Defining Hospitality

Dan Ryan: Today's guest is an accomplished hospitality leader with around 15 years of experience. He's driven by the potential to reimagine the real estate and hospitality landscape. He believes that both old and new properties alike can be transformed into engaging and thoughtful spaces.

He co created the Fairlane Hotel in Nashville. and Hotel Claremont in Atlanta, which were both number one ranked hotels in their prospective markets and many more. He's a managing partner and co founder of Oliver Hospitality. Ladies and gentlemen, Ethan Orley. Welcome, Ethan.

Ethan Orley: Thank you, Dan. Thanks for having me.

Dan Ryan: Um, and full disclosure here, I think, I don't remember if Fairlane was one of your first hotel, was it one of your first? Second?

Ethan Orley: was our, it was our third, second or third. The Oliver was the first.

Dan Ryan: Yep. And I remember doing that project, um, which is kind of right off Printer's Alley in Nashville, did the furniture there, and it was so awesome because You took this, I guess it was an old bank and brick and in a place and it was before Nashville. Nashville was like just starting to like really ramp up in the, in the zeitgeist of, of Taylor Swift and everything.

And, uh, I think you really reimagined that place and like created. So much value and such a really cool experience.

Ethan Orley: Well, it was, it was, it was funny because we, Phil, Phil, uh, my partner and I, we did the Oliver in Knoxville, uh, back in 2010. And he came to me, I think a year later, maybe at some point and said, Hey, you know, we should do a project in Nashville. There's an old office building downtown. And, uh, we should do a boutique hotel.

At that point, there was only the Hutton hotel and there was nothing downtown, um, in, in the historic core. And, you know, we pitched this to a few people and they're like, wait, Nashville and downtown, really? It was very early. And it took us a couple of years between financing. Uh, and, uh, convincing enough enough folks to kind of get on board.

So we were early in the, kind of fantasy of it all. It took us a couple years to execute on it.

Dan Ryan: Yeah, well, you were, um, right place, right time, and also just a complete reimagination of that property from like, I just remember like a, a dark kind of weird 80s bank lobby, right? And then you turned it into... The Fairlane. And so like, it was a complete like reposition, but before we get into that one, and I think actually it's a great segue into like the big question we always ask here, but as it pertains to like how you've transformed buildings, neighborhoods, properties, like how does, how do you define hospitality?

Number one. And number two, like how does that help in your search for the perfect projects?

Ethan Orley: great. Great question. Um, you know, I, I look at hospitality as a canvas, in which to really put forward the best product and service. in front of a guest who frankly just needs a, ultimately just needs a commodity of sort. It needs, you need a, you need a privacy, a bed, um, and a hot shower, if you will.

And so we try to really exceed that, um, in, in both areas by enhancing, um, the service to something that you might not expect and something you can take home with you. Um, so there's that kind of theatrical. Where we want to just wow the guests, we want them to be like, wow, I love what they did with the rooms.

I never would have, I've never been to a hotel like this before. I've never seen someone transition a building this way. I've never been served this way. I've never had this type of food before or wow, like the pillars were fantastic. I want to take these home with me. Um, you know, We love the canvas of boutique hotels, um, especially being independent because it gives us the flexibility to truly reimagine buildings, and reimagine the experience one could have, um, in an overnight capacity, um, and that goes for restaurants as well.

They truly are, um, just one off, one of a kind. And that's how we treat them.

Dan Ryan: So if the guests love it so much and they want to take the pillows home with them, do they just stuff them in their bag and go? Or is there like a reorder that they can do?

Ethan Orley: You know, it's, it's, it's funny, you know, when we first, when we opened our first hotel, I think it was like the first month we were open. We had no idea what we were

Dan Ryan: Wait, which one? Which, which hotel

Ethan Orley: This was the Oliver Hotel in Knoxville back in 2010. And I remember our GM calling me and being like, We're missing all the pillows and towels for one of the rooms.

This was like the first month we were open. And uh, the GM called the guest, and the guest came back that afternoon, opened their suitcase, and All the pillows and towels came out of their luggage, and so every so often they do take it home with them. Um, and if you do, we're happy for you to, uh, we'll just have to charge you on the way out.

Dan Ryan: That's a great metric for successful design. I think like, are they taking, are they taking the accessories out of the room?

Ethan Orley: Well, you know, our matchbooks at the, at the Hotel Claremont, when you open them up, they say, you know, um, you know, it says, it says, please do steal. So, you know, it's a good sign when they take all the collateral, it means you've done something well, and it's, it's, it's the price of, of, of being memorable.

Dan Ryan: Um, who designed the Oliver in Knoxville when you did that one?

Ethan Orley: Um, that was a, uh, that was Courtney Bishop, who was a residential designer out of Charleston. And, and it was our first hotel project and we brought her in to do the interior design. Um, it was very much a collaboration with her, um, and our just off the shelf know how. It's, uh, it was a very, uh, meager budget at the time.

I'll leave it at that.

Dan Ryan: Well, but those experiments actually, I always like to call them those crucibles where you don't know what. Kind of amalgam is going to come out of the other end. And now you've been on this path of, um, repositioning some really awesome properties and to think like Nashville has always been a cool place.

It's kind of like, it's gone parabolic, I guess you could say, in the past 5, 7 years or so, um, but when you're, like, when you, when you first found the Fairlane as this old office building, and actually, let's not limit it to the Fairlane, is there a thread through all of those things? Yeah. Early projects that you did from the experimental, um, all of our hotel in Knoxville to like, okay, you got your feet under you, you know what you're doing, you're delivering value for all of your stakeholders, from investors to the team, to, um, the community, like, is there a thread that if you were to pull on it, it brings all those together in like.

