From CEO of Days Inn to Launching Marriott’s Autograph Collection | Richard Kessler E47

Few people have left a mark on hospitality like Richard Kessler.

He started his hospitality career by helping scale Days Inn into a household name as the early CEO

Then he founded the Kessler Collection, one of the leading boutique hotel portfolios in the U.S., which ultimately helped launch Marriott’s Autograph Collection.

In this episode, Richard shares the biggest lessons from his 50-year career, including:

 • How to lead through downturns and find opportunity in distress
 • Why reputation as an operator attracts financing and partners
 • The role of vision, teamwork, and conviction in building lasting brands
 • Why his mother’s advice, “Don’t take the elevator, take the stairs”, shaped his approach to success

This is a rare chance to learn directly from one of hospitality’s true icons.

About Richard

Richard C. Kessler is a visionary hotelier and entrepreneur with more than 50 years of experience in hospitality, best known as Chairman and CEO of The Kessler Collection. He previously served as President and Chairman of Days Inns of America and later pioneered the boutique luxury movement, restoring historic properties like Casa Monica Resort, The Mansion on Forsyth Park, and Savannah’s Plant Riverside District. Kessler co-launched Marriott’s Autograph Collection, becoming its largest U.S. franchise operator, and remains deeply involved in the design and development of each property. Beyond hospitality, he is a committed philanthropist, supporting faith-based initiatives, education, and the arts through scholarships, cultural collections, and community projects.

Connect with Richard

LinkedIn: Richard Kessler - Chairman and CEO at The Kessler Collection | LinkedIn

Website: The Kessler Collection

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Transcript

Michael Russell 0:00

What if you could unlock the secrets from one of hospitality's true icons? At only 23 years old, Richard Kessler helped launch Days In, working as Cecil Day's right-hand man before rising to president, CEO, and chairman. He went on to create the Kessler Collection, a boutique portfolio so distinctive it helped launch Marriott's autograph collection. And his crowning achievement, the $370 million Plant Riverside Project in Savannah, an awe-inspiring transformation of a derelict power plant into a world-class destination that redefined an entire city's riverfront. In this powerful conversation, Richard draws on 50 years of experience to share the mindset that carried him through downturns, setbacks, and massive bets, and how vision and grit can transform challenges into growth. This is a rare chance to learn from a legend. Let's dive in. Mr. Richard Kessler has built a remarkable 50-year career that started with co-founding The Days In, and he has later played a pivotal role in launching the Marriott's autograph collection and ultimately created some of the finest independent luxury hotels and restaurants in the world through the Kessler Collection. Mr. Kessler, it is truly an honor to have you with us today. Richard is funny. Oh, thanks. All right. Richard, great. I mean, you're, I think you're you're close to 80 years old here. So you've accumulated this lifetime of experience and perspective. And we can't possibly cover it all in one conversation. But what we'd love to do is tap into your wisdom, to pivotal decisions that have shaped your journey, maybe some projects that you're most proud of, and maybe even the lessons or regrets that stand out along the way. So we're thrilled to have you here. Richard, welcome to the Hotel Investor Playbook. Let's dive in. Thank you.

Nathan St Cyr 2:34

We've been looking forward to this moment, Mr. Kessler, for quite some time. Ever since we we saw your name pop up that you were going to join us, we've been counting down the days and the hours. So we're excited to have you on. And just anytime you we can tap into the amount of wisdom that someone through your experience has had. It's just it's a real blessing for us and for our listeners. So I'm excited for the show today.

Michael Russell 3:00

Let's go back in time. I I'd like to know. So you founded the Days In at just 23 years old, if I'm not mistaken. And gosh, in my mind, that's just unheard of. I mean, looking back now, what do you remember most about those early days? And maybe what were some of the key decisions or turning points that that really shaped the trajectory of your career?

