Buying, Financing & Operating a Seasonal Boutique Hotel | Ryan Edwards E17

🏨 How do you turn a seasonal boutique hotel into a $2M value-add opportunity?

In this episode of The Hotel Investor Playbook, we sit down with Ryan Edwards, owner of a 17-unit boutique hotel in Maine, to break down the real strategies that make a seasonal hotel thrive.


We cover:
✅ How he financed his $3.6M hotel deal with 75% bank financing
✅ The $100K revenue increase that added $1.4M in value
✅ How he built a 100% direct booking strategy (no OTAs!)
✅ Staffing challenges & using visa programs for seasonal workers
✅ Marketing strategies that fill rooms months in advance

If you’re considering investing in boutique hotels, seasonal markets, or direct booking strategies, this episode is packed with gold.

🔗 Connect with Ryan & Learn More:
👉 Instagram: @FiveGablesInn
👉 Website: https://fivegablesinn.com/

Connect with Michael on Instagram or LinkedIn.

Email Us at info@hotelinvestorplaybook.com

Visit the Hotel Investor Playbook Instagram

Invest with Malama Capital

Submit a deal

Transcript

Michael Russell 0:00

Buying a boutique hotel involves risk, but what if it's in a seasonal market where you only make money half the year? In this business, knowing your numbers isn't just important, it's essential for success. Today's guest, Ryan Edwards, has cracked the code. In this episode, Ryan shares how he acquired a boutique hotel in Maine, secured bank financing with a killer pitch deck, built a 100% direct booking strategy using Google Ads, and manages operations, including hiring seasonal foreign workers through visa programs. Plus, he reveals the strategic moves he's implementing to increase his hotel's value by $2 million. If you're looking to buy, finance, market, or operate a boutique hotel, this episode is packed with golden nuggets to help you succeed. Let's dive in. Welcome to the Hotel Investor Playbook, your guide to building wealth and freedom through boutique hotel ownership, hosted by Mike and Nate. Get in the game. This podcast documents our journey to building a $400 million business, sharing our wins, losses, and lessons along the way so you can apply them to your own journey. So, as mentioned, I'm operating this podcast solo, first time ever. Uh Nathan is on a snowmobiling trip right now. Good for him. He works hard, so he should enjoy a little play as well. And on today's episode, I'm very happy to introduce Ryan Edwards, who owns a hotel in Maine, coincidentally. Ryan, welcome to the show.

Ryan Edwards 1:50

Michael, thank you so much. Glad to be here.

Michael Russell 1:52

Yes, I am so pumped, and I've got you all to myself. So I am gonna machine gun you with questions. I hope you're okay with that. I'm ready. I'm ready, prepared. All right. I want to dig right into uh I want to get some information about this hotel that you purchased. You bought a 16-room boutique hotel on the water in Maine back in 2023. Can you provide a brief description of the property and let us know what makes this special?

Ryan Edwards 2:19

Yeah, thank you so much. So the Five Gables Inn is our hotel. It's in Booth Bay, Maine. So if you don't know much about Maine, Booth Bay is basically the mid-coast, what they call it. It's in between Portland and Bar Harbor. It's a vacation town. It's it's on the water, it's known for whale watching, a ton of lobster oysters if you're into that kind of thing. Um, and just a lot of nature hiking. A lot of our guests that come to that are on a summer vacation. We're a seasonal property. So we operate from May to October. Uh so we pack a lot in. We have very high occupancy, which we could touch on. And, you know, the property itself is what I would call, you know, a small hotel or boutique style hotel in the vein of a bed and breakfast, right? Which is very popular in the northeast part of the of the United States, particularly Cape Cod, Maine, New Hampshire. So we fit right into that type of market within the geography that we're located in. And the inn itself does have 16 rooms. You are right. We also, when we acquired the property, we also acquired two other houses. So one house right behind the inn where the previous owners lived, and then another house we use for for staff in the summertime, which is a couple streets away. Um, the house that we acquired, we actually turned into a cottage. So technically, you know, we have 17 total units, and there's definitely different types of guests who, you know, would stay at the cottage versus the inn. So we now have the five Gables Inn that has 16 rooms, and we have the Adler Cottage, which is uh named after my son.

Michael Russell 3:55

Yes. Okay, awesome. You know, there's a lot to unpack there, and I want to get into all of that. So we may compartmentalize, but I want to take note that I am really excited about speaking with you about the fact that your property is located in a seasonal market. So we're gonna dig into that. I want to know what the nuances are, what the upsides and what the the challenges are with operating seasonal property. And I'm curious to know about your staffing as it relates to that. You mentioned that you have staff housing. So this is all very interesting, but I'm gonna start with let's talk about how you acquired this deal. So, how did you source it? Was it on market? Was it off market? Can you walk us through that?

Ryan Edwards 4:34

Yeah, it was on market, and actually it came about because I had tried I pursued a similar-sized hotel in Siesta Key, Florida, a beach in basically. And um, you know, I went after that deal and it kind of fell apart at the last second. But through the whole due diligence period of evaluating that deal, obviously learned a lot about, you know, inns or hotels versus multifamily housing. And so it really excited me to find something similar somewhere else. And I honestly went on to Crexie and I searched through a ton of properties online that were on the market that I was trying to find like compared to something I had already looked at. And I came upon the five gables. And then in learning about it, speaking to the owner, obviously going there, I was able to piece together kind of a financial model, compare that to other properties that I also looked at. Um, and then really just due to the potential that it had and also the location of where it was on the water, which is where I wanted to try to stick to, you know, I pursued it. And so that's that's the the origin of why I chose Maine. Really just because of the market it's in and because of the financial opportunity I saw.