Something that makes, that's like your unique special sauce, so to speak.

Ethan Orley: Yeah, I, I, I, I think it's, it's the challenge. I think at the end of the day, you know, we're, we're, we're truly motivated by money returns. You know, that's, you know, for the investors, they're ultimately looking for a return of their dollars. So. You know, Phillip and I have a real estate finance background together, um, and so we look at projects, at least from a real, from a real estate standpoint, at first, you gotta make sure that you're, you're, you're structured correctly.

With the right canvas, you can build anything off of that. Um, if you have a bad structure in place, then you're in trouble no matter how pretty the product is. Um, so that's, that's one piece of the puzzle is, is really having a real estate hat on at the very beginning. The other half. Is really the imaginative.

Artistic, creative, and, um, and most of all the challenge. I really think that Phillip and I have done projects that either nobody else thought to do. Um, people, you know, were naysayers. And I think we just like to kind of either prove others wrong, or we like to just turn something on its head and just try something that nobody else has.

Um. You know, the, you know, the examples given and, and, and by the way, I'm sure anybody else you have on this program would probably say the same thing. I mean, if you do what everybody else does, you're, you're, you're not going to necessarily. Hit it out of the ballpark because the market has a way to adjust pricing, um, um, to, to, if it's already kind of, you know, plum, um, we look for things that we can really change.

So the Oliver in Knoxville, there was never a boutique hotel downtown. There hadn't been one for 30 years since the World's Fair in 1981. And, uh, we bought the building, um, it was going to be slated for condo development. This was just off, off the recession, 2010. Um, and so that was the challenge of taking a 28 room hotel that nobody else said could work because who was going around trying to do 28 room hotels?

Um. Um. Typically, they're a lot, they're much larger to scale up your, your fixed cost. Um, the Claremont, you know, was on the wrong side of the tracks. It had, you know, had a world famous, uh, burlesque, uh, club in the basement called the Claremont Lounge. Um, it had a storied history of, uh, of being an hourly hotel.

It had all the things that made it probably the most challenging hotel deal, um, ever. Uh, it was, it was a great case study, you know, for any college course and hotel development. The Fairlane was, um, again, was a challenge because it was a unusual floor plate, um, in a town that, again, had not had another boutique since Union Station and the Hutton downtown.

Uh, and I can kind of go on and on. Um, you know, we, we are actually in the middle of a project called Lodge at Marconi. Which we can talk at great length about. We could probably have about five, five podcasts on to itself. It's got such a history, kind of, uh, story past itself, but that's in Northern California.

And that, that was a, is a state historic park, um, that really was never a successful hotel.

Dan Ryan: Which, which park is in here?

Ethan Orley: So it's actually on Tomales Bay between Point Reyes and Bodega Bay about an hour and 15 minutes north of San Francisco.

Dan Ryan: one of my favorite places in the world slash country. And it's like, it exists in such like a little, um, like a fantasy bubble, right? It's like you get there and you're in another misty world and it's so close to San Francisco, but it's also just like you've stepped into your, you feel like you're not in.

The, the, I guess the, the urban air, like, I don't know, within like an hour and a half radius of downtown, it's like a very special, unusual place.

Ethan Orley: It's, it is like, it is, I was, I just, I got back from California last night. I drove at 7 a. m. yesterday morning to, to San Francisco and, and the fog rolling over the hills. I mean, I've never been to Loch Ness, but I would just imagine that this is kind of like what it looks like, you know, just, just like you feel like some prehistoric animal going to come out of the water.

It is just the most. Astounding place. Um, and it, and let alone fact, Point Reyes is the coldest point in the continental U S in the summer,

Dan Ryan: Really?

Ethan Orley: Northern California.

Dan Ryan: Well, that's, uh, well now living just two miles from, I, or maybe not two, maybe within five miles of Mark Twain's final resting place up here in Connecticut, and he has a library up there, but he always, there's this the coldest winter I ever spent.

Was a summer in San Francisco.

Ethan Orley: There you go. And that's it.

Dan Ryan: so there we go. It's because of Point Reyes. Um, well, that's a really magical place and I'm excited. So basically, if what I'm hearing you, you and, you and, um, Philip are really sadists. And you really, um, are gluttons for punishment because you want to roll up your sleeves, buy well, put in a lot of imagination and reposition, but somehow your hair has managed to not turn super gray since I've known you.

You're looking good.

Ethan Orley: Um, it's, it's all, it's all appearances, Dan. I'm Jell O on the inside.

Um,

Dan Ryan: well, I want to, I want to just peel back on that one thing, because I know you said that you and Philip both have real estate finance backgrounds. Like, where were you both working before you took the entrepreneurial leap?

Ethan Orley: so, uh, I, I, I'm from suburban Detroit. Phillip is from, uh, Clarksville, Tennessee, and, um, Phillip was the guy in college who bought an old house and fixed it up, um, and was, was smarter than the rest of us. Uh,

Dan Ryan: I love those people.

Ethan Orley: we all wish we were that guy. And I. I graduated college and ended up working for my family real estate business, um, which was in residential development.

And it really, frankly, did appeal to me. Um, and I wanted to work on historic projects, creative projects, urban projects. Um, and so I moved to New York City. We both met, um, at, uh, NYU, um, doing a graduate, uh, program in real estate finance. Back in 2005 and 2006. Um, and so we both went our separate ways after graduate school.

Ended up working for, uh, A developer in the city, I ended up, uh, working for a company, uh, buying, uh, debt on commercial properties and it was really the catalyst of the recession where we both frankly lost our jobs or whatever we were being paid wasn't appealing enough to stick around and, and we were both, you know, I think we were just playing tennis one day and I said, what are you, what are you working on?