Richard Kessler 3:22

Well, first of all, let me start back earlier than when I was 23. I grew up in a small town and my father was in construction. And so I grew up in construction, building things, doing things. And I went to Georgia Tech in engineering and received a bachelor's and master's degree in engineering. I never planned to be an engineer, but the reason I took it is that my counselor was asking me where I would want to go to college, and I said, Well, what's the most difficult school in the state of Georgia? And they said, Georgia Tech. I said, Well, that's where I want to go. So that's just saying is that I'm always interested in taking difficult routes to things. Others I've seen have been very successful in taking easy roads, but for some reason I've always kind of said, Well, I'm going to take the road less traveled, let's say. So, and there are always bumps in the road that's less traveled. So that took me into when I finished school then, I knew I wanted to have my own business one day, and I wanted to do something in development. And I thought about what people had done over the years to be successful financially so that they were able to do other things with the resources they had made. And when you look into it, developers in real estate has been an industry where people have done extremely well. So that motivated me also to want to be a real estate developer. So when I graduated from Georgia Tech, I took two weeks off and went to work with a guy named Cecil Day. I had interviewed a number of companies and I had about 10, 11 offers with large companies, banks and investment houses, et cetera, and big real estate companies. But I didn't want to go down that road of big companies that didn't interest me because I wanted one day to start my own. So that led to meeting Cecil Day, and that led to joining him as his right hand to build real estate and build developments, et cetera. So right after I joined him, he had was selling his apartments he had built over the years. Then he was trying to decide what he wanted to do next. So he takes the trip, goes to California, uh sees this concept called Motel 6, comes back and writes something up, says Daisons of America, and it talks about a budget luxury hotel, and it was written on a yellow piece of pad paper. And he came out of the office that morning and said, Let's get together and talk about what I left on your desk. I said, Sure. And he said, Did you read it? I said, certainly. And he said, Well, do you think we can do it? I said, Certainly. Why not? Yes, we can. That started the journey. And he said, Well, okay, go down the hall and grab these other four other people that used to run my apartments, and let's all get together and talk about it. So we had his construction man in the room. We had one of his key operators in the apartment business in the room. A gentleman, an older gentleman, was in the food business, was in the room, and I was in the room with Cecil. And we talked about it for quite a while, and finally Cecil said, Well, it's time for us all to vote to see what we're going to do here. Are we going to do this or not? And so we started the vote, and he said, and the questions started arising out of it. We've never built a hotel. We don't know anything about operating hotels. I mean, just a few practical questions like that, hey, but then finally, uh, so Cecil said, Richard, you know all these numbers that I've run, and you understand numbers. So why don't you stay here and convince these other two guys to vote for this? And I'll go to the Burger King and get you a Burger King hamburger, and I'll be back, and then we'll vote. So that's exactly what happened. I stayed behind, and a couple of the guys stayed behind that wanted more help taking through this, and so I helped them think through it, and they came back and said, Okay, it's time to vote. Well, we voted, and everybody voted for yes, except one person, and that person said, I'm not for it, I'm not against it. I just don't understand how we can do this right now. And so that was enough vote to go forward. So that was the way we launched the program, and my role was to head up the development side of it. And I said, I can handle it. And so he got one of his real, he had a real estate company called Dale Realty of Atlanta, of Georgia, I think it was. And he sent out a realtor to start looking for locations up and down the other state. And so that led one thing to the other. I headed up the development program. I was building numerous ones at simultaneously when I was 23, 24, 25 years old. And I had about, I think, 17 projects going at one time. At that point, I was traveling through Orlando and I saw the expansion that was beginning to happen. And this was 1972 when I first noticed it and spent time there. And I came back after traveling and looking at all our projects that were in the construction and said, Cecil, if we're in the real estate business, we've got to open an office in Orlando because that place is going to boom. And he says, Okay, when would you like to go? I said, Me? I said, Look, I've got 17, 18 projects under construction. And he said, Well, you've got a team you built, and half of these are in Florida, where you go, you would be in Florida. So why don't you just keep these under your wing, you complete all those out, and help the other guy that says they need help for the other 17, the rest of the team, and then you start this company and let's start developing more hotels. So that led to a big step for me where he and I were partners, and I was 25 years old and working away, and we started building immediately and buying hotels. But the old embargo hit along that time, and that really changed things because it really put days ends and a very big financial crunch. It it reduced traveling, it really caused a lot of complications. Out of that complication came opportunities, honestly, for me. And that the rest of the team that was operating threw up the hands and they basically said, we can't meet the rents, Richard, that we owe you and the development company. And I said, Well, if you can't pay the rents, hand me the keys, I'll take it over and I'll deal with it. And I said, It's not gonna get better, it's gonna get worse. And sure enough, it did. I mean, the travel slowed down even more as the embargo hit and played a big role. I don't know if you know about what happened. This listen, before your days.

Michael Russell 10:22

We we've read about it.