Michael Russell 5:47

Okay, great. So it was on market, walk us through. So how long was it on market for?

Ryan Edwards 5:52

It for it was on market twice for over the course of 12 months. So the owners had listed it without the two properties that it came with initially, so only the inn. Then they relisted it with their house and in the staff house that they were so they were selling it all as a package, and that was on the on market for about nine to 12 months. Okay. Can you share with us what did you pay for this property? Uh, we acquired the property for 3.6 million.

Michael Russell 6:21

Okay, 3.6 million for 16 units plus an additional cottage that can be rented out and some staff housing. That's correct.

Ryan Edwards 6:30

Yes.

Michael Russell 6:31

Okay. And how did you finance this? Did you bring in partners? What did you raise money like syndication or did you do a joint venture?

Ryan Edwards 6:39

Yeah, we did it, we did a sh a joint venture with one other equity partner. That's what I did. So we financed through a bank as well, but I had a partner come in with with equity. So basically myself and one other partner put up put up the uh the funds to acquire it. And then we used a bank loan for the for the remaining mortgage.

Michael Russell 6:56

Can you walk us through how was the experience? What was the process with getting financing to acquire this property from a bank?

Ryan Edwards 7:03

Yeah, it's different, it's different than a multifamily or a house, that's for sure. And if the you know the first one you're doing that's more of a commercial size property, like a hotel, right? It's a look, it's a learning experience. So the process itself was everything comes down to the appraisal, right? So, and when you're appraising a revenue-producing asset, an appraiser that's assigned from the bank typically is going to look at it different than other types of properties. They look at the condition, they looked at the condition of the property of all three properties. So not only the inn, you know, but both houses as well. And then uh and they assigned a value to each. So basically a resale value, what they think it would get on the market. But more most importantly, within the appraiser report was the valuation based on income. So the income method valuation. And really what they did was they evaluated the financial statements for the previous owners. They came up with their own, and when I say there, I mean the appraiser's own NOI of what he thought or they thought the NOI was. And then they basically used uh an average cap cap rate, you know, multiplier, which in Maine, or at least in this part of the country, I'm sure it's probably similar elsewhere, but it was about between seven to eight percent. So they, you know, you take the NOI of what the whole business does, right? So what the owners made after everything, and and they divided it by, you know, that that that cap rate that they came up with. It was about between, like I said, seven and eight percent. That ended up with their valuation of the property. And it ended up being very similar to the the resale method of what the of what they thought that each individual asset was worth just by selling it as a property itself, not the income-based method. So we got very, very close to 3.6, and the bank was satisfied with the number we came up with in terms of the valuation. Dang. Well, that sounds marvelous.

Michael Russell 8:54

The fact that you were able to acquire this with bank financing. And I mean, were there any major hiccups or challenges that you had to overcome, or was it pretty smooth sailing?

Ryan Edwards 9:05

Yeah, I think there's always some challenges in there somewhere, right? With these types of deals. Thankfully, nothing we couldn't overcome. There were a couple that I'll share. You know, the bank wanted, so we're a seasonal property, as I said. When we acquired it, it was towards the end of the calendar year or towards the end of an existing season. Because as I mentioned, the seasons run from May to October. So after or right before we received the clear to close, the bank came to us and said, we actually want you to hold six months worth of mortgage payments and reserve. And we weren't anticipating that because we knew that the previous owners took in deposits for pre-bookings throughout the winter months. And we had already modeled out that we would have enough based on historical performance of pre-bookings to carry us over until the next season. And the bank wasn't satisfied with that, right? They wanted they wanted all of it in cash in escrow, essentially, for six months worth of mortgage payments. So we're talking about almost $150,000 cash that we were not factoring into our cash to close. And that was challenging. So what we ended up doing was I came up with some of the extra cash that I had to, but not nearly enough. And I went to the sellers and I just kind of made a case and I said, Hey, would you carry a note for me? Right. Out of the closing cost, out of your proceeds, would you carry a note, which ended up being um, you know, close to a hundred thousand dollars. And I'll pay you this term, this interest over the course uh of the next six months until we open. And uh, you know, would you do that to help me get this deal closed? And we ended up, at first they didn't want to. We ended up getting it done because they needed a few extra days to move out of the property. So we we basically settled. We said, hey, we'll let you stay in the property after closing for another week if you extend this note to us for the cash. And that's how we did it. And I ended up paying them back the week before we opened for the for the next season.

Michael Russell 11:03

I love it. So you guys got creative. So you had a challenge, you overcame it. Yeah, let's talk about the loan to value. What was the bank willing to loan? What was the uh leverage on this? We ended up doing 75%.

Ryan Edwards 11:16

Um right out of the gate. Right out of the gate was a well, yeah, it was close to that. Right out of the gate, what it took a little negotiating, I would say. We worked with a great bank, I believe a great bank, you know, in terms of they were vested in the area we were in, which is important. Because as you know, when you're, you know, these types of businesses that know the market, they understand the appeal of that type of destination. And so it was easier to explain to them than it would be to a national lender or would be to maybe a hard money lender, something something of that nature. So, you know, we I definitely put some effort into the presentation, which I which I felt like helped us a little bit, uh, you know, in terms of uh getting some favorable terms. But yeah, we ended up at 75% LTP.

