that you'rereally excited about for the
future of the industry?
Speaker 1 (30:47):
Yeah. I appreciate the opportunity to share our
story. Hopefully, some of thefolks listening had a there's
some tidbits that are useful.Folks can email me at
roman@casa.com or find me onLinkedIn if they have follow
ups. I think this is reallycomprehensive.
I think we're at a very, veryexciting moment in the
hospitality world whereconvergence of changes in
(31:08):
consumer behavior needs in termsof what owners require in their
p and l's and opportunities intechnology all are converging.
And I'm just excited to bothwatch the movie in the hotel
world as it unfolds in the nextdecade and also hopefully be a
leading part in it as well.
Speaker 3 (31:27):
Alright. Thanks so much for coming on, Roman.
Speaker 2 (31:31):
That's all for today's episode. Thanks for
listening to Hotel Tech Insiderproduced by hoteltechreport.com.
Our goal with this podcast is toshow you how the best in the
business are leveragingtechnology to grow their
properties and outperform theconcept by using innovative
digital tools and strategies. Iencourage all of our listeners
to go try at least one of thesestrategies or tools that you
(31:53):
learned from today's episode.Successful digital
transformation is all aboutconsistent small experiments
over a long period of time, sodon't wait until tomorrow to try
something new.
Do you know a hotelier who wouldbe great to feature on this
show, or do you think that yourstory would bring a lot of value
to our audience? Reach out to medirectly on LinkedIn by
searching for Jordan Hollander.For more episodes like this,
(32:17):
follow Hotel Tech Insider on allmajor streaming platforms like
Spotify and Apple Music.
So we built this system that does background
checks on guests, has decibelmeters and marijuana sensors in
the units. We have a predictivemachine learning based risk
score that predicts whether apotential guest will cause an
issue in the unit. Unit. Itlooks at a lot of interesting
things like do you live within30 miles of the property.
Speaker 2 (00:18):
From Hotel Tech Report, it's Hotel Tech Insider,
a show about the future ofhotels and the technology that
powers them. Today on the show,we have a very special guest. We
host Roman Padan, the founderand CEO of Casa Living, who
earlier this year announced the$70,000,000 series c to continue
building their vision for thefuture of a tech enabled
hospitality brand. In thisepisode, we dive into Casa's
(00:40):
tech strategy, how theirorganization looks, what they
decide to build versus buy, andsome of the really interesting
applications of artificialintelligence in their business
that they're looking at today,already accomplished, or looking
at for the future.
Speaker 3 (00:54):
Roman, thanks so much for coming on the show today.
We're excited to have you.
Speaker 1 (00:57):
Jordan, I'm excited. It's a pleasure.
Speaker 3 (00:59):
I'd love to learn about the cost of business in
the quick minute, 2 minute.Where did you start, and where
are you guys today, and how doyou position yourselves in the
market so that we can use thatto set the stage for where you
guys are at from a technologyperspective?
Speaker 1 (01:13):
Yeah. So we're a dinosaur in this industry. We're
almost a decade old. I startedthe business while I was at
Stanford Business School betweenmy 1st 2nd year. Prior to that,
my background is technology.
I have a computer sciencebackground, started a tech only
business in undergrad and realestate. I was in the private
equity world at Walton StreetCapital, large real estate only
(01:36):
private equity firm, and then atKKR where I helped start the
real estate practice alongside 6others. And so in many ways,
Casa melds those 2 in our DNA.Above the surface, what many see
in Casa is the industry leadinghotel and apartment hotel brand
and manager. Our goal is tomaximize the profitability of
(01:57):
hospitality operations whiledelivering exceptional guest
experience.
And, really, fundamentally, wemaximize the profitability by
lowering the cost of operatingproperties. We've automated,
centralized, or eliminated partsof a hotel p and l
systematically to make them moreprofitable. We operate across
(02:17):
the US. We have 85 propertieshosted well over a 1000000
nights in 40 cities. And we'rereally proud to be trusted by
some of the largest and mostdiscerning owners of real estate
like Starwood Capital, TPG, GreyStar, KKR, Morgan Stanley.
It's a long and formidable list.We're proud that they work with
us, they trust us, that we'reconstantly expanding with them.
(02:40):
But we get a lot of joy inworking with the local
developer, the entrepreneurwho's building their own brand
across the country. That's whatfolks see above the surface.
Happy to delve into kinda what'skinda underneath the surface,
but that's the quick background.