Richard Kessler 10:24

You heard about it, you read about it, right? Well, I'll tell you, it was not a fun town time. But anyway, so overnight they handed me the keys to, I don't know how many rooms, 4,000 rooms, something number like that, that we were leasing today's in at the time. And so I had 4,000 or so hotel rooms, I had restaurants, I had gasoline operations on the interstate, I had gift shops, all of that. So I had all that overnight. I had to quickly put the team together and deal with it. Well, actually, I had started a little an operating team just to do respites already. And so I just morphed that into this. So that became my initial team, and then I quickly built onto it and started hiring other key people that I needed. I went back to some of my Georgia Tech graduate friends that was in engineering, hired them to help me. I met a man named Tom Prince, who he and I became very close friends. He was selling stock in Orlando at the time, but he grew up in the hotel business with his father. And he said, I heard all about Day Zen. And I said, Well, come on, come help me and help me, let's do a lot of building and add more hotel rooms to Orlando. So that was a big step during that period of my life from 72 to 75. And it was a big period. Well, by seven, by the time of 75 hit, that's when the bar embargo was a problem. So then came to Orlando and asked that I come back to come back to Atlanta and take over all of Day's Ends. And so I did. And so from then on, from 75 then until 84 when we sold the company, my job was to fix the operating company first, because it had lost four million dollars before the year I got there, and we had to quickly turn it around. We had five properties that were on construction loans that had to get placed because the banks were putting a lot of pressure on getting these construction loans taken out. So I found myself in dealing with those two issues, big issues, and the third one was the franchisees were getting restless because they were not making any money out of the restaurants. So the food program. So, and that was a big income for the company, 3% royalties on all the food, which was a lot of money at that time. So a franchise came to see me one day, a group of them, about five from the same company, the largest franchisee we had. And this was my first exposure deep into franchising. And they said, Well, it's Castle, we came to see you and to tell you that Monday morning we're going to take down all the restaurant signs, and so we're not gonna be paying any more fees on restaurants. And I said, Really? And I said, Monday, they come in with a sign removal? He said, Yeah. I said, Well, tell them while they're there, take down the days in sign too. They said, No, no, no, we don't want to do that. No, no, we don't want to do that. I said, Well, that's the choice. You take down all of them, you take down none of them. But I will give you a caveat. The caveat is give me 12 months to fix the food program. I just need 12 months. And if I haven't fixed it so that you can make money and the system can make money out of the food business, come back to see me and we'll talk. And they finally said, Okay, we'll give you 12 months. I said, All right. So sure enough, I then quickly pulled a team of people together and got the hands deep into the food business at that time. And where we uh actually rebuilt the whole food business for days ends. And we did it. We turned it around, and less than 12 months we had restaurants that were profitable, and everybody was smiling again, and there was no more conversation about taking down signs. Anyway, so that's when you you learn to deal with adversity, and and in that time, all I needed, I needed some time to fix it. I knew I could fix it, had confidence I could. So I had the time. I had 12 months to turn everything around. And so we turned a $4 million loss around to a half million dollar profit the next year, and then we started compounding earnings over 20% a year for every year thereafter, for the nine years then that I ran the company. And I ran it, and then I became about 12 months after I came in as president, and then I came in as C and CEO. 12 months after that I became also chairman, CEO. So I I ran it, built a really good organization, and it was run like a Swiss clock. It was everything about what we did was highly engineered, let's say, so that it worked. And I think back on it and you look back and say, well, what made that possible? Well, one thing is that you have to think beyond limits. Don't think about limits. Think about possibilities and plan for possibilities. And the other and when you do that, it requires a team also. You can't do it by yourself. You can give the leadership, which is necessary, but it also takes people that buy into the vision, buys into the excitement of what you're planning to do. And so I was able to do that. I was able to encourage people and get them fired up about it, get franchisees fired up about it, what they could do, and that started really expanding further our program. And then we were still building for our own for our use also. Started setting up other companies. Uh set up the one in South Carolina and put a person that was a member of the company. He was actually one of my first cousins, put him in charge of it to build a company over in South Carolina where we developed a number of properties. We set up another company up in Richmond, Virginia, which we developed that Richmond and up to Washington, D.C. area. Set up another company in Denver, Colorado. So I wanted to start developing in Mid-America, which really hadn't been done before. And then I set up another company during that time. I was running it in California, in Sacramento, California, and we started developing up and down the coast of California. And so the part of the strategy was to really make a national company out of this. And to do that, I wanted growth more than just on the East Coast. I wanted to have a plant of some flags in the central part of America. In addition to that, earlier there had been a company set up by Cecil and another gentleman in Dallas, but frankly, it didn't go too well for them. And so I ended up inheriting it and then fixing it and then expanding also in the Texas area through that company. But with all these companies, all of a sudden, we were really making great progress because in every region we were building new hotels for company purposes. It also opened up the franchising opportunity even greater to a national program. So we were not only known on the East Coast, all of a sudden, the name had made it to California. So that's really some things I learned along the way is that you need to think without limits. Then it takes a clear vision, then it takes a great team of people that are excited about what they wanted to do and about and having the energy to do it. It takes energy to do all this. And it and but we had a great time and we made a lot of friends along the way, and it was really a growth experience through the Days In program. And we sold a company and then I retired for 30 days and decided to, I was going to start my own company doing some other things. I was burned out with hotels there for a short period of time. And then later I decided, I did some other big expansive things. I built a 1,000-acre international industrial park and commercial park and uh north of Atlanta. That came out real well and successful. I did a 500-acre plan unit development in my home area, home county of FM County, just north of Savannah. I started a chain of banks, Federally Sharded Banks, which was a challenge. And particularly when we got into the period, I think it was '89, that was that really bad recession we went through. Banking wasn't fun during that period. And the other thing about the banking I didn't like so much is that I saw it getting more and more controlled. You didn't have the freedom to really run the business. I felt it was getting just too containerized and too, too unexciting. So after building and starting 10 federally charted banks around the United States from east to west coast, I decided it was time to get out when I saw it getting more and more controlled. So I've been over a period of about a year and a half sold out all of my bank interest and sold the banks. I'd started a bank management company too, and I had a 20% part, and I sold them the balance of what I had, my 80% to them, because they love the banking, and I didn't, I was not enchanted with it anymore. And so I sold that out. So then a number of years later, I said, you know, what I want to return to is what I one thing I'd started in days in, and that is building a boutique hotel. So I built my first boutique hotel. That would have been in 1982, 83, 82, 83, is I built the first boutique hotel. In Savannah called the Mulberry Inn. And it was very successful immediately. And I knew I was on to something. And I didn't associate it with Days Inn at all because it was a different price point. It was more, it's what we would call an autograph property today. And then right after that, I built another boutique hotel in Orlando, right across from the convention center. And uh it was also very successful immediately. And but when we sold the company, all that went with the company with days ends. But I remembered how successful it was, and I really enjoyed doing those because it required creativity. It was doing a level of product I really enjoyed doing. And so I said, that's really what I want to do now. So that's when I started building what we call, I call grand theme hotels, and later converted it to uh the Kessler Collection. And so that's what they're known as today. And that's what we do today is we do high-end boutique, unique properties that in every market we're in, we're generally the leader in that market. Leader in rate and leader in occupancy, repar, et cetera, in those markets. And we've done that, it's been very successful, and I enjoy it. We have 11 properties total now, and we're going to be doing more. We're getting ramped up. We're doing some changes right now to position ourselves to grow faster than we have over the last three two or three years. So we're going to start out next year on a new envisioned program to speed up our whole development and expansion. So, Mr.

Nathan St Cyr 21:37

Kessler, I I want I want to dig more into what you're doing right now because it's really, really exciting. But I there was a lot to unpack with what you just gave us that were, from my eyes, absolute gold. And so I I want to make sure to go back to a few points that that you just shared with us that I feel are we look for, and when you have extraordinary people, we want to dig in and find out well, what's the differentiators? Like what are the differentiators about them that lead to a different trajectory than someone else? And so I wrote down a few of those as you were going through your story. And I want to go back to the very first one, which I was like, whoa, what just happened? So your decision to go to Georgia Tech when you didn't want to become an engineer, but you asked the question of what's the most difficult college in Georgia? What's the most difficult path? That was something that that's a that's a mindset decision that had nothing to do with anything else other than this mindset that's obviously impacted your trajectory. Where did that come from? That's just me.

Richard Kessler 22:48

I don't know how to say anything else. Yeah, it's just distinctively me. That's my personality. You know, I grew up working. My dad was a very hard worker, and I learned that from him. He taught me how to work. And you don't stop until you get everything done correctly, and no matter how mundane the activity may be, but you do it perfectly. And so by doing a lot of things, small things perfectly, you can achieve something. And that's something I learned from working with him. When I went to Georgia Tech, I learned how to think creatively. I had a professor named Cecil Johnson, and he was, I mean, he was not out of the books. He was a one-of-a-kind professor and a per an individual. And he really taught me how to think, you might say, out of the box. I hate to use that phrase, but it's true, it's out of out of normal thinking, you might say. And so I give him the credit of teaching me how to think. And then later I gave Cecil Day credit in teaching me how to develop and how to get things financed. I watched him do that. And so I learned by just observing. He was really not a good teacher, honestly. But he what he was, he was good at what he did. He was a great salesman, and he knew how to make things happen. And so watching him, I learned. So those things came along. Now, what made me want to do the most difficult thing, I think has to just to do with challenge. I I suppose I like challenge. I don't like things that are easy. I like things that are more complicated.

