How a Property Manager Can Help You Maximize Your Hotel Profits | Bryan Tubaugh E12

Join us as we sit down with Bryan Tubaugh, a seasoned hotel management expert, to explore the common pitfalls of self-management, the benefits of bringing in a pro, and how to evaluate whether outsourcing management is right for you. Whether you’re buying or managing your first—or fiftieth—hotel, this conversation is packed with insights to help you maximize your investment.”

Episode Summary:

Hotel ownership comes with tough decisions, and none bigger than whether to manage your property yourself or bring in the pros. In this episode of The Hotel Investor Playbook, Michael and Nathan are joined by Bryan Tubaugh, founder of Aligned Hotel Management, who breaks down the biggest pitfalls of self-managing, the surprising advantages of professional management, and how expert insights can maximize your hotel’s profitability. Bryan shares real-world success stories, key strategies for due diligence, and insider tips on working with management companies to drive both revenue and NOI. Whether you’re an investor new to hospitality or looking to refine your portfolio, this episode is packed with actionable advice you can’t afford to miss.

Listen Now: Learn how to make smarter decisions, save time, and boost your bottom line by leveraging the power of professional hotel management.

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Transcript

Michael Russell 0:00

Is it the best use of your time to manage your hotel yourself? Self-managing may save you money on the surface, but is it costing you time and potentially even more money in the long run? In this episode of the Hotel Investor Playbook, we tackle an essential question for hotel owners. Does hiring a professional property manager make more sense than going at it alone? Join us as we sit down with Brian Tubaugh, a seasoned hotel management expert to explore the common pitfalls of self-management, the benefits of bringing in a pro, and how to evaluate whether outsourcing management is right for you. Whether you're buying or managing your first or heck 50th hotel, this conversation is packed with insights to help you maximize your investment. Welcome to the Hotel Investor Playbook, your guide to building wealth and freedom through boutique hotel ownership, hosted by Mike and Nate. Get in the game, welcome to the Hotel Investor Playbook. We are Mike and Nate, founders of Malama Capital. And in this podcast, we're documenting our journey towards building a $400 million business. On today's episode, we're happy to introduce Brian Tubaugh. Brian, welcome to the show. Thank you for having me. Excited to be here. Yes, sir. You know, we're really excited to have you here. We've not had a hotel property manager on our show before. So I think our listeners are really going to benefit from this. So look, many hotel owners try to self-manage, but it's not always smooth sailing. You know, I mean, in your experience, I'm sure that you have seen where self-managers can get into trouble. What are the biggest mistakes you've seen them make? And how does a professional property manager step in to turn things around?

Bryan Tubaugh 2:01

Yeah, first of all, thank you again for having me. Um, no, I think the the first and biggest mistake that I see a lot of times with self, you know, owner operators is they're actually too close to the asset. They're too close to the numbers and they're too close to their dollar. Um, and a lot of times what happens is they're going to try to squeeze every penny out of the property and tend to forget that you know you have to put money back into the asset to make to let the the asset work for you, right? So, you know, I always tell my owners the money is the tool. You gotta you gotta use the tool to make sure that the asset performs for you. So a lot of times, best intentions in mind, they're they're just you know, again, they're seeing their dollar. Um, so the biggest, that is the number one, the the biggest mistake I see from a owner operator is they're almost too tight for with the finances. You have to spend some money in order to make to to really maximize your profits. Um so really that I would say that's the number one biggest uh I would say mistake. I hate to use the word mistake, but the biggest opportunity to go into a property that has been owner-managed for a long time.

Michael Russell 3:11

Okay, great. So let's say you encounter that problem upon taking upon a new management contract, you recognize, hey, there's some improvements we need to make. They're emotionally charged, they're attached to this property, but you recognize from a more of an objective perspective, hey, these are the changes that we need to make. How do you go about making those changes?

Bryan Tubaugh 3:30

You know, I think first of all, uh as a as a management, as an operator, you have to have a you have to have a story of success to back you because there is a lot of trust put into this, right? And I I think that's another big thing. And I I believe we'll probably get into this a little bit later. When you're looking for a management company, you really have to go in and understand that this is a partnership. Um, and there's a lot of trust on both ends that has to go into it. So when you're when you're starting to look for property management, if you're going that third party route, you know, don't always go for the biggest, shiniest penny. It truly is a relationship. So, you know, again, during that process and that vetting process, I'm gaining the trust of the owner that they know that I have their best interest in mind, correct? So it's it's a lot of saying, okay, look, this is, you know, these are the expenses we're adding, but this is the ROI you're gonna get on it. And you need to be able to, we need to be able to explain that uh very clearly to them. You know, if you put in, and I'm just throwing ballpark numbers out there, you know, you put $20,000 into a food and uh beverage program at a boutique hotel, you're gonna add a $10 value in your ADR, right? And maybe you might see a loss or just break even on that food and beverage, but you're gaining it in other ways with an experience. So it's really being able to coach that owner. Um, and and and again, you have to have something that backs it up. So we, you know, again, we keep track of all our wins, our losses, and this is what we've seen. Uh, but it also helps a lot when you say, you know, we we've operated 27 hotels or 20 hotels, we've seen a return on these things at every single hotel. Um, so yeah, so it is, Michael, like you said, it's it's getting past that emotional state and and making them realize, you know, again, me not uh it's more pressure on me because it's not my dollar and I have to answer to every penny that is spent, correct? So it's easier for me to explain to an owner if I'm having you spend a dollar, this is the ROI you're gonna get on it. Because again, my my success is determined on getting that ROI.

