How to Start an Aparthotel Business

You going for the location first or the business model? You might go, okay. Well, I want to cater or to this specific demographic of people, then you've got to think about, well, what's the location that that would work in. And, again, then that would come to and then what's kinda building that I need to do, or you might be going, actually, this is a location that I want to invest in, who is the demographic of come here, what's the market for this particular location,and then you build your business towards that. So it all comes down to the search part. So what we sort of teach people is to do your market research first.You're listening to expat property story, a podcast in which I share my story to smooth the way for you to have your own.Hello there. That was Carly Houston introducing episode99, our final episode featuring just 2 digits because We're just one episode away from number 100, which will be a compilation of the best moments from the first ninety nine episodes.And if you want to make sure that you don't miss this extravaganza, then gently push the plus button on Apple or follow on Spotify.Carly Houston is an experienced property investor, developer,coach, and mentor, who, together with her sister, has amassed an HMO portfolio of more than 100 units in and around Brighton And Hope in Sussex, working closely with housing charities and local authorities to provide high quality supported living schemes to people with mental health issues and those facing homelessness.The reason I asked Carly on the show was to talk about apart hotels,and she has so much great information to share about this business model that we're cutting straight to the chase this week But before we hear about how she became an expert in this space, it's time for our very last property song because it's time for a change. and we'll be introducing a new feature soon, so watch this space.

I'm choosing Nothing Can Stop Us Now by St.Etienne, which happens to be my husband's band.A bit of name dropping.The lyrics aren't particularly deep and meaningful as he was able we actually listened to it. This sort of sentiment is about that sort of connect and love and support, then you can kinda do anything. And it was just quite fitting. It was also my husband's song because my husband's not involved in the property business. but he's been extremely supportive throughout the whole journey. And, really, I wouldn't have been able to do what I've done without his love and support. and he's picked up the mantle with the kids and all of that kind of stuff when I've been building this business. So, actually,I've sort of listened to lyrics, and I was going, oh, okay. This is Betty. really fitting. So how did Carly learn all about Apart Hotels? We started this back in 2017,and it's just kind of our concept that we'd came up with, obviously, a part of hotels did exist. It wasn't like we came up with it at anything, but we've never really heard of them, and we just kind of had this idea we'd sort of been interested in service accommodation as back in 2016,2017. Both my business partners, Stuart, and I had various single lates that we had done Airbnb with in Brighton. I mean, knew there was a great opportunity there, but, you know, we were worried about upcoming legislation and everything. we kind of actually thought, well, is there any way that we could do this differently? Like, could we do this with something that's already got planning? And we sort of thought about the idea of taking these old gas houses because we'd been investing in HMOs, and I'm sure anyone that's listening that's been investing in HMOs, you kinda look at gas houses and go Oh, wouldn't they make a present HMO where they've got? Oh, and sweet. So, like, great. But it's very, very difficult to get Plan and permission to convert a guest house into an HMO. So, yeah, we thought about, well, if we took a guest house and we did it as, like, many, like, service accommodations,like, how would that work, and that's how we started doing a bit. There was no one teaching this when we started out. We just kinda had to learn the hard way and a lot of trial and error involved in that, but we learn a lot. We set up all our systems. We, you know, we do all the managing in house. We've set up all the software. So we really systemized this business because we didn't wanna be involved in the day to day. That was one of the the key things. We were doing these big buildings that were gonna generate a lot of it. But the main thing was we didn't wanna be involved in the day to day. We didn't wanna be taking phone calls from Guess. We didn't wanna be going to the property So we very much focus on systemizing that business to to take us out of it. And so then that's now what we we teach other people. So, basically, people on Laird from the things we did,right, and the things we did wrong, as I said earlier. So we've we've launched the training, which is the a part hotel revolution. And we've got kind of 2 core products with that. We've got, like, a 1 day discovery day. So that's usually for people to come along. see how the model works, see if the model's right for them, and actually learn some key things on how to get started and over this business model.And then our sort of flagship training is our 6 month