What Makes a Hotel Succeed or Fail? | Naveed Khan E48

How do you turn a struggling hotel into a profitable asset?

This week on the Hotel Investor Playbook, we sit down with Naveed Khan, co-founder of London Rock Partners, a hotel management and advisory firm that oversees everything from branded hotels like Holiday Inn to boutique independents and even a 650-bed hostel in London.

In this episode, you’ll learn:

• Why the first step in turning around a hotel always starts with people, not P&Ls
• The advantages (and risks) of branded vs. independent hotels for investors
• How management companies can become a true partner in value creation
• Why tech and automation are reshaping hospitality operations
• Tactical advice for first-time hotel investors on keeping it simple

If you want to understand how the right management partnership can transform your hotel investment, this episode is a must-listen.

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About Naveed

Naveed Khan is the Chief Operating Officer of London Rock Partners, a leading hospitality asset and hotel management firm based in the UK. With a career spanning revenue management, commercial strategy, and full-scale hotel operations, he has led both branded and boutique properties through transformation and growth. Naveed is known for his people-first leadership, tech-driven operational strategies, and ability to maximize asset performance for owners and investors. His journey from revenue manager to COO reflects both resilience and a deep commitment to reshaping the future of hospitality.

Connect with Naveed

Website: https://www.londonrockpartners.com/

LinkedIn: https://www.linkedin.com/in/naveed-khan-580ba179/

Instagram: https://www.instagram.com/londonrockpartners/

Connect with Michael on Instagram or LinkedIn.

Email Us at info@hotelinvestorplaybook.com

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Transcript

Michael Russell: 0:03

Welcome to the Hotel Investor Playbook, your guide to building wealth and freedom through boutique hotel ownership, hosted by Mike and Nate.

unknown: 0:12

Get in the game.

Michael Russell: 0:26

On this podcast, we talk story about everything you need to know to make money investing in hotels and in hospitality assets. And on today's episode, we are pleased to introduce Naveed Khan, who is the co-founder of London Rock Partners. We're excited to talk with you because you've built an impressive management company. And what we've noticed is that you're focusing not just on managing hotels, but you're turning them around and building value along the way. And so what really stood out to us in preparing for this interview is for one, how diverse your portfolio is. You're managing everything from branded assets like the Holiday Inn to boutique independence like the Winchester Royale to a massive, what is it, 650-bed hostel in in London, which let we can relate to hostels. So having you on the show, this is very timely for us. We're identifying properties and we're trying to determine whether we'll go independent, whether we'll operate them as branded or flagged. And of course, how do we incorporate a management company to partner with us? I want to get your story, your journey. I know that you started your company after having years of experience working for another hotel property management company. And then the global pandemic hit, and you're like, you know what? This might seem like a good time to go my own way, which is ballsy, and that took a bit of courage. But I want to know how has all of your previous experience led you to co-found London Rock Park?

Naveed Khan: 1:59

Perfect. Hey guys, good to be here. Introduction-wise, we we we we are a hotel management firm. We specialize in in hotel operation, and we've been trading in the UK for the last four and a half years. We started the business during COVID. And the business was started with by myself and a business partner of mine. And we both used to work for an asset management firm in in London. During COVID, a lot of people went through a time of reflection in terms of what's ahead, what's your career journey ahead. And we decided to take a massive leap of faith and decided to do it for ourselves. And a lot of people said to us, look, it won't work. You're taking a big risk, it's a big gamble. Why would you do it? People are losing their jobs, companies are not investing. And and we thought that was a good opportunity and it was the right time to do it because everything was on the floor and the only way you could go was up. So we started our business about four and a half years ago. And our business model is based on people. And running hotels, especially if you have a very challenging economic climate, can be really hard. So but if you have a good location, you have a good hotel, a good a good brand, a good set of people that you're working with, you you generally have a good chance that you can make it work. And and uh that was the principle and the ethos, and that's what we started with. And and our journey is not just about managing hotels. We we help, if you're an investor coming in, we we take you from a life cycle of here's a piece of land, can I build a hotel? So we start with a feasibility of if it's going to be a hotel, how many bedrooms is it going to be? Is it going to be a brand? We we can help speak to the banks, to the valuation, and then we take you through opening of the hotel, and then we run a hotel. So that's what we do as a business.

Nathan St Cyr: 4:03

When you had this vision, what gave you the courage to say, okay, hotels are being built on people, but I believe that we will differentiate because what? What is that differentiator?