Michael Russell 12:01

Hey there. This is Mike and Nate jumping in with a quick favor to ask. If you're enjoying this show, would you just take a moment and go ahead and leave us a five-star review? Your reviews really help us grow our listener base, which in turn allows us to bring on even more high-qualified guests who share their actionable insights and strategies to help you succeed in your hospitality journey. So if you've gotten value from this episode or any of our past episodes, we truly appreciate your support. Tap those five stars, follow the show, and share it with someone you know who's looking to up their game in hospitality or investing. Thanks so much. And now back to the show. That's great. That this is so true. It's such a valuable lesson. So, did you did you use a um a mortgage broker or did you just go direct to the bank yourself?

Ryan Edwards 12:45

I went direct to several banks myself. Yeah.

Michael Russell 12:48

How how many banks did you go to, and how many approvals were you given?

Ryan Edwards 12:54

I went to eight banks. And um, we had we had a commitment bladder, so to speak, from about three. Okay.

Michael Russell 13:02

All right. Well, that's not bad. Uh that's impressive. You know, I've I've heard that it well, I know from experience, it's getting more difficult. So 2023, perhaps the uh lending environment was a little bit more favorable, but it's now getting a little bit more challenging. And so the fact that you had success like that with getting traditional financing right out of the gate, relatively smooth sailing, small little hiccup at the end. You did have to have the debt reserve, which is kind of a bummer. But how long is that debt reserve in place? I mean, are they gonna hold that indefinitely, or is after a certain amount of years, they'll refund you that money out of Best Grow?

Ryan Edwards 13:37

Uh, no, it's already it's already been resolved. So it was resolved after six months. All we had to do basically was come up with the cash up at close, put it in a separate account, and then that paid our mortgage for six months. I ended up paying back the sellers within six months, essentially, after closing. Gotcha. Yeah, cool.

Michael Russell 13:56

All right, exciting. So you mentioned that you were attracted to the market in Maine. But what's specifically about that area or that region? What attracted you to that market?

Ryan Edwards 14:08

In Maine, you know, I I grew up in the Northeast of New England, and I went to school in Massachusetts, and we did a lot of trips. My friends and I, family did a lot of trips to Cape Cod. And Cape Cod was always, you know, the desirable summer destination in New England, right? Unless you're getting on a plane and going somewhere else, you're going to Cape Cod. And I and I believe that Maine is extremely similar. It attracts the same types of guests and travelers. The other unique thing about Maine that I loved is that it attracts European travelers and Canadian vacationers as well. So it has multiple different types of guest profiles, right? That it appeals to. And people seek out Maine, which is great. It is similar to Florida in that way, that if someone wants to go, they're usually not going because they catch an advertisement and they've never heard about Maine before. It's either they know about this particular place in Maine or they've heard about it before. So you don't have to reach out and grab them. You just have to differentiate yourself within the market you're in. And I I'd rather bet on differentiating myself than having to convince somebody to come to where I am. And so that that was a big appeal for me, for Maine.

Michael Russell 15:19

So you recognize that the area in general has already established demand. What about supply?

Ryan Edwards 15:26

There's high supply. So there, I would say there's high supply of properties like us, right? That are that, you know, colonial style, you know, northeast, near the ocean, lobsters, fishermen, that whole scene and theme, right? So there is a high supply. What there's not a high supply of are Airbnbs, oddly enough, because a lot to do with rules and and restrictions, because you know, tourism is a huge industry for Maine, right? In these towns like Booth Bay, where we are on the Mid Coast and also on the southern coast of Maine, they rely on tourism and they have a lot of what I call historical inns. A lot of properties that have been built that were built many years ago, in a lot of cases over a hundred years ago, and that are still there. And they've been operating as a hotel or lodging for a very long time. And Maine wants to protect those. So they try, they go out of their way, right? To try to limit the amount of short-term houses that you could rent on an Airbnb or VRBO. So we do have to differentiate ourselves quite a bit in terms of guest experience, which to me is probably the most important thing you have to focus on when you own a hotel.

Michael Russell 16:37

Okay. So earmark that. I want to dig into guest experience because I think that's going to relate a lot to your booking strategy. But I want to go back to due diligence to walk us through the experience. So you've identified this property, you feel like it's in an area where there's tremendous demand. You recognize that there's uh an abundance of supply. So you're going to differentiate yourself and you're kind of coming up with a marketing plan for how you're going to do so. What are some other maybe common red flags that you watch out for in your due diligence process? What are you looking for when evaluating a property and its potential?

Ryan Edwards 17:14

Yeah, I mean, the biggest thing to me is what can I add to this property to increase the NOI, right? I mean, what, you know, it sounds simple and straightforward, but it's really the most important metric because at the end of the day, whatever your strategy is, you know, to either sell, exit in in the future or perhaps refinance, right? It all comes down to how much you're taking in after everything. And so you cannot stay status quo. You could continue doing certain things the way that it's been doing if it were successful, but you have to figure out a way to either make a lot more money, right? And while also kind of optimizing your spend. So I focus on those two things, right? Optimizing spend in terms of being creative and efficient with the dollars that go out the door and what the return is on those dollars. But also, you know, primarily, how do I make more money from this asset? How do I make more money from this investment? The main deal was extremely attractive for two reasons. One was that house that was right next to the property, right, where the previous owners lived. That's an immediate, right? You know, roughly $100,000 a year to the bottom line. Because you're you are, you know, you already, as long as you, you know, continue to do things the way that um you know you you had been doing in terms of $100,000 in revenue or $100,000 in ultimate value. Well, essentially to our bottom lines profit, right? $100,000.

