Turning $400K into $10M: Lessons in Fear, Failure, and Direct Bookings | E13

What does it take to transform $400,000 into $10 million in hospitality assets while building a brand that wins awards in just a few years? In this special crossover episode, we’re featuring a conversation we had as guests on Direct Bookings Simplified, hosted by Gil Chan.

In this episode, we reveal:

•How we tackled fear and failure to seize opportunities others missed.

•The strategies behind our 12% increase in direct bookings—adding $600K+ to our property valuation.

•Why obsessing over guest experience, systems, and culture is the ultimate hospitality growth formula.

Whether you’re an investor, operator, or someone with big dreams in hospitality, this episode is packed with actionable advice and real-world insights.

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Transcript

Michael Russell 0:00

So, what does it take to transform $400,000 into $10 million in assets and build an award-winning hospitality brand in just a few years? It's not magic, it's strategy, it's great, and it's a willingness to challenge the status quo. In this special crossover episode, we're featuring a conversation we had as guests on the Direct Booking Simplified podcast hosted by Gil Chan. In this episode, we're going to reveal how we tackled fear and failure to seize opportunities during a global pandemic. We're also going to cover the strategies that led to our 12% increase in direct bookings, which added over $600,000 to our property valuation. And also why obsessing over the guest experience, systems, and culture is the ultimate hospitality growth formula. Whether you're building your first property or you're scaling your portfolio, this episode offers valuable insights to help you grow with purpose and confidence.

Nathan St Cyr 1:31

When you start to attack your fears and your failure and just step into it, even though it's this feeling that's making you stop, but you just do it anyway, the relationship changes. And when you start to see positive results from failing and from fearing and stepping into it, then it's that's really where all of the magic happens. So from a mindset standpoint, I would say check yourself on your relationship with fear and failure, and you can you can start diving into this just like that.

Gil Chan 2:17

Yeah, it's great to be on. Thanks for having us, Gil. Yeah. This is I I'll admit to you both of you that this is our first pairing. We're like 40, almost 50 episodes deep, and we have not yet had a duel on the show. So I'm very interested in how this is gonna be and how we can bounce ideas off each other. It's always been a one-on-one. I haven't even done a single show, uh, to be quite honest. But I'm very interested in kind of like having you guys both here and uh having you guys talk about just how you guys divide and conquer both sides of your business. Um, but before we get too deep into it, uh Nathan, Michael, do you mind kind of sharing a little bit about your property management, what you guys have done, and kind of how you guys work together?

Nathan St Cyr 2:58

Yeah, absolutely. So I'll kind of kick us off here. Um so Mike Russell and myself were the the co-founders uh of How's It Hostels. Um if you we each have our own story, obviously, that uh from a from an origin story that led to a moment. But um I think what people are most interested in with us, there's there's two sides of our story that that that people are drawn to um and and want to hear about. And one side of it is the kind of the investment in the real estate side, where you know we we basically took a $400,000 uh down payment and investment and uh forced about $4 million of equity in under two years. And that has now led to us owning from that $400,000 down payment, $10 million worth of assets, uh, where we're driving, you know, $2.5 million worth of revenue, uh, $800,000 worth of NOI, and $500,000 worth of net income. And so from the investment side, I think that that part of the story is like, wow, you guys really compressed time and utilized your entire life's work to recognize an opportunity and then jumped on it and and and took advantage. From the hospitality side, I think the the part that people really go, whoa, wait a minute, what hostel? What is a hostel? You know, like aren't these all dirty things? That like, and um again, we we recognized opportunity. And when they go, whoa, they go look at our website, they go look at what we're doing. Um, there's these two, these two guys that knew nothing about hostels. And in the midst of a pandemic, when everybody else was, you know, you know, really wait, you know, sitting back going, what's gonna happen to the world? We decided to take massive action and go all in on our vision and uh purchased an existing hostel. And in two and a half years, uh, we were awarded as the best hostel in North America. And so people from the hospitality side are like, wait a minute, you had no experience and you went in and created the best hostel in North America. What the heck? And um, and so when we look at the hospitality side of what we've done, we really attribute that to these three three major components. And one of them is we built this thing based off of this concept of let's go and obsess over the guest experience. And and it started with um building off of listening to the existing hostile clientele and reviews. And then the second thing is we recognized, all right, well, how do we go and create systems and processes? And um, Mike is an absolute beast. He is a freaking champion, executor, and integrator of systems and processes. And so we listened to our guests and then we went and put processes in place. Um, and then the third component to that is we we really built a team and a culture that all had aligned values and with this concept of yes, this is a hostel, but forget about what don't put us in a box. Let's go create and align our values that we're gonna obsess over the guest journey in every step of the way. And from everything that we do, from hiring to becoming the employer of choice in the industry, everything is designed around that aligned value. Everything comes down to those two things people and process and systems.

Gil Chan 6:42

That's that's amazing. Kind of rewinding back, you just said hostels. What are hostels? And I'll give you kind of a what I interpret as what hostels is. And I'm in San Francisco and we have a few hostels here. Not typically what people think about hostels, but the the one thing I I remember was, gosh, maybe 15 years ago. I just got into my startup days. And right next to our startup incubator, there was this hostel that basically people slept in small little rooms, and all they did was really try to launch their startup. It was a startup hostel. Uh, it was the first of its kind. And I remember it being like almost feeling like almost like a jail cell type of experience. Not that, not, not what I would imagine the best place for hospitality. Um, so I don't have too much exposure of what hostels are, but how did what was your impression of a hostel and what was your vision of it afterwards?