Naveed Khan: 4:15

Nathan, the big, big differentiator is whether if you're coming into work feeling, are you empowered to make a decision? Do you enjoy coming to work? Do you look forward to coming to work every day? And I think you can, I think I'm sure all of us have been there where you work with a lot of organizations where you're just a number. But in hotels, we deal with guests on a daily basis, on an hourly basis. And you have to have the right attitude, the right mindset, and the right organization. Because if you are feeling happy, your guests are going to feel happy. And and I think having that mindset is important because if you're not, then you're not meant for hospitality. And how do we create teams is because look, you can have the best hotel in the world, but if you don't have a great team running that hotel, no matter whatever you do, whatever investment you make, you'll fail because the people that are driving the business are not invested in it. That could be paying people slightly above average. It could be you provide the best meals on duty, you could provide the best uniform, you could give the best parental or maternal leaves, the best holiday package, working from home flexibility. There's a lot of things you can do as an organization, which we do, which a lot of people think it should happen, but it doesn't happen, but we actually do it. And that's why it's about making it a good place to work rather than you're just coming into a hotel to work, do a reception shift or work in a restaurant, serve drinks. So for us is having a good place to work for the employees because if they're happy, the guests are going to be happy. That's what we believe in. Yeah, yeah.

Michael Russell: 5:51

So you want to be the employer of choice. And I want to unpack this a little bit because when I think about what goes into providing that level of service, it's it's focus, right? If you're managing a holiday inn and you're managing a hostel, those are two very different guest avatars. And you only have so much bandwidth, right? Like your focus can only be concentrated in so many areas. And I'm curious when you take on all these different types of asset styles, property styles, whether it's independent, flag, hostel, you name it. Like what's the connective thread that makes a property a good fit for your portfolio?

Naveed Khan: 6:32

I think the the the the collective thread is is I guess from our point of view, is is always been hospitality. You are in the business of being hospitable. And it's whether you are running a hostel or you're running a holiday or you're running a Hilton, your the key thing, the common threat is is being hospitable. And and that's what drives drives our businesses. If you're a backpacker, what you want is a great night's sleep, right? You want a safe environment, and you want to be looked after when you as soon as you check in and you've got all the right facilities. If you're in a holiday, no you've a you're in a Hilton or you're in a marriage, you want exactly the same thing. You want a clean room, you want a good night's sleep, and and you want to you want great service. So service and being hospitable is the key element in all of this.

unknown: 7:25

Yep.

Michael Russell: 7:26

From our point of view. I hear that, but look, I want to I want to dive in a little bit more because especially with something like a hostel where you have an avatar, that yeah, they want a clean room, but really what they want, they want an experience. And the same thing could be said about an independent hotel that is maybe a little more upscale. Maybe they're looking for a little special service. And so when you are managing staff and you are placing people in different hotels and they have to have different training, a holiday inn is a, for the most part, a commodity style hotel. You could call it a box hotel. It's gonna provide comfort, cleanliness, convenience, but it's not necessarily gonna rock your world with the hospitality level of providing this world-class experience, similar to a hostel where you're gonna expect, I want to meet others, I want to socialize, I want to have game night, I want to have shared experiences. That's a very different experience of Halloween where people value privacy and being quiet and solitude. So when I think about like in my own world of us looking at going from managing hostels to managing an independent or a flagged hotel and hiring the right people and pouring into them with direction and being the employer of choice, it's just there's a very different outcome that we're trying to accomplish for each one of those assets. And so I'm having a hard time understanding well, how do you, other than just use the word, yeah, we provide great service, okay. What do you really do to be able to guide and provide direction for what the expectations are based on the unique or the individual property?

Naveed Khan: 8:59

I mean, it's entirely driven by you have different sort of ownership groups, right? You have, you have, you, you in the UK, you'll have high net worth individuals, you'll have private equity, you will have family offices. And I think like at the end of the day, everybody's working towards a common goal that we are going to make some money in hotels, right? And I think you're right to say hostels are very much about the communal feel, right? You have to have people coming in, can mix around with the same age group, they're having lunch together, dinner together, you're sleeping in a dormitory with 20 other people. But holiday in, yeah, it is a slightly different model, but uh it is still hospitality. I guess how we see it is slightly different, which is when you're dealing with different customer base. In a hotel, you're dealing with slightly mature guests. It could be corporates, it could be business travelers. Whereas when you're in a hostel, you're dealing with Gen Z, young travelers, 18 to 25, and expectations are different. It's how you manage expectations of different age groups across varied asset classes in hotels and hostels. I think look, it becomes challenging. Obviously, it does become challenging, and I don't say we get it right all the time, but and then this is the part of hospitality that it's actually fun that because you're dealing with so many different people of different cultures, different backgrounds. And a lot of what we do is in in London. London gets people from all over the world. So everyone's got different expectations. But coming back to Michael, where you said, the the point is the same. Everyone's looking for a good experience. And that's our job to do. That's what we do we try to provide.

Michael Russell: 10:35

I want to shift gears. When you take over a struggling hotel, what are some of the things like what are the first steps you take to assess and stabilize the business? What do you look at first? A PL, do you look at the staff, guest reviews, the systems? What's your process when you inherit a mess?