apart with tail mastermind. So that's where we literally share every thing with our transformation so that they can then do it themselves and get the learning that we kinda wished we'd had again, which is really that blueprint to build this business, but systemize it so that you're not having to stay in the day to day. The particular model that we've done with airport hotels is it we we've taken small existing guest house or or hotels and then converted them into more self contained units.which have some cooking facilities in there, and we've made the the the buildings kind of room only so that they're, like, little mini studios based So you've almost got a block of little mini studio rooms that are self contained. There's no breakfast room, so it's not a traditional guest house. The owners aren't living on-site.All the units are kind of independent. The guests arrive. They can let themselves in with our digital key code. and with no staff on-site, so there's no reception. So the units have got more facilities in a standard hotel room because we have little kitchenettes in them. So it's like a kind of hybrid between your sort of service apartments and hotels. Carly and her business partner currently have 2 Apart Hotels in Brighton, one with 11 units and one with 12. Within those buildings, the units are different sizes, accommodate in different numbers of people. So some of them will just accommodate 2 people. Some will accommodate 4 people, and then we've got, like, a larger, you know, that accommodate. It's like six people. So you've got, like, a range of unit sizes, which means that you can really attract different demographics of guests, which means you're able to cater for more takes travelers. Getting the right mix and balance of accommodation sizes can have a significant impact on revenue. 2 of those units. We'd refer to them as kind of studio suite that sleep up to four people, and then the rest of the unit sleep two people.but also the beauty of having all of those units in one building is we can accommodate larger groups as well because, of course, they can rent multiple units in the same building. So if there was, like, ten people coming together, they could have the suite of 4, and then they can get another Two rooms that sleep to people. So you're really able to cater to larger groups as well. It's been really good having that mix because a lot of the sort of small hotels, guest houses,they'll only have rooms that accommodate two people. So that means that they can only accommodate travelers of two people. Then on the other side of that, you may people that are running, like, an Airbnb type business. And those apartments are, like, a one bed or 2 bed apartments, and, you know, they'll accommodate four, six people, and actually what that means is because of the costs of cleaning and stuff like that, it makes it really difficult for them to, viability, be able to cater for two people, for example, so they're only able to take those larger groups. But because we've got this of unit sizes within one building, we're accommodating both couples and the larger groups. So we're getting the the business route from from both sides of that. And it also means that we can be more competitive with the pricing, and maybe our units are smaller than your standard one bed and 2 bed apartments, but we've got more of these suites that could sleep four people, but, actually, those same suites can also accommodate 2 people, and we can still do that in a financially viable way.If I was going to start this, I would find it very difficult to work out Building 1st and then the avatar or the avatar 1st and then the building.So I almost think about it in differently, I think about it is, like, you're going for the the location first or the business model first in the sense that if you're wanting to get into doing in a part tail, you know, and that's the business model you wanna run. You may go okay. Well, I want to cater to this specific demographic of people, so you may say that you might be dead set on. Well, actually, I just wanna deal with corporate guests, or you might be really into the idea of having, like, a kind of leisure part would tell me when I accommodate leisure guests and add all the things that would be appealed to leisure guests. So if you start with the guests and the avatar person because that's what's driving you, and that's what you're kinda passionate about is providing that kind of service. Then you've got to think about, well, what's the location that that would work in. And, again, then that would come to and then what's kind of building that I need to do. So that's one angle to come at it, or you might be going actually this is a location that I want to invest in,who is the demographic of people that come here, what's the market for this particular location, and then you build your business towards that. So it all comes down to the research part. So what we sort of teach people is to do your market research first.So you need to research the location. You need to understand what is that guest profile. Who are the visitors that are coming to that location? what are those attractions, you know, what are the main visited attractions there, you know, there's corporate, who are the employers, all of those kind of things. to work out who you're