And he said, well, I'm trying to buy. You know, a bunch of apartments that all went back to the bank, um, which was the case back in, uh, you know, 2009, 2010. And, uh, I said, let's, let's try to do something together. So we actually started our business buying apartments and, um, you know, I think we, we, we, his mother actually ran a bed and breakfast.

And I had done, um, a good amount of traveling, uh, uh, internationally in my youth, and I loved hotels. I loved the idea of travel. And for me, even before I met Philip, the idea of, of building, owning, operating hotels was kind of a way to stay in the travel business, if you will, you know, if you, if you build and you have to travel to them, you can at least justify the trip.

And so I'd always kind of fantasized about this. You know, this idea of, you know, maybe we all do to some degree, you know, this idea of, okay, I'm going to, I'm going to go and we're gonna build this great hotel. And, you know, it's going to be on some cool hiking path, the side of the mountain, and it's going to be on some island somewhere, and it's going to be by a mountaintop.

And so you get to have all these great experiences. We haven't achieved that yet. And, and, and by the way, that sounds pretty exhaustive right about now. Um, however, it was because of Phillip's background is with his mother and my interest, um, that he approached me after we bought our first apartment deal with, Hey, there's a boutique hotel or a hotel for sale.

Um, it wasn't boutique. I, it was an independent hotel. I'll keep it at that in Knoxville. Why? So, you know, what do you say? And neither one of us had ever worked in a hotel, um, had ever acquired a hotel and everyone told us it was a terrible idea. Um, we went ahead anyway. We bought, we bought the building for a very, uh, a reasonable sum of money.

We raised money from friends and family. Uh, we couldn't even raise the last 5 percent of, of the capital, so we had to roll our fees back into it. And we started off with, uh, you know, buying the mini shampoos, the mini toothbrushes ourselves and place them in the rooms. And we hired our first GM and, you know, and, and just kind of learn the business, um, over the course of, you know, one or two years.

Opened in our first bar called Peter Krohn Library, PKL short, and then we

Dan Ryan: And where was that?

Ethan Orley: this was all the Knoxville,

Dan Ryan: at the Oliver. Okay, got it. Okay.

Ethan Orley: all the Oliver, so really the hotel was a first, then we opened a bar, which was our first opportunity there, then we opened up our first restaurant called Oliver Royale, and each one of those was a first, and, um, you know, it was, it was just kind of, Um, good luck, good design, um, you know, right place, right time.

Um, and you know, I just, I'll share with you a fun little story that I like to just tell myself. Um, cause it makes me realize how much more everything has gotten, how much more expensive everything has gotten. But we, we did our bar, we built that bar for 30, 000.

Dan Ryan: Wow.

Ethan Orley: the way we did that was there was a going out of business sale for a restaurant up the street.

So I went to the auction, bought all the stainless steel appliances. And hired six fraternity brothers because University of Tennessee is down the street. I paid him with a six pack of beer. They walked the equipment down the sidewalk and we placed into our space. The most expensive piece of that of that bar, Dan.

It's this Japanese wallpaper. I think it cost us 5, 000, which was crazy at the time. And so without any advertising, um, and it being 600 square feet, it's, it's, it's successful. And I think it was that kind of like bootstrap mentality and just like, uh, we don't know any better. There's nothing like this in town.

We saw a bar like this in New York City. I think it could work here. It was that naivety. And, and just the fact that we didn't spend overspend and we had patient partners that it gave us the runway for real success in that market. And then the launchpad to do hotels elsewhere.

Dan Ryan: So that's, yeah, I mean, basically if you buy well and you stay on or under budget and then you can deal with all the people and not lose your mind, it could turn into a great. Um, and that's kind of where I, I'm intrigued by that because I know a lot of people who start off in finance, right? And they're, whether it's private equity, real estate, whatever, whatever, and they're doing financial models and financial engineering, and they're making it work, but oftentimes when they, I find that when they want to go be the entrepreneur and start the business and have to start not dealing with spreadsheets and dealing with people.

And hotels have a lot of people, just from obviously everyone operating it, to building it, to the community around, and it's... It's a whole different ball game. And how did you go through that decision tree to kind of stay on target once you've dealt with all the people? Because oftentimes what I find is people who come from a finance background, when they start having all these people and they're bootstrapping, so to speak, they pack up their tent and go away.

Like what, what made you. Um, and Philip kind of lean into the people part of it because that's, that's like the real magic because it's all people that make it all happen.

Ethan Orley: Uh, well, I'll, I'll, I'll be honest with you. If, if, if that 28 room hotel that we started with was 280 rooms, we would have ended up with a larger management company. And we never would have started our own management group, so to speak. And by the way, when I say management group, it was me and Phillip working in our little efficiency apartments in New York or elsewhere and just trying to direct traffic.

So it wasn't much of a company. We were doing our own payroll at the time. And Phillip was doing the accounting. So really, we had no choice but to get into it because it was such a small property. And we knew that nobody else would try to save We tried to save a nickel, you know what I'm saying? So we had to man, kind of man the cash register.

Um, and so I think it was really just a function of that. And then we learned as we went along and we both liked the details. I think I liked the details more than Philip. We both have our, our, our strengths and weaknesses. And I like to get into the stuff and pick, you know, pick those little, uh, you know, odds and end operating supply and equipment pieces that most people could care less about.

I love the branding. I built the first website, you know, I, I, I like, I like working with all those individuals. Um, I don't think I'd be great behind a front desk. I'd probably talk to the. You know, talk to the guests too long and we keep people waiting, but you know, we got involved because we had no choice.