Naveed Khan: 10:51

I think Michael, you you you've mentioned most of the things. You should be running hotels with us because you you you seem to know the right things. But I I think for us the PL comes afterwards. I think for us it's more about understanding what is what what is the problem, right? And and nine out of time, nine out of ten times, usually it starts with people, right? Have you got the right people doing the right jobs? Profit and loss is is an easy anyone can analyze that, but it's it's having the right people makes the biggest difference. Because our first thing is we've got to make sure that have you got the right people in the business, and then we start going through the profit and loss and the structure of the building. Because you can do it the other way around, but then you can fix everything. But if you've not fixed the people, then you you'll continue to struggle. So our first step usually is getting the people right, getting the teams correct, and then start some leadership. Every hotel that we have has got a general manager, making sure that the general manager is aligned with our objectives. And Nick, I always say it, if you bring a hotel management company in, there's usually a problem, right? Because for some owners and for some banks and some financial institutions, we are usually the last resort because they've tried everything and everything's not worked. So okay, let's let's try with a hotel management company. So we go in knowing that there's something wrong here. But our first one is let's start with people because that you get that right, the rest follows. Yeah.

Michael Russell: 12:21

I saw that you were advertising for a position at the Holiday Inn on LinkedIn. So when you take over property and you say, look, this the existing management or manager is not the right fit for our culture and for our objectives. We need a new GM. In your experience, what's been the best way to find the right GM? What platform? Where do you recruit from?

Naveed Khan: 12:42

We're a team of about 15 individuals, and we all have got backgrounds in hospitality. We work for different organizations, and in and UK is not a very, it's not a massive country, right? And everybody knows everyone in this in hospitality. So there are some people that we would know from the past, somebody there'll be some people that we always have in our pocket, which we could deploy. And then the last one is that people that currently work with us, it's they could be a number two in a hotel, and that could be a natural step up for them for their career progression or for their development. And that that's the route sometimes we take. And I don't know, I'll give you an example of of myself when I started off in hotels answering phones, and I worked through the ranks, and I got to work my uh work through, and then got to the highest, and then started my own business. So I was given the opportunity, and I think a lot what we do is is develop within because that's easier, because that's that's the a culture you create that the company gives you or the organization gives you the opportunity to grow within your role. And so there's a lot of ways of recruiting, but we have recruited within a lot of times.

Michael Russell: 13:57

So I I want to acknowledge here that you're not the first property management person that we've had on our podcast. And what I've noticed in kind of reviewing and thinking about well, what what did I learn from that was as an individual, us as property owners, our network of potential employees is limited to us. But when you go and entertain the idea of hiring a property management company, well, not only does that property management company own or manage, I should say, a multitude of properties with lots of next people up type of positions in play. We've got minor leagues coming up to be able to position themselves so that they can go and then maybe take a higher management role because you've got all this staff in all these different positions. And maybe you move someone from one hotel where you're managing into another hotel that you're managing. So that in theory, that's a lot of value right there because you've already worked with someone, you've already had their experience with it.

Nathan St Cyr: 14:50

But Mike, I want to go to the other side of that because as I hear this, I'm like, I'm thinking about a man, as we're looking at our next direction and we're looking at interviewing management companies, I'm like, okay, we've built in our organization, we've created that, right? We created the minor leagues, we created the on deck, and then we've built them into our organization. Like everybody in our organ organization is at upward growth. So I look at the property management when I hear that and I go, oh crap. As we're building and caring for people as an ownership group, the property management company goes and plucks number two that we've been developing and puts them over in some other owner's portfolio. I go, oh, I don't like that feeling. I don't, you just you just talked about it as this big benefit. And I'm sitting here going, dude, we're gonna pour into our people. This is bullshit.

Michael Russell: 15:42

Well, you paint a very gloomy picture there, but I would hope that as an employer of choice that they would want to stay working with our staff. But you're right. It's something to consider.

Nathan St Cyr: 15:51

No, I'm saying they're the prop, they're the property management company, right? Navida's a property management company, and we're one of the ownership groups, but they work with many ownership groups. So they take our number two to another ownership group. That doesn't concern you.

Michael Russell: 16:07

No, I mean when you put it like that, but let's hear Nave, what's your explanation? What's your take on that?

Naveed Khan: 16:11

I think guys, it and Michael, you're right. That's a very gloomy way of looking at it, by the way. Because at the end of the day, I I guess you've got to remember you are talking about a certain individual, right? And and nothing happens by force, by the way. This is part of development because you develop people to an extent. And what they could do that same role for two years, four years. How long would you expect them to do that same role? Because eventually that person will need growth. And if they're not going to grow with you, they'll grow with somebody else, they'll leave you. So why not you retain the talent within the network rather than be able to join your competitors? So that's the view we take, right? It's it's not about plucking people from one ownership to another ownership. I think it's more about thinking of them as individuals and what would they want to do and what what is their career path. I think it comes down, and again, I I mention people a lot of time, because this is about people. This is not something that you force upon. So look, that's my view at least. But Nathan, you're also a very gloomy picture.