Michael Russell 18:38

So NOI, right? Because so what's the cap rate in that in that area? The cap rate is about uh 7.2%. Okay, so we take an extra hundred grand of your bottom line divided by a 7.2 percent cap? 7.2%. That's a close to a $1.4 million increase in value. Yeah, absolutely. That's nuts. So you recognize holy heck, we get this cottage going, there's an extra $100,000 potential, and we can raise the value right there with that one change. And what you're describing, I think, is is critical because you're you're talking about there's two ways to increase net income. There's either generate more revenue or be more efficient and save costs. So ultimately, more net income equals more value. And in this example, this one thing that you recognize that's an extra $1.4 million. So hats off to you. That's fantastic. Yeah.

Ryan Edwards 19:28

Now, obviously, it took some capital to convert that house, right? Don't get me wrong. I mean, but you make all that back within one year essentially. And now your valuation is much higher over a million dollars higher. That was the entire game plan going into this. Now, are there cost saving opportunities? Yes, but they're not tremendous. I would say the revenue addition uh opportunity was tremendous in this particular deal. That's what drew me to it because we are getting all of those properties like in the house, the staff house, based on the value of what the income was based on what the income was of the existing operation. So it was a it was basically a couple nice bonuses that were thrown into the deal, which which is really why we wanted to, you know, I wanted to go after it. So why do you think that the previous owner wasn't utilizing that space for short-term rental? They lived there. That was their house. And I think there's a lot of those around the country, right? I think there's a lot of cases. Now it also comes down to who are you as an owner and what is your goal? Right? They that is their life. That was their life and their business. And I thought when I saw that place, I could do the same thing here and but I don't have to you know make this my life in the way that they did. Like this is this could be an opportunity for now I spent a ton of time in Maine and at that property of course. But you know that's not my my entire life and career doesn't have to be just that one property. There could be other properties and we could talk about that too.

Michael Russell 20:56

But that that's that's the biblical their model was owner operate and you saw an opportunity to implement staffing to take over the management which didn't require you living there and opened up a huge opportunity for increase in value by renting that space out. That's right. That's awesome. Well all right let's um walk through you mentioned that you were very prepared to present to the lender yeah your business plan and you you mentioned that you created a pitch deck. So I'd like to know what should be included in a pitch deck to make a deal stand out for lending or for potential investors?

Ryan Edwards 21:31

Yeah I mean there's really two two things right away that are probably the most important number one is who are you? Number two is why should they give you money and and how are they going to make money back? So you know whether it's a bank, whether it's an investor you have to introduce yourself and sell them on you, you know, first and foremost, especially if they're not familiar with you. If you have a track record, it's a little bit of a different story, but still it's important. And then also you know why that property why that investment and then how are they going to get their money back. So that's what I really focused in on. Now the why part of it is a very long list right so it's not a simple I like Maine. I we used to go to Cape Cod. We should invest in this property. It's why is Booth Bay such a strong tourist destination, right? And I knew it was because I found a ton of data on the occupancy rates over the course of time and what type of inventory that market had. So that market as I mentioned has a high in inventory right boots small hotel inventory and it's had a very strong occupancy rate. So if you compare it to the rest of the state right it's in the top 5%. And if you compare it to the rest in New England, it's still in the top 5%. So you know those are great indicators as to why we should buy this then you get into the specific numbers as I talked about here are what the current owners are doing. Here's their top line revenue here's all their expenses what they spend money on at the end of the day this is their net out for any income and we think by acquiring it by putting X amount of money into that house converting it to a cottage rental we'll generate this amount of money right and that basically goes to our bottom line just like you and I spoke about and now after a two a couple of years or a few years or so we'll get a reappraisal and we'll increase value by $2 million, which leaves us a lot more flexibility all the while paying interest on our mortgage, right? But also you know at the end of the day this what our this is what our return could possibly be. So you have to go into a financial projection right and your financial projection is really based on your idea your vision of what that property could do. And again that could include cutting costs that could include what I'm talking about which is you know increased revenue but that's a big part of the why right that's what anybody who's going to give you money cares about.

Michael Russell 23:48

So you want to give credibility to the operator you want to give credibility to the location and credibility to the business plan. And if you can put all three of those into a pitch deck then you're going to be better off. But one area that I'm curious about is credibility to the operator. What if this is your first hotel but you own other real estate assets, right? I think you've got over $10 million in in assets that you own is that correct? Total portfolio, yes. Yes. So what if someone getting started in this doesn't have a tremendous you know big background in in real estate or doesn't have um a heavy net worth um do you have any suggestions or tips for someone that's getting started out how they can maybe leverage the joint venture or what they can do to build some credibility for themselves to be more lender or credit worthy?

Ryan Edwards 24:29

Yeah absolutely no great question uh so I really started in doing anything in real estate five years ago about five years ago. So you know in my opinion not a ton of time right my my advice to to someone similar is to say that doesn't have a ton of equity or credibility is you have to have a goal. I think that's the most important thing because you could just say and a lot of my friends or people I come across ask, well how do I get into real estate? So do you even want to right and why but you could put money into the stock market make the same return and not have to do it. So and take on risk too so you know there's risk with any type of investment. So you do have to know why my why in terms of starting it was I wanted to use real estate as a vehicle for wealth right I I chose I deliberately chose I want to focus more into real estate because I could have more control over this type of investment asset than I would a stock an equity in the stock market. Right. Both things could provide you a return but I want to use my knowledge my creativity whatever I could bring to this investment I want to have some control over that. So that's why I choose real estate and I want to go as big as possible. That was just my intuition and just my focus and goal.