And once we got into it, we realized that frankly. You know, from a finance standpoint, from just an investment standpoint, you know, when you invest in a hotel, um, you can make fees on the front end. Then you can, you know, wait until you pay back your investors and, um, you know, hit their preferred investment.

And there's maybe a split, there's some kind of capital moment, you know, three or four years later during a refinancing, you eventually sell it. But in the in between moments, there tends to be very, very little cashflow. So if you. If you left your job and you've decided to go open a hotel and you don't manage it, um, there's probably not going to be very much income along the way and you've got to support a family.

In my case, I had, uh, just at that point, I just had, uh, two young kids, um, and I had to, I had to create some income. So the management side of the business actually allowed us to have some operating cash flow along the way that we would have given up to somebody else.

Dan Ryan: Yeah, and again, it's that, it's bootstrapping and all of those things that you're talking about. But again, another interesting thing is. For those people who are in finance and they experience the people part, and they're either leaning into it or running away, it's very rare that the partnerships are as enduring as you and Philip, right?

And I think that that's also a testament, like, yeah, you can do it alone, but if you can... If you can somehow find a partner to, to lean on and go through the ups and downs and stick together again, but you are gluttons for punishment in a way, maybe that's what kept you, you both together. Like, how did you, how did you guys realize that you were great for each other?

And then did you have any. Like prenuptials before getting into it so that you had, like, you could pull the ripcord and still appreciate each other if it, if it wasn't going to work out, like, how did you navigate that whole thing for the long road?

Ethan Orley: That's that's that's that's that's the million dollar question. Um, they, they, somebody told me a couple of years ago, they said, well, If you've been partners for over 10 years, you'll probably last at least another 10 years together. And I was like, I was like, that's, that's probably a pretty good point. If it was going to break up, it would have already broken up.

Um, partnerships are marriages. Um, I, you know, I've, I, I'm, I'm very happily married. Um, but you know, anybody who is married, uh, or in whatever partnership you're in, I mean, it's, it's work. And, um, Um, Phillip and I have our highs and lows like any partnership, but I think what keeps us together is ultimately trust, honesty, integrity.

Um, I know when he does things, he does it for the, for our collective kind of best interest and he does, you know, he knows that at least I believe he, you know, he thinks the same of me. So that is the basis. You know, if you've got to over, look over your shoulder, it's probably a pretty bad sign. Um. We also work very hard.

Um, he works hard, I work hard. Um, and I think what attracted me to Philip at the very beginning was I thought he was one of the smartest. Um, kind of thoughtful people, creative minds, uh, that I'd met. Um, and he, everything was just a puzzle. Oh, you know, I do this and you structure this way and we add this to it.

And we just, I'm like, Oh, well that actually, when you break it down, it makes a lot of sense. So, you know, I, I think, um, I tend to work more on the creative operational side. I also do a lot of our, um, capital raising on the equity side. Um, Phillip has always done more of the, um, debt structuring, um, um, property acquisition.

He's got a great set of eyes. Um, and really kind of between, you know, Philip buying the property and then it kind of goes to me to pull the team together, um, set the branding, um, and, and work with the interior designers. We, we, we end up kind of all, you know, the whole thing falls into place. Right. So, you know, you know, one person's good at, you know, making dinner.

The other person is, is, you know, is great at tutoring the kids. And we all kind of just work in this dynamic, crazy atmosphere. Uh, we are 50 50 partners. Um, we have a, at this point, over a 20 person corporate team. Um, you know, over 300 people, uh, working with us, um, across, uh, six operating hotels in four states.

And it somehow all works together.

Dan Ryan: I love, I remember in the fair lane before, like when you, before you started demoing, I believe it was before you started demoing, going in there and see there was like three or four of you. That were because you were putting your offices in there. I was like, it was so cool. Like now it's, it's amazing to have seen your, your growth.

I think a surprising thing I just learned about Philip from you, which shows me, because if I, if I compare his type and I'll get to the type in a second to other people that I know, like him, they are the smartest people in the world because the ones who are in college that buy the house and renovate it and either rent it or flip it while they're in college.

Yeah. They win.

Ethan Orley: Totally.

Totally.

Dan Ryan: Wow. And I, now I'm going to have to like, I think some of my kids and their friends listen to this, and I feel like I just need them to know that when they're in college, try and get a duplex or a fourplex, renovate it, rent it out, and go, and then you can either keep it, or sell it, or 1031 it into something else, and that's a good path forward.

Ethan Orley: You know, it's, it's funny all through college, all I wanted to do was buy a place and fix it up. I love fixing old things. I just, I love, I love just, uh, you know, I, I, I wanted to be in business for myself probably since at least since high school. Um, and the funny thing is that I, I tend to be a little bit cynical, skeptical, you know, there's too many opportunities.

Like, you know, I get, I get lost in the jean store kind of thing, you know, too many different cuts.

Dan Ryan: hmm.

Ethan Orley: And so Phillip would say, okay, well, this is the cut. Um, but it's not exactly the right size, figure it out. And so I'm the, I'm the fixer. If you give me a problem, I'll stay up 24 hours and I will figure out how to get it, um, um, right sized.

And so that's kind of how we work together. He, he finds the problem and, and, and I'll lead you to jump in and try to, you know, fix, you know, get to the solution. Um, so, so, so, so we work in tandem that way. It's fun.

Dan Ryan: And it's interesting. Cause like when you were saying, saying how, when you first were starting, you would do the website, you would do this. So you're like the tinker, you want to figure it out and you're going to find the best way. I feel like that's me too. I like. When presented with a challenge, any kind of challenge, I like solving it.