Michael Russell: 17:17

The other side of this equation, too, look. So yeah, you're right, both ways. You can look at it, it's it could be a positive and a negative, depending on your perspective. But the other aspect of property management, too, is the Rolodex within the network. You said, hey, in the UK, it's a very relatively speaking, small community of uh hospitality professionals. And so in our conversation with individuals that work at property management companies or run them, they're getting data and information, not just from their own properties, but from all of those in their network as well. And so, not only from a staffing perspective, but also from a data perspective, from interpreting potential opportunities to invest, a property manager brings to the table a level of experience and expertise that an individual might not have all on their own, or an individual investment group might not have all on their own. They get to piggyback on the collective intelligence of not just that property manager, but the Rolodex of other people in the industry that that property manager can call upon and say, hey, look, I don't have any properties in this state. Let's say if it's in Arizona or Texas, whatever, you're just like, you know what, I don't have properties there, but let me call my buddy who does and let me get some intel on this specific town. We say in your case, in the UK, it works the same way. For me, that resonates. That's a really valuable piece. It's timely because we're lining up some deals in a couple of different states currently. And we can do all our due diligence through CoStar and we could research online and we can use AI. But at the end of the day, I think leaning on the experience of a property manager and that property manager's Rolodex can be critical. Can you walk us through more of from the investment standpoint? I kind of want to move on into this category where if you were partnering with a principal or with an investment firm that's looking at acquiring a hotel, how do you help them in terms of deciphering whether it's going to be a good investment or not? And then from there, how do you determine whether it's going to be best fit as an independent soft brand or full brand?

Naveed Khan: 19:19

You always have to think that what would I do if this was my money, right? Then decision making becomes much easier, right? Because you get emotionally invested in it. So if you were an investor and you said, look, I want to open a hotel in the UK. And and mine would be that, look, if this is your first investment, let's go down a slightly lower risky route, which could just be a standard could be a Hampton by Hilton, or it could be just a Moxie, or it could just be something which is straightforward, two, three hundred rooms. You're not providing any food and beverage, or you, if you are providing, is fairly basic. You're taking a less risky. Route entry into the market, right? But if you are a seasoned investor and you said, look, I've got like hundred of hotels in the US and I'm looking to add more in the UK, then the route is slightly different. You could look at multi-facet properties where multi-use, and it could be you have hotel on the top, you could have commercial at the bottom, you could have some shops, retail, food and beverage outlets. They are complex operations that you but if you are a seasoned investor and you've dealt with this before, but if it's your first one, my advice usually is take a slightly lower risk route, which if that's what was my money, that's what I'd be doing. But then again, look at it, depends on individuals. And and location plays a key part, right? And everybody wants to have a hotel in London, right? Because I can, if I was the owner, I can tell my friends, mate, I've got a hotel in London. That's quite nice, right? Rather than saying I have a hotel somewhere in Manchester. But then in the UK, hotels is relatively a very good asset class, which gives you, can give you double-digit returns. But to get those double-digit returns, it's doing that due diligence that, okay, if I run it independent independently, what could my return be? And could I put a flag on it? Could I put a hilton or could I put a Marriott on it? And what would my return be? Because the brand would want it to a certain standard. It needs to have air conditioning, the bedrooms need to be done in a certain way. So it's measuring up how much you need to spend versus what your return is going to be. But my advice usually to investors is if you're coming in brand new into the market, take a slightly lower risk approach. Define lower risk. Lower risk is where you are running a hotel which is very much just a bedroom block. It could be like you have a hotel in central London and you have 700 rooms and it's all just bedrooms, right? And you're not running anything else. So the only thing you're focusing on is cleanliness of the room, right? The day-to-day operation, which is checking in, checking out, making sure the condition of the hotel is really good. And and you're managing your rates online. So it it is really keep keeping the operational model efficient and very simple and straightforward. So that is a less risky route rather than you having five restaurants, three swimming pools, leisure clubs, gyms. So that's what I mean.

Nathan St Cyr: 22:27

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 quite yet. Early in our journey, both Mike and I invested passively alongside seasoned operators, which gave us the behind-the-scenes view and showed us a 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 the risk on your first go. If you'd like to know what that might look like for you, just click on the link in the show notes. Now let's get back to it. Yeah. So amenities and different level of a different level level of hospitality opportunities that create the experience, create more risk. But what about let's use that exact same example? You have the 700 room, it's just a box, just the rooms, you're creating this experience, you're dynamically pricing rooms. Now, what's less risky? A branded hotel or an independent hotel?

Naveed Khan: 23:36

With a branded, one branded is is whether it's risk. It's more exposure, because what a brand brings to you is you can plug in into Marriott, for example, and what it brings to you is a database of millions and millions of people, where you know you could like you in the US or you're in Hawaii, you can you go onto Marriott, you search London, I come up. But if I was an independent, you probably would have to look for me somewhere, right? So I think it's the level of exposure that a brand gives you. But then look it a lot depends on on location also. If you're right in the middle of London, maybe you don't need a brand, right? But if you are slightly on the outskirts, then maybe you do need a flag, right? So it it it depends on location where you are, product, bedrooms. It's easier to sell a hundred rooms every day rather than selling a thousand rooms in a in a hotel every day. So but you have to evaluate case by case. So that that's what I mean. Yeah.