Nathan St Cyr 24:26

Yeah, and I think that that's rare. I think it's rare that typically our nature is let's find the, especially in today's world, I just see it constantly. What's the easiest and fastest way to do something, the path of least resistance? So that innate ability in you was is really inspiring. Every time you got to one of these pivotal moments where there was a big thing occurring in a challenge, and you were being pressed to step up in a new way. There were three or four different trajectory points. Each time you said, so I had to put a team together. And then later on you identified that that leadership is important, but as much team and the people are important. So anytime there was a challenge, it seemed like you'd go in and put together and lead the right team. How did you identify who was right to go and carry out ultimately what you needed to execute it? That's a very good question.

Richard Kessler 25:18

But it's really the secret sauce, and I don't even know the recipe myself. But I will tell you this what I look for. I look for people that are givers, not takers by nature. If you find people that have a giving personality, you can really work well with them and you can do things that with no limits in a sense, if you have givers. But if you have people that say, what's in it for me, and that's really their focus, that's not pleasant to work with. And it doesn't really work out well in a team situation. So you want givers. That's number one. Number two, you want people that are generally happy, not people that are down in the dumps or depressed or negative. It's just no place for that. You can't go forward with that. So you've got to have happy people, people that are satisfied with them themselves and says, okay, I'm with you. I like I got the vision, and let's go do it together. That's what you need. You it's it's just necessary, really.

Nathan St Cyr 26:21

Hey guys, if you're excited about investing in hospitality but still have a few question marks in your mind, you're not alone. Maybe you understand the potential, but you're not quite ready to take down your own deal yet. Look, earlier in our journey, both Mike and I invested passively alongside seasoned operators, which gave us a behind-the-scenes view and showed us the playbook while our money worked for us. That's what we offer our capital partners a chance to be a part of real deals, see how they come together, and start building the confidence to do in yourself without carrying all that risk on your first go. If you'd like to know what that might look like for you, click the link in the show notes. Now let's get back to it.

Michael Russell 26:58

Can we dive into that a little bit, the the vision? Because here you gave us this arc of your career. And it all just seems like one thing led to another. But what I'm curious is when you started, did you have at 23 years old, when you're getting your start right out of Georgia Tech, did you have a big vision from the beginning that you were going to build something iconic and lasting and this huge company? Or were you just simply focused on like the step right in front of you at that time?

Richard Kessler 27:27

Well, actually, when I was a teenager, when I was in high school, I started thinking about what I wanted to do in life. And I got it down to three things that I thought were important. One is, believe it or not, I'm an active Lutheran and I grew up in a church that was built in 1734 in Georgia. Uh these were Salzburger immigrants that came over. So the first thing that I thought about is that, okay, the church needs great creatures. And should I become a Lutheran pastor? Because that was important to me. The whole theological aspect was very interesting to me. The second option was, do I want to go into music? I love music. And I thought about that quite a bit and said, Well, you know, the problem with that is that I'm okay at music because I've started when I was in second grade with piano and like most of us do, and then I was in the band and chorus and all those kind of things. And I really enjoyed music, but I said, I could really never, probably never make a good living out of that. And I said, Well, the third one is what I'm what I feel like I have a talent in is recognizing talent in people and potential in things. And so with this idea of recognizing talent and potential in things and opportunities, that really is speaks to real estate. And then said I said, you know, if I would do real estate and if I'm really good at what I think I could be good at, I could make enough money to do the other two things too. I could then do things in music, I could do things in for the church and in theological education, because I'd have resources to do it. So therefore, it's obvious then what I should do. And that's how I decided really to get into real estate development. Right.

Michael Russell 29:24

And so with that in mind, when you're starting out, it's look, you're you're a leader of people and you're clearly a visionary. Did in your mind, did you have that vision at the start of your career that if you look at where you are now, if you were to go back in time to when you were starting out, would you have ever imagined where you'd be right now at that time?

Richard Kessler 29:45

Yeah, I mean, I felt confident I could achieve the goals. And so, what goals did I want to set if I would set it, no matter how difficult it's going to be, it can't be more difficult than Georgia Tech.

Michael Russell 29:57

Let's dig into that difficulty a little bit because Nathan touched upon this. And clearly you're not afraid of a challenge. And one thing that really stands out to me is you keep building even during difficult times. Other people are ready to hang it up. The oil embargo hits. So many of these hotels are distressed and and going out of business, but you decide, you know what, I'm gonna press forward and we're gonna, we're gonna be successful no matter what. I'm curious though, in that moment, how are you able to finance these development opportunities when capital is tight? What lessons can today's investors take away from that approach?

Richard Kessler 30:32

Well, it was really interesting. I was in Orlando at the time when that bar logo was so bad, and I had just before I took over all of Day Zens, this was like in this would have been in 71 through 73, let's say, that period when it was really, really bad. What happened before, if when it started, the banks, if your banker wouldn't even invite you for a cup of coffee anymore. And so because you were in the real estate business, because you're in the hotel business, that even was worse. So you were an outcast for about two or three, two or three years to the banking community. But what happened is that banks during that same period started foreclosing on properties, hotel properties, and they would call me then and say, Richard, would you come down now, have a cup of coffee with us and talk about this property? We're willing to deliver to you. We'll finance 100% of it, and you take it over and make it a day's end or whatever you want to do with it, because you're good operators. Can you do that? And I said, Sure. And that's how we grew during that period of time. One gentleman called us up. He had just built a brand new property on I-4, just south of what is now the Millennium Mall, and in that area. He said, I built it for my son, and my son is now finished. My son had wants nothing to do with it, and so I will uh let you have it for my cost. Back then it was six thousand dollars a room. That won't even pay the taxes now or the permit fees. But it was a brand new property, and he said, I'm in banking, I'll finance it for you, and you just pick it up and go with it. And so we had opportunities like that. There were two brand new holiday inns on the beach, high rises, they were like 10 stories uh on the south part of Daytona Beach. I forgot how I got those actually. I think it was a bank ended up with them, and they called me and I took it over and took the holiday inside off, made them days ins, and within three months we had them profitable. And so that's how it grew during that period. Another thing we did, it was a uh financing program through the federal government uh where you could uh you could bond a project. And so, anyway, we worked with some of the government programs that was out there, and we that worked for a number of projects we did. So it was just piecing it together and just showing the lenders that that you could operate, you can operate profitably. So we had a very good reputation in that way, and that opened the doors, still do some financing, but you'd also do other unique things like I was speaking of uh during that period also.