Michael Russell 25:44

So that you know my advice would be you got to start with why right there's there's let me hone in on that I want to hone in a little bit so you're describing that you had a passion for real estate but of all the different types of real estate assets why specifically did you dive into hospitality what is it about the hospitality investment that attracts you yeah so initially I didn't it was really multifamily I wanted to go big with multifamily so a lot of apartments.

Ryan Edwards 26:09

I've read a ton of books about all these industries who made a lot of money with you know apartment units. And what happened was I eventually purchased a uh a house in Florida and in Sarasota Florida. And um what I learned was Sarasota Florida which is right next to Siesta Key is a great tourist destination. And so I thought well okay this is a single family house let me try to find a multifamily I couldn't find any multifamily in the entire county I looked every I went looked north to Florida south to Dennis right I couldn't find anything and I kept it because there was too much competition or there just no other inventory. It was an inventory issue there was nothing on the market. I even tried I even put effort into purchasing list right of uh homeowners that were behind on their mortgage payments that own multifamilies and try to mail them and email them and reach out to the owners to try to make an offer direct and uh you know I came kind of came up shorthanded over the course of a year. And eventually while my house was being rented one weekend around the 4th of July I ended up in Sarasota I ended up staying at a beach hotel in Siesta Key and the the property next door was listed on the MLS as a multifamily but it was labeled incorrectly it was listed incorrectly it was really a commercial property. It was a hotel and the agent made a mistake and they listed it so I saw it for sale and I said I'm just gonna walk over there. So I walked over there the owner was there spoke to the owner I learned all about how they rented this place and I thought wait a second this is listed for the same amount of money as it as a multifamily house but the cash flow is about $120,000 higher and I just thought the appeal of running a hotel is way more fun than running it uh you know than being an owner of a of an apartment unit right you don't interact with tenants you're not there to please them or you're not there to serve them right you're there just to provide a clean unit. So that interaction alone, call it happenstance, you know, whatever you may right that interaction alone put the idea in my head of this is a safer bet than an apartment. This is a safer bet than a multifamily. This is more exciting to me than the multifamily and that's when I really pursued that particular property. And as I mentioned that one didn't work out but it led me to you know may it led me to think about others.

Michael Russell 28:28

Yeah you know what you're describing Nathan likes to call this is the passionate asset class. It's so much more fun because there's a lot of creative tools that you can apply that you can generate more revenue, you can cut cost. It's not as simple as just a standard ordinary multifamily investment, right? Where you paint the walls, you change the carpets, whatever, and you just rent it for what it is. There's a lot of creative artistic opportunity and it's fun and it you also I say this all the time you're affecting people right you're having an impact on people's lives people look forward to vacations and just it's very fulfilling to be the curator of those experiences. So I resonate very well with what you've described. And there's also a lot of potential to make like you were describing from a cash flow perspective it's kind of the best of both worlds because multifamily you might have a big payoff somewhere down the road but in the interim the cash flow is usually pretty limited. But with hospitality uh there's more opportunity to generate a higher ratio of cash flow while you're operating the investment.

Ryan Edwards 29:31

And I'm glad I I came to that realization before I went too far into multifamilies right and because I think I'm more suited for the guest experience and well let's change gears.

Michael Russell 29:44

Let's talk about that a little bit. So you mentioned that that was one of the things that you had in mind as far as improving the guest experience. And I I want to dive into specifically how you're able to accomplish a 100% direct booking uh ratio. How you know most people have got this stuff on the OTAs they're giving away lots of money you know 15 20 to expedia to booking.com what have you and you're not even on any of those from what I can tell you you're only available for direct booking how how do you do that?

Ryan Edwards 30:16

Right. So 100% of bookings come direct through our website now there's a few ways we do it we lean heavily into three main advertising slash marketing channels right so number one is the website. I really think everything kind of starts with the website. So and the previous owners did a phenomenal job right I have to give them credit for for the website itself and I still continue to work with the web developer on our website but the website is the first point of contact that eventually somebody makes with you know with your property for the most part and so that has to be it has to be optimized. It has to have great photography it has to you know it has to have a place to put other marketing materials like a blog post right and it also has to host your booking engine which drives all your revenue. So you have to invest in your website for sure. And uh I definitely knew that coming in because I have have used websites before to drive bookings even to short term rentals as opposed to Airbnb or VRBO. So I knew that the website was was extremely important. We've continued to invest in the website over the past few years. Secondly newsletters are paramount right so also through your website and through your booking engine you collect customer emails. So your email distribution list is is really a gold mine, right? Because when you have you basically own your CRM, you have access to your customer data and what can you do with that customer data? Well you can send them monthly newsletters. Many properties do this obviously and so we we say we send one newsletter every month to our entire list and we send a second email a few days after the first one goes out each month to those who didn't open the original email and we're getting a pretty high open rates and click through rates on each month. So that helps drive a ton of revenue now the click through rates and the and the open rates that's done by trial and error a lot of times testing out different subject titles testing out different content um you know fortunately it it really helped us when we launched our cottage because you know we had this we had this strong email list and so when we list the cottage it was only a month before we opened for the season it drove the most amount we did the highest amount of pre-bookings that the property ever did the month the that the month that newsletter went out to to announce the cottage. And so what type of content are you putting in these newsletters that is appealing to people? Yeah so a lot of time it's it's either content about something different at the property. So example here's a cottage is opening right next door and if you book there you'll still be able to you know enjoy the breakfast that we make every morning for the guests at the inn as well you'll still be able to have access to our coffee and freshly baked cookies every night afternoon if you come over to the inn um you know there's there's a hot tub in the back and there's you know there's pictures so so something new or if it wasn't the cottage another example of something new would be um you know we're really known for the breakfast that's served at the inn and that's a big part of guest experience is you know making sure that guests are happy. And so we put a ton of, we go over the top with breakfast, right? We're not talking about a couple eggs and bacon. These are freshly made quichas, frittadas, smoothies shots with your breakfast and things like that. So if there's something new that we add to our menu or a rotation of breakfast items, that will go in the newsletter. Or the other thing that we usually type of content within the newsletter is information about booth bay right because booth bay is such a draw right the surrounding area has an unlimited amount of things to pull from to talk about in terms of content. They have the botanical gardens which drives about 250 2700 visitors a year for a pretty small town which is great. So we talk about that we talk about the history of booth bay um things of that nature are uh you know usually drive our content strategy and it also drives our blog post right if there's new restaurants that are opening new things to do in the area um you know new ideas for basically anything to enhance the guest trip to booth bay we want to talk about it we want to produce content for it and we want to put in our newsletters on our blog posts that go on our website fantastic well who's who's producing all this content it's a joint effort so we have a company that we work with we actually pay our company that handles our website we pay them to do our newsletters as well it's efficient because they own well they don't own the the the custom the guest list but you know we provide them access to it so they could easily distribute that monthly newsletter and automate all the follow-ups. So myself and essentially a couple people on their staff are producing the newsletter each month.