Michael Russell: 24:37

Our line of questioning is really it's because we're looking for some confirmation here in our own train of thought because we're lining up these hotels and we're looking like for a less risky investment. And obviously, that oftentimes means, like you said, you could look at London or you could look at Manchester. And I don't get the reference because I'm not as familiar with England, but I get the idea, right? There's one place that's going to be more popular and it's going to be higher priced and potentially could be a little bit more risky. So everybody would love the trophy property, but the problem is oftentimes the trophy properties don't pay the bills. And so when you look at these ugly ducklings that are out there that are passed over by people because they're not as glamorous or they're not something that you're necessarily like bragging about, like I own a hotel in Manchester, whatever, you know, whatever that means, maybe doesn't have as much effect as, oh, I've got one in downtown London, right? We have certain places here, obviously in the United States, that are going to be more of the trendy, or they're just digging it around it to say, oh, yeah, I've got a hotel there. And so we're taking a little bit of a contrarian perspective in that, like, okay, we're just really looking at value. And sometimes that leads us to these outskirts where we're going, hmm, the independent is not going to work here. And that's why we're digging into, okay, well, less risky. What are your thoughts on the brand versus going independent? And you're just, you're kind of confirming things that we've already we've come to these conclusions, but sometimes it's nice to hear from an expert say, Yeah, okay, we're on the right track.

Naveed Khan: 26:06

Yeah. No, no, Mike, 100%. I think because hotels, there are two kinds of segments in hotels. One is a you have a leisure segment and you have a business segment. If if you have a hotel on the outskirts and you if you don't have many demand drivers, then then it will be a problem, right? And what can help maybe is a flag because they give you that exposure, and people will probably travel further out because they want to collect points, or they want that because they would they know they will get a good experience. Or you could be next to a business park, or you could be next to a massive entertainment center. It really diff it really depends where you are. So, but a flag helps because it gives you that exposure. But if you are right in the epicenter of London or New York, I'm sure you can you probably can survive without a brand.

Michael Russell: 26:55

Yeah. So from an investor's perspective, one of the obstacles of feeling total comfort with a property management company is if you're not going with a branded or a flagged property and you're going independent, then some of that nuance, some of that specialty, some of that service, some of that uniqueness. The concern from an investor's perspective is well, can a property management company really provide that level of customization and service and uniqueness? Obviously, they can manage a brand or a flag one because there's an instruction booklet. Do it this way, follow the rules. This is the way we do it at every single spot. But when it comes to unique properties or independent ones, what's your approach for that as a property management company?

Naveed Khan: 27:35

I think, Mike, if you have an independent hotel, it's much more fun because you decide the culture, you decide the standards, you decide the day-to-day, you can actually decide what goes on the menu, you decide what goes on the breakfast, lunch, dinner, how does the lo room look like? You can personalize things according to where you are, which city you are. It I think being independent just gives you that flexibility that you can have your own brand or your own personality. And some people like that. And some people do it with the view that okay, I'll do my first and then I'll do my second, and then I'll probably build my own brand. But again, some people just want to feel secure, and some investors would say, no, look, from a valuation perspective or from a property appreciation, value appreciation point of view, I would want to have a brand because that's gonna help me with the bank, or that's gonna help with my funding. It really depends. The reason people love hotels is because you just can't open one type of hotel, you can open six to ten, twenty different types of hotels, and and it works because everyone's got a different view on it.

Nathan St Cyr: 28:40

Yeah, and I think that as you're kind of walking through this, and I'm thinking about us, is in this next step of our journey, we're now representing other people's money. And that changes the dynamic for for Mike and I. We built our brand name, our investment company is Malama, rooted in the Hawaiian word of to protect and to cultivate. And so that's like a core value for us. So I think that when we look at this next next set, we're looking at, okay, well, how can we protect our investors' money at the strongest level? And so as we're processing through this piece, although we may want to have fun and go create, look, we did that. We created the North America's best small hostel, like in three years after having no experience in it. So that was fun. And we got to put our spin on it and do our thing. But now we're it's when we bring in other people's capital, now we're it's it's changing the way that we look at things to give ourselves what we feel like is the best shot to to go and and execute the targeted returns that that we've underwritten to. And so I think that's some of the questioning about the the brands and the risk mitigation, and that's it's the driving force behind us, is that it's not just our capital, it is partnering with others' capital as well.