Nathan St Cyr 33:19

Well, I want to connect a dot here, a couple of dots here, that was as you were describing this. So you said, well, the banks would call me down and have that conversation with me because I was an exceptional operator. And I was thinking back to your start and how you credited the impact that your father had on you on doing mundane things perfectly. And here you are, this leader of people, and and to get them to rally around the idea of doing mundane things perfectly is really this the essence of operating consistently. And the fact that then that led you to the reputation that you created, the differentiator. Again, we look for what are things that differentiate people. And the fact that the banks would call you down because of your exceptional operations, I think is a point that's really missed today, to put the focus into being excited to rally around doing things exceptionally well at every level. And that's really impressive. And as a father, as a dad, I'm thinking back that you gave this credit to your dad of that that's one of the things that he taught you and you learned from. And now to see what you've built out of that. I don't know. As a as a father, that that means something to me. And that brings me to my next question. I I read somewhere that I believe bringing your grandson into the business. And can you just share a little bit about that and and what that means to you? Sure.

Richard Kessler 34:57

First of all, I had dinner with him last night. We had a steak cookout here at the house, and they were playing in the swimming pool. We had a great time last night. They finally left at about, I don't know, 10 30 or so. I said, I've got to go to bed. It's a long day. So they're going to actually move to France for a year, which I'm I have mixed feelings about. Uh, and they're gonna live there and uh go to a French school and and really enjoy the international experience. And we did that, I did that with our children when they were 13, 10, and 14 years old, also, and that was a really wonderful experience. So my daughter remembered that, and so she said, Well, we go, I'm gonna do the same thing with my boys. And so we have three boys, two twins, and they are 15 now, Oliver and Morgan, and then and then we have the young one, he's one year uh younger and 14, and uh Arden, totally different personalities. All of them great, great kids, totally different. Morgan is gonna be the moneyman. He was renting out his toys to his brothers when he was four or five years old, so that that's Morgan, and he has a great eye aesthetica, very, very good aesthetica. And that's one talent somehow inherited some of that, and certainly he has it. I said, What are you gonna do when you get to France and get set up? He said, I'm gonna start a car cleaning business. I said, What do you mean? He said, Well, my my brothers noticed when they came to see the school recently in France, they saw these very expensive cars out in the parking lot. He said, We saw that as opportunity. And so I'm going to be doing cleaning these very expensive cars. And I know how to do that. So he's already gone and bought all his materials he needed for this business. He's already packed it up, and he'll be leaving in about four days to France, and he's gonna start his business. And then Zeth Morgan, and I've got him thinking about another business while he's there too, that I think he would he could do. The second one is Oliver. Oliver loves cooking, and he's I mean, this this kid is unbelievable. He'll get up at six o'clock in the morning and get up, fix breakfast for everybody, create new best recipes, or he'll go down in the basement and build things. He's very talented. He was the top steward in their private school here. The younger one, he's an absolute character. He is Mr. Personality and very smart kid. And he says, I'm gonna decide I'm gonna be a neurosurgeon. Well, I'm a little disappointed about that, to the point that I wanted him to be head of real estate and acquisition because he could do that really well. And uh, and then the other two can run the company. Uh Oliver would be head of operations because he's a fabulous cook and he loves it. Wow. So that's the boys. Hopefully, I can get at least two of them back into the business. With two of them, I can we can make it happen. But even one of them would be certainly uh possible. So love it. Absolutely love it. Yeah.

Michael Russell 38:10

That's awesome. I love that the the backstory there. To this point, you've talked a lot about the origins of your your uh your career, but I want to fast forward to 2010 because you played a pivotal role in helping launch Marriott's autograph collection. And I want to know how did that partnership come about and what have you learned from it?

Richard Kessler 38:30

Well, I was in the office one day and uh I get a call from uh the gentleman from how from Marriott said, We'd like to come by and talk to you. I said, Sure, go on by. Well, all of my properties at the time, which had about nine at the time, even, and uh they came by to talk to me and we had a nice chat, and they were all independents, and we were doing extremely well in every market we were in. We were at we were the we had the we're the ref bar leader in every market. And uh they said, look, we've decided we want to build a company, uh a kind of a collection of properties that would be uh high-end but very eclectic. And we've looked around the U.S. and we like your properties the best of all that we've seen. And they said, what we'd like to do is we would like to bring them in and and let us use those to launch a new program. They didn't even have a name for it yet, but uh of individual unique properties. And I said, look, I think it's a great idea, and I've thought about it myself, and uh, but I really don't want to do that. I don't need to because we're number one in all the markets already. So they went away, and about, I don't know, a month later they came back again. And they said, have you thought about it? And I said, Well, not really, because I've decided that's just not what I want to do. So they talked, tried to convince me. Then, sure enough, about a month later, they called me up and they said, We want to meet with you one more time. I said, All right. Sure, come. So they came to see me one more time and they said, We're gonna make you a deal you can't refuse. I said, Really? I said, Okay, I'd like to hear a deal I can't refuse from Marion. And before it's over, they made me a deal I couldn't refuse. I said, All right. Under these terms, I would accept and we will we will launch, I'll launch the program for you. And so they came down and did a big video of me in the Grand Bohemian in Orlando and talking about why, as an independent operator, I thought there were some advantages to this collection idea. And so for the first 12 months, people thought I owned it because they were calling the office wanting to franchise it. And I say, you call the wrong number, you need to call Marriott. So that's what happened, and that's how it started. And I think today we're still the largest operator of uh autograph collection, I think, in the U.S. There's a couple others getting pretty close to us now, or maybe even as large as we are. But it's been good. It's been a good relationship with Marriott. I've enjoyed it. It has its downsides to it, and it has its upsides. And we've tried to uh obviously look at it in a positive way, and uh, we won a lot of awards that they gave. Matter of fact, one of our properties, the Greenville Hotel, just named their top property in the in their system, the best new development in this system. It is a beautiful, gorgeous property. It's built to look like a 1920s uh American lodge, something you'd see up in Canada or North and northern part of America. And it's uh right on the river in a park. And this has waterfalls on two sides of you. It's beautiful. People love it. It's running high occupancies already, and it's in very strong rates.