Nathan St Cyr 5:32

Okay, so can I I want to jump in and ask because I'm what you just shared with us is hey, if an owner has been operating for this long, they've been operating for years, they're close to the asset, and then here's some money that they need to put into it. But I'm looking at it from a little bit of a different standpoint. Like we're in the process of purchasing hotels, right? So because we're in the process of purchasing hotels, we don't already have this connection to the hotel or this experience with the hotel. So at what point will you get involved with somebody that's in the process of making a purchase and say, hey, and then do you charge is there a consulting fee while they're going through the purchasing? Or how does that work if somebody doesn't own it yet, but they're considering bringing on a property manager and you're going through these things that you feel like, hey, based on our success record, looking at this asset, here are things that we would do. Um what's your what's your relationship to new owners that are in the process of purchasing?

Bryan Tubaugh 6:39

Hey, it's funny. We're we're we're actually we've got a couple clients that we're working with right now. Um again, every every management company is gonna be a little different. Our approach is what, and just being very honest, life's too short, right? I want a partnership with my clients. So I ask them to bring me in, and as soon as they're comfortable bringing me in, uh, we do charge a consultant fee because this is a lot of time, a lot of work. Uh, but the way we approach it a lot of times is okay, we'll do the consulting fee up front and we'll credit your management fees back over a year time, right? So now I'm showing that I am committed, that we're we're we're here as a partnership. We don't want to just take your money and run. We're here, we want the long-term relationship, but I've also got to protect my team and and and our worth and the work that we put in. Uh, so that that's that's how we go about it in the beginning, Nate. And then as far as real quick, can you tell me?

Michael Russell 7:32

I just want to know, like, so what does a management fee cost or what does a consulting fee cost? If someone is doing their due diligence, they have not yet closed, but they're trying to interpret the opportunity to purchase this asset. Your knowledge, I feel like, would be critical because it's one thing for um someone to analyze the potential for a property, but you know, like you know the market, you know the ins and outs of like, okay, these are the areas, these are the things that the leverage that we can pull. So from a financial perspective, I'm just thinking, wow, your service would be critical in the beginning prior to purchasing. What does that consultant fee cost?

Bryan Tubaugh 8:10

You know, it's funny you asked that because I think it it's really case by case, right? It depends one, you know, how much of the feasibility have you done? How much do you want us to do? Um, obviously, you know, you you go to HVS or these places, you're gonna spend 40 grand on a on a feasibility. Uh and it could be even more depending on the project. Um, we don't quite charge that much, obviously. Uh we're we're anywhere from 10 to 15, depending on depending on the scope of work, right? And I tell all my clients, I need to see the property, I need to feel the property, I need to see the market. So obviously travel expenses are included in there as well. Um, but we have to go out, we got to get a feel. I mean, I can use one example, um, Sulvay in California. You know, I love the market, but let me tell you, if you don't get into that market and know the bakery shop ladies who are then going to tell you everything about every single hotel and the owner of this area, and this is the guy you got to connect with to market to this group, to that, you know, um you're gonna struggle because you really need to know from a local perspective and you need to make relationships in any market. I don't care how big it is. Uh here in Phoenix, right? Fourth biggest city in the nation, uh, I can't tell you, due to our relationships, how much business we can drive into our hotels, we're the first call from a lot of people. So, very beginning, the earlier you can get your property manager into the mix, the smarter it is. One, I have to learn your vision. You're my client, right? I don't get to incorporate my vision of the hotel. I can advise, but I'm here to execute your vision. And no two owners have the same vision. Uh every single owner, I mean, they all have the common denominator of, hey, we want to drive the NOI, we want to drive the ROI. But no two owners, uh, and I've got, I think it's 12 ownership groups, no, none of them want to operate or do the same way. So we, the sooner we can get in and understand your vision, how you want to operate, we can put our touches and advise a lot. So the sooner the better.

Michael Russell 10:12

How long does it take you to turn around and report? Let's say someone is in their due diligence period, maybe they've got 30 days, maybe it's 60 days, they're gonna balance out, hey, 10 to 15 grand. They don't want to spend that until they're reasonably certain that they're gonna be able to close on this deal. But when they do, they're probably gonna ask for a quick turnaround. How long does it take?

Bryan Tubaugh 10:29

You know, to really get in and do a full market analysis, we we always like to be about two to three days, depending on the size of the market. Uh, you know, Sylvain, we were there for two days, we really got a good understanding of what was coming in the market. It's amazing. And, you know, I actually heard on one of your podcasts, it's amazing the data you can get just walking to the front desk, right? Or walking into a GM. And, you know, they they love to tell you everything that's going on and about their successes. And they should. They should have pride in their hotels. And it's also amazing how many owners in a market will tell you what they see, what the fate and what challenges they've faced, et cetera. So two days in the market, actually being there, uh, boots to the ground, seeing the property. And then I it's usually about a five-day to six-day turnaround because we do want to do our co-star research. We want to see what the market's driving as far as ADR occupancy, what is coming into the market. That's always a big deal that a lot of people uh tend to forget. You know, three years from now, there could be another large brand hotel that's being uh that's being built, right? So there's gonna be more supply coming into the market. You need to make sure you understand that because it may look good for two years, but hey, you know, there's going to be a direct competitor with a bigger flag. They're gonna be newer. You need to be prepared for that. What does the strategy look like to go around that? So I would say it's about a good week to get a really solid, you know, performa underwriting on a property from RM.