Michael Russell 34:53

I see you have a guest list that you send newsletters to you've got a website that's killer I looked at your website it's really well done but you mentioned advertising so where are you advertising?

Ryan Edwards 35:04

So the biggest thing is Google ads right and and you know the strategy that you know I have and I take is everything is through Google ads. So whereas if you rely on the on OTAs you are you are going to pay a ton of money right in com in commission rates and fees and things like that. Now you you have access to a wider audience of course because that's what they're for um but you give up a lot in terms of revenue. So my idea is just divert as much of your available funds for marketing solely towards Google ads because I believe and I've seen this, I've seen the results of it it has the biggest bang for your buck, right? When you focus on a strategy of optimizing keywords and search terms that are specific to your property that will draw in someone who's Googling, you know, let's say a hotel in your specific area or something that's relevant to your property, right? It increases your odds of getting their attention being placed on the top, you know, nearest to the top of the page. And also having a strong website helps you with that optimization, right? So all the content that's being posted, all those links that go to your website furthermore help you know optimize or maximize the ad dollars you're spending on Google. So what I do is there's a different company I pay every month that helps me with the optimization of Google. And you know I am I wasn't any sort of expert in Google or AdWords beforehand, but I think for a reasonable amount, which is about $500 a month, right? So $6,000 annually, you know, they help handle all of the advertising that we do. And that alone I believe is the reason why we've reached the hundred percent OT. We were able to basically stop you know any sort of outside you know source of um of lead lead referrals or bookings well let me clarify there.

Michael Russell 36:57

So you pay an agency to handle your advertising on Google but does that $500 a month or $6,000 a year does that include ad spend or are you paying Google on top of the marketing agency?

Ryan Edwards 37:13

Yeah paying Google on top of the of the marketing agency and so it's around about about $600 a month right it's about six it kind of fluctuates right but in that range and so about a thousand dollars a month you know total and and uh and that you know we've been successful because again you're in a market that has strong demand already and you're trying to differentiate yourselves. So you know guest reviews are paramount because if you have low guest reviews even if someone sees you they probably won't butt with you. So having strong guest reviews plus you know focusing on the optimization of those keywords that Google uses for their algorithm and relying on an outside party if you're not an expert in it, the return on those marketing dollars is insane. You know it's so what's your top line revenue? Um $700,000.

Michael Russell 38:07

Okay so if you take $13 grand right which is the combined amount of ad spend and agency $13 grand divided by you said $700,000? Yeah. Okay. So it's about two percent right so the average OTA is going to charge 15 to 20% so it's costing you two percent to generate your revenue in marketing because that's essentially what an OTA is it's a marketing experience exactly it's a market 2% versus about an average of 18%. So it's a significant you know uh better ratio to the way you've described this. Now I will preference this and it or I will caution that this is really reliant on areas that have high demand for specific search terms. You mentioned early on that one of the things that attracted you to Maine was there was already pent up demand. People already want to go there. If you're trying to do this method and you don't necessarily have a ton of preexisting demand, you you may want to reevaluate that. But from what you've just described right here, it seems like an obvious choice like this is the better method.

Ryan Edwards 39:09

It's an obvious it's definitely an obvious choice. I've actually um I've played around with increasing the Google budget and and decreasing it to kind of see what you know what it might do. There's definitely a point of diminishing returns right because if you go you know we we do have a strong occupancy so at a certain point you don't need more advertising right I mean it sounds like it's a great problem it's not a problem it's a it's a great thing right that you don't need more advertising after a certain threshold of dollars. So we found that number to be pretty accurate or I found that you know six seven hundred dollars a month to be pretty strong in supporting a 90% occupancy. That's about that's about what we're at for season.

Michael Russell 39:52

Yeah and what's nice is you can you can pull that lever you can turn it on or turn it off right so if your trend Where your occupancy is really high and you maybe don't want to advertise as much, you can cut your ad spin if you want. And you know, we have a love-hate relationship with OTAs. I mean, we got to be grateful because they do bring in a lot of traffic for us, but I sure as heck would want to save, you know, 15% in marketing expense and not have to use them if possible.