Michael Russell 7:43

Yeah, I think that you bring up a a good point that there's a stigma with hostels about them either being dingy or they're just really budget-oriented. It's the cheapest place. And so, you know, we're we come from a background where, you know, I've got experience with short-term rentals, particularly luxury short-term rentals. And so the idea of a hostel is not really, I wouldn't say I'm like, you know, my background is hostels at all. But we recognize an opportunity where, you know, because we don't have that background in hostels, we we had a different lens, a different vision where we, similar to you, recognize I think there's an opportunity to provide a more upscale product that doesn't necessarily need to cost an arm and a leg, but with intention, we can create a product that is more design forward, that curates an experience, really um encourages people to socialize and that the value of the hostel is more than just the fact that it may be less expensive, but that it provides an opportunity for individuals traveling on their own or perhaps groups to meet others. And in this day and age, a lot of the um the generation, our our demographic, our avatar, uh guest avatar, you know, they're oftentimes tied to their phone, looking at social media, but they're not really interacting in real life with people. And it's a very refreshing experience when you're, in a sense, forced to interact because we're curating an environment that encourages it. And so what we find is that our guests are sure, they're pleased with paying a little bit less, and that may attract them to our website and maybe get them to book, but the word of mouth that occurs afterwards is less about how cheap it is. It's hey, this experience was incredible, and here's why. They offer free tours and excursions and daily on-site activities where you know you don't have to, you don't have to pay for it, but also you are encouraged to join others that may be strangers where you build those relationships, and that's like the most fulfilling part of human nature. So we're fulfilling that that need, that human emotional need to connect with people. We're doing it very well, and we're also providing a way better experience in terms of the accommodations. They are not, it's not the four seasons. Let's not you know exaggerate things. But if you go to our website, housithostels.com, you'll see that, for example, our Maui property has a pool table and it has a beautiful kitchen and murals. And those are amenities, or that's uh a design style that you wouldn't typically associate with a hostel. And again, circling back to my original comment, that's because we're not really hostile guys. You know, um, we just we we've stumbled into an opportunity that we say we we we thought we could do uh an excellent job, and there's not a lot of competition in this space right now, so it's just a great from a business perspective, it's a great opportunity.

Gil Chan 10:23

Yeah. So for our listeners there, I don't know if you guys caught that. We didn't mention it before, but these hostels are in Maui. Um yeah. Um and I think like hindsight's 2020, and it makes a lot of sense that you guys went down this and found this niche in there. What drew you into this in the first place? Like, what was that inspiration that really said, oh, this is this is there's an opportunity here? Like, how did you guys come to that point?

Nathan St Cyr 10:50

Yeah, so I'll I'll I'll jump jump into that. Some people would say that we got lucky. Uh I would say that our entire life's work between both Michael and myself, uh, investing in real estate with 40 years of experience in multiple asset classes. Um, and then really uh his focus uh on short-term rentals, what he experienced in the margins that he was gaining from his two luxury short-term rentals here on Maui. Um look, part of it for me was was regret. I I didn't act fast enough and the regulations just came cascading down. And um, so so Michael was able to leave uh his full-time job, his W-2. I was still stuck in mind. We were gonna do something big together. But one of the things that he recognized was even though his short-term rentals were crushing it, that ultimately they were still only valued at whatever the value of homes were. Yeah. Right. And so um we both wanted financial freedom, but we also both wanted to do something huge where we could go and create a shift in generational wealth. And so we started uh really educating ourselves on commercial real estate and decided to start purchasing apartment buildings. And we wanted to make that purchase in our backyard first, right? Because we're out here in the middle of the Pacific, so it didn't feel comfortable purchasing something for our first purchase, you know, in Ohio or wherever. So as we set off onto this plan, the first property that we called on, uh, it had gone into contract that day, so we never even got to look at it. But in the comments, it said previously being run as a hostel. And we're like, what, what, what previously being run? So we asked the real estate agent, by the way, what is this? What does it mean it was previously being run as a hostel? And look, hotels weren't even on our radar. They it wasn't even a thought for us because you know, there hasn't been a hotel sold on Maui for under $25 million in the past decade. So it wasn't even a thought, it was totally out of touch. But all of a sudden, this concept of, well, wait a minute, we knew what Mike was getting from, you know, cash flow and margins from his short-term rentals. And here, this was a more approachable or affordable piece of real estate because it was an apartment building, but it was zoned correctly. It was zoned as in hotel zoning. And so we were like, wait a minute, is there a way where we can take the margins that Mike is gaining out of short-term rentals and use this business model of this hostel concept to go and do something really big? Because if we could and develop a prototype here, there might be a need for this. And the real estate agent caught on to this. He started sending us all this information on what was happening in the world with hostels and that the US was completely behind in the global sense of where the hospital industry is. And uh the light bulb went off, and we dug in and we recognized there was uh a massive, massive opportunity for potential gold mine.

Gil Chan 14:04

Yeah. It sounds like uh a little bit of a serendipity that that happened there to bring all these things to life. But also, I think because of what you said uh of your experiences, it's almost like a magnet up opportunity there. Like it's because that you've invested so heavily in real estate in the past, and perhaps your knowledge in commercial real estate. And Mike, your your experience in hospitality that these two came came to be. Had you guys not come across each other, had you guys not had the background, this wouldn't have been possible. So, like, yes, it's partly luck, but it's obviously like more luck of you guys putting together, like you guys coming together more than anything else. Yeah, absolutely.

Nathan St Cyr 14:47

And then having the mind having the mindset to the part that I did leave out was um the hostel that we ended up purchasing. Um that happened in 2000. We we negotiated this in 2020. So you have to imagine what was happening in 2020. The world had stopped, it had shut down. And if you think about how many people out there would say that it was a wise investment, if you go back to the feeling of the way the world felt, while we were all stuck in our homes, governments had shut down everything, nobody could fly in or out of Hawaii. And Mike and I were like, let's keep moving forward with our hostile vision to go and create a business model around shared accommodations in the midst of the pandemic. And look, we we took massive, again, the the world was was kind of paralyzed with fear, and that we knew that was our time to to to attack and to potentially um create an unbelievable life-changing opportunity, which we did.

Gil Chan 15:47

Nice.

Nathan St Cyr 15:48

Are you guys uh expanding on Maui or other islands?

Michael Russell 15:51

Yeah, so we are we are actively looking to acquire additional properties. Um, we have currently a property on Maui, we have one on the big island of Hawaii, and we are looking at markets in San Diego and near San Francisco, uh mostly along the west coast. Um but yeah, we are definitely open to to growing where we're actively trying to grow.