Naveed Khan: 30:00

I can't agree, Mo. If you take the approach that if this was my investment, what would I do? Decision becomes a bit more simpler. And and we we are not a massive organization, right? We're brand agnostic. And and and that helps with the decision making because our interest is our customer, which is our investor. And it it really what's fit what fits them and where they are in their journey of investing. And that this is come back to my earlier point that if it's your first one, we want to make it less risk because it's you you probably think we are risk adverse, but you want to take them through the journey where it's a bit fun to do it, and you want to get the first one right because it gives you if you do if you get your first one right, and I've worked with so many owners before, you get the first one right, they will do a second one, and they'll do a third one, and they'll do a fourth one. But if you get the first one wrong, they will probably invest somewhere else.

Michael Russell: 30:56

I'm curious, do you ever take an equity position yourselves, or are you guys just strictly advisory and management?

Naveed Khan: 31:01

Uh we I think given that we started four years ago, we have relatively young business. But if somebody was to ask that question today, which you have, it's we will look at it. I mean, we we we're not in a position to pump obviously millions of equity, but if that helps us with the whole deal process, then yeah, we will certainly look at it. But again, we have to be comfortable that we are advising and it's the right thing to do. Sometimes you have to put you have to put your the money where your mouth is, and it makes everything much easier, right? So yeah, we look at it. It depends.

Michael Russell: 31:37

Well, let's say someone brings you something, uh, an opportunity deal. What makes you say yes or what makes you walk away? Have you ever refused to take on a property and and manage it?

Naveed Khan: 31:47

We've refused loads over the last four years. Because look, and at the end of the day, we are we we are operators, and there is a certain amount of businesses we can fix. And there are some businesses that are just beyond repair. And it could be because if somebody's highly leveraged, given over the last four years, the interest rate climate is quite similar to where we are and where you are. People have seen that you can make profit, but if you aren't paying back your your debts, you you're still in a problem. That's that has become a challenge sometimes for us. And we have said no before. Or it's in a location where we think it's it's highly saturated. And look, there are too many hotels here. We have to be realistic before we sign a contract because we might sign a contract and six months later you would say, Okay, you promised us this, so where is it? And given its own business, we do want to be in that position. So so that's the point where we've refused business.

Michael Russell: 32:45

Yeah, and you manage some relatively large properties. What does it cost? What are the fees? That what's the range? What's the industry standard?

Naveed Khan: 32:52

I think Michael, it depends. A traditional hotel management company, and I say the word traditional, will charge a percentage of top-line sales, and it could be two to three percent, and it will charge a percentage of profit, which could be in the region from about six to ten percent, right? But that's a traditional setup. How we've done it in in some situations is that, and and Michael, that comes back to your earlier question. If we see a business which is really broken, two to three percent off top line and ten percent off profit, if you're making zero profit, ten percent of zero is still zero. So we don't make any money. So what we tend to do is we incentivize ourselves in a way that our fees in some cases have been 50% of the profit, right? Where we don't take anything from the side.

Michael Russell: 33:45

If you can get it.

Naveed Khan: 33:46

Yeah, exactly. Right. So we have the bandwidth and the depth in the team to say whether we can make this work or not. Because if we are the last resort, we can't make this work, then we're in the wrong trade, right? So for us, it's and we have structured some of our deals where we we say, okay, you know what, you're not making any money, that's fine. We're not gonna charge you anything. But as soon as we start making profit, 50%, and that's a profit share, we've had some, we have successfully signed some, and we have successfully made money from that because if you're an owner and you're not making any profit, 50% of nothing is nothing, right? You're not gonna pay me anything. But if suddenly I start generating profit, then you're better off anyway. So we we tend to do things differently, and and that is because it gives us the freedom, because it's our business, right? And we can make it work. So so we do tend to structure things slightly differently, where it's incentivized. Like it could be different in year one, it could be different in year two. We try not to follow the traditional model.

Nathan St Cyr: 34:50

Yeah, and that works well for an ownership group that's currently struggling in their situation, but obviously for a new owner that's coming in saying, Hey, we got this project, they're gonna be very different scenarios and it's gonna be attractive or not attractive based on the current situation of that ownership group.

Naveed Khan: 35:06

Yeah. Exactly. Yeah, and there's been some owners where we tend to be more heavily weighted towards the profit because that's where the incentive is, right? So if you make more profit, we get more fees. And that's what we try to do. But we we don't have, you know, that this is our fee, that's what you're gonna pay. We try to tailor made as per the requirements of our client. And this is why probably we've been successful over the last four and a half years and we're still in business, because we are quite tailor-made, quite bespoke in what we do. Yeah.

Michael Russell: 35:36

So there's a lot of ways to gain efficiency. One of those is tech. And I've heard you talk about tech being emphasizing the role of tech and streamlining operations. So I want to know what tools or systems are actually moving the needle for you?