catering for.You wanna be looking at what kind of reach you may be able to charge,what sort of occupancy levels, might be able to get there, and then you're finding a suitable building to meet that market and that demand.People kinda they just wanna fast forward to getting the property and doing the b furb. actually one of the key things that's starting with that market research first. Where is the best place to find those statistics for the research that you're talking about? I mean, you can't really get around the fact that you just need to you need to put some time in, and there's gonna be some manual stuff Unfortunately, there's not just that one magic source. It really is about bringing all of those different elements together and looking across like,various different resources, which is the one s and sort of tutor sports and things like that. And then there's, like, there's paid software,and and then there's, of course, just getting feet on the ground and doing some research on the location, speaking to other people in the area. But, yeah, you have to put the legwork in, really.say, for example, you're targeting contractors. You've got this dilemma between do you go into the city center where people want to be, maybe close to a train station, but then you've got nowhere for people to park. So what's your advice around that?Exactly. And so, again, that's all part of your research. You know? So if you're going for contractors, and there's, like, building contractors, and they've got big vans and things like that. They obviously that's gonna be affected as parking. that's gonna inform what kind of building, what location the building's in, and and then let you say, you know, are you then limiting yourself to other types of visitors. You need to know that there's enough demand for that market. You know, if you're going to go to a location that provides the stuff that you need, for your kind of main visitor, you wanna make sure that you've got enough demand that's gonna sustain the business. That's all part of that research piece.So once you've worked out your market and your target guests and everything like that, where do you start looking for these buildings? What we're teaching people is really to focus on existing c1 buildings or properties that are maybe already gas cases and stuff like that because, you know, you've not got the issues around planning and all that kind of stuff. But it's really in the same way you you were looking for any properties. You know, you wanna have your sourcing strategies. You know? You're looking off market and off market in the same way that you would look for for any kind of good 50 deal, you're kinda looking forward a sort of range of different sourcing strategies to generate as many leads as possible.So you said that do you know how you've got on market and off market. Could you give us a couple of clues about where to look online? Because these kind of tired BNBs,tired guest houses, I guess, is talking about. A lot of them are not on right move, are they? Where do people look for them?Some of them be on right move. You know, with this right move, commercial. They might even be listed under visiting or some commercial agents, you know, a a lot of them will get advertised with commercial agents rather than kind of residential agents, you know, Google's your friend, like Google searches. There's some business websites where sometimes people advertise things for sale. you're kinda looking in slightly different places maybe to your traditional residential properties, but you're just looking at maybe more commercial type agents that local commercial agents or even some national commercial agents, that's kind of places where they get advertised. So that would be on market. How about off market? What do you guys do when you're looking for off market? Off market. You know, similar in the way you would look for off market of any type of properties. I mean, there are some softwares that you can use, which can be really good. So I'm obviously you have to pay for those. Just the whole walk in the street thing as we do with the another type the properties and, you know,recommendations, like contacts, you know, other sourcing companies. all of those same sort of tactics you would use if you were trying to find HMOs or single lets off market.What's your funding model for this? Did you use private finance bridging, a combination of the 2? Could you talk us through how you did that? Yeah. A combination, traditional bank finance, private investors. And the thing is the market's changing all the time in terms of the lending market. So, like, what was relevant 4years ago, 5 years ago might not be so relevant now. So it's really having a a a really good broker that you can talk through the project with to look at what those funding options are. Again, there's a lot of nuance and complaints around it. But, yeah, we've used a combination.on our second hotel, we don't even have any bank finance.It's all 100% private investors. So, you know, we work with private investors.You know? In the kind of market, we've got better terms actually with with private investors than than if we were using institutional funding. So there really is kind of lots of creative ways of funding these kind of projects. So what did you do? Did you find the