Gil Chan 16:17

Nice. And when you're looking at assets, are they are they typical apartment buildings or no? Do they have to have some type of criteria in order for you to be able to operate it as kind of your your proof of concept that you guys have right now? Actually, more than proof of concept, but like your initial um hostel build. Like is there certain like criteria that you're looking at?

Nathan St Cyr 16:40

Yeah, well, first of all, we recognized uh we've learned a lot. We've we actually created our prototype here on Maui, and then we purchased our second hostel on another island, which generated a ton of confidence in us. You know, you still have to get on an airplane to go over there. We were able to do the whole from renovation to building the team, everything we were able to do remotely. So now we do have the confidence like, look, we've learned a ton through this process. Now we can now we can go and really expand. Um but the first thing that we we recognize through this learning process that um hospitality zoning, hotel zoning is what we look for. So we actually go into areas that are um heavily regulated for short-term rentals. Right. So if we can find the right zoning where it's hotel zoning, and the second part of that, it's actively being run as a hospitality asset, then that puts us in a position where it really minimizes uh risk. Once you go into finding the right zoning, if the building is being used differently, then a lot of times you have to go through a change of use. And then it brings up the the whole concept of, well, are they is the county gonna approve this concept or not? So we do everything we can to minimize risk, especially when it comes to uh as we grow investor dollars and being responsible. Um Stuart.

Gil Chan 18:01

Yeah, yeah. It makes it makes a lot of sense. Like you're you're not trying to take on more risk as you're growing or take on like uh massive new risks. What you're trying to do is like take each one of those properties and learn and build off of them. And it could be down the road. You might be flipping entire commercial buildings and and trying to figure out how to get through the zoning regulations, but that's actually not a challenge that you need to solve right away. And you can still scale massively by targeting previously operated hospitality units.

Nathan St Cyr 18:32

You are, you know, first you're you're you're right on point there. Like we because we're gonna do that, what you just said. We are targeting commercial buildings and urban centers that were previously um maybe office buildings that we can get an unbelievable um purchasing opportunity off of because they're vacant or they're empty, but we have to go through that part. But right now, um, as we grow, we want we don't want to just grow at all costs. We want to grow, you know, responsibly. And so if we can find exactly what we've learned, check off all the boxes of the things that are take away all the risks, everything that checks the boxes of what's made us successful, that those are the areas that we can grow right now, while simultaneously we're investing in what you described as some things that take more time and diligence and research that is more of a longer-term play.

Gil Chan 19:26

Yeah, yeah, yeah. Uh I want to rewind just a little bit. And you said something earlier about really there's three things that you guys focus on. One is really obsess over the guest experience, listening to folks, understanding your systems and processes, building out your team. It reminded me of a previous conversation that I had on with Chris Petsy. I don't know if you know him from STR Secrets, but he actually talks about the same things. It's really around building your operations under people, technology, and processes. And it seems like as short-term rentals matures and we're stepping into not just operating your single properties, but starting to scale out your units, starting to hire remote teams. It's really these three things that is critical in order to scale with high quality. It's people, technology, and processes. Would you agree with that? Absolutely. Yeah. Awesome.

Michael Russell 20:23

I mean, Nathan, you you talk about this all the time, right? So the people part of that is probably more Nathan's department. And I would say I'm the processes. So you got the the two-headed dragon here, Gil. Um, yeah, you asked how this was gonna go. If you want to talk about people and leadership, then ask Nathan if you want to talk about processes and systems, and that's that's my uh wheelhouse.

Gil Chan 20:46

Yeah, yeah. And and for listen to our series, we talked just a little bit before the show, and we're talking about systems and technology and all that stuff. And I immediately understood like Michael, kind of like why you're so good at what you're doing, is because like you understand like really how to leverage technology most efficiently, where to find out like when is the time to start leveraging technologies or people that might know certain things to really help you scale. Um, and I'm I'm we've only known each other just for a little bit, but I'm starting to pick that up as like one of your superpowers of why you're able to run these operations so efficiently.

Michael Russell 21:23

Yeah. Yeah. You know, I think too, one of the, you know, we a lot of times look, we you want to position yourself as an expert or you want to talk about your success. And I think one of my skill sets is recognizing where we're where we're a bit vulnerable and knowing that it's okay to be vulnerable in that area, but then go find the specialist that can help you. I know enough about a little, you know, just a little bit, a little bit about a lot of things so that I can delve into something. And although maybe I won't be an expert in that exact subject, I know enough to kind of direct traffic to get us where we need to be.

Gil Chan 21:57

Yeah, yeah. And that's that's kind of also why like I ended up starting this podcast in the first place. Like, I'm not a marketing expert. I come from a product development background, I come from a technology background, but I know that there's a ton of way smarter people out there that knows marketing, that knows how to scale things, that knows how to efficiently um run marketing teams. Um, and that's why every week I bring on a new guest that has done really well because I am certainly not smarter than all those folks. I'm probably not even smarter than any of those single folks in that specific domain. And everybody has a very different way of looking at it. And I might think Mike, you're right. It's like when you can really leverage the network around you and really lean on the right folks at the right times, that's when your business starts to take off and it starts to have a life of its own that is not bounded by your knowledge or even your resources.

Michael Russell 22:51

Yeah. Yeah. Oftentimes we're the the biggest bottleneck to our growth. We got to get out of the way sometimes and let others really take off and flourish. And Nathan reminds me of this often enough to where I'm like, yeah, because I'm a bit of a perfectionist. And so to me, I get sometimes hung up on things being perfect instead of things working effectively, like overall and flowing and things growing. And so, you know, it is a constant balance of striving for perfection and then empowering others to to to be able to to do the things that you you know you can't do everything yourself.

Gil Chan 23:25

Yeah. Do you have any examples of uh or if you kind of draw back four or five years from now or previously four or five years ago, and how you operate the business and how you operate it now, what was what would you say is the biggest contrast?