Ryan Edwards 40:16

Yeah, yeah, absolutely. You know, the the other thing that I do a lot of with marketing, obviously, is do look at where our guests come from, right? So understanding who comes to Booth Bay, who comes at to our property and why is really important. So one thing I do, which is very easy, is I talk to guests. I ask as many guests as possible, why'd you come to Booth Bay? Where are you from? Right. Like, you know, what drew you to come here? And also what did you like or not like about our property? So things like I do real-time live reviews. And, you know, they don't help our Google score if they give it to me live, but they help me in terms of marketing. And what I typically do with that information is I compare it to our guest records. I have all state zip codes of where people come from and I'll look for insights in that data. I'll look for insights. I'll use, you know, the chat GPTs and different AI tools to tell me, you know, tell me something interesting about 8,000 guests we've had over the past few years. And if I wanted to create a newsletter, you know, to help drive occupancy in the month of August, what type of content should I produce for these guests based on, you know, what you could see with how many guests come from what state? And you know, that gives me ideas a little bit.

unknown 41:28

Yeah.

Michael Russell 41:29

So you're saying you're using AI to be more efficient with how you're marketing towards your guests. And, you know, you do in-person surveys, you're talking to people, and that's great, but that that's very manual. How are you automating this in a sense where you're gathering data? Like what data are you uploading into Chat GPT to determine these demographics and this other information you're using?

Ryan Edwards 41:50

Yeah, there's you there's there's several very important and valuable metrics that that I can easily find within our within our reservation engine. So typically what I'll look for is number of nights stag, right? That that a guest will stay. I'll look, you know, we assign a customer ID to every customer in our CRM, right? Just kind of like a unique identifier. And so, you know, you could look at all the unique identifiers and you could say, oh, and I I filter by the past three years, let's say, of stays. And I'll say, you know, of everyone in the past three years, tell me where the most guests came from in terms of state. So now you have a geographic piece of data, right? And then you have a number, which is volume. So X amount of guests came from, you know, Georgia's a big state for us, and it's in the south, right? And so, you know, you might want to say, you might want to ask Chat GPT, you know, here's a little bit about my property, and you don't need to prompt it much, you just give it the name. Here's my property, or here's my occupancy rates at this time of year, like let's say August or September, where things start to slightly dip where we are, and say if I want to maintain the highest level of occupancy or to drive more occupancy based on where my guests are coming from in Georgia versus, you know, Colorado, what type of newsletter might entice a guest from Georgia to, you know, book a three-night stay in Maine at this time of year? And then I could use guest emails that have not stayed with us in a while, and I could write more specific content to them really quickly. So you're not just writing one general newsletter to send out to everybody who comes from everywhere, right? People in Georgia care more about certain things than people in Colorado or people thinking, like you write a newsletter that says, like, are you sitting there sweating in the heat?

Michael Russell 43:37

Time to cool off, come up to the sea breezes of Maine, right?

Ryan Edwards 43:41

Yeah, yeah, absolutely. Or, you know, some sort of we don't do a ton of pricing promotion, but there are times of the year that, you know, like your shoulder season, right? Where occupancy is a little bit lower than the peak, that you know, you have more inventory. So you can play around with it. You could say, hey, you know, here's a three-night minimum or three night offer for a discounted rate, but it's a minimum stay. You have to stay three nights, you'll get a discounted rate. And then you can only target people who you know typically would come during that time of year. That's the key thing that AI would help me figure out is of all these guests, right? You know, what type of offer should I make to who? And it's not a very drawn-out, elaborate, you know, data science exercise. It's just putting in a few metrics into a question and then asking, asking the engine to write you something or to answer that question for you, right?

Michael Russell 44:29

And I imagine this principle applies for your targeted advertising with Google ads as well, right? Maybe your agency is handling this, but the idea is you're gonna market to the the regions in which you have the highest amount of clientele. So if someone's doing a search, you want to target the folks based on where they're geographically located.

Ryan Edwards 44:48

There's absolutely an opportunity to do that. Yes. There's a many ways you can target your ad spending around Google. What about dynamic pricing? Are you using that at all? I experiment with it again at different times of the season, right? So I believe I don't need to during peak times because we're pretty confident to charge full amount. Yeah, flat flat rates. And so I do a lot in May. I've I've been leveraging the dynamic pricing or like yield management, you know, which is you know, which is essentially kind of dynamically coming up with the price based on the occupancy and the market trends of of where you are. So we do a lot, I do a lot of that in uh mid-May and the end of October as well.

Michael Russell 45:29

Okay, cool. Well, let's transition to this then seasonality. So, this to me is the most kind of scary uh uh factor of investing in a region like Maine, where the idea of a resort shutting down, there's so much to this that I guess I would have to process. Namely revenue, projecting revenue, understanding like if you're underwriting a deal and you haven't operated in a market like that, you don't have experience, like how you could really understand what to expect. Maybe you can look at the historical data from the seller, but it's not always accurate. And then there's staffing. What do you do with your staff? So let's dig into this. Can you touch upon the challenges and opportunities potentially of purchasing a hotel that that has seasonality like yours?