building? It was already a guest house, and then did you convert some of the living quarters and stuff like that to extra rooms? Is that what you did? Yeah. Yeah. So just maximizing the space that was already there to repurpose and create more units, so increase the number of rentable units. Obviously, they increase the revenue, then that's increasing the profit. That increases the value.So it's really about finding building where we could add more units to that because then, you know, it's a business, and it gets valued as a business, and that like to do with its performance, which really about improving the revenue, improving the profit, improving the performance, which then increases the value.So while you were adding those extra units, were you still able to rent out the existing units, or did you have to shut everything down? And we shut everything down. That's what we wanted to do. It really is depending on the building, depending on how much work is needed, what what you need to put in there. there's lots of things to consider around fire regulations, all of that kind of stuff. So for us, we just had the property empty.did the work in the low season, so we were then ready to open for the summer. But depending on how the building's set up, we'll look at,okay, can you do it in a phased way? Would that work? to keep some of it operating while you do that, or would it not? It's really gonna be,like, project by project in terms of what makes the most said and and, like, the timings and everything like that, and that's where you can kinda negotiate with the seller because you might negotiate on timings and all of that to do it at the optimal point. So, yeah, their first one, we we did that. 2nd one was, like, it was kind of a wreck anyway, so it was that's quite a big project. So, yeah, we did that just from empty, and then COVID happens in the middle of that, which is fun.So, yeah, we've navigated COVID with with this model as well and come out nowadays. So then what did you do? Optimize the revenue and then get a commercial valuation 12 months, something like that. Yeah. And,again, that's gonna be dependent on the kind of lenders, what they're gonna wanna see in trading history and everything like that. So there's a few different facts just to take into consideration. But, yes,we'll actually know where the first one we went to the banks kinda straight away,and then we weren't able to add the value, and then we just stayed with the same bank and refinance it. With the second one, we did that on development finance, and then moved over to private investor money. So then which we just kept, actually. So we could have refinanced it with the bank, but we've actually chosen to stay with private investors. But yeah. So build up a a bit of trading history, and then you can go to the more mainstream banks to refinance, if that makes sense. you know, we had a lot of delays with COVID in that one, but it's it's all worked out. And, actually, yeah, we got an offer from the bank.We could have refinanced that last year, but as I say, we chose to stay with with private investors on that one. It's important to us that we're adding value to the building. And then that there's gonna be you know, we've got investors that are still in there that we've got enough profit to be able to pay them a good return. then it's gonna make a good return for us. With our first one, we actually added a lot of value to that. So, you know, we pulled everything out of there, like, after we'd be financed. I mean, it took about refinance because we got delayed with COVID, but there's no capital left in there. So -- So you waited to refinance, what, a year after you you were open? We would have done it sooner. Yeah. We would have probably done it after a year. But then because we decided to do a second hotel. And then we, you know, we didn't really need to be financed, and we were talking to the bank. I was like, well, actually, we did the first 1. We've got the second one with development financing. In the back, we we were better. On the first one, we're like, well, can we refinance the second one with you? And they're like, yeah. Fine. So we actually decided to wait because we thought we'll do them both together when the second one's finished. So we held off, but we could've that was the plan. We would have refinanced with them after about 12 months, but then we waited for the second one, then COVID hit so that put everything to stop anyway.So we didn't actually end up refinancing the first one until last year till 2022. So it ended up being, like, kinda 4years after we started trading, but that was more of a kind of decision on our part rather than the banks needed us to wait that long. Do you see what I mean? And because of COVID and stuff as well. I know you have these kitchenette in there. Right? Mhmm. How do you get that balance between space? Because, obviously, they take up a lot of space, and then it starts to look a bit pokey. What was your thought process with that? With some, like, really clever space design, really. So it's about how you design the space.You're not having to design the space in the same way that you would if it was like a sort of HMO room or something like that where someone's gonna live in that room and they need a wardrobe, they need a chest of drawers, they