Nathan St Cyr 23:40

Well, I can share with you that that I'm just gonna go from a time standpoint. So if you want to look at where we started, where 85 per look, we've always had the vision to grow. So there's kind of two components to our business, right? There's the the operation side of you know running a hospitality property, and then there's the okay, well, but that's not our goal. Our goal is to go and and grow. So there's the investment side of the company. And in the beginning, we were spending over 80% of our time on the operations, you know, like actually running and working with the team and you know, going down for meetings, and it just eight eighty percent plus of our time was spent working in the business. But if we fast forward to today, now we have empowered the right people and the right systems that allow us to spend less than three hours a week on the operations.

Gil Chan 24:44

Wow. Wow. And was it through the learnings of just how to operate the business more efficiently? Or was it more of a mindset shift of like how you want to and kind of forcing that kind of pulling yourselves back as much as possible? Like what started to transition things if you if you can like remember.

Nathan St Cyr 25:03

Well, I would say the biggest part of that trans that transition really came from hiring a business coach. Right? Like we knew we knew what we needed to do. We were listening to books, we were listening to podcasts, but then ultimately it was like we need somebody to hold us accountable. Like help us go roll this out. And so um we hired Rick English with UpAdvisors, and um he has a background in, you know, we read the book Traction and learned about EOS. And although he's not, that's not exactly what he does, he does a version of it. And we started working with him and creating really looking at every part of our business and creating uh a function and then all of the components that go under that across every single thing that we do, and then creating ownership of each one of those functions was the start of that process.

Gil Chan 25:57

Interesting. Yeah, I didn't realize you guys had a business coach. It makes a it makes a lot of sense. And I I bet now whatever you paid has definitely has returned its rewards many times over.

Nathan St Cyr 26:10

Yeah, well, and Mike, Mike really mentioned that that like where we're vulnerable, that's where we go and and and hire, and that's where we go and take people that have more experience. And he's been, you know, Mike's really an unbelievable executor, like just like the best. He's just champion, like straight up championship pedigree in executing at a high level and recognizing, okay, we need to get better here, and then going and finding people that can put us in a position to do that.

Gil Chan 26:39

Yeah, yeah, that makes sense. Um talking a little bit about your direct booking. You've already talked a little bit about your website and how you're driving traffic, uh, or kind of like how you actually position your website. Can you talk to me a little bit about just your makeup and how you think about direct bookings? Like why is it important to you in the first place? And from a systems and even mentality standpoint, like how do you approach direct bookings?

Nathan St Cyr 27:06

So I'm gonna start this off with the impact that it's had. And then Mike can go through the the systems and processes. Um but from an impact standpoint of why it matters, um since we know we purchased this existing hostel, rebranded, took over, we've increased direct bookings over 12% from where they were. So we're up to 30, 35 to 37 percent, depending upon the month. And what that's led to, because we see $2.5 million worth of revenue between our two properties, that 12% increase is $336,000 worth of gross revenue. And if you look at if that had been booked by the OTAs like it used to be booked by, that's $50,900 of commissions paid. And then if we go take that into our valuation, our ability to refinance or sell, and we look at $50,900 based on the cap rate here in Hawaii for our product of 8%, that's $630,000 of value that we've gained out of increasing just 12% in direct bookings.

Gil Chan 28:22

Wow. So it's you're thinking about it not only from a, oh, we're now at a 30% direct booking rate, but really around like, how does that change the valuation given that your cap rate and how much if you were to sell this asset today and you flipped it over, how much more revenue is able to generate and how much that next person can buy buy that asset for? Absolutely.

Nathan St Cyr 28:43

Yeah, how does it impact our bottom line from our net income? And then how does it how does it affect us from ultimately what our goal is, and that's creating building something that's more valuable? Yeah.

Michael Russell 28:56

Yeah, I want to I want to hop in there because I want to be clear on a couple terms here, and they're both they're both important. But so Gil, you said direct booking's intention is to create more revenue. Hands down, absolutely. If we have a website that is more easily found through search engine optimization tactics or through Google uh business page or or you know through um a variety of other ways we can get into. But the bottom line is if people are finding our website in their booking, we're generating more revenue. But to Nathan's point, if we're getting more direct bookings and we're not paying OTA commissions, ultimately we're saving money, which results in more net income. So the net income to us is that is the um the metric that we are ultimately tracking and and trying to drive more of because that affects in our real estate, in our business, right? Net income affects valuation. And the higher that our property is valued, the more that we can go and grow because we can go to the bank and say, hey, look, this business is worth more money. We have a track record of being successful. So this is not just um about generating more revenue for for the sake of hitting you know 30% to 40% or 50% bookings, whatever. It is really, we're looking at this at this from you know the whole picture of it is critically important for for our business that that we deliver more net income.

Gil Chan 30:24

That's interesting. Yeah. I don't get a lot of folks from the commercial side on the show, but it makes a lot of sense why you guys think about it this way. And the metric that you guys judge your performance on is partly more revenues, but it's it's more than an income from a valuation standpoint. How that how that can change the overall value of your your business overall.

Michael Russell 30:46

Yeah, we have a love-hate relationship with the OTAs, right? Like they're great because you know, in our market, we use an OTA that may not be familiar with folks, but it's called Hostile World. And it's so important that we use Hostile World because that's where um people that like to stand hostiles are gonna find us on that OTA. But they also charge a commission. And it's like, gosh, you know, we're we're paying for this because we're getting the exposure and it's great. But the more that we can drive people to our website, obviously, the more net income we're gonna we're gonna um net. So um, you know, we we have we like you said we have this love-hate relationship with them.

Gil Chan 31:23

Yeah. Talk to me a little bit about kind of your not just not necessarily your stack, but what do you guys invest into to drive that 37%, 35%, and probably even more now. Um, but how do you guys drive that that traffic and that volume there?