Ryan Edwards 46:15

Yeah, staffing might be the hardest thing in terms of running running the uh property. So we have during I have one full-time employee or general manager that excuse me, I pay for I pay an annual salary to. And the reason for that, and that's not extremely common, I would say, with uh where we are, but the reason for that is because I need her to stay, right? You know, I want I need her to want to come back. So it's an incentive. You're getting paid in the off season while you're not working, right? But during the season, you're working tremendously hard. And so, you know, it's it's a reward. And you know, I I also come up with different retention types of bonus ideas and incentives, right? For my for the general manager. Um, we also have two local staff members, and we have another local staff member who helps serve breakfast every morning, right? And so those are our three the GM, our afternoon manager, and our server are our three local employees. The housekeeping is the more difficult part because, as in with many seasonal types of properties, you know, the ability to it's very difficult to find local labor, right? And so, because of that, the US allows a visa program, a temporary visa program to find labor from outside of the US, from different countries. And um you could submit for a certain number of visas. And in our case, we need about three housekeepers for the summer season. And so, you know, we pay a different agency, staffing agency, to help us with the visa process. And so, for example, last year we brought three workers from Jamaica and we used our staff house to uh to house them. If you don't have housing uh that you own, they could find housing in other, you know, places with their own housing within the area. You obviously pay them, you know, and you and you advertise, you put a job posting out in the off season and they're able to apply. Uh, you're able to interview, right? But you do have to absorb the cost of going through the visa process, paying an agency if you need to to help you navigate that process. And you also are responsible for their transportation to and you know, to and from the country that they uh are from. And so, you know, we chose to do that because we could not find local labor for for housekeeping, it's very difficult.

Michael Russell 48:36

And is there a condition with this program where you can only hire someone if like you've just you've just described that you can't fill a position, you know, with someone locally?

Ryan Edwards 48:48

Is that how it works? You have to advertise locally. So we uh we do, right? I mean, I advertise all year. And um, but if you yeah, you you do have to add for a certain amount of time, you have to show that you've advertised for that job for a certain amount of time. Yes. Um, what type of visa program is this? It's the one that we utilize is the H2B. H2B Visa. And you said it's constantly. So what does something like that run? Yeah. Um about five. So, you know, the the application fees themselves that all go to the government, it's about five thousand dollars a year. Wow. Yeah, isn't that over applicant? No, that's that's for the that's per job posting. So fortunately, we're only posting for one job posting housekeeper, but that's per, so if you have multiple, if you need some different type of role to fill, that's five thousand dollars roughly per. We also pay probably another three to four thousand dollars just in cost between the staffing agency. Um, and the staffing agency really helps the whole paper process. It's extremely you're sending applications and form back and forth between yourself and the department of labor. Um, and it's it's a long, lengthy, complicated process that many employers choose to use a staffing agency to help them navigate, and we do the same thing, and uh, we probably wouldn't be able to do it easily without them. It's a complicated process and it's expensive. But for us, it was worth it because we need the housekeepers. Well, and is this what the previous owner was doing as well? Previous owners did a combination of the H2B and also what's something called a J1B worker, which is okay, not necessarily uh based on visas, but it's essentially foreign exchange, more college students that are coming to the US for the summer, and a US student would be going overseas. So they did a combination of the J1B workers and the H2B workers as well. And really those acronyms are just the visa names.

Michael Russell 50:48

Yeah. No, this is fascinating stuff. And this kind of unveils a little bit of, but it does also make me think, goodness gracious, that is a lot of that, those are a lot of moving parts, and that's a lot of a lot of work each year to maintain that. Um, and I assume that most of the comparable, you know, most of your competitors in that market, most of the hotels are doing the same thing, right?

Ryan Edwards 51:07

They're hiring seasonal workers the same way. That they have to rely on it because of the shortage of labor for for those types of jobs.

Michael Russell 51:15

Well, that's really interesting. Okay, well, we could do a whole podcast, I think, specifically just on staffing, but uh maybe we'll have you on again and we'll dig into this a little bit more. But before uh we head out, Ryan, is there anything else that you think that you would want to share with someone that is wanting to get started investing in hospitality, hotels, boutique, boutique hotels, otherwise experiential lodging, anything that you can share that would be beneficial for someone who is starting out?

Ryan Edwards 51:39

Yeah, absolutely, Michael. So, you know, we touched it, we touched upon the guest experience, but I'll go back to that. So the guest experience is really everything, um, in my opinion, in terms of getting repeat guests, right? Because your repeat guests are your most profitable guest. You don't have to advertise anywhere to you know bring them back to your property, right? They want to come back, they spread reviews themselves to their friends and they're invaluable. And the only way you could attract a repeat guest is by making their experience as enjoyable as possible. So definitely making a guest happy and enjoying their time with you any possible way you can, even when a problem arises, right? Just going above and beyond to try to fix it for them, you know, people appreciate the littlest of attention. And so the guest experience is the one thing I'll leave you with, which is critical to success in anything. Yeah, we do.

Michael Russell 52:32

Well, Ryan, this has been great. I love your passion for this. And I can tell that, you know, if your goal is to go and do big things, um, I'm gonna definitely stay in touch with you because I want to follow along and watch your journey. If our listeners want to stay in touch, where can they how can they um stay in touch with you?

Ryan Edwards 52:46

Yeah, I think the easiest way is our Instagram is the Five Gables In. So F-I-V-E Gables, right? G-A-B-L-E-S-I-N-N. Five Gables in uh Instagram. You know, I'm pretty active on there, and you could find the rest of our contact information on Instagram too.

Michael Russell 53:01

We'll put that in the the show notes so that they can link and see your Instagram page. But Ryan, thanks so much for being on the show. Listeners, appreciate you. Thanks so much for listening, and we'll catch you next time. Aloha.