Speaker 3 (02:55):
What does the average typical property look like from
a amenities staffingperspective? No property type?
Is it like service apartmenttype of buildings? And is it a
whole building or a part of abuilding? Are there any
amenities or outlets?
Speaker 1 (03:09):
We actually have a range of property types. We cut
our teeth in the servicedepartment world, and that's
where we really became theindustry standard to some of the
largest apartment owners. 10 ofthe 20 largest apartment owners
partner with us eitherexclusively or kind of 1 of 2
partners. And in those formatswhere either the entire building
or a few floors of a largerapartment building. So about a
(03:33):
third is where a portion of alarger apartment building, a few
floors of 1.
About a third of our propertiesare full building apartment
hotels. They're apartment hotelswith kitchens, living rooms,
ones, 2 bedrooms that we operatethe entire building. And then
about a third are boutiquehotels that we are either the
soft brand or we're poweringsomeone else's brand in those
(03:56):
properties. And our apartmentbuildings have luxury gyms and
rooftops and communal space, butthose are part of kind of
apartment style communities. Inthe hotel side, we will have a
typical hotel, either rooms onlyboxes or f and b.
We have a property that has a1600 person theater, a rooftop
(04:16):
wraparound pool with kind of awine bar concept and a lobby
bar. We typically partner withthe best of F and B operators
and focus on what we're best inis which is delivering
exceptional hospitalityexperiences to guests and then
really profitable operations tothe owners.
Speaker 3 (04:34):
And from a multifamily perspective, when a
multifamily owner comes to you,what's the job to be done or the
problem that they're solving? Isit lease up time that and they
want or they wanna, like, kindadiversify their asset into 2
different asset classes to be alittle bit more durable in
different market conditions.What do they come to you for?
Speaker 1 (04:51):
So apartment owners are recognizing the shift in
consumer demand that's kind ofunderneath the surface, been
consistently happening for thelast decade, accelerated in
COVID, which is the push towardsflexible living. People's jobs
are more flexible. Their officearrangements are more flexible.
So they want living to matchtheir job and their office
arrangement and its flexibility.And so activating within their
(05:14):
building a set of inventory thatcan match the growing demand
segment for flexible living isreally important for owners long
term.
If you pull an apartment ownerand ask them, will the future
apartment building just serviceunfurnished 12 month leases?
They'll almost all say, no.It'll have an ability to service
multiple forms of demand.Unfurnished 12 month, furnished
(05:36):
5 month, but also furnished 3night, 5 night, 10 night. We're
making their buildings futureproof.
That's the long term kind of clevel strategic thing we're
solving for. What we're solvingfor the developer, the asset
manager, the property manager iswe're converting vacancy to cash
flow. It's most obvious in alease up. A lease up will take,
(05:58):
developer 18 to 24 months. Ifyou miss the window, you're
exposing yourself on the backend as concessions expire and
are sort of stuck in 80%occupancy purgatory.
What we'll do is we'll generatecash flow earlier and more cash
flow at stabilization. So whenyou're just leasing up, we'll
fill the property with furnishedinventory, and that furnished
(06:22):
inventory generates cash flowday 0 and quite a significant
amount of cash flow on day 0.And then at stabilization, we
generate more than market rentfor the owner. And, typically, a
building will have vacancy aswell. And so in existing already
stabilized units, we can takethat vacancy and convert it to
cash flow for the owner.
(06:42):
And so the value proposition,the problem we're solving short
term is we make the buildingmore profitable. And long term,
we make the building moreresilient, diversify demand
sources, and allow for it to befuture proof to a consumer
that's increasingly seekingflexibility.
Speaker 3 (06:58):
I imagine when you guys started, and correct me if
I'm wrong, that you started moreon the multifam several floors
of a multifam building and theboutique hotels came later. What
was the pivotal moment? Was itopportunistic? A hotel deal came
up and you're like, we know howto do all of the things that are
required for this. Or how didyou guys get there, and how did
that grow into becoming, itsounds like, a third of your
business today?
Speaker 1 (07:19):
Yeah. And in many ways, the apartment hotels are
also a form of hotels. So 2thirds of our inventory is,
hotel building, either apartmentinventory or typical rooms
without kitchens and livingrooms. But it happened very much
a lot of the things in thebusiness, you have a good plan
and then things happenorganically, you adapt to
conditions, you solve a realneed for your customers that
(07:42):
they're banging on your doorasking about. And as long as
that customer need andopportunity is in the direction
of the overall mission andvision of the business, we've
been willing to adapt ouroperations, I think, to our
benefit.