Nathan St Cyr 11:53

So, Brian, I love that. And this is extremely valuable. And you touched on something where you said you touch on a previous episode that we had. And if a listener hasn't listened to that previous episode, I think you're referencing the one with Gideon Spencer. Um, but what you were referencing is that sometimes in our mind we have fear that if we go into an area and we're not going to go and talk to uh a competitive GM or owner because we feel like they don't want to share their information. Like, why would they share their information with me? That does not make sense. And so then we therefore we don't go and ask. But what we've found and what you're now verifying as somebody that goes in to do the market research, you literally go in and talk to people and they want to share. They want to share what's good and what the challenges are. And um, I just I wanted to touch on that because um it, you know, if you're considering purchasing a hotel or you're in your due diligence, don't let that fear of what you think stop you from taking action of really what could potentially be incredibly valuable information.

Bryan Tubaugh 13:02

And Nate, if I could add to that, you know, I I find it very interesting. You know, we're we're in a market where there's a few uh third-party management companies here in Phoenix. And I will tell you, uh, some of my best friends are my competitors, and it's incredible how much information, you know, not the granule that gets us in trouble fixing all of that, but hey, you know, I'm noticing some of my hotels are down 10% or 8%. Is that why is that is that market wide? Are you seeing the same thing? I know I have data here telling me this, but what is your take? What are you seeing? Um, and I'm telling you, I I and I think I found on my personal journey, uh, it's it's it's amazing how much people want to lift other people up around you, right? And everybody wants, there's enough to go around. Um, and and if you go in with that mindset, it's incredible the data and the information you can pull. I I could tell you right now, I would have not had a startup company if I didn't have help from competitors. And that's just being very honest. It's incredible how much people are willing to help.

Michael Russell 14:04

Yeah, I just had a moment of clarity there while you were explaining that, which makes so much sense. You know, we found a lot of value in developing a network of like-minded people, investors. We are leveraging each other's experience, uh, predominantly in looking at finding deals, right? But quite honestly, um, you know, our network currently, there's not a lot of people that are operating at scale that have 27 resorts under management. But what you've just described is in your, you know, your line of work, you you have all of your own properties that are data sources, but then you have the ability to go within your network. And so when someone um agrees to uh hire a property manager, they're not just getting access to management, they're getting access to data that is invaluable. You the the data that comes from your network. If your company has 27 properties and you know another property or property management company that has 50, 100 properties, what have you, and you have the Rolodex to just dial up and get some information, that is critical information, particularly at to Nathan's point at the beginning, when you're analyzing whether or not this this opportunity, this deal is feasible. So to me, paying for that consultation at minimum could be incredibly uh it could be make or break.

Bryan Tubaugh 15:24

Absolutely, I agree 100%. And again, we have more of a pulse on labor market compared to I mean, owners aren't typically out there seeing what the labor market is, right? That's not something that's really on top of mind. You're looking at assets and what the returns are gonna be on that. I can come and tell you, hey, great market, but I'm gonna tell you right now, our opportunities, our challenges are gonna be this, that, and another. It's also really nice when I can call up the street and say, hey, you know, uh, we'll just say a name, Neil. Hey, you know, we're a little short on housekeeping. Do some of your people need ours? It it's incredible how, again, that network may be competitors, but it at the end of the day, we all come together to help.

Michael Russell 16:04

Yeah. Let me let me circle back. I want to go back to, you know, that first question that we opened with, which is when people are evaluating purchasing a boutique hotel, there's the self-managed model. And you know, doing so without the assistance of a professional property manager can be a bit risky for all these reasons that you're explaining, that there's certain unknowns that you you won't know until you go through that. But is there something that comes to mind, maybe a specific example, something that was a you know, a very costly mistake that perhaps a self-managing hotel owner made um that you can recall that you were able to come in after the fact and make some adjustments? Does anything come to mind?

Bryan Tubaugh 16:42

You know, there's quite a few stories. I think one of my biggest successes and one of uh my proudest successes, I would say, is we we walked into a larger branded hotel. Uh, I'll keep it confidential, just you know, it's easy to pin it down. Um, but we walked into a property, and and first of all, here's one thing I'll tell you. I I have not encountered one owner that uh or investor that just I've truly enjoyed working with. And this gentleman, when you go through the process, then you start becoming personally attached. So we came into a property. Uh, his family and him were working the property. They were, you know, the work ethic was there. It's just sometimes there's just, you know, revenue management is complex. It's not as easy as just getting up and setting rates, right? Um, there there are a lot of strategies that go into place. It's it's understanding market, et cetera, et cetera. So, anyways, this property was losing about $20,000 a month. Um, and again, family, uh and here's the other thing. We work with a lot of investors. This is their 401k, this is their friends' money. This is, you know, these are syndicated deals where they've got their reputation on the line, their egos on the line. I mean, there's a lot vested other than dollars. Uh, so we came into a situation where the brand actually forced them to bring us in. Um, and I can say within a year and a half, he was going from losing 80 or 20 grand a month to us writing a check of $80,000 a month to this gentleman. Uh, he has now created an amazing portfolio in California. And he's even made his own management company, but he refuses to let his management company touch this property because we're his lucky star. Um, so so yeah, that was a big turnaround for us, really got us on the map with the brands. Our growth has come all from word of mouth, and a lot of it has been from the brands because of these those type of stories turning it around.