Michael Russell 31:42

Yeah. So I think you know, what you're asking is it's important to get into okay, what is your content strategy? What is your marketing strategy? But if I may, I want to rewind just a little bit to when we got started. And one of the first things that we did to identify, we realized, look, we do want to start our own website because the previous operator, when we bought the the hostel, it was um a really outdated website. So it was just like so obvious that if we had a better updated website, we would generate more traffic and ultimately more revenue and drive more net income. Um, so when we were thinking about, okay, if we're gonna have a website, the first thing we had to do was identify, well, what's our brand gonna be? And I think that this is so important to start at the root because if the goal is to drive more direct bookings, you gotta think about to start. The very first thing you can do is create a brand that people will recognize very easily. That's not gonna be something that they confuse with perhaps locational landmarks, and it kind of just blends into, you know, like if your town is um, you know, I don't know, um think of a town. I don't know. Well, what's a town name? I can't blank it right now, but like um, I don't know, um San Diego. I'll pick San Diego. If you're at the San Diego Inn, right, like that's just not memorable. So the Maui Inn, for example, would not be memorable. You gotta have a name to start that people are gonna recognize and they're gonna talk about and they're not gonna forget. And it's gotta be simple, it can't be something that is hard to pronounce. So to start, when we came up with house it, it was very intentional for our guest avatar because it elicits a feeling. Hospitality is all about generating a feeling. So to begin with, it was unique, it was relatively easy to remember because in Hawaii, how it is slaying for how's it going? And so there was an alignment there. It it provided this brand where if you know we knew when we were gonna grow that the Hawaiian essence would be carried with the brand, even if we expand onto the mainland. So though that vision was important for us to start with creating a brand that had our guest avatar in mind. So I just wanted to take a minute to to point that out because so often I do look at websites or I look at other competitors and I go, gosh, their their brand essence just really isn't it isn't nailing it. Um, so we started with that, and I feel like we did a nice job. We got a great logo, it's memorable. So um understanding your brand, and then as it relates to building your website, once you've got your logo and your brand, now it's like, okay, well, what is my content strategy? Who, you know, who am I gonna try to appeal to? So, what type of information do we want to have on our website? Um, from the written uh copy to images. And look, we're not, you know, necessarily like website builders, but we knew that we wanted to go out and build something nice. So we started looking at some of our competitors and some of the other companies in the space. And we just created kind of like a mood board in a sense, and we we we took these images and shared it with a website designer that was able to um prepare and develop our website that was really focused around our avatar of youth, of adventure, of collaboration or connection, I should say. Um, and so the written content that we had in there also uh it mirrored the imagery that we were providing so that it was there was a consistency there. Um, compared to the original website that was outdated, these were, you know, more like the the photos were refreshingly new, and the video content was you could clearly see that modern technology was being implemented. All of those things were to start like, okay, before we even open, like what are the things we want to accomplish? That was the the base, the fundamentals of building our website for direct bookings.

Nathan St Cyr 35:42

I'll go further than that though, Mike. You actually had the vision of what our website was gonna look like, but in the design process of actually the physical design, we were making decisions that were like, well, look, we're gonna spend more here than what's necessary, but it's gonna market very well. So when we put this on the website, it's gonna show and create a feeling. Even if somebody doesn't use this, it's worth the investment in building this out this way. So kind of reverse engineering, you know, I heard when when you know Ben Wolf was talking about that as well. And when I listened to his episode that he was on with you, right? Is think about the design and how it's gonna impact ultimately your marketing from the beginning. Well, Mike did a great job of having that vision of let's spend extra here because I can see that photos will be taken and we'll end up being able to market well to our avatar.

Gil Chan 36:39

Yeah, yeah, yeah. That makes a lot of sense. And we talk about guests, like you're knowing your guest avatar quite a bit. You're actually the first guest that talked about a mood board. And I think perhaps maybe you had such a strong vision and being able to translate that to whoever's building your website on the other side, a mood board is a very effective way. And us in being in hospitality space, and many of us doing renovations, we're very, very familiar with mood boards. We that's how we know what fabrics, what colors, how to design the interior of the space. But really using what you're saying is also using that mood board, and it could be a Pinterest board, it could be anything, but really allowing that to help bring in the feeling that you're trying to get on your website, the assets, the materials, the videography, that helps you also write your content more effective as well, as well. So, like kudos to you to really know how to translate that vision in the most effective way. Mood board is a fabulous idea.

Michael Russell 37:45

Yeah. And it doesn't have to be some elaborate um project. I mean, it could be as simple as like, like you said, going to Pinterest and saving photos and just marking them up like this particular thing I like, and and sharing it with whoever's gonna be working on your site. But but you know, collecting that information and having it central to whatever you're trying to convey is the feeling, I think is is important.

Gil Chan 38:08

Yeah. And I would even like strongly suggest, even if you're working on this alone, spending that time to do that mood board, even if you're talking to yourself, it helps you really convey what you're like, put your vision down on like digital paper there, where you can start to react. And when you're putting your assets together, you're like, does this actually feel right? Um, for us on the product side, we always use wireframes. So before we do any type of development, we spend all of our time doing, we do a low fidelity wireframe, which is like chicken scratch, and then we do high fidelity wireframe where we're bringing in the actual pictures that we want to have on these types of templates to rather to figure out whether or not like the template that we're gonna produce is something that our hosts are gonna be proud of using there. And like it's it's a bit probably more rigid form of a mood board, but it's a great way to like really put your vision down on paper.

Michael Russell 39:01

Yeah, I love that. It's I'm laughing a little bit because I remember when we were putting our website together, the chicken scratch part. Like, I remember having the vision, like, okay, this is where the logo goes. This is how I want the menu bar to be. I want it to be simple. This is how I want like a splash page with a little video slide or carousel underneath here. So, like, I'm not in any way artistically inclined. So, chicken scratch is a great way to describe it. I had it written on like a no, Mike.

Nathan St Cyr 39:25

You literally would send me, all right, so here's what I'm thinking. And it would literally be a piece of paper with, you know, boxes and bars, and then he would send me screenshots, which he's calling the mood board, screenshots of other people within the industry that did this really, really well so that I could get a visualization of okay, here's what they're doing, here's where this part that they do really well. We could have that here, and it would go back to his chicken scratch. And it was like he the he that's exactly what happened.

unknown 39:59

Yeah.

Gil Chan 40:00

Is Nathan, are you are you alluding back to the point where you made earlier about like it's because Mike had such a strong vision on building out the website that like it may have costed a little bit more to do something like that or to put in that feature or to make it interact in such a way. But if you step back and take a look at it and actually go through the booking process, it feels very natural. It feels very trustworthy. It feels like the brand is actually conveying through. Is that what you're you're portraying there?