What happened was in COVID, alot of hotels struggled to stay
open. And in a bunch of thosehotels saw how efficiently we
(08:04):
were operating within anapartment context. We have a
very labor lite by necessitymodel that we've built the
technology and the operations tosupport that drives really high
margins by hotel standards. Ourapartment units run as
hospitality are running close toa 70% gross operating profit
margin. And you look at a hostreport from STR Global, and you
(08:27):
see the average US margin forhotels at the same kind of
apples to apples line as in thethirties.
And so we're running anextremely high margin and a low
fixed cost model. In COVID, whenrevenues dropped, owners were
really worried about their fixedcosts. They couldn't do anything
about taxes, insurance, debtservice, but they could adjust
their labor model to fit theneeds of the moment. And they
(08:48):
wanted to adjust it both for theamount of fixed cost as well as
both the margin, overall margin,and the amount of that that was
fixed. And so the first hotelwas a hotel in San Francisco
where the owner, kind of out ofdesperation, came to us saying
we need a different solution.
And we said we believe ourproduct can work for you. We
(09:09):
haven't tested it. But then veryquickly after operating the
property for 9 months saw reallygood results, which led to the
second property, which, again,we delivered strong results on,
which led to the 3rd. And today,we're close to 30 hotel
properties across the US.
Speaker 3 (09:26):
When you think about reorienting a labor model, there
has to be some processes orusually technology or digital
tools that enable that. Can youtalk me through day 1, you guys
launched Casa? What was thetechnology strategy, and how has
that evolved to today where youhave these different types of
properties in the portfolio?What have you guys built? What
(09:46):
does the team look like?
Everything like that.
Speaker 1 (09:49):
Yeah. So we started the business trying to solve the
problem of delivering, you know,unique profitability to owners
and an exceptional guestexperience in a, at the time,
format that was not in greatsupply in the United States,
which is apartment stylehospitality. And we endeavor to
do that by building the leastamount possible and using the
(10:12):
most off the shelf tooling.Obviously, it's really expensive
to build new technology. It'sexpensive to maintain new
technology.
My background is half realestate and half technology. So
we knew we had that as asuperpower if we needed to, but
we tried very hard to avoid itgiven its difficulty. And so we
decided we'll only build newtechnology if it's core to our
(10:34):
competitive advantage and kindof our goals that we are seeking
to really optimize for for ourpartners. And if it doesn't
exist on the market or doesn'texist in a way that will deliver
on our goals effectively. So weused off the shelf PMS to start.
We tried a couple of PMSs. Weused kinda off the shelf systems
(10:55):
across the board. And then wefocused on building only the
things that didn't exist orcaused the most problems and
were required most by ourpartners. The first thing we
built was a trust and safetysystem. We don't have as many
on-site folks.
These were in these apartmentbuildings where they're long
term residents, and our partnerswho are these institutions who
really treasure the fabric ofthe community. Amly Residential,
(11:16):
for example, is one of the topmanagers of apartments in the
world. And they are an owner andoperator, and they have no
tolerance for causing any issuesfor the long term residents. So
we built this system that doesbackground checks on guests, has
decibel meters and marijuanasensors in the units. We have a
predictive machine learningbased risk score that predicts
whether a potential guest willcause an issue in the unit.
(11:39):
It looks at a lot of interestingthings like, do you live within
30 miles of the property, whichisn't higher risk indicator of
your likelihood of throwing aparty, and it takes different
actions. And so we built thatfirst. It didn't exist in the
market. It was extremelynecessary to our successful
operation. And we did that overand over and over again over the
years, found things that didn'texist, built them.
(12:00):
One day, we woke up and we hadbuilt a PMS by necessity, not
by, like, that was our plan. Andso now we have our own property
management system as our brainthat really is focused on
optimizing the profitability ofhospitality while delivering a
great guest experience. And thenwe've partnered with a lot of
third parties that integrate viaAPI into that brain, but at the
(12:23):
core is our own system. And Ithink it's unique that we have
the operations and thetechnology and the feedback loop
is really powerful. We can veryquickly solve for things that a
PMS provider may not realize isas important or may not be able
to activate in the right waybecause they don't control the
operations themselves.