Nathan St Cyr 18:32

I love that. I love that. So if we can kind of just identify for a moment that there's a couple of different asset types that people are interested in in purchasing. So let's say somebody has targeted a lower revenue, uh, 700, let's just call it $750,000 of revenue. They want to go with a uh a staff like remote check-in type model. Um, and then, you know, let's say we cross over that one that million dollar threshold and they're thinking about, well, maybe I should have a team here. Do you look at revenue as an indicator of of ultimately what type of staffing do you work with properties that are remote managed? So can you kind of walk us through that piece? You've touched on brands. I'm sure that you manage independence. So can you just kind of walk us through like what you've what the different categories are that you look at and how you manage them differently?

Bryan Tubaugh 19:32

Yeah, absolutely. I uh you know it's an important uh question to ask yourself before you get in the investment as well, right? You know, what are we looking at here? And then obviously different classes, prices, et cetera. But um, yes, so what I would say is obviously the branded properties are gonna have a lot more support because you've got the brand. Uh the boutique, the boutique independent hotels, you know, I always the question I ask, right? And and we're actually working on one right now. Are we going uh when you say a boutique independent, are you doing this because you want to flow through and you're watching your expenses and you're all you care about is that flow through, right? Or are you going to make an elevated you know experience? And if so, you need to understand that that middle is going to get a lot heavier.

Michael Russell 20:18

Let's say let's say the route that you go that you're looking for a way to save on expenses so that you're not having to pay a brand. Let's just go that route.

Bryan Tubaugh 20:25

Yep. So you're going independent, and there are different models, right? So uh and and we've been fortunate, we and I'm coming back around, I apologize. But you know, my team, a lot of us, we came from the branded full service luxury uh um sector of the industry, okay? So what we've learned though, taking on a few of the economy scale, and we had to to grow, is we found a more efficient way to run. So, you know, you can come in and, you know, for example, and I just use this example all the time, my front desk agent, there's no reason that they can't be folding laundry and doing laundry at the same time. There you go. I just cut how many hours, I mean, not cut, but I I've just controlled how many uh and your biggest controllable expense is your labor, right? So we have, you know, and again, the whole industry has found ways because margins are somewhat tight. Is we've come in and said, okay, where can we be the most efficient and make sure that we're given the same experience? Uh so yeah, so when we go that independent route, we have a lot more flexibility because the brand will require certain staffing models, whereas an independent, you can get creative. Uh and again, it goes back to what kind of experience do you want to give to the guest? Does that answer the question?

Nathan St Cyr 21:38

Yeah, and then I guess I'd follow that up with do you do any um remote check-in model management?

Bryan Tubaugh 21:48

We do. So we've got a few properties now that we uh we have the VA model. Um, and and we go out and we vet the VAs, we train the VAs, uh, we teach them the software. You know, we've got uh we I mean, there's so many systems out there now, right? You've got uh uh guestie, I've got track, you know, we have to learn the systems ourselves. That's a lot of the pre-work. And then we go out, and yes, we do train the VAs on how to respond, um how to give codes out if it's uh the the locks that have the key codes. Um so yes, we do have that model. And I will tell you what, Nate, that's the future of hospitality.

Michael Russell 22:26

That is what why do you say that?

Bryan Tubaugh 22:29

Uh well, I mean, one and the the biggest thing, like I said a minute ago, is labor is your biggest controllable cost. And you can provide an experience, and what we have found is you can provide a pretty personable experience with this new uh remote check-in. And here's the other thing. I don't know about you two, but me, I I want to get to my room as fast as I can. I want to unwind, get my you know, my bags out. If I have to get an email out, get an email out. I I just want to go straight to my room. So, really, the traveler, because we're so instant gratification now with our cell phones, this is a lot easier and more convenient for the traveler. And I do think the bigger brands are gonna start catching on to this as well.

Michael Russell 23:13

Okay, so you're you're describing the advantages of using technology for uh a couple of reasons. Um, for the you just mentioned for the convenience of the guest, it's to their benefit, they have a better guest experience if they're not having to deal with sitting in line at the front desk to talk to someone, you know, they can just go straight to their room. That's convenience. But also from a labor cost, if there's ways to be a little more efficient, particularly for independent hotels that don't have the same standard operating procedures that a flag brand may have, you can cut labor. And so ultimately you can be more efficient with cost. So there's two things that I want to know. Number one, I want to know your fee structure. And number two, I want to know your technology stack. But I know those are very diverging questions, but can we just start with your fee structure? And then you can get into technology.

Bryan Tubaugh 24:01

So, and again, I'm talking broad here. Um, you're uh you're gonna look at a management company anywhere from four percent all in, including accounting fees, system fees. You know, again, you you're gonna look at probably about a 7% hitting your bottom line. If I'm being completely honest with you, that's that's where it's gonna be. Obviously, everything is negotiable for us, because we have found a niche in the boutique sector, independent hotels. A lot of revenues aren't making enough to make sense for us from a 4% standpoint. So we we do tend to put a minimum, um, and then we'll do an all-in cost, right? And you know, again, I've just found that's the easiest way to partner with the ownership groups. I know they're conscious of the bottom line. We know the value we bring in. So a lot of times we'll we'll even do a stacked fee structure. Okay, year one, this is your flat fee. Year two, we need to go, you know, to this point, et cetera. Um, so that's how that's how we do our fee structures. I know there's a million different ways to skin a cat, but really for us, it's it's sometimes it's case by case, Michael. I mean, again, if a hotel's only making $800,000 in revenue, a 4% model doesn't make sense for us. You know, I my rule of thumb is it the hotel needs to make $2.2 million to really go by that 4% model. Um, otherwise, we have to get creative with the fees. And and again, we're we're here to partner, but it needs to make sense on both sides. It has to be a win-win.