need all of these things, like all of that storage. You know? So you're just being really clever. You're not having to put a load of big freestanding furniture in there. it's just being really clever with the the space design and with your storage solutions and things like that that just make the space really usable. So if about how you fit it in and what you put in there.So it should be nice for them you know, have somewhere for them to be able to set, you know, have the kitchenette facilities, You don't need to have, like, huge big chest of drawers in there that are gonna take up a load of space. So maybe you've got the kitchenette. Might have been somewhere that you had a big wardrobe, but if it was in a HMODIM or something like that. So yeah. So just really clever space designs. So even in our smallest rooms, we have different sort of levels of kitchenate, you know, the different grades depending on the room size. So even at the smaller rooms, we still wanna provide those Asia facilities because people probably value having that over having, like, a wardrobe in the corner. You know? And you still got storage for the suitcases and everything.Yeah. Exactly. We've got beds. We've got under bed. You know, we also wanna make sure we've got all the things within the bim. You know, we still have irons and every iron and iron boards and every bim, but they're, like, kind of mini ones, and we want them to have, like, everything they need. And I think guests value that more than having that extra space. They just kind of want even if it's compact, it's literally got everything they need. It's got a nice coffee machine. It's got a fridge. You know, maybe we got a microwave. They've got everything they need in there. and it's just got a clever design use of space. Have you been surprised that what your guest advertise turned out to be, or did it turn out to be exactly as you thought it would be? I don't think we've been overly surprised.I mean, I don't think we put enough thought into it in the the first place. There was a lot of involved. We had the ideas and the concepts and all of that. And then I think we were lucky that it that it kinda worked because I don't think that we put in, like, oh, you know,the stuff that we we're teaching people to do now in terms of all the research, and we go into a lot of detail on on how how they do that. we didn't do a lot of that stuff. So it's, like, I think there was a certain amount of luck involved. There was a certain amount of instinct,you know, of kind of an, obviously, location and all of that. but it's quite good because we can now retrace our steps and kinda go, well, what were the things that we did well and what were the things we didn't do so well? people can learn from the things they did we did well,but they can also learn from some of the mistakes that we made as well.So can you tell us a couple of things that you did wrong that you wouldn't do wrong this time. And there's some stuff around the build and work that we might have done slightly differently. We might have done a bit more of an extensive refurb than we did on the first one because it was already operating. There's a lot of the stuff was already in there. And just some of the things that we didn't realize we would have to do around sort of firebreaks and stuff like that that you need to think about from day 1. Yeah. Just stuff like that. We might not do a list of building again.But yeah. But it works out fine, but, yeah, that that would be may be something we do do differently, but with listed buildings. I mean, obviously, we didn't need plan and permission for the use.But you did to make the alterations Yeah. Exactly. With a listed building, you need planning permission for just about maybe you have to sneeze, I think. You need you need planning permission. If people listening want to check out Carlies, a part hotel. You can see it on YouTube. Right?And if you just put in a part hotel bright and it comes up --Does it? You've got lovely design. Rick yeah. comes up Mike Stenhouse when he came down to visit you. Okay. Yeah. Yeah. Okay. There you go. A couple of weeks ago, we talked about the 5 f's of building an HMO portfolio. finding, funding, finishing,filling, and future proofing. Well, the same concept applies to apart hotels. I guess we've covered 4 of the 5 f's But how about future proofing? You know, as with with any property businesses that, you know, obviously, you want to buy well in the first place. So the location is really important in terms of the longevity of that that business. So you wanna make sure you're buying in the the right location. because it is a because it is gonna stay that kind of business. You know? And that's the, you know, the one thing to consider. Obviously, you're you know, when you're all putting SA within a c 3 residential property. At the moment, anyway,you've got that option to switch back to Besi. Whereas, if you go down the street, you're already buying it like that. So it already is that. So you wanna make sure that it's in the kind of location is gonna have that long term appeal to travelers, so it's getting the the location right in the first place. And Yeah. I mean, I think having the the business is systemized and streamlined as possible. We think that's really important because that's gonna help