Speaker 3 (12:43):
Have you guys built your own guest tech? Like, what
is the check-in to servicingwithin stay, whether that's to
someone on property to getsomething as basic as a towel or
whatever or to customer servicecentralized? Did you guys have
to build that because you havethose two things in tandem?
Whereas with Marriott Bonvoy,I'm not reaching out to their
central customer support peoplefor stuff and stay usually.
Speaker 1 (13:06):
Yeah. So we've built our own booking engine. And the
reason we built that is it needsto really tightly integrate with
our pre arrival checklist, whichensures that before you arrive
to the property, you've uploadedyour ID and selfie. You only
need to do that once with Casa.But for the 1st day, we need to
verify your reservation muchlike a person at a front desk
would need to do that.
(13:28):
We built that pre arrivalchecklist flow. It's very core
to us. That's also the placewhere the hotelier can upsell
for early check-in if they wannacharge for it. They can offer
room upgrades. They can addparking.
They can ask for specialrequests. We also from the ID
that folks upload, we pull outthe information that's useful
(13:49):
for understanding what segmentof demand they represent. We get
everyone's age and his date ofbirth, obviously, and age and
ZIP code and anything that's onan ID or use OCR to pull out and
then make sure that we canservice the guest more
effectively and understand theguest more effectively. And so
that flow, we've builtourselves. And then the virtual
front desk, which is partiallyhelpful tool to help you get
(14:12):
into the unit when there isn't afront desk person physically
there.
It guides you with photos andtext from your Uber or your car
to the inside of your unit in afew steps. And we have keypads
on the exterior of the buildingand on your unit. We have a code
(14:33):
setting service that ensuresthat a unique code is set and
securely and is wiped post yourstay. We know when you've
unlocked different doors, so wecan send you a welcome message
when you've arrived kinda thing,and all that is very tightly
integrated. And the hard partabout self check-in and why most
of the brands offer it but stillstaff essentially a full front
(14:55):
desk, and as a result, it's anice feature but not a cost
savings to the owner.
And frankly, in many cases, isdone in a clunky enough way that
it's not even a good experiencefor the guest. The reason why
that's the case is they're using10 different systems that don't
talk to each other effectively.A lot of legacy systems are part
of that. And 2, there's thislong tail of issues that are
(15:19):
really challenging to solvearound self check-in. You know,
there's people who book throughthe GDS and you're not able to
get their email addresses aseffectively.
There are people who put in, youknow, their assistant books on
their behalf. There's just amyriad of these issues that
we've gone 1 by 1 by 1, and it'slike it was easy to get to 90%
(15:41):
self check-in effectively. Itwas really hard to get to 98%,
and we're probably at, like, 90we're not perfect by any stretch
of the imagination, but Ibelieve we're the most
comprehensive solution to selfcheck-in. So, yeah, we've built
the booking engine, we've builtthe pre arrival checklist, and
we've built the self check-in,system. And then there's a kiosk
(16:03):
at the property for folks whoneed it.
And that's an option for theowner, but we think that for
most properties, it makes sense.It allows for people, you know,
who are confused to very quicklyget to their room even if they
didn't do it ahead of this day.
Speaker 3 (16:15):
We haven't really talked about the org structure
at Caso. Maybe we start with howis the tech team organized? And
then just more broadly, whatdoes your org structure looks
like? And how is that differentfrom, let's say, a traditional
hotel management company, inyour opinion?
Speaker 1 (16:30):
Yeah. So we're fairly I think, we're not reinventing
the wheel on the tech side noron the organization around hotel
operations. Although, we areprobably more centralized in
hotel operations, generallyspeaking. On the tech side,
we're an agile kind of shop. Wehave kinda self sustaining pods
(16:51):
that have every person that theyneed to ship finished code
within them from product toengineering to design.
We have really 2 main pods. 1 isfocused on revenue and channels,
and 1 is focused on hospitality,although they really deeply
interact. One of the thingsthat's really unique to us is
(17:14):
that we control and haveoperations in addition to
technology, and we use that as asuperpower where our operating
teams are deeply connected tothe technology team. And if
something comes up that can makea material difference, either
the guest experience or theprofitability to owners that the
tech team didn't think of butthe operations team highlights,
(17:36):
that will go to the top of ourlist in terms of what we
prioritize on the road map. Onthe operations side, where we
have different regions that haveportfolio general managers who
oversee those regions, theyreally have full P and L
ownership.