Michael Russell 25:27

And just for clarification, so this 4% to 7% range, this is top line revenue. So prior to any expenses being paid, whatever revenue comes in the door, and that is also you got to account if you have a flag, right? A flagged hotel is gonna take their um I guess fee for for using their brand. And then you got OTA fees, and so this would be in addition to that. And so the property has to have uh enough revenue and you know, you got to account for all the additional costs to make sure that hey, this this is gonna be profitable. But with an independent possibly, you can save on a lot of those um, you know, labor, hotel flag fees, all this stuff. It might actually make it might make it more feasible to go the independent route if they're gonna be stacking in your fee as well.

Bryan Tubaugh 26:13

And two things I want to add to that, Michael, is one, a good property management company, they're they're gonna do the pre-work for you and show you what the impact that their fees are gonna have. Uh, and if they won't do that, I again I'm all about partnership. That doesn't sound like a clean partnership to me. And the second thing is uh the one thing I think every investor owner needs to account for is how much your time costs. So if that 4% or that flat fee, if you can't take that time that it would take to operate a hotel and go double that 4%, uh I I think time is more than 4% personally, right? I can take with knowledge of being an investor, where's my next deal? Where's my money going? That 4% is well worth it. I I tell a lot of my clients, you know, at the end of the day, you're paying for your time back.

unknown 27:01

Yeah.

Nathan St Cyr 27:01

Well, look, I want to so I'm gonna weigh in on this. Yep. Um so Michael and I took three years. Three years now, this time for us to go and and learn operations, to be full in on developing systems, processes, tech stack. I mean, just the whole thing of what's best, understanding our avatar, marketing, the whole thing, right? Well, so that was two high earner, you know, guys that invested three years of their life. Now, for us, we wanted it was a specific decision. We wanted to do that so that as we moved forward, we would we would have a deep understanding of the operations and the fundamentals of hospitality. And ultimately, if you create an experience vision, how do you go and execute it? Um, but that's three years of two high-earning individuals' lives, livelihood that that went into that process. So at this point, it's like, okay, well, we don't number one, we have a lot of our own systems. But if if I'm starting over and I'm just buying an independent hotel and can take someone on like you that for you know a 7% management fee can go and deliver the goods without me having to go through three years of my life force to get there to allow me to then move on to the next property and the next property that it it really does make a ton of sense.

Bryan Tubaugh 28:36

Well, and that's the other thing, right? I mean, that's 7%. You're paying for a hundred plus years combined experience of a team. So you know, I've got a team of 12 people that are out and have done this for their entire lives, right? So you're paying for our experience. I mean, good for you. You learned a lot faster than I did. It took me 20 plus years, and I'm still learning every day. Um, so you know, it again, that that percentage, you're paying for a lot of expertise to come in. And and again, I think what we pride ourselves in is we don't come in and say we know everything, right? We we come in and people like people like yourselves that took that time to learn it, you're my favorite type of client, right? Because we're gonna go back and forth. It's not going to be yes, yes, let's just do it that way. And no, you're wrong, I'm right, kind of thing. It's gonna be okay, this is what I've seen, this is what we've done, what is your vision, etc. Um, so again, it all goes back to that partnership when you're choosing a property management.

Nathan St Cyr 29:30

Can I ask just a maybe this is a little personal question? And I know you said that you developed relationships with owners along the way, but I mean, have you ever just met someone that's just a dipshit?

Bryan Tubaugh 29:47

Uh hey, and you know what? It goes both ways, Nate. I'll I'll be honest with you, man. I lost one of my biggest revenue generating clients because it just got to a point where it wasn't a partnership, it was a nitpick. It was, you know, I I can, you know, you could you could raise RevPAR by 30% in six months, and they're still not happy because some people just look at it that way. And you know what? To me, life's life's too short. You know, the the $10,000 we make a month or the $8,000 we make a month, it ain't worth it. I can get I my time, my energy, I can go to my partners and work and and and really focus my time and energy on that. So to answer your question, yes, but I think that's any industry, man. I love it. It's the dipshits that have never operated a hotel and telling you you don't know what you're doing, that pissed me off.

Nathan St Cyr 30:42

No, I'm just kidding. Well, and I and I bring that up though, too, because you know, I think that's it's important for as we're going through this process, as there's um newer people coming into the industry from STRs that have had a lot of experience that have maybe scaled over there and now they're like wanting to scale is like I think that finding a partnership in a manager is critical, but also being able to all of us like just if we each check our egos at the door and then come together and be like, all right, how can we create success out of this asset? What's the how can we deliver the best experience? What is your experience? This is here's my feeling. What do you feel? Like, I I I that to me is a creating that win-win environment is is critical.