Like, for instance, uh, when we did the furniture at the Fairlane, I remember things went in storage for a while because it was delayed. And then there was like all this cloudy finish. And I went back to, and the factory was like, oh, the, the packaging attacked the lacquer. I'm like, what the fuck are you talking about?

That doesn't happen. And they wouldn't pay for it. And I was like, I need to figure out a way to just make the doors. I'm going to make it right. But it's like, I need to always, I need to be presented with a challenge and I'm going to find a way to shine. And, but I do appreciate how on the Phillip side, he, he's like, he'll find the challenge.

And that's, that's a really good, um, Venn diagram for a partnership. when you look at the process of finding a property that needs some TLC, and then you look at all the different stages of where you add value from, from the purchase, To the reposition to the operation and maximizing the operational cash flows. Um, to exit, like, where do you think that you, that you and Philip add the most value to your investors?

Like, if, if I were an investor looking at a project that you were looking to do, where do you, where does most of the value come from your, from your partnership with, with Philip?

Ethan Orley: the, the adage that it was, was, was, was told to me many of times growing up was, You make all your money at the buy. You can't, you, you, the only thing you can control is your, is your entry point.

Um, it's going to cost what it's going to cost to renovate. You can be skillful and we've worked with, you know, we tend to work with kind of roving crews.

Um, we don't always end up with the, uh, kind of white, white shoe, uh, GCs. Um, We're a little bit kind of, uh, we're bootstrappers, you know, ourselves and sometimes the folks we hire and just to save, just to save a few dollars, um, and to be kind of creative and a little bit more kind of speedier to the finish.

Um, um, but you know, the buy is, is important. Um, and as we all know, you can't predict timing. Um, you know, and, and we tend to buy, you know, when we started. So the Oliver was in Knoxville, total tertiary market, still a tertiary market, but now all of a sudden it makes more sense, especially post COVID, you know, you know, you give somebody an option to invest in a, uh, second, you know, an Asheville or Chicago, just, I'm just trying to think of a good example here, or Savannah, uh, and maybe even in Knoxville, they, they might say, you know what?

We'd like to be in those markets, um, urban, you know, tertiary is the, is the, is the, is the new, is the new kind of cool, cool kid, um, because of the work from anywhere mentality. Um, so we got lucky in buying in markets like Knoxville, uh, Nashville is just, just dumb luck. Um, Atlanta, Atlanta was interesting.

Atlanta is a top, top market, right? So it's, it's, uh, I don't know if it's the largest, the second largest city in the Southeast. Relative to, I guess, Miami. Um, but you know, you're talking about a market that if I recall had 85, 000 hotel rooms. and so they did not need another hotel, and they did not need two guys, you know, working out of, uh, you know, their efficiency apartments, you know, buying an old hotel.

And, um, and so what we brought, you know, Philip and I asked ourselves, why us, and 2010. What we determined was Atlanta has a ton of money and a ton of very, very accomplished developers. And what happens. Within our own cities, and I see this happen in Nashville where I don't see what other people see. And so I've missed out on a ton of opportunities here locally.

Um, is I think, I think the average person developer in Atlanta said, uh, we develop along peach tree. We develop in Buckhead. Nobody has ever gone, you know, you know, east on Ponce on Ponce. That's a no go zone. My parents didn't go there. I'm not going to go there. Wrong side of the tracks, too much hair on it.

And by the way, we can just go buy a piece of greenfield and develop something ground up, which is what we always do, you know, and that was the opportunity. We bought a building at 40 a square foot. Um. Two, you know, two and a half acres, uh, you know, right near the Beltline, which had not fully formed at that point, but it was, was, was, was under development.

Um, Jamestown was developing Ponce City Market, you know, a multi hundred million dollar development that still hadn't fully formed yet. And so the buy was good, but it was beyond that. It was. The creativity of, of getting rooms into that hotel that felt, um, comfortable enough, um, and exciting enough for the average hotel goer to, to accept and really to stand out in a market as big as Atlanta, what we provided.

Was a product that did not exist in a true lifestyle format. There were plenty of independent boutique, but none of the caliber that we had experienced in Los Angeles, San Francisco, Miami, New York, Chicago, there wasn't that defining hotel to us that really was just like so memorable. You want to buy the hat and wear it.

And that to me, that's it, right? You can be a cool hotel, but until somebody is going to want to wear that hat, everyone's like, oh man, that place is awesome. We had the best night there. That is the differentiator, right? The t shirt and the hat that you want to wear proudly, not that you just buy because you were, you know, you didn't have a hat for the day, like at the Four Seasons playing golf or something, you know?

Dan Ryan: hmm. And, and, and yeah, and most hotels that you would stay at, there's no desire to buy a t shirt or a hat after your stay, right? Because... In a way you're buying, your guests are buying that t shirt or hat. I think that's a great metric, by the way, because they're buying that because they had a memory, right?

And now, and they want to carry that with them and wear it and talk about it or not. And so in, in that idea of creating memories, if you were to look at your portfolio of hotels, like what's a real, what's a great example of that kind of idea of hospitality where you're. imprinting a memory or create, or your guests can create like a really wild memory.

Ethan Orley: I'm trying to think of the right, of the right, you know, answer to the question. I think. What we're, I'll speak kind of broadly and then kind of narrow it in. Broadly, because our hotels and really anybody else that's in the kind of boutique hotel business or hotel business at full service in general, a larger proportion of your revenue is coming from food and beverage than ever before.

What used to be 20 percent became 30, became 40. Now we're at 50. I mean, there's some hotels that are doing 60 percent F& B revenue, um,

Dan Ryan: most of it is the B, not the F, correct?