Nathan St Cyr 40:27

Well, when the previous comment that I was make was during the actual renovation process, like the actual what we were choosing from a design standpoint, what tile we may be using, or what, you know, I mean, we put you look at the murals on our walls and they're the the amount that it cost for us to go do that, but ultimately then what impact it had on the vision of once this hits the website, what is this gonna view like? You know, these differ these little all of these details that were thought through of, okay, well, do we need to have this here? Is it gonna impact, you know, ultimately what a guest thinks? Probably not, maybe, maybe not. We're not really sure. But hey, if we go do it based on what we want our marketing or our website to feel like, imagine what that photo would feel like. We took that into consideration.

Gil Chan 41:20

Yeah. Makes a lot of sense. Um Mike, back to the what we're talking about earlier about um, I'm I'm glad you stopped us and and really talked about really your your brand and kind of really starting from the guest avatar before you do anything else, uh, diving a little bit deeper into like your strategy side of things. As you're breaking down your direct booking strategy or your marketing strategy, how are you breaking that down? How are you thinking about it?

Michael Russell 41:46

Yeah, well, here's the good thing. I mean, a lot of this is out there. You you know, if you do a quick Google search or even just ask ChatGPT, it's gonna give you direction very quickly. So it's not like we came up with something that was unheard of. We just followed the recipe, the formula. And, you know, to answer your question, we wanted to start with identifying, well, what is our message? Right? We we have a brand, but what are we trying to communicate? And you know, we have we had a few things that we we outlined on our website that we wanted people to feel comforted knowing that you know they're gonna find a clean, safe space, like the brand tenants, you know, that like we're inclusive, um, that you know, we're we're all about connection. So that that was just kind of our our identifying our messaging. And there's there's there's five or six things that we you know write on our website that we stand for. Um, we started immediately blogging. So, you know, we had uh one of our our hires, one of our team members is a writer. And so although she works with us, she just enjoys writing. And so she would go out and do some experiences with the group and then write about it and just do that consistently. We the way we look at blogging was it's like a it's like a marathon, you know, it's a it's it's never gonna end. It's a marathon that never ends because you just got to keep doing it. But over time, it does have, you know, it it we've seen results. Um we we started an email campaign where we were encouraging others to share what's happening with the transition from what we were to what we're becoming. Um, so you know, these are all the things. Um paid paid advertising is something that uh we recognize that is an opportunity, but we we haven't, you know, totally we haven't gone into that yet, but we know it it's it's out there. So just just in general, I'm kind of like thinking about what are the the areas in which you can market social media. We really invested into our team creating an awesome social media page so that our brand will proliferate. Um those are the types of things. Is that does that answer your yeah, yeah, absolutely.

Gil Chan 43:49

It it seems like definitely you're you're leaning in on your brand and really figuring out like what's the best way to represent the brand, where do we need to convey and what do we need to have our brand present in? It sounds like the the brand is present in your social media, uh it's it's it's it's present in your email campaigns, uh, it's on your website as well, too. And then you're extending your brand to people that may not even heard of you through more organic search, through blogging, it sounds like.

Michael Russell 44:20

Yes. Yeah, yeah. Yeah, and what we found the results. So look, I'm gonna I want to tell you before I walk through this, I'll give you a little quick disclaimer. So one of the challenges we're finding with our PMS is that currently, and this is maybe an area where you can help, Gil, but the the iframe that we're using, we're basically we've got a website, but we use a PMS, and when people go to our website, they have to go from our hosted website to the PMS, which is hosted separately, and that's where we lose data. So I think this is a common occurrence, I would assume, amongst many um hospitality owners, is that we want that data, we want to see where they come from within Google, how they get to our website, but then it dies. We don't get to see the conversion once they actually book because that's going to a different, uh a different hosted website that's going to the PMS. So unfortunately, we're like we're missing this component. Um, but we're constantly trying to execute and iterate and tweak and improve. And so what we do have as a tangible uh data point is we can just see where we rank for keywords. And look, I don't know, maybe you know, Gil, but I don't know if it's um you can drill it down to a specific thing, like, oh, it's because of blogging, or it's because of maybe some videos that you posted on YouTube or maybe your social media strategy. I'm not sure. But what I do know is when we first started, when someone would type in the keywords that would ultimately, you know, be like for someone looking to come to Maui and stay in a hostel, for example, we didn't even rank anywhere on Google at all. And then over time we just keep tracking it and we were just getting up and up and up. And now, I mean, for the most important thing that matters is when someone types in hostile Maui, we're gonna land not once on the first page, but twice. We have two separate pages that are indexed on the first page of Google related to our main keyword. So that to us is that that is how we would identify that that our our efforts are successful.

Gil Chan 46:26

Yeah. And Mike, you you mentioned something that's not uncommon, uh, at least not uncommon for folks that have done this for a little while now and they're starting to look at their metrics, and everybody wants to know what's a row as, what's what how performant are their campaigns doing. And when you can't tie that back to the actual traffic there, if you're not able to couple that conversion to that traffic, it's really, really, really hard. And unfortunately, because so many folks use iframes and widgets and so on and so on, that data doesn't get transferred through. Um, some PMSs do allow what they call like cross-domain tracking there. But from my observation, it doesn't work half the time. It's really, really, really hard. Which which makes it difficult for us because we're trying to figure out how do we actually monitor that conversion. And the only effective way that we've seen that reliably reliably get tracked is when checkout actually happens on your side, on your site there. But unfortunately, not a lot of folks have the means to build out the whole entire checkout flow and also do payment processing as well too. That's that's the challenge that a lot of folks have nowadays. We do this for a couple of RPMSs, like for instance, guestie. If you're a guestie user and using Craft Estates, we will host your website. We will also host the checkout as well too. So if you're a guestie user and you build out this really beautiful page, you're able to see your traffic coming in. What campaigns did you use? What source did you use? What even what email that person clicked to get on your website to convert? We will even tell you which we do we do something called e-commerce tracking as well, too. Um so the stuff that we're doing right now has been in existence for about 10 years. If you go to any Shopify like site and you're connected to Google Analytics, it'll tell you all that information. Yeah. It's just that a lot of folks will end up building out their website off of typically WordPress, is probably the most common one I see on the more professional side of things. And then they'll they'll use the widgets or they'll use the checkout pages from the PMS, which is the most effective way to like bring out a website and actually make it feel real. But on the operation side, when you're trying to optimize and look at your tracking, it's really, really difficult. So we had to make the hard decision when we integrate with Guestie to actually do the entire flow. And so what we're doing now is we're going back and going back to each one of our PMSs that we're going to get into and starting to do checkout on there too. Um, I don't know how long it'll take for us to do each one of the PMSs, and also depends on their capabilities and their APIs. But for larger operators that's really looking to monitor the results and really undefine the their impact, it's really hard. Yeah. It's it's unfortunate too, because like unless you're hosting on the PMS entirely, that's the only way you can track right now.