They work in pods with revenueand accounting and themselves as
the manager portfolio generalmanagers who ultimately owns the
(17:58):
p and l to ensure that we'rethinking about revenue
management and guest experienceall in one thought. Those
portfolio general managers aresupported by centralized
services, which is a robust setof services that allow for them
to really focus on the guest asmuch as possible. That includes
accounting, centralizedaccounting, that includes
(18:18):
centralized customer service,revenue management, corporate
and group sales, as well asleasing. So kind of the gamut of
things. So we take off as muchoff their plate so that they can
focus on the guest and on theproperties and the owners.
Speaker 3 (18:35):
I know you guys have 2 different models. So you've
got your properties that youguys operate, and then you also
have a powered by Cosworthbusiness. Can we talk about when
did that come about, and wasthere a specific customer that
drove you guys in thatdirection?
Speaker 1 (18:49):
Yeah. So we're super excited about this. Because if
you zoom out and ask yourself,what is Casa truly? What are we
really best at? You'll kinda seethat we're at the cart and
operating system.
Like, an operating system in thetrue sense of the word operating
system where we have anoperating component and we have
a technology component. And thatoperating system, fundamentally,
it improves the profitability ofkinda overlooked hospitality or
(19:13):
concepts in hospitality thatotherwise are not well served by
the traditional brands and whichneed kind of a solution in terms
of technology, infrastructure,and centralized services. And so
that is what the operatingsystem is. It is technology
infrastructure centralizedservices. It's our PMS, and it's
connected systems associatedwith it.
(19:33):
It's the centralized services ofaccounting, revenue managements,
corporate sales, and groupsales, reservations, etcetera.
What it does is it powers kindof hospitality for brands and
owners for whom the traditionalsystems are not a good fit, the
traditional brands and managersare not a good fit. Maybe
(19:54):
they're too small. They're tooniche y. Apartment hotels are an
example.
The traditional systems are justnot a good fit. So our offering
to the apartment community andto apartment hotels is a subset
of this operating system, but sois our ability to operate and
power other brands. How it cameto be is just like the hotel
world, kind of a naturalexpansion as a result of pull
(20:14):
from our customers. Thatcustomer was Starwood Capital,
which was seeking a differentinfrastructure layer for one of
their apartment hotel brandscalled Tucker. And we had worked
with them in other context inthe past.
They had seen our systems. We'vedone demos of our technology to
them. And they made the commentsaying, hey, this technology
would be useful, and centralizedservices and infrastructure
(20:37):
would be really useful to usbecause it allows us to focus
all of our attention and thenwhat we do best and where we
believe we're differentiated increating value. For us, that's
the site selection. That's thebrand activation.
That's the creativity behind theguest experience. We know we
have to do accounting, but we'renot gonna be paid for being
(20:59):
better than the next companythat's building a brand at
accounting. We know that we haveto put together a tech stack,
but we're not gonna be paid forfirst off, it's not our
expertise. Second off, we're notgonna be paid for putting
together the 10 systems and thentrying to make sure they talk to
each other. And then thecentralized services,
reservations, and guestexperience.
As long as you're able to tailoryour approach to our brand
voice, we don't wanna hire 50people in reservations. One, it
(21:23):
won't be economic. And 2, thatis just isn't the thing that we
will differentiate our brand on.And so we started operating with
them. They had a different setof systems in place.
We improved revenue by 30%almost immediately. Like,
really, we're excited by thoseresults. We improved review
scores a tremendous amount, alsoin that 30% range. And then
(21:44):
after the doing that, we haven'teven publicized this that we do
it. But we spoke to a fewothers, mentioned it in passing
in conversations, and had a lotof demand from people building
brands or building hospitalityconcepts that want to have all
the best infrastructure, thebest centralized services, and
the best technology all given tothem with an easy button, and
(22:06):
it's been exciting to deliver onthat.
Speaker 3 (22:09):
So it's obviously a sensitive subject, but there's
been some kind of, call it,service apartment hospitality
brands that have popped up overthe years, and there's been some
turbulence in that space. Whatdo you think sets Casa apart
from some of these other brandsthat have kind of run into some
roadblocks from a strategicperspective. What are the
(22:29):
turning points or pivotalmoments for your business that
you feel puts you guys on adifferent path?
Speaker 1 (22:34):
Yeah. So when we started the business, this was
the hottest sector in theventure world. We were probably,
like, the 16th company that wasfunded in this sector. There
were probably, like, 25 of usowners. We're excited but
confused why there were so manycompanies in the sector.
