Start-Up Hotel Retains Zeidel & Associates for Aggressive Acquisition Plan Fueled by Sudden Increased Demand
Situation
Zeidel & Associates represents a start-up “hotel” operator that offers large, modern apartment units within residential developments mostly comprised of traditional rentals. Our client’s hybrid model captures the benefits of Airbnb and the traditional hotel model, by providing a consistent, branded, guest experience, with a contactless system — no front desk or guest room keys – but with support services such a digital concierge.
While the company initially encountered the typical challenges of a start-up, the pandemic unexpectedly provided an environment that drove demand for its business model. Displaced workers, healthcare professionals and college students were attracted to our client’s accommodations and amenities: full kitchens, in-suite laundry and generous living space that could easily accommodate remote work and school and were well suited for a lengthy stay. While most of the hospitality industry suffered, our client’s exponential growth led it to seize the opportunity to find new locations. The company turned to Zeidel & Associates to execute an aggressive acquisition plan.
Approach
Zeidel & Associates drew on our unique combination of real estate and hotel experience to provide a practical approach to the process, which was paramount given the challenges with which we were confronted. Our client identified strategic locations across the U.S. in upscale residential apartment projects developed by residential real estate owners that were accustomed to working with individual tenants and leases, not hotel uses and related concerns. These owners expected our client to sign a bundle of their standard individual leases, which would not address the complexities of a hotel business. As it was not realistic to educate the building owners about the nature of hotel documentation, we had to develop a process within parameters with which they were comfortable to expedite the transactions.
Zeidel & Associates was asked to address the weaknesses in the proposed documentation, without creating an excessive delay or complexities that could deter the owners from pursuing an unfamiliar transaction. These competing goals required a delicate approach to modifying and negotiating each lease.
The firm worked quickly, collaborating with property owners on a master lease approach, which incorporated the apartment lease forms with which they were familiar, modified globally for the hotel business. This addressed significant issues for our client’s protection. We found this structure gave the property owners the comfort of working with its own documents and avoided overwhelming them with the unfamiliar legal contracts we preferred. Accordingly, in view of our client’s imperative to move quickly into these markets, this required us to carefully evaluate each apartment lease on a case-by-case basis, for the legal and operational issues and carefully weigh the implications of proposing changes to property owners who were not accustomed to extensive negotiations. At the same time, we pursued traditionally structured hotel management agreements in other locations, where possible.
Result
Our client expanded its operation to 10 properties. Its New York City location, which we handled, was ranked the #1 hotel in the U.S. by Tripadvisor’s Travelers’ Choice™ 2021 Best of the Best Awards.