Bryan Tubaugh 31:27

Well, and for us, you know, at the end of the day, right? At the end of the day, we're here to advise and operate. So we're gonna go behind closed doors. I may completely disagree with you, but if you're stuck on something, it is my job to make that vision come to life, right? So for me, there are times, and even my favorite clients, the ones that I golf with, you know, once every two weeks or once a week, I could totally disagree with them. But you know what? When we leave wherever we're at, we're gonna go have a beer. I'm and we're gonna execute their vision. Um, and a lot of the good ones, uh, the the not the good ones, the successful owners that I work with. Okay, let's try it your way for a couple weeks and let's see if it works. And, you know, we've got, like you said, check your ego out the door. All right, you were right. I was wrong. Let's move to the next strategy. That is the one thing about this industry that I think is another big thing is you better be able to pivot because you can't control market, right? The what's happening in the world will impact your business directly. And you better be able to pivot and you better be able to catch on to you know, whatever um cycles are going on. It's real estate. So again, there's one year where we could operate one way and then the next year we're whoa, pivot. You know, now we got audit doing laundry. I've got GMs covering shifts at the desk, I've got my bartenders being able to check in people. So a lot of cross-training, we believe in that, anyways. Uh, so you there you you have to be able to adapt and do it quickly because it happens like that.

Nathan St Cyr 32:55

Yeah, I I absolutely love that. In fact, when we developed our our mission and vision statement for our company, there's three components to it. And one of the fundamental components is we will we will carry a value of pivoting when the market demands it. So that is a uh really core philosophy that that we're very bought into as well.

Bryan Tubaugh 33:17

Absolutely, you have to. You just have to. You have to be able to pivot. And not to mention the different workforces, right? I mean, we we've been talking about this for years when the millennials came in, now you got the Gen Zs and the alphas aren't far behind either. And then and and let me tell you, there is a big difference on how you manage uh the labor and the workforce. And if you don't adapt, uh uh you can be as hard-headed as you want, you won't have anybody working for you or with you. I love that. Yep.

Michael Russell 33:44

All right, so let's let's pivot back then. Let's talk about technology, right? We started to go down that route where um I forget what the original question was at this point, but I said, I've got another question on technology. So let's get into it, right? What's your tech stack look like? What what what are you doing? What are you incorporating in order to be more efficient and more profitable in managing these hotels?

Bryan Tubaugh 34:04

Yeah, Michael, that's a good question. I think uh, you know, when we first started aligned, um we invested heavily into tech. And even, and again, I go back to relationships. There were a couple we use actable, which is profit sort. It allows me to pull up a dashboard. I can see all 27 of my hotels as granulal as I want, including up-to-minute labor. What is it called? Uh it's called it's actable is the company, and it's profit sort is the BI system. So, what it is is all my PMSs and my accounting system, which is M3, flow into one BI system. It allows me to get up and see everything live, right? Live data. Um, not cheap. It was probably, I would say, probably 40 to 50 percent of my initial startup. Um, but I wanted, I knew, and I and again, it you can't fight technology. It's it's coming, AI is big, everything you better embrace it. So we we invested heavily in technology in the beginning. I'm glad we did because now we're, you know, we're in four different states. It allows me to see what's happening in California live. Um, and data always tells a story, right? So you you have to use that data um and and it and allows me to see, you know, okay, there might be some deficiencies here or uh opportunity in certain areas. So I would say that's our biggest tech. Uh right now, we are developing an app that we're going to roll out to our clients, our owners, to allow them to get the same live data that we get. Again, we're partners, right? We want everything to be as transparent as possible. Uh, so they'll be able to, and instead of the email questions, they'll be able to go into their app and see, you know, kind of what we're reading um and and have lab live data.

Michael Russell 35:52

So, you know, so I would say our biggest ones are M3 and Profit Sorter, probably our two biggest tools uh as far as what you're you're describing here is you've got the this technology that you've just um mentioned is for internally your property management system, and then also for reporting for the owners. And I'm curious to know it are you using any technology that is geared towards improving the hotel's performance, whether that's evaluating uh you know key metrics of average daily rates or occupancy or anything that gives you insight to making adjustments that will ultimately generate more revenue or otherwise save costs on a property level.

Bryan Tubaugh 36:31

Yeah, there there are quite a few programs out there. You know, a big one is Lighthouse, you've probably heard of, that will do market uh rate shops for you. They send them out daily. Uh, so you know, every morning uh for most of my markets, I shouldn't say me, my team, they will get an email and you pick out a comp set that you're chasing, which is part of your due diligence that you're you're comparing yourself to. Um, and they will give you a rate shop every single morning and say, hey, they dropped by $3, they went up by $4, they went up by $5, etc. So each each property, depending on the PMS, have different tools that tie into it. Uh, but Lighthouse is kind of that one that we chose to use. And then obviously we use CoStar to do our data, um, and then star in general as well. Gotcha.

Michael Russell 37:18

All right. I I want to shift gears, Nathan, unless there's something you want to continue to piggyback on that. I want to shift gears a little bit. Yeah, please. So, you know, I'm listening to this, I'm evaluating this, and I'm sure a lot of listeners are going through this as well, where it's like, look, in an ideal situation, if I don't have to manage a property and I can just turn this thing over and it's still profitable, phenomenal. That's the route to go. I get my life back, I can go focus on buying more properties, spending time with my family, what have you, right? That's the dream. But I want to know, like, okay, when you when we get into the fee structure here, the the fees are based on top line revenue. So the more revenue the property brings in, the more money your company makes. But what I'm uncertain about is well, what about balancing cost control? Because ultimately net profit is not something that your company is compensated on based on the description I've heard so far. It's just top line revenue. So if I'm gonna just give you a total hypothetical, but if I'm a property manager, I'm like, let's pour into the most amazing amenities, let's pour into awesome marketing. We need to go and generate revenue, revenue, revenue. And then I don't care about the cost because I'm not getting paid on that. I'm not saying this is a reflection on you at all. This is total hypothetical, but I just I gotta know if I'm evaluating this as a hotel owner, how do you, as a property manager, balance cost control with you know maintaining a high quality experience for revenue generation?

