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on Santa Monica , Los Angeles Santa Barbara with a general bigger focus on Southern California . “ We think in a market like Los Angeles , we can easily have over 50 Stay Open properties scattered throughout the market ,” Shpilsky says , adding that the concept could also work as a potential workforce housing solution in resort towns .
The San Diego project is unique and will act more as a proof of concept space as , generally , Stay Open seeks out real estate partners to own or lease the underlying real estate that Stay Open operates and markets for fees .
The concept was conceived pre-COVID , according to Shpilsky , when the group recognized retail and office space demand was on the decline . The last 18 months have served to only accelerate the phenomenon . He believes if Stay Open can “ crack this nut ” and take available space already by default generally in a good location from a commercial perspective … “ people need a bed , whether it ’ s a hotel bed for a night or for a frictionless stay for a few months … There has to be a way to repurpose this space .”
Shpilsky adds that he has been financing and developing what he terms cold and boring hotels for quite some time , and among other things , it just takes way too long to get open . “ It ’ s too expensive and a lot of times the product that ’ s being conceived isn ’ t even that great ,” Shpilsky says . “ Let ’ s try to get to a very affordable and flexible price point , but without sacrificing the experience .”
Shpilsky also points to the broader hostel segment , which he says is fragmented and not techforward , and creates an opportunity
WE NEED TO GET THROUGH THIS INFLECTION POINT OF INSTITUTIONAL OWNERSHIP , REALIZING THAT THE DAYS OF NORDSTROM SHOWING UP AS YOUR ANCHOR TENANT TO TAKE UP 200,000 SQUARE FEET ARE GONE – THAT TENANT-OWNER RELATIONSHIP DYNAMIC IS CHANGED AND PROBABLY CHANGED FOR GOOD .
to acquire and / or rebrand many of these spaces down the road .
Stay Open is targeting close to an impressive 50 % operating margin , as Shpilsky notes eight pods selling at US $ 50 a night is twice the potential ADR of a US $ 200 a night , same size , select-service room . “ And I have eight mouths I can feed and I just put US $ 150 more in their pockets to spend on things they like , and maybe some of that they ’ re going to leave with me ,” he says .
That is a recurring theme for Shpilsky : why not us ? “ We need to get through this inflection point of institutional ownership realizing that
– STEVE SHPILSKY
the days of Nordstrom showing up as your anchor tenant to take up 200,000 square feet are gone – that tenant-owner relationship dynamic is changed and probably changed for good ,” he says . “ Once that happens , that ’ ll be a key inflection point in opening up some very significant scale and good velocity for us . I think we ’ re probably getting close to that … Real estate needs an underlying form of cash flow , and if no one has figured out what that is then that cash flow has gone away . Someone has to figure out another operating business to put in these spaces , and we are that solution .”
20 hotelsmag . com November / December 2021