Naveed Khan: 35:51

The single biggest cost in in any hotel is is staffing. And the second one is probably utilities, right? It's your electric bill or your gas bill, especially in where we are, the cost of utilities is quite high. And the cost of employing people is quite high also. So whilst we don't want to move away from the traditional model where you know you check in and there's no one at the desk, we also want to be a hospitality business. And where tech can help is through the customer journey, where we give you the option of you can check in on your phone, right? And you don't have to check in on the desk. So, and we encourage that. But if if somebody still wants to check in on the desk, we're still available. And it's taking a lot of, it's not just the front end, it's the back-end functions also. How can you automate those? And there's a lot of tech now available that you can actually automate a lot of your back-end, back up, back of house functions. And that could be related to answering emails or it could be picking up the phone now. So there's a lot of things that has evolved in hospitality over the years. And and look, and the second one is when it comes to, for example, utilities and your electric bill, how do you be more cost conscious or more aware that you're working towards a carbon neutral strategy where you're trying to offset your your energy against better purposes? So there's a lot you can do, but generally, hotels, hospitality is usually the last one to adapt to technology because this all costs money, right? And when you're running businesses which are on a daily cash flow basis, there are some owners who are really willing to do it. And but there'll be some that would just probably just want to wait till the end. So if you can demonstrate a good ROI, generally people are okay with it. But hospitality is usually the last one to say, okay, this is great tech, let's do it because of the cost.

Nathan St Cyr: 37:52

Can you give an example of that? Because I think a little bit of the opposite, like, oh man, that's a small cost for what you end up getting out of it.

Naveed Khan: 38:02

A simple example is look, you guys, I'm sure you guys travel and you guys still check in in hotels. How many hotels can you check in on your phone? Yeah, you you can probably, unless you're booking somewhere for like a Hilton or Marriott, there are very little hotels still around in the world which will give you the option to just have a customer journey which is completely based on this. They're still on a phone because people are still very slow in hospitality to adapt to it. And again, I think it comes down to cost.

Nathan St Cyr: 38:34

But what is the cost? What is the cost to that? So give an example of what's the cost to implement that level of technology.

Naveed Khan: 38:43

Yeah, look, a single biggest cost could be, and this is really basic from from our point of view, could be the door locks, right? Your door locks in some hotels and some traditional hotels could be based on a key, right? I've seen some hotels myself where they still use the traditional key and lock. And that could be some hotels which we have today, where you tap your key card and they're not compatible with your mobile phone. And if you have a hundred-bedroom hotel, a door lock is going to cost you about a thousand pounds. That's only a hundred thousand pounds. So you have to invest. But if you're not making the profits or your profits year on year are the same, why would you invest another 100K if it's not going to add additional, I don't know, 200K on your top line? Why would you do it?

Michael Russell: 39:29

Well, what I've seen with this is the the convenience of using your phone, it doesn't it doesn't always necessarily translate to a cost savings, but where I do see added value, there's two areas. One, you said labor's super expensive. So if you can cut down labor by not having as many front desk people, then that's massive. The other thing too is these apps with the phones, they don't just provide convenience for the guest, they provide the potential for upgrades, for upselling, for collecting reviews, which can then lead to better marketing, which maybe saves on marketing costs. So some of this stuff's interrelated. But if people are comfortable enough using their phone for the check-in process, then it's in all likelihood they're more comfortable than booking that spa or massage or whatever extra service. Maybe they want to book like some breakfast and they'll just use their phone because you can ping them and say, hey, how about breakfast? We're offering a 20% discount. Sure, I'll walk down to the lobby now and I'll use my phone to pay for it. So all of these features provide accessibility to just make it make it easier to market towards them.

unknown: 40:37

Yeah.

Naveed Khan: 40:38

And I think in hospitality there isn't a platform to do that yet. Because look, Apple Wallet is really easy, right? You've got an Apple phone, you download your cards and it's really easy to pay. But if you're going to travel across different brands or different independent hotels, you are not going to download an app for every hotel you're going to stay in. No one does that, right? That's just that's how it is. So I just don't there is an attack available yet that says one universal key or one universal wallet for every hotel, then life will be much easier. And probably, you know, that probably happen in the next 20, 30 years. But right now there's a bit of evolution, but there's no re revolution yet.

unknown: 41:18

Yeah.