Bryan Tubaugh 38:46

So if you don't mind, I'm gonna put on my owner hat, and this is what how I would approach it with a management company. And just went through this whole exercise, actually. You know, again, I we're gonna do our flat fee because that's honestly that's the value we bring, right? We bring this, we're gonna drive it. However, I would incent a property management company. If you get X percentage, you know, we do with most of our hotels, if we do 10% over the budgeted NOI, owner gets paid first, then we get X percentage of total revenues in addition to our fees. All RGMs, the way we structure our bonus structure internally, nobody makes money until our owners make money. So we budget a quarterly bonus, right, for our general managers, our property managers. However, it's based off of NOI, not top line revenue. Because if I bring in $2 and spend four, it doesn't mean anything to you, right? You're still losing money. So our whole model is based around the NOI. Um, and let me tell you, we want that extra incentive because that's just for us, that's we didn't budget that those dollars. That's where I can invest more dollars back into my company to be more efficient. Um So if I'm an owner, I am definitely pro-incenting. And you know, there's other things you can do as far as negotiating. Work, depending on the size of the property, it will dictate a lot of that as well, right? If you if if you're a bigger box property and let's say you're bringing in, you're projecting 4 million top line revenue, then maybe you go back to your property management and say, hey, 3% flat, you get the extra percent or 2% if you're X over NOI. Um and then really incent that to the property manager because those dollars do matter. Um, and then again, I go back to a uh for us, there's so many management companies out there, reputation is everything. If I don't manage that middle to get you your bottom, you're out, you're gone. And I I lose that and I lose that repu that reputation hit as well. I take that reputation hit.

Michael Russell 40:51

So there's no contract length period minimum?

Bryan Tubaugh 40:54

So I will tell you, uh, I think some of the bigger ones are a little bit more strict. Um we are still in our I feel like we have to prove it, right? I I really truly believe it's a partnership and there needs to be a proving ground. I asked for two years in every agreement. Uh, and the reason I asked for two years is because the first year is a honeymoon stage. It's learning to work too with each other, especially if you've been operating your property on your own. We're gonna do some things that you're probably not gonna agree with, and you're gonna want us to prove and see if it's working, right? And then that's that second year, it usually takes a year. We like to come in and say we could turn it around in 90 to 60 days, or you know, any management company that tells you that, I unless they've got some secret sauce I don't know about, or your hotel is operating that inefficient, it's going to take, I would say, at least six months to really see the impact of the strategy changes. Um, so we always like to ask for that first year, and it's a honeymoon too. We could come in and it's so inefficient that we're just blowing numbers out of the water. And let's really see what happens in that second year. And again, I'll go back to my investor owner hat. I would push back on the property management company and say, put your money where your mouth is. I am somebody that believes in a 90-day out. I do. If we're not happy with each other, and I'll put some metrics in there. If we're at 110% RevPAR index and you just want to get rid of me because you're having a bad day, you know, there's some things you could put in there. But there should be a mutually upon uh et sit for everyone. I I truly believe that.

Michael Russell 42:27

Yeah, what you're describing here. So in my mind, I've got a list of questions and you're kind of just answering them as you're speaking. So I'm like, oh, this is great. But what you just touched upon was the financial budgeting portion, which is so critical. Yet for new um hotel operators, investors, that's not typically something that they are recognizing that needs to be incorporated into the budgeting and forecasting, you know, of what their financial costs are. Like, unless you have an experience in finance already, and that's just something that's that's second nature to you, then there's gonna be a huge gaping hole because you gotta start accounting for things like capital improvements. Um, you got to account for like what you just described with budgeting for 10% over over budget. We can give an incentive so that everyone is you know rolling in the same direction, you're all aligned. That stuff, there's gotta be financial accounting and projections. And so, like in our example, we've accomplished this by paying for a fractional um CFO, and it's worth every penny. It's helped really elevate our business to understand what the key metrics are and to make decisions based on the financial um information that is provided to us. But there's no way in heck, Nathan and I are gonna just like go watch YouTube and learn how to be, you know, fractional CFOs. We had to pay for this, and so having that financial piece as part of your uh service, you know, I'm thinking about what the cost is and your fee structure and the revenue and these smaller, let's just say, you know, a million to two million dollars in projected revenue, you can't afford to go hire a you know uh CFO. And so if you're gonna do a fractional one or whatever, even so these costs need to be accounted for. I'm just thinking about how this all works, and that's it's not just important from like a financial perspective of like understanding the reporting. When you touched upon, hey, if we can incentivize people to go out and get paid more based on performing well, that affects everything within the operations. And the only way that's possible is by having the financial understanding, which you know, you've paid big bucks for software, and you have this, you know, infrastructure where you have economies of scale so that you can afford to pay for this uh service to be done. It all is starting to make sense from that perspective, particularly for people that are uh just starting out that don't have the infrastructure in place.

Bryan Tubaugh 45:01

Well, and and and we can get so granular, right? We know you a lot of a lot of hotels we take over, you know, they have their QuickBooks, they go in and oh, we're making money. And okay, that's great. But what are you running cost per occupied room? How many hours are your housekeepers working? This is a great flow, but you know, you may be at 32%. I can get you to 40%, right? So there's a there's a 10% increase. And it's easy things that we can go in and look at. Hey, where are your vendors? By the way, we get a huge discount because we've got 27 hotels, right? We've got over 2,100 keys. You don't think that these vendors like Hilliard and all these other places give us discounts on supplies? So there are a lot of things we can leverage that are gonna that are really gonna justify that four per four to seven percent.