Michael Russell 49:32

Yeah. Yeah. And look, you know, technology is not my expertise. I'm just, you know, guy that invests in real estate and knows a little bit about like, hey, we need a website build, and this is what we're trying to accomplish. But when I to your point about Shopify and stuff, I'm I'm completely mystified that that the ability to track the the data and analytics does not apply for for hospitality. Short, yeah, for hospitality, right? Like it seems like it's a similar conversion. Why in the world does that not work? You can go and track, you know, someone buying something on Shopify, a physical product. Well, a a you know, vacation is a product, it's a you know service, I guess, but it's essentially going through the same uh route. It just I don't understand why you can't track it.

Gil Chan 50:18

Yeah, and it's it's mainly because there's two systems being coupled together to to make that transaction happen. You have your website that that you that you hired to have that built, and then you have the PMS that's doing the checkout side. And every anytime you visit a website, there's what they call a session there. And if that they can't marry that session from when they first checked in, or like when they first bounce on your page, or not bounce, but when they first visit your page, and then when they get handed off to the checkout, if there's not that soft handoff and they know it's the same session, it's really hard to track.

Michael Russell 50:49

Yeah.

Gil Chan 50:49

And my hope is that come 2025 that we start to bridge that with more and more PMSs there. Yeah. Because that's the only way. Like, how do you know whether or not is it your blog that's being the most effective of driving traffic? Is it your organic search? Is it your Instagram? Is it your ad spend? Especially if you're spending money on ads, you want to know if those ads are actually converting. Um, so I I hear you on that one. I I definitely hear you on that one.

Michael Russell 51:15

Yeah.

Gil Chan 51:16

Yeah. Awesome. Um, Mike, was there anything else like you wanted to share from uh from kind of like your your tactics um standpoint that that has worked out really well for you? Or maybe actually ask in a different way. What are some of the lesson learns that you've you've done now that you kind of rebranded the entire website, you've deployed different marketing campaigns. What's what's been one of your biggest lesson learns?

Michael Russell 51:40

Well, okay. I let me when I when thinking about how to answer your question, what immediately came to my mind is okay, referring back to when we started and not having a track record, but wanting to get business, and what are some of the levers? Well, we started by blogging, but that doesn't happen immediately. You don't see results day one. So we started, you know, I started reflecting on like, well, what were the things that if someone were starting their hospitality business right now and they wanted to see some immediate results, they should be starting some of these long form things that are that are gonna pay off in the end. But the easiest and simplest thing to start with is the Google business page. And what I mean by that is of course optimizing and make sure that you know that you've got your website listed there and your contact number and you know any other information that Google page prompts you. But most importantly, um is how you respond to reviews. And and even before we get there, like are you prompting people to provide reviews? Are you getting user engagement with reviews? Because someone may not know that you exist at all, but you put a Google page up there and they type in the keywords that relate to you, and Google, you know, on their Google Maps, it shows right then and there, you can get instant access to all these viewers without having this robust website, without having you know years of blogging and all these things. But the way that you know you really want to curate reviews is um if you're you're operating a short-term rental, then there's software like StaFi, I believe, is the name. I I don't use that one, but we have one for our hotel or for our hostel that basically prompts people to provide their email address if they want to access the Wi-Fi, just like any coffee shop or hotel. And um, that's been an important thing for just generating uh, I guess, emails and such. But also, what it does is it prompts them to provide a Google review. So they get an email from us two days into their stay that says something along the lines of, hey, are you enjoying your stay? And we use our language so it's target our demographic, like, hey, we're stoked to host you. Like, hope you're having a great time. Like, do us a favor, like you know, give us a review, click here. And it makes it really easy for them to click like between one to five stars. And if they click less than four stars, so three stars below, it takes them internally to you know a response area where we can respond to them and and resolve whatever they're concerned about. But if it's four or five stars, it automatically takes them to Google. Interesting. So that software has been critical for us because we're we're able to generate a lot more reviews quicker. Um, and we also we have put you know, we we have signs posted physically around our location. But what I'm driving at is if you can start focusing your energy and harnessing how to get people to start reviewing you immediately, that is like the low-hanging fruit. It's a great way to start. And not only is it important to get those reviews, good or bad, right? But if you get a bad review, it's not it's not necessarily just like, oh man, like, oh darn, like we got this terrible review. It's how do you respond to the review? The the essence of your spirit, like like the the the you know, when you're responding, are you defensive or are you uh acknowledging what their concern is and validating their concern first? And you know, I'm being very specific here because when we tasked our staff with responding to reviews, I was very like specific on how to respond. If they defended their position first and then later on in the paragraph went and empathize with them, I was like, no, start by empathizing with them first, acknowledge them, validate them, tell them, you know, we totally understand where you're coming from. And the reason why I was like harping on this so much is because people that are gonna read the negative reviews, if they see that there's really care and passion, it's not what happened that went wrong. It's how did the hospitality business respond to it? Did they make the guests feel like they were shaming them for complaining, or did they say, gosh, we dropped the ball, we're gonna get better? Thank you for helping us get better. And if you create a culture around that, I mean, it it really, I feel like we saw a significant lift in direct um bookings as a result of getting better and better reviews.