Michael Russell: 41:18

I mean of course if you're a brand like Marriott and you've got a loyal base of guests, well, they become more comfortable and if they associate that their stay is going to involve using the Marriott Bonvoy app. And so if you're a hotelier that's looking at the value of joining a flag or branded company like Marriott or Hilton or anything, then investing in that infrastructure from a technology perspective, there is some added value there. I guess I was really wanting to drill down more into like the real nitty-gritty of tech stuff. I'm all over the internet now. I'm going down the rabbit hole with ChatGPT and AI and notebook LM and all this. And so I'm now the the algorithm recognizes I'm interested in learning about AIs. It's sending me stuff that I didn't know about a few weeks ago. And for some listeners this is like common knowledge but there's something called N8N and it's incredible because we were speaking with another person that that owns a hotel and he was sharing with us how his group of hotels they're using this software to automate messaging with guests. But it's the N8N is then able to connect directly with chat GPT. And so the level of the chat message bot is so much more advanced than what we've had over the last decade. It's using the most up-to-date chat GPT language. And so it was funny because he was describing how he walked into one of his hotels he was chatting with one of the guests and they mentioned that I forget whatever name that they referenced but let's just say Julie because I I can't recall. Oh Julie was great Julie set us up with the best restaurants to go to Julie said that we should go visit these different places in the city. And so Julie really made our vacation amazing and he was thinking he's like Julie Julie Julie on staff who the heck is Julie oh Julie Julie is the fake name that we gave our AI bot that we created with this software that's connected to ChatGPT holy heck these people didn't know the difference but they were like grateful for all of everything that quote unquote Julie provided them. And so it's like wow that is an example of how technology is replacing someone who could possibly have a full-time job right there, which depending on how you feel about that, right? There's conflicting feelings about labor being replaced but also as a business owner saving on cost, it's incredible how this technology is advancing so quickly that there is a very real possibility that 50% of a hotel's front facing staff can just be eliminated by having better technology. And so I'm excited and concerned at the same token because the greater ramifications of automation and robotics and AI throughout our culture is going to eliminate a lot of jobs. And this is a much wider subject and I'm going on a tangent but the the there is some great uncertainty about how technology is going to potentially impact people that are just working the middle class or you know lower to middle class people that are just working labor jobs. A lot of that much of it will presumably be eliminated here. And so staying ahead of the curve here and preemptively planning for the future is really important. I don't have all the answers I just right now have more questions and more concern than anything. But it's just it's an interesting time right now to to see some of these the the technology like I described being implemented in hospitality to where people don't even realize that it's AI software, that they feel they're interacting with a real human and it's smart enough now to provide them what they need to be able to have a great vacation.

Nathan St Cyr: 44:55

That's the ticket right there what you just said because if you think about where we were and you think oh I want to talk to a human right well the reason that we're saying that is because our experience when we call in and you have to press two to talk to this person and then you get it. And then it's like you got to put three and they don't then they're like please say into the thing and then you say into the thing and they don't get it. And so you're like can I just talk to a human but that's changed. It's changing if you can get what you need from not talking to a human sometimes it's more pleasant not talking to a human being. And that's sad to say but it's the reality of it's about are we executing what they need? What is it that they care about and need and so this is a part that I'm really excited about and interested in seeing is how well that level of fulfillment of what is a human I want out of customer service. Cause man, a human being depending upon their mood, what happened to them in the morning, the culture that the organization has created.

Michael Russell: 45:58

Dude, my emails are a hell of a lot nicer than you know now using AI than it would be if it were me.

Nathan St Cyr: 46:04

I know I actually enjoy getting your emails now it's like who is this guy?

Naveed Khan: 46:08

And then I realize oh it's not him no I think Mike and coming back to your point it's it is a real concern but I think for us where we are today and for us is is is still about hospitality and I think the front end hospitality can only be delivered by people. And but then it also depends on your you know your purpose of stay if you're a frequent traveler and you are not so fussed about who's going to greet me, who's going to give me my key card compared to a leisure traveller who's traveling with kids, needs them answer needs some questions answered right now in the UK as of today, the front end roles are still very much people orientated and I think for the foreseeable future they probably would be but then again it depends where you are if you are in a high footfall in the centre of London and your purpose of visit is business then then it might be slightly different. But yeah we're look we're all equally concerned that what will happen in down the line but end of the day if in hospitality if you're in a restaurant I still think a human is going to serve you a drink and someone's going to prepare for you in the food in the kitchen is still going to be a human for now is because that's where the hospitality factor is. But down the line you never know is a real concern right?

Michael Russell: 47:29

Time will tell and I think we're going to learn here real quickly what's going to happen. So so Naveed your business you manage and then and advise clients so if someone is interested in breaking into hospitality what would be a tactical tip that you could provide them if if they want to get involved in investing in hotels can you share a tactical suggestion I think uh my my mine would be keep it simple and location matters.

Naveed Khan: 47:54

You get the right location and you will be okay and and keep it simple don't complicate it. I think a lot of people what they try to do is complicate things. And when you complicate things then you need to get external consultants or external people to fix it. But if you keep it simple and you got a great location you got a great USP you got good demand drivers around you the chances are you're going to be okay. I I'm making it sound really simple but it generally that's how it is.

Michael Russell: 48:22

No I mean I think that we're all guilty of overthinking things analysis paralysis is real well this has been a great episode. If our listeners want to stay in touch with you follow your journey they want to connect with you what's the best way to do so?

Naveed Khan: 48:35

You can come to our website is www.londonrockpartners.com and drop us a quick email and we we'd love to get in touch.

Michael Russell: 48:43

Okay excellent well it's been another episode of the Hotel Investor Playbook we are Mike and Nate and he is Naveed Khan we are signing out for this week we'll catch you again next time aloha