Michael Russell 45:49

Great. So all right, then look, let me let me shift gears again here. This is this is great. I wanna, I wanna um I want to get your perspective on you know what you feel is the most rewarding part of managing hotel properties. And also what challenges do you see coming in the future of this industry?

Bryan Tubaugh 46:13

Yeah, I think uh this industry as a whole, so I'll start with the the opportunities and the challenges, right? What I have seen a lot of and experienced in my career as well, we've lost middle management. So training, retaining and training and lifting people up, uh, we we have set a lot of people up to fail because they haven't had the proper training. Um, and I know that is something that's near and dear to my heart. I grew up in this industry. I started when I was 14 years old in housekeeping. I have worked my tail off in the industry. I love the industry to death. It's all I know. Um, and what I have seen happen in my career because of events that have happened in the world, margins, et cetera, is there have been a lot of that middle, that middle management, that middle staff. There's a lot of people going from a front desk agent to a general manager, right? So I think that's that is an opportunity for the industry as a whole, is to really that that labor force, it's not that it's not strong, it's not educated, it's not trained properly. It's we're just trying to throw bodies at things. And we have really tried to take an approach of no, we're gonna train and we're gonna train and we're gonna train and we're gonna train. Um, so that's the biggest opportunity I see, Michael. I think it's just because at the end of the day, no matter how much technology comes in, how much we try to get away from keyless entry, decoding, all of that, hospitality is exactly that. It's people. It is people, and it is people that either work in the industry or it's the experience you're creating for other people. And that's what I love about it. I love people, and no two people are alike. So you're always pivoting and shifting and and training and finding new ways to motivate. And that so that's what draws me to this industry. I absolutely love it. I I I love going to my properties, I love getting in there and help uh make beds, clean the toilets with them. I I we genuinely on my level uh of my team on the executive level, I don't hire anyone that doesn't have line level experience. I I I just refuse to do it.

Michael Russell 48:20

I love that. Yeah, that's great. You know, you again another another thing that just came to mind is you're talking about the staffing and how you went from, you know, someone goes from being a front desk person to a general manager, and then well, what about the years of like middle management and learning? And there's there's a bit of a labor shortage here. And so I thought about well, what the heck? Human resources is a whole nother area that is just like takes bandwidth, right? That's 90% of our jobs from eye, you know, constantly recruiting and dealing with payroll and issues with personnel and you know, hiring and firing or whatever, and and vacation and pay time, all this stuff, right? It's just it's a constant uh process. So all right. I'm gonna I think I'm gonna end with this last question here, which part of this you've covered, but just to kind of sum it up here, if you can make it um just kind of wrap this thing, uh, put a bow on it. But what advice would you give to first-time hotel investors about the importance of a strong property management partner?

Bryan Tubaugh 49:26

Absolutely. I mean, for a first-time investor and not knowing the industry in and out, the experience that a property management will bring to you is invaluable. I mean, you can't put a dollar sign to knowledge. These are big investments that can cost a lot of money or they can make you a lot of money, right? They're big risks, they're big risk assets. The three to the four to seven percent that you're paying, you can't put a dollar, you cannot put a dollar value to somebody guiding you, assisting you, and advising you through these, uh, through this purchase or or through an acquisition. Yeah. I mean, it's invaluable. Yeah, I agree. Too many times, guys get in over their heads and it's big dollars you're playing with. I mean, you know, I know you talked about property improvement plans. So you purchase it, and like you said, now you better put two to four percent aside because in five years, you're gonna have to put money back in, or you're gonna quickly start losing clients and your revenue stream if you don't put it back, right? So again, it it's a long-term play. You need to look at both, you you need to look at worst-case scenarios. That's how we do all our underwriting. We always do two underwriting. That's what we think we can do, and this is worst-case scenario, so that our owners are comfortable knowing both ways and and what could happen, right? We always want to be transparent. And if you are shopping a property management company and they're agreeing with everything you say, I would strongly recommend going to shop elsewhere. They need you need to find somebody that's gonna push back you on you a little bit and and really give you the good and the ugly and be comfortable to do so. So good.

Michael Russell 51:08

Yeah, yeah. Brian, this has been great, man. I really have enjoyed this, and I think our listeners will agree like this information that you've provided is so valuable. So thanks so much for being on the show. Um, Brian, your property management company is called Aligned. And if someone wants to get in touch with you, where how should they reach out? Where should they be able to, where can they reach you?

Bryan Tubaugh 51:31

Yeah, aligned HM is in hotelmanagement.com is the easiest way to find us. And then uh yeah, obviously, my email, Brian.tuba at alignedhm.com.

Michael Russell 51:42

Okay, and we'll put that in the show notes. So if someone wants to find you uh online, they can click on the link and get you that way. Excellent.

Nathan St Cyr 51:49

Nate, anything before we go? Bro, I'm so frickin' my I'm spinning right now. I'm ready to go frickin' buy some hotels. Let's go.

Michael Russell 51:56

Let's go, baby. Thanks so much, Brian. As always, listeners, thanks so much for tuning in. Please rate, follow us, review, share this podcast with others. Goes a long way for us. Will help us continue to grow this and get high-quality guests like Brian on our podcast for future episodes. So thanks so much, and aloha, and we have a lot of money.