Michael Russell 41:54

How do you decide when it makes more sense to build from scratch, from the ground up, versus remodeling or repositioning an existing property? And what are the trade-offs that you're weighing weighing out in terms of cost and financing, and then of course long-term, long-term value?

Richard Kessler 42:10

Very good question. And it goes back to the question you asked earlier about how do you finance? Well, what's happened, if you look at what's happened in the last two years, and pretty incredible impact on the development community. And that is when interest rates go from 4% to 8% to 9% to 10%, that is a that is a lethal blow to development. In addition to that, at the same time, you've had major increases in labor cost, and that's a big one. So you've got labor and material has gone up significantly. Some products have doubled in cost. So all of a sudden, you we've gone from building a four and a half star property, unique property, say for at $650,000 a key. Now all of a sudden it's a million and a million two, and one of them we priced out, we'd planned to do was a million four a key. $1,400 per key? A million four per key. And when I say per key, if you take the total cost of the development, land cost, building cost, all the cost involved in it, divided by the number of keys, it's it's already pushing through a million a key. Wow. Whereas before, I mean, 600 a key was a big number. And 650 a key was a big number. In today's market, I do not think anybody can do the quality of development that we do for less than I'd say 800 a key would be the minimum that I could believe could be done. And but the two deals that we had, we actually owned the land, already had them approved, et cetera, architecture done. It takes a year and a half to get that much done. And that year and a half, it's just got the markets got more and more difficult in interest cost and product costs, building costs. So that leads me to the answer. And the answer is what you do is you go out and you buy hotels that have the bones, they say, or the ability to be renovated and made into a four and a half star Grand Bohemian hotel. Well, they're not they're not on every corner, but they are a number of properties out there like that. And we've been shown some, and we're pursuing two right now already that we can do. And we can buy them it in the way it works is you buy a product like that off of a cap rate. So they say, okay, this product, this uh project is making, say, an 8% return or is selling at an eight cap rate. And uh so you that determines the price per key. Well, a lot of these markets, and given the concept that was used by that particular hotel, had had not been too successful. They've been successful, but not real successful. And we think we can come into the market and take that and make it a very successful, making it into a true brand bohemian hotel in markets that we think are have a real future to it. So that's what we're doing. So we're buying for uh much less, and I think I think by the time we finish these two we're working on right now, we'll be in it for about three, probably about $350 a key, which is a third of what it costs to start all over. So I think this is the way to go now. This is the only path that I see. Almost impossible to start and build something a four-star brand new. Three-star, uh, three-star products, you can still make those work fairly well. Not great, but fairly well, even with these other problems. But uh, but you get into the four-star plus where you get into serious architecture, spending a lot of time designing, year and a year, year and a half designing a project, and then you got to work through the financing of it. That's gonna take six months or maybe even longer. Uh, so it's a couple years, many times, before you even get put a shovel in the ground. And then you're looking at two years to build it, sometime more. So you get four years minimum to do before you even get one time of income back out of it. So, with this other plan, we can be in business in somewhere around six to twelve months, depending on the property.

Michael Russell 46:26

Yeah, that makes a lot of sense. Now, obviously, we're not going out and building $400 million resorts, okay? But the same principle applies even on our level. We're lining up some deals now where we're looking at properties. For example, we're about to go uh visit a location in Montana where we're analyzing this opportunity because we're looking at replacement cost and we're looking at the acquisition cost, and the acquisition cost is 40% less than replacement cost. And so we just we have this natural like, okay, we think, well, the answer seems obvious. If you can buy at such a discount from a replacement cost over time, one would assume that it's only gonna, it's gonna have to go up in value. And so that that shapes our investment perspective. And I'm I'm just kind of curious, although we're not completely remodeling these into luxury properties, do you feel like how much weight would you put into evaluating that part of the equation into your investment analysis at whatever level, whatever scale, but we're looking at more of the mid-scale economy style hotel motels, maybe even a days in? Okay. We're looking at beyond just measuring current income and cap rate financials for evaluating value. We're also looking at replacement cost. And that's just intuitively playing a role in our decision factor where we're balancing all of this. I'm just curious to get your perspective from an investor, a very successful investor's perspective, how much does that weigh in when you're making a decision on whether or not to pull the trigger? How much does replacement cost and acquisition cost play into that equation for you?

Richard Kessler 48:01

Well, I think it, again, I think it really defines possibility. I mean, today, if you go to build a million dollar key property, you you better be darn sure you you can get some serious rates, five, six, seven hundred dollar average rates to support such an investment. Whereas if you can buy right a solid, a good location and a building that has some character that we could take and personalize it, you might say, and make it into a castle property. Uh, and I can do that for $350 a key, even $400 a key, it's still half of what what it would be. And I can be in business in six to twelve months, not in four years. And so when you look at all of that, this it's the thing to do. Yeah, it seems like an open. It's really the it's the only practical pathway right now to developing developing a lot of properties.