Today, we're really the leadingcompany. Unfortunately, a lot of
(22:56):
the businesses that had greatpromise ended up running into a
bunch of problems and wentbankrupt or disappeared. The
reason for that there were someand obviously, we've gotten
lucky along the way, so Icertainly wouldn't chalk it up
to strategic brilliance on itsown. Though our team has worked
exceptionally hard, and I thinkwe've made some thoughtful
(23:17):
choices in how we've architectedthe business. A lot of these
businesses, there was a greatflood in the pandemic, and two
things came together.
1, revenues dropped by 80% forour industry for a relatively
short period of time, but thatcan be a death sentence for
companies that are still intheir embryonic stage. But they
also most of these companiesworked in master lease formats.
(23:41):
So they similar to WeWork, theywent to owners and offered to
pay a fixed rent. And and thenif they were making a profit
above the rent, they'd pocketit. But if they were making a
loss below the rent, they wouldbe on the hook for it.
These are often not verysustainable contracts to begin
with. But in COVID, that wasaccentuated because their
revenue dropped, and that led toa lot of companies not making it
(24:04):
through. And, certainly, you seein the news, Saunders, today,
that the base of their businessis these 10 year contracts that
are not profitable at the unitlevel, at least according to
what I can tell from theirpublic filings. And as a result,
that creates a not sustainablebusiness long term. It's perhaps
a subtle point, master leasesversus management agreements or
(24:27):
revenue shares.
But it's actually an even moreprofound point than just the
economic arrangement between theowner and the company because it
also is a signal of productmarket fit. In a lease, you're
paying your customer who is theowner. You're going and saying,
hey, maybe I can pay you tooperate the building. In our
context, we are charging a feeto deliver our services. And the
(24:47):
reason we charge a fee isbecause we can deliver more
profits to the owner than theycould make without us and a
better guest experience.
But we'll only grow in ourcontext if we're doing
delivering on our promise. Andwe'll grow with the same
partner. We'll expand to otherpartners because they'll talk
to, you know, references. Andwe've been really excited that
we've grown mostly through samepart a lot of our growth has
(25:08):
been through same partnerexpansion. In a lease model,
you'll grow if you can pay yourlease.
And so Casa's model is the oldschool model, frankly, the
Marriott, Hilton, Hyatt, Wyndhammodel of either management
agreements or powered byagreements which are more closer
to kind of the franchiseapproach and not leases. That
(25:28):
was the kind of level 1 of whatwe did different. Level 2 is
we've focused on institutionalowners as well as the local
owners. Most of the othercompanies in this sector focus
just on local owners. Why?
Because as a venture business,local owners are faster to close
versus Starwood Capital and TPG,they have deep compliance
departments. They're verythorough, and to earn their
(25:50):
trust requires a lot of data.And so some of these are 2, 3
year sales cycles, which, youknow, you're trying to grow as
quickly as possible in some ofthese companies, and you don't
have the patience for those. Butthey can be really powerful in
terms of the scalability of theplatform with those partners.
And the third is we've actuallybuilt our own technology, which
I would say is non consensus atthis point.
(26:12):
You always wanna be nonconsensus and right. I believe
we're the only company that hasoperations that also has
technology. And although a lotof companies have tried and a
lot have abandoned their effortsfrom building first party
technology, we believe that itallows us to deliver a unique
experience to guests and aunique profitability to owners,
(26:33):
and we can show that in the pand l's. But that's not
consensus. We believe it's notconsensus and right, but that's
another area of distinctionbetween us.
Speaker 3 (26:42):
What are some of the most exciting applications of
Gen AI that you're seeing todayor that you guys are really
focused on right now?
Speaker 1 (26:50):
Yeah. It's interesting. I've been seeing a
lot of businesses that are,like, basically taking old world
businesses, like accountingbusinesses, old world front
ends, and then the thesis is toautomate a lot of the work that
is heavy labor on the back endusing Gen AI. And I think that's
likely going to be a fairlyinteresting thesis to build
businesses around in the future.In many ways, if you were to
(27:13):
have that thesis for hotelmanagement and services
business, you know, a businessthat's in the hotel management
world automated quitesignificantly by AI, Gen AI, or
otherwise, you'd build Casaalong that road to that company.