Ethan Orley: Um, and it better be most of the B than the F because the B is really where you're making your money. And anybody in the restaurant business knows that, um, you know, if you stop drinking at a restaurant, they're going to go out of business. Um, so our, our hotels tend to be in that 50 percent camp, uh, and for your listeners who don't know, F and B is food and beverage.

And beverage, um, you know, tends to have a, um, much higher margin on it than does food. Um, your cost of goods sold with food is call it, you know, industry standard, you still use 32%. Um, and, and beverage, and beverages in your, uh, you know, you know, 15 to 20 percent camp, depending on what it is. So we tend to try to keep our guests entertained and, and really we look at everything as the layer cake.

You know, um, in Atlanta, it's, uh, start your evening off at the Lobby Bar and then you go to Tiny Lou's one level below for, a meal at our French restaurant. Then, uh, after that, um, head to the rooftop. Um, for, um, views of the city and another, uh, kind of post dinner cocktail. And then after that, call it, you know, 11 o'clock, 12 o'clock at night, head down into the sub basement of the Claremont Lounge.

And so we're keeping folks entertained, um, you know, in what we call a layer cake, or I guess you could even call it a cruise ship. You know, keep people on board. Um, and moving around. Um, so I, I think the Claremont is the best example of that. At the Fairlane in Nashville, um, you know, we, we try to create kind of multiple memory outposts.

lot of folks have a brand guide, right? That has colors and, you know, what's your voice? You know, I, I tend to look at it as like, who's our character and what's our character doing? So at the Fairlane in Nashville, because it was a 1972 bank headquarters for Fidelity Federal Savings and Loan, um, and it was this beautiful travertine, uh, 13 story building.

We hit, it was, it was, I mean, you couldn't build this thing today, it'd be too expensive. And, and we just imagined this chairman, CEO of the bank, you know, strolling in and you've got this like seventies kind of like. York CD and not being CD, but kind of this, this kind of fogged over delicatessen window you might encounter in Chicago or New York or Philadelphia.

And so you go in there for your coffee and your hand rolled bagel, and then you go to your room and after your room, you go for a cocktail on the 4th floor at Ellington's, which is our kind of homage to 1970s power lunches. Um, in the vein of like, uh, you know, windows of the world and the world trade center, but kind of dumped out a little bit.

Um, and then, and then once, once your day is, is well over you, you, you rise up to the penthouse, which beyond just being a. Rooftop bar was kind of this like, uh, uh, Will Chamberlain 70s, like wild, uh, penthouse experience. And you could kind of hang out in the CEO's penthouse overlooking the city. So it's really just taking the, the guest, um, through a journey.

Um, it very much is like a kind of live action theatrical performance. Through multiple venues, and that's really the art side of the business that that really creates those memories.

Dan Ryan: Um, I love the idea of the layer cake and actually I want to dig into that, the B part of the F and B. So if 50 to 60 percent of the revenue of one of your properties is coming from the F and B, When you look at the net operating income or the profit, uh, the net profit margin or however, however you want to describe it, what percent of the, of the bottom line, so to speak, if, if 50, 50 to 60 percent of your gross is on the, um, from the FNB, what, what, where does that wind up down at the bottom?

Like what percent of the, of the net?

Ethan Orley: you know, 12 to 15 percent margins on a. Full service, um, upscale restaurant is good, right? Um, 10%, you know, some people might say is, is good as well. Um, so you definitely have a much greater margin on the hotel rooms. Um, and so you'd rather be in the rooms business than in the F& B business, but, um, you really have no choice but to be in the food and beverage side, um, given that it enhances, people are going to spend more on the hotel room when they know they're going to have a great food and beverage experience and, and, you know, you can Remember if you were You can only sell a room once per night, right?

But you could have, you know, you could, you could, you could have three deep at the bar. So really your. Your revenues is somewhat maxed out in a sense on the room side. Once you, once you hit, you know, most hotels, you know, never exceed 70 percent occupancy for the year. So that's kind of your, your standard and your rate is really derived as a function of, you know, demand and competition. Um, in the market, but the food and beverage is really the variable for any hotel. You know, you could project 3 million in F and B and all of a sudden it's six or seven and you could, you know, project, you know, seven or 10 and you only, you get a dud and it's only two or three. Um, and you get some very angry investors along the way, but, but that's, that's the great, the high and the low of F and B is.

It can make or break a hotel. Um, and it's a necessary evil, but yes, the margins are much stronger on the events side of the business. Uh, uh, events is, is, you know, is, is right up there and then rooms, um, and then, um, and then, and then beverage and then food at the bottom.

Dan Ryan: Got it. Um, so of all the deals that you've done and reposition and created these place memory making locations, um, if, if, if you can control the one thing, which is the buy, so to speak, which, like, of all of those, which one do you think you bought the best?

Ethan Orley: bought the best. Well, um, if you look, if purely by number, um, The, the, the project we're in in California, we took over State Park for 55 years, um, and the state of California, uh, gave it to us, um, it's a concession agreement, and so we don't own it, um, but we, uh, operate it, and so there was no transaction cost in getting into the project, but in return, we had to put in a significant amount So that one probably is the best buy because there was no buy.

It's an operating agreement. Um, you know, the Oliver again, kind of post recession pricing back 12 years ago, um, was, it was a good buy. The Claremont was a good buy. Honestly, I think all of our projects is what has been good for us and our investors over the years has been a very good basis every project.

And so at this point, we've never, we've never had a loss, um, in our kind of short career so far. Um, and, uh, and so we haven't hit home runs every time. I don't think anybody ever has. Um, we've had our highs and are kind of mediocre, but we've never had. A total loser. Um, and I think a lot of that rests on, on the fact that we've been very patient, uh, we haven't been forced to put out money or to buy, um, as, as you might feel if you were a REIT or you had a fund.