Gil Chan 55:58

Interesting. Interesting. Yeah, I've never I haven't heard of like leveraging your reviews, and it makes sense because you're what you're trying to do is like get your word out there beyond beyond just the OTAs. Um, you're you're talking not just the reviews on the platform, but also driving folks to leave your reviews in other places that helps validate you as a business and also helps you drive uh SEO as well, too. Like that definitely helps you on the SEO side, but also how that up levels your performance as a team and as a company and an operator, really, there is like we always strive for that five-star review, but like you said, we do miss up sometimes. Um, or we miss a clean or we miss something there, and things happen there, but it's it's how we deal with it as an operator that helps us separate from the really great folks and the people that do all right.

Michael Russell 56:52

Yeah. And in your speaking by love language here when it comes into like monitoring the views and and and um you know making implementing improvements based on the feedback we're getting in reviews. Um I think there's a symbiotic relationship there. There's two things that we just kind of covered, right? There's you were talking about um you know reviews, so reviews on OTAs, reviews on Google, like if you have better reviews, then um I guess more reviews, then you're gonna get more visibility, but or and more, ultimately generate more revenue. But also when you're monitoring the reviews and you're taking stock of those reviews and you're making changes based on those reviews, what's gonna happen is your team, they're gonna change their behavior. They're gonna start behaving in a way that aligns with better reviews. So when someone is you know noted for doing something uh really great and they get that positive enforcement, that they get their recognition, like, you know, Sally did an awesome job taking us on a tour, or I was greeted by Sam and he was so friendly, or you know, I've just picking theoretical examples here. But you know, the point is that positive recognition is gonna motivate them to do more of that. And then when there's issues like who cleanliness was subpar, and we step in or our management steps in and points that out, we're gonna get less and less of those if we're paying careful attention to those reviews, which ultimately is gonna generate more business because we're operating more effectively.

Gil Chan 58:19

Yeah, absolutely. Awesome. Nathan, Michael, it was really good having you guys on the show and really understanding kind of how you guys got into this thing called hostels in the middle of Maui of all places, and really how you've grown and and some of the things that you put into practice today from a business standpoint, hiring your business coach, leveraging other people's, uh leveraging your network and really smart people around you, and really breaking down how your system, breaking your system down to how you become better operators as well. Too. We usually end the show with two questions. I've never done this before. So you're welcome to answer these separately. Um, but one's a mindset question and one's an action-oriented question. So from the mindset question first, what's the one piece of mindset advice that you would give to someone that's starting something completely new? I'll jump on the mindset one.

Nathan St Cyr 59:13

So I believe that from a mindset standpoint, to ask yourself, what is my relationship with fear and failure? And it's like my favorite thing. Like wherever I it's the fear and failure that stops us from doing things. So if we create a relationship around it where we actually strive to attack fear and to attack failure, it changes the relationship because that's where all the good stuff happens. When you start to attack your fears and your failure and just step into it, even though it's this feeling that's making you stop, but you just do it anyway, the relationship changes. And when you start to see positive results from failing and from fearing and stepping into it, then it's that's really where all of the magic. Happened. So from a mindset standpoint, I would say check yourself on your relationship with fear and failure, and you can you can start diving into this just like that.

Gil Chan 1:00:11

Yeah. That reminds me of uh, I don't know where I saw this, but it was like some clip or some even real. It was like I'm 86 failures till success. And if you think about it that way, I'm 86 failures away, I'm actually more inclined to take more failure points so I can get to success faster. And 86 is just a made-up number. But if you think of it that way, you don't think of failure as the be-all and end all. It's helping you grow and to get you closer towards success. So I thought like that. That's like a funny little mental hack there. Yeah. Awesome. Um, Mike, I don't know if you had anything to share. I can also toss the next question towards you.

Michael Russell 1:00:51

All right. Let me let me take a stab at the next question. I let I'll let Nathan uh, I think he handled the first one okay.

Gil Chan 1:00:57

So let's take a stab at the next one. Yeah. I think the next one actually is very appropriate for you. Is like, what's the one piece of tactical advice uh from a direct bookings perspective that you want people to put into practice today?

Michael Russell 1:01:10

Well, gosh, I mean I th I I think that maybe I covered that in one of the last questions, which is the low-hanging fruit of of Google, right? I mean, that's a if someone's getting started and they don't have their Google business page set up, then that's an obvious choice. Um I would say also, too, that you know, if you don't know everything and you are not executing because you're worried about learning how to do everything first, then I really think it's important to identify who can help you in those areas. And obviously you can definitely employ people. There's plenty of consultants which we have found tremendous value in success, but also, you know, in your network, you'd be surprised like if you just open up your phone and think about okay, who are people that are that are working in um you know fields of where I could just I can pick their brain, ask for help. Sometimes people are afraid to ask for help. And if you you know don't have the budget necessarily to start to go and hire someone to do what you're looking for, you can start with your network and and you'd be surprised. Like if you follow up with an additional question of like, hey, who else do you know of that might be able to help me in this area? Then you can leverage their network as well. So there's a compounding effect there.

Gil Chan 1:02:27

Yeah, awesome. Thank you for sharing the mic. All right. Um, Nathan, Mike, before we end the call or the show, where can folks find out more about you? How can they keep in touch? Is there anything that you're working on that you want to get in touch with folks on?

Michael Russell 1:02:45

Yeah, listen, so we're very much right now focused on building out. Um, we've got we're we're documenting our journey towards building our company. And so we've got a uh podcast that we run. It's called the Hotel Investor Playbook. We're really passionate about it. We're loving it. Um, and we're just we're we're hosting people that are focused on um building wealth and freedom uh through investing in boutique hotel, boutique hotels and hospitality assets. So if anyone has an interest in that, then yeah, look us up, the hotel investor playbook. We're on all the socials and we have a podcast.

Gil Chan 1:03:19

Awesome, awesome. Well, Nathan, Mike, it was uh again great to have you on board, and I can't wait to see kind of how you guys expand and all the things that you guys tackle. Thanks. All right, bye.