And we didn't obviously knowabout generative AI when we
started the business or at leastit wasn't in our plans. There
(27:34):
was a kind of a leap forwardwhen the world awoke to what was
possible. But we lucked into thefact that the tenets behind our
business really fit well withwhat you'd needed the business
to look like to use AI. What arethose tenets? We're very
centralized.
So everything you know, a lot ofthe systems and data are all
flow through including customerservice. You're texting us.
(27:56):
You're emailing us. It'scentralized and digitized. All
of our processes, whether it'saccounting, revenue management,
sales, customer service, we'vestructured and cleaned all the
data about our whether it's thereservation, the guest, or much
more importantly, the property.
So what is the thermostat in agiven unit? You know, we have
the model number centrally kindof tracked, and we can pull up
(28:20):
kinda how to use it as a resultof that. And we also and
finally, you know, we controlsome of the underlying systems,
which allows us to really deeplyintegrate in a cohesive way
artificial intelligence. And sowe're just kind of at the start
of putting it into everythingthat we do. But in theory,
anything that's centralized canbe enhanced in a deep way,
(28:43):
whether it's revenue management,distributions, accounting,
customer service, usinggenerative AI, or trust and
safety, which I mentionedearlier.
Our predictive risk algorithm isa machine learning algorithm at
its heart. Today, the mostobvious use case is in customer
service for us where a typicalhotel, most of the conversations
are analog. For us, it's alldigital because, you know,
(29:05):
you're not going to a physicalfront desk where the information
is lost. For us, you're textingus or emailing us or calling us,
all of which are digital. Andright now, we're answering
direct to guest almost 20% ofthe questions with Copilot
serving as a enhancer for ourexisting team for another 60% of
questions.
So if you're a customer serviceperson on our side, we call it
(29:28):
guest experience. You'll get arecommended answer for every
question that's generated by AI.But for 20% of questions, it
will just go and send directlyto guests, and we're increasing
that every month. The input intothat is that we have very good
data about our properties, verygood data about our, obviously,
every other element of thestate. Super exciting, and I
(29:49):
think we're just scratching thesurface.
It'll take some time to reallyoperationalize these things. You
crawl, walk, run, but the impactand power to the guests, the
profitability of the propertiesis huge.
Speaker 3 (30:01):
And outside customer service, any other applications
that you're really excitedabout?
Speaker 1 (30:05):
Revenue management is another. So some of the
automated steps related toexceptions handling, I'm
excited, but we do not yet useit in distributions in terms of
optimizing our listings, boththe content, the order of
photography, the, like, makingadjustments to the listings
based on data in a recursiveway. And so those are areas
(30:31):
which are both core to the guestexperience, are huge cost
centers in some cases, and alsocan deliver outsized revenue
results.
Speaker 3 (30:41):
Anything else that we haven't covered that you think
makes Casa unique or that you'rereally excited about for the
future of the industry?
Speaker 1 (30:47):
Yeah. I appreciate the opportunity to share our
story. Hopefully, some of thefolks listening had a there's
some tidbits that are useful.Folks can email me at
roman@casa.com or find me onLinkedIn if they have follow
ups. I think this is reallycomprehensive.
I think we're at a very, veryexciting moment in the
hospitality world whereconvergence of changes in
(31:08):
consumer behavior needs in termsof what owners require in their
p and l's and opportunities intechnology all are converging.
And I'm just excited to bothwatch the movie in the hotel
world as it unfolds in the nextdecade and also hopefully be a
leading part in it as well.
Speaker 3 (31:27):
Alright. Thanks so much for coming on, Roman.
Speaker 2 (31:31):
That's all for today's episode. Thanks for
listening to Hotel Tech Insiderproduced by hoteltechreport.com.
Our goal with this podcast is toshow you how the best in the
business are leveragingtechnology to grow their
properties and outperform theconcept by using innovative
digital tools and strategies. Iencourage all of our listeners
to go try at least one of thesestrategies or tools that you
(31:53):
learned from today's episode.Successful digital
transformation is all aboutconsistent small experiments
over a long period of time, sodon't wait until tomorrow to try
something new.
Do you know a hotelier who wouldbe great to feature on this
show, or do you think that yourstory would bring a lot of value
to our audience? Reach out to medirectly on LinkedIn by
searching for Jordan Hollander.For more episodes like this,
(32:17):
follow Hotel Tech Insider on allmajor streaming platforms like
Spotify and Apple Music.
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