Michael Russell 49:02

I I really want to touch upon this plant riverside property. I just, it's so incredible. And I'm sure you get asked about it all the time. You're probably sick of talking about it, but it really is remarkable. And can we just dig into a little bit about what gave you the conviction to take on a project of this scale? I'm sure many people looked at it and no one probably saw the same vision that you had. I mean, most people would probably say, well, what you've done is impossible. But how do you take a coal plant, a coal plant, like a power plant, and transform that into this luxury destination, this cultural hub? How do you do that?

Richard Kessler 49:39

It takes a hell of a lot of work, first of all. But when I bought that property, if you walked inside, there were big holes through the brick walls that they had put pipe through in the past. There was lead paint everywhere. There was uh a waterfall in the basement where the water was literally coming through the walls down below, and it sounded like a literally like a waterfall. It was thousands of gallons, and it was running out of a big pike that they had going to the river. I mean, it was all the huge windows had to all be taken out and totally rebuilt. I mean, it was it was everything. And then you had to, then you we took out thousands of tons of steel where steel was in the wrong place for our development plan. So we had to take out thousands of tons and put thousands of tons of new steel back in to make it work. But one thing that helped us there and and made it possible, frankly, was the investment tax credits. Through investment tax credits, it was a that was a big number. So everything, every all the dollars you spend on it, you get a tax credit, a state and a federal tax credit. And through those, that was a big, important sliver, let's say, of the equity that went into the deal. So that was really, really important. And actually, it was a pretty sophisticated financing I put together. Ted, the head of lending for Wealth Fargo said, Richard, I have to take the hat off to you. He said, uh, I've seen a lot of financings over these years, but I've never seen one so complex and so innovative is what you did. And it was, it was, you had to draw a map of how we financed it because you had investment tax credits, you had people buying those, you had lenders buying those. About one time we, I think we had four or five lenders in the project with different competing objectives, you might say, and you had to satisfy five at one time. And I mean, it was a complex mess. And uh, but we worked through it. He actually told me uh the head, one of the head guys of Marriott, uh, the lawyer, he said, Richard, he says, uh, I told him what I was working with, and he said, Richard, you'll never get a loan close with them. That was just a start. And but yes, we got the loan close with them, but then it got to be so complex when we got into putting together all the equity we had to have because we had we had to raise uh one way or the other, we had to have about 50% equity in a roughly at the time $350 million project. And uh and and if and if I look back on it and if I tell you the truth about what we ended up with, I think I figured one time when I finished this financing that I did and how I put it together, I think I ended up with less than a million dollars of my cash. Wow. Nobody would believe that, and I hardly believed it.

Michael Russell 52:48

That's incredible. I mean, you said that this is a complicated uh capital stack was super complicated. But what I'm hearing you say is on the one side, you had a mixture of lenders that a combination of lenders, and on the other side you had equity, but you had to raise the equity if you didn't put in uh a significant amount of your own equity. Where did the equity come from? Are these like family offices, private individuals? Where's the money coming from?

Richard Kessler 53:14

Uh I had a few family friends, you might say, or just friends that put some equity in it with us. But when I started, when I started and really got it fully do it going, I owned 80% of it. I had only sold off 20% of equity in the deal. And uh I kept it that way until we had a little problem. And the little problem was I went out to the site one day and uh we had to rebuild, I wanted to reclaim all my land that was in the Savannah River. So in the whole uh the bulkhead that was built was a long time ago, was rusty, had to come out anyway. So we had to rebuild the whole waterfront. So I said, okay, I go with the city and said, look, I'm gonna straighten this line out. So you own some of this, I own some of this, we're gonna straighten it out, and I'm gonna build this new wall. And they and they said, okay, so we traded, everybody's happy. So we build this wall of uh 1,100 feet long, concrete and steel. The steel was sheep, went down 70 feet into the earth, and uh they drive it down, and then they had a big concrete beam, the four feet by four feet across the top of it, that steel, all the way 1,100 feet to hold it all together. Well, somebody made a miscalculation and engineered them. And when I went out there to look at it, they were just finishing that because that was a big important mark to finish that because we can backfill and then really push forward with the construction. I went out and I saw a big crack in the top of it. I said, What's this crack? He said, Well, I don't know, but it's nothing important. He said, I'm gonna call the engineers out, they'll look at it. I can patch it up, it's not a problem. I said, I don't know, it bothers me. I can't figure out what why it would do that. And so he called me about two days later and said, Oh my God, we got a problem. Well, it turned out, it turned out that crack started showing up up and down the whole uh 1,100 feet. So guess what? We had to then tear out a beam four by four feet of concrete, 1,100 feet long, and stabilize the wall so it wouldn't roll into the Savannah River while we were doing it. And it took, we had it stopped the project basically for six months. Couldn't do anything along the river, nothing. Wow. And then in addition to that, my chief administrative officer had had uh negotiated the all the insurance, and we had we put a five million dollars of insurance on the engineers. Well, guess what? When it came time to call them and say we got a major problem with the engineers, but the problem is bigger than five million dollars, it turned out they only had three million dollars left in their policy, and I had a $25 million problem. My gosh. Wow, so how'd you get out of that? I had to solve a $25 million. That that would that would create a consternation, and so uh so I had to solve it. And the three engineering groups got together and took six months to figure out how to redesign the bulkhead and rebuild it, and all that, and then the subcontractors turned in timesheets for all the time they were losing, and all that ended up costing, like you say, 25, cost me $25 million, and I had about three million dollars of insurance, as it turned out. Oh brutal. So then what I did is I had to sell my a lot of my interest, uh-huh, which I still own 40% today, I think it is. But I sold 40% of half of my interest to get immediately get $25 million to cover all these problems. Wow, so you had to take a bit of a haircut there. A big haircut. But anyway, we got it done. And in a sense, I'm still in control of it and still control it. It's my project, I own 40%. You can't take it to the grave anyway, so what does it really matter if it it's doing what it's supposed to do? And it is. And it was it was to help the community and really create something special for Savannah. It's really defined the whole uh hospitality industry in Savannah. And I think most people that know Savannah and know it would agree with that. They tell me that.