Um, and so we, we end up, um, just sitting back and, and being way more opportunistic. The other, other part of our business that's been, um, good to us is that, um, and it will change as we get larger, but we've always kind of been in that, uh, middle market space. Um, you know, you know, at first we were buying properties in the, you know, one to 3 million range.

And then we were in the. 5 to 10, and now we're in the 10 to 20 to 30 to 40, but, you know, it gets even more competitive at the institutional level, um, at the 50 to 150 million level. Um, but even at, at that point you could buy something well and do even better. Um, so, you know, hotels and, and the hotel business is one that is the, um, it's either the fifth or the sixth food group, you know, whether, whether or not you count it as real estate or as an operating business.

Certainly it's an asset class that everybody wants to get into, but most people don't know how to operate in. And so there's a lot of opportunity to buy a property that is not performing for one reason or another. And if you have a way to fix it, there's tremendous upside in value that can be created.

But, but at least right now we end up operating in that middle market. It's, it's too small for the big guys, too big for the small guys. Um, and they tend to be in, in markets where, you know, the average person might be doing a branded hotel or. Maybe isn't willing to be as big of a risk taker as we are to kind of go for it and do something as crazy as we have in the past.

Dan Ryan: As you're, as you're talking, what I'm visualizing is my trip to Cooperstown many moons ago and looking at the, the, the strike zone that Ted Williams had where he would, you know, there was like a heat map for like the pitches that he would take and I feel like you're in this place that's almost like a, not a no man's land, but it's like, it takes a certain, as Liam Neeson would say, a certain, what is that?

A certain set of skills. Uh, I have a very specific set of skills where, you know, you're good with the people, you're good with the finance, you're good at bringing all that stuff together, it's that glutton for punishment to really push it forward and make it work. On a valuation question, more jokingly, um, for Knoxville, did you see the valuation increase after they fired Lane Kiffin?

Ethan Orley: You know, you know, it's funny every year somebody comes up to you going, Oh man, that hotel must be worth a fortune now that, you know, you know, our scoring's gotten better. I mean, it's, it is the funniest thing that we get into these projects in SEC towns. We just opened a hotel up last month in Oxford, Mississippi.

Um, also called the Oliver Hotel, um, but of, of, of, of Oxford, um, kind of our first, you know, entry into, into kind of the brand making. Um, it was another three story brick building right off the downtown square. And we thought, you know, in an SEC town, we thought this is another Oliver. Um, and everyone came to us and said, Oh my God, you guys are going to kill it.

You know, during, you know, the football games, you must make a fortune. I go, guys, the football games represent, you know, six or seven weekends. I got 52 weekends and 365 days. I mean, that does not pay the bills. sorry. mean, it feels good. Everyone's like, man, you're making a mint. Um, and then every year they're like, man, you must be suffering this year because those towns do live and die by the success of their team.

So, um, I'll, I'll support any, any good decision when it comes to the sideline play.

Dan Ryan: Good. Fire lane is all I gotta say. Uh, anyway, moving on. Um, as you, as you and Philip, and actually I really wanna have Philip on. I think it'll be really cool to interview Philip too, because then I, we can get the. That he said, she said, we'll compare notes. We'll try and keep him in a compartment so he's not listening, but, um, but, um, as, as you look forward, and you and Phillip look forward, like what, what, and what you're seeing out there with this really, um, challenging rate environment and inflationary environment, I also think that's the time to find the most opportunity if you're a shrewd operator, but, um, What's exciting you most about the future?

Ethan Orley: Um, a few things. One is, in the last 36 months, um, our, our, our, call it our brain trust, our corporate team, um, you know, my trusted colleagues, we have, we have grown our ranks. Um, and so we have a phenomenal. Uh, new, um, colleague who's our COO, um, Chad Abramson used to be with, uh, 21C Hotels running, running their operations for a decade until they sold to a core.

Um, Uh, I can go on and on, uh,

Dan Ryan: Investing in leaders.

Ethan Orley: investing leaders, uh, Ashley and Sondra and, uh, Brandy. And I mean, there's, you know, everyone has their, their place and, and we're only as good as, you know, um, as the team working together. So what is exciting for me is that. But I hopefully can spend less time, um, called it doing the paperwork and doing more time out there, um, trying to find opportunities for our team.

Um, and what they're excited about is growing the company. Um, when we're, when we're not growing, everyone gets bored real fast. They all say they want a break, but we're all glutton for punishment. We love, I mean, everyone loves an opening. Um, it gets everyone together. Um, it's a little scary. Um, but. I'm excited about, um, continuing, um, you know, being in acquisition mode, enhancing our current properties, finding opportunities to, to tweak, um, um, the formula, the programming.

Um, but, you know, earlier, you know, you mentioned, um, uh, as part of your question that, you know, we're kind of in a stalemate, you know, frozen capital market situation right now and it is affecting anyone. Who's in the hotel space, um, or frankly, the real estate in general. Um, it's very challenging today to raise equity and debt for projects.

Um, we actually bought a, the old grand hotel of Knoxville last year. Um, 160, 000 square feet, it'll be almost 170 keys, ballroom, rooftop, you name it, beautiful property, um, and uh, so we're currently trying to raise capital for that project, um, beyond the acquisition. And, um, you know, anybody wants to partake in Knoxville, welcome to call me.

Dan Ryan: Have you tried Dolly Parton?

Ethan Orley: I have not, I've not tried Dolly, but I am planning on going to Dollywood with the kids for fall break. So, you know, maybe that's my, entry point is, uh, I'll go to your resort if you come to mine. Um, and, um, and beyond that. We have, have slowly but surely made our way into third party management because it's a way for us to expand, um, our, our, truly our, our revenue base as a management company.