you adapt to at different times, and we were able to adapt really well to COVID, you know, because our first one was was up and running and and, you know, we had a lot of hotels and hospitality businesses and they say they, you know, lower than just right now, business student COVID. But we didn't. In fact, we feared pretty well. We did you know, we didn't suffer at all really through through COVID because we were streamlined So we were able to, you know, reduce our cost, and we didn't have restaurants to run. We didn't have staff to pay and for you know? So we were able to kind of really,like, economize on our cost, and then we were also able to pivot and and still operate in a way because you know, in that first lockdown, we we we managed to get key workers in there. So we were we had people staying with us throughout the whole of COVID. So and that was because of the self containment because we bought a traditional gas house, and we'd repurposed it. None of the other gas houses were able to do. what we were able to do. And how about environmental sustainability? There's only so much that you can plan for and second guess for the future. You know? So you do wanna be thinking about that. And certainly, when you're doing the verbs and renovations, you wanna be looking at what are the requirements around energy efficiency. know, so when you're doing any renovation of any property, you wanna factor all of that in. And doing a full refurbishment does give you the opportunity to do that. So I think you really wanna be looking all that kind of stuff to, you know, are you putting traditional boilers in,or are you doing a heat pumps, whatever they're cold, or So definitely within your renovation of the building, you definitely wanna be thinking about the way that you future proof that from an energy efficient and environmental point of view. And then in terms of is this gonna appeal to people in10 years' time? I mean, with any business, you've got to take calculated risks. Just be sensible in terms of how you plan for it so, you know, be putting money aside if you renovate a a property. hopefully, you don't have a huge amount of maintenance when you've got a newly renovated property, but you still wanna be putting money aside every month. you wanna have some kind of sinking fund to be able to update either works maintenance works that's need to be done. So you're gonna have your kind of emergency, day to day maintenance, but then you have your planned maintenance around that. Okay. Well, I know it's gonna need external decoration in 2 years' time, so you're putting money aside to do that. you also might be thinking about putting money aside to update the aesthetics and things like that as well. You go, okay. Well, maybe this isn't in style anymore. So you would plan for that. I know that you have HMOs as well. What would you say now that you've been running both for a while, would you say that one is more profitable than the other.They're very different. The business model I have for my HMOs is a is a very different business model. mean, again, it depends, like, what you value is being profitable because you've got you've got return on cash. You've got how much tamed of the tea cup and -- Well, let let's just say the cash. I mean, on an individual property basis,the part of hotels are making more profit from a point of view of how much profit is that making. You know, so I do actually have a fourteen bed HMO,for example, similar in size. You know, so the far hotel makes more cash profit than the large HOO. If you want to get in touch with Carly, you can find out how in the show notes together with a link to her mastermind course.the Apart Hotel Revolution.Lots to choose from for our highlights this week, but here are my top3. 1, The first thing you need to think about if you're interested in this strategy is whether your primary passion is a particular guest type or a particular location. This will determine the design of your model. 2, one of the attractions of Apart Hotels is that you can potentially lower your cleaning costs given that you have multiple units in the same location, allowing you to offer more competitive rates for guests and therefore higher occupancy levels. and therefore higher occupancy levels. And 3, if you get the balance right in terms of the different sizes of accommodation you able to offer within your apart hotel, you can hit the sweet spot between hotels catering for couples and single travelers and larger groups.Exciting news ahead of our 100th show next week, We have a listener in a new country. It's Montenegro, so we now have listeners in more than 130 countries. And although I haven't been to Montenegro as I record this episode, I kid you not all being well, I should be there.right now if you're listening to this episode on its day of release because we are on a week long road trip around the Balkans.So if you're our listener in Pod Garitza, the capital city of Montenegro,get in touch at the podcast website www.expatpropertystory.com, and let us know the one thing that you're struggling with in your expat property story.That's it for this week's show. Thanks to Carly for appearing and to you for listening. And if you're feeling really helpful, share the show to spread the word. You've been listening to. Expat property story.