Michael Russell 58:01

Yeah, it's gorgeous. I can't help but just as you're describing this story, I'm picturing sitting at a casino table with a pile of chips and placing a bet, and then I get back a slightly larger style of chips, and as the night goes on, my chips keep getting a little bit bigger and a little bit bigger, and there's this little bit of turmoil because you're going, wow, I'm winning. But each time you go and bet, now the bets are getting a little bit bigger and a little bit bigger. So you're winning more and you're winning more, but the risk of losing has significantly more consequences. And I wrestle with this to a much smaller degree than a $400 million project with $25 million losses here and there. But you know, I think back like when I bought uh one of the homes that really kind of catapulted me to relative financial freedom was a big bet. You know, in my my world, it was a big bet. It was this is before things went crazy, but it was a $1.6 million home. And I that is more money than I could ever imagine. And I remember just like wrestling with this at night because I kept writing down on a piece of paper, like back in the napkin math, what the investment would look like and what it would return. And I'd write it. Sometimes I'd wake up in the middle of the night and I'd write it down again. And then I'd wake up in the morning and I'd stare at it and be like, nope, it's still there. The numbers are still there. This is this makes sense. But the fact is, I had to just gather the courage to put my chips in. I put that money in, I bought a, I bought it this to me, it's a crazy expensive home. And it's been the best bet I've ever made. It it set me onto a path to financial freedom. And now the home's worth twice as much and everything, whatever. I get to live to tell the story. But I can tell you, it is not easy to place these bets. And what I'm witnessing or listening, and what I'm reconciling here with what you're saying, is that process. It doesn't matter where you're at. It still exists, whether you're placing small bets or bigger bets, as you grow, you continue to have to re-ante up and just place bigger bets. And I'm just really impressed with how you've been able to just continue to progress and grow and place bigger bets, but do it calculated. You've always had to a degree either a backup plan or the confidence to know that whatever struggle you encounter, you'll work through it. You don't seem like a man that takes no for an answer very easily. And so I don't know. This has just been an inspirational conversation. Uh it's not every day that we get to meet someone who's placing bets at your scale, but it is relatable. I'm going to speak for myself here, but I'm inspired because I know, like, although the bets are bigger and the moves you're making up are more complicated, it's still directionally speaking, going in the same path. I don't know in my lifetime if I'm going to reach the level of career success that you've obtained, but I know that I want to be able to one day sit down and speak with my grandchildren and be able to communicate to them about what I have done and feel proud of what I've done. And I think that you're living that life right now when I'm close to 80 years old. I hope to at very least be able to have the uh accumulated knowledge to be able to pass it on to the next generation. And I appreciate you taking the time out of your busy schedule and your busy day to share some of these moments with us. It's really been a privilege.

Richard Kessler 1:01:31

Well, thank you. Thank you. Oh, my pleasure. And uh what I didn't tell you about my grandsons, uh, this summer, believe it or not, uh Morgan, uh Morgan worked in the uh maintenance department detailing runes. And and he they said he was one of the fastest one they had on the team that could detail a room out, put it back in perfect condition faster than anyone they had. But that's that's Morgan. He's the financial guy. The other one was Oliver, he's in the bakery. You remember he's the cook. He's the chef. He's in the bakery making desserts, having a great time. When they started out, he told me today, he said, when he he told me last night, he said, Dad, granddad, when I started, he said, they said, these are things you cannot do because you're of your figure 15 years old, and we can't let you do it. He said, after watching me for a while, they let me do anything, and I was doing everything. And he said, I said, Did you have a good time? He said, Yeah, I loved it. Had a great time, I learned a lot. And then you had Arden, he was the um, he was a receptionist for the pizza restaurant. He that's great because he's wonderful with people. He had a good time. So so all three had had their experiences. Right all. So I'd encourage you to take your sons and get them involved in whatever you're doing and watch them grow.

Michael Russell 1:02:58

Absolutely. Uh Nathan, you got any other uh questions before we land this bad boy?

Nathan St Cyr 1:03:04

No, I'm I'm really inspired. And just, I mean, from a really simple perspective for me, just the reminder to really keep believing in myself and betting on myself, knowing that that level of conviction of how when you got your start, that was that original conviction. Going the tough route and knowing who you were, believing who you who you were. Seeing what that ended up accomplishing, to me, that's uh yeah, I'm I'm excited after this conversation.

Richard Kessler 1:03:38

I'll tell you one final little story. Well, thank you. Thank you. I'm glad. I'll tell you one final little story. My mother got married when she was 17, 18 years old to my father, and uh, and she went to a little small country school, and but she was a valedictorian. She was a good student, very good student, and she was a valedictorian and she wrote the valedictorian speech. And in her papers, I found her valedictorian speech. Now, this is from a girl that whose father was a sharecropper who grew up in a wood frame house in the country and went to a small country school, and she writes writes the speech. I found the speech, and what the key line in it, it said, in life, don't take the elevator, take the stairs. Don't take the elevator, take it slow, take the stairs. And uh it was a beautiful speech she wrote, and uh I still have it. We framed it and we built a a learning center out at the retreat center, a Christian family retreat center, and we named it for her, the Mildred Kessler Retreat Center uh learning center. And we took a picture of her at when she was very young, and we took her speech and we put it up for everybody to read, the kids to read when you come in, because I think it's a real simple, clean, straightforward thought about life. And uh I was very impressed. I go back occasionally and read it myself to be inspired. So many people today want to take the elevator, the fast, quick way to the top. But she said, take your time and take the stairs. I love that.

Michael Russell 1:05:25

That's a great quote to end this episode on wow, this is there's a lot to unpack here. I'm gonna re-listen to this one multiple times. This is yeah, this has been a great time. This is another episode of the Hotel Investor Playbook. We are Mike and Nate, and he is Mr. Richard Kessler. Thanks again for being on the show. We'll catch you again next week. Aloha.