And we can, you know, we can bring in more people, give people more opportunity. So if we don't have, and for those people who don't know what that means is, you know, in the hotel space. Um, there are people who, um, license, uh, uh, uh, call it brands or reservation systems, the Hiltons, the Marriotts of the world.

There are people who develop properties, developers, owners, and then there are management companies. And unlike a lot of other businesses, there are management companies that just, you know, Manage hotels and there are development companies that don't manage, they just own hotels. And so it's very segmented.

We tend to be vertically integrated. Um, and, um, and so we are, we are exploring several third party opportunities where we can come in and help people who want to get into the boutique hotel space, um, who might own a, own a building or they're looking to buy a building. And they're going, we don't know anything about this and we can say, Hey.

You know, look, look at our portfolio. If you like what you see, we could probably do it for you too.

Dan Ryan: Okay, that's awesome, because I think as difficult as the environment is, I think it's also a time for finding some real, real gems. Diamonds in the rough, if you will. One last thing I just wanted to quickly touch on. Is as far as excitement for the future and building your, like, investing in your leaders and building it, like the investment side, yeah, okay, there's, you know, you're investing in the people with money and salaries and benefits and all that.

But I think one of the things that in a lot of these conversations I have is the investment in time in the next. Round of leaders that you're bringing on. So for you and Phillip is like founding partners. What are ways that you invest your time in the new leaders and from like a coaching perspective, or like, how do you guys do that?

So you can get the things out from between your ears. Into them from your, like how do you share your experience so that you can shorten their journeys?

Ethan Orley: we have, we have people that have been with us for a long time. Um, I just came back from, like I mentioned, from California yesterday. I was with my colleague, Craig Bradford. Um, who's an unbelievable kind of brilliant engineer, um, and, and it really helps, it kind of helps take, um, the insanity of some of these, uh, retrofit projects, you know, the old kind of call it old busted hotel, busted motel, and, you know, kind of, you know, turn around, uh, this is like, uh, This is like, uh, you know, instead of Restaurant Impossible, this is like Hotel Impossible.

Um, I tend to work best with people who are, call it adults, who are professional, who are 110 percent invested, who also don't sleep well at night because they're thinking about how to solve that problem. And so I, I, I, I don't love, I love mentoring. If you asked me to help you with something, I'd probably spend all day, you know, looking into it and giving you all, you know, I'd give you all my, my notes.

Um, but you know, I, I, I think Phillip and I both tend to work with people who are just. As excited as we are and love to nerd out on all the, all this minutiae. The other thing that I think we both do, at least I do, is try to work harder than anybody else and, and I think, you know, if I'm working hard, other people are going to be like, oh shit.

Ethan's doing that. I better keep up. Um, and I, and I don't do that to, to, to encourage people. I just do that because I have no other life, but this hotel life I live in. Um, and so I think, I think when people see that intensity, um, you know, when, when we first started this business, Phillip and I were spray painting frames gold, um, for, for the, for, for Knoxville because, you know, we, we, you know, we bought them like frames.

com. We had to spray these things on. Our fingerprints are all over them in all the rooms. Yesterday I was in California. I mean, I was, I was schlepping, I was schlepping, um, tables on my head down the road into the rooms because somebody had to do and we're opening this week. And you know, I, you know, call, call me, call me a frugal or, or dumb, or, you know, um, maybe I'm not a great, uh, uh, delegator, but I believe that if you're willing to work hard.

People are going to be attracted to that, the right people are, and they're going to be working hard right alongside you.

Dan Ryan: Yeah. I think, uh, a lot goes to say like charging up the hill, like literally charging up the hill and not pointing, um, leading your teams up. It, it, it goes a, a tremendous way. Um, Ethan, this has been awesome. I really want to get, uh, Philip, I think it would be really fun to have Philip on now and like that'll be great.

And also just like, I think it's, I don't, don't think I've had part, like part business partners on in the past two years. Um, as different as you are as people, like, you're so similar in so many different ways, right? And, uh, and obviously you have to be as partners and for, to do all the great things that you've done.

Like, there's like definite alignment and synergy, which goes without saying. Um, but this has been so fantastic. If other people wanted to, like, reach out and learn more about you, your hotels, or Oliver, or anything, like, what's the best way for them to get you?

Ethan Orley: Um, probably through oliver hospitality.com, which is our, uh, which is our, um, hospitality company website. Um, or they're welcome to email me directly at, uh, ethan@oliverhospitality.com. Um, and, uh, a me a myriad of ways, uh, LinkedIn, et cetera. I'd be happy. To, uh, to discuss.

Dan Ryan: We'll put all that. Um, we'll put that in the show notes. Um, Hey, we've known each other for a really long time. I've really enjoyed this conversation. Um, Ethan and I just want to say thank you a wholehearted. Thank you for investing your time and sharing your experience with everyone else in, you know, it's just so awesome.

I get such great feedback when I have people on and they share Thank you. their experience, I really believe it shortens other people's journeys. So thank you very much for sharing.

Ethan Orley: Dan, it's, uh, kismet that we're here back together. Um, it just, it's, it's, it's great to see you and, um, be able to kind of hang out with you in, uh, in, in, in this, uh, context. And I look forward to seeing you in person here soon.

Dan Ryan: Yeah, a hundred percent. And I'd be remiss without thanking our listeners. Without you, I wouldn't be sitting here with Ethan and Philip would probably say, no, I don't want to talk to you. you. Thank you listeners. We, we appreciate you all. And Philip, I appreciate you too, but Ethan really thank you.

Thank you. Thank you.