Crowd funding is a fairly common term we hear in many areas of business today, especially with the ability to promote these opportunities online and gain a large amount of interest with relative ease. While this concept is familiar, the Hard Rock Hotel Palm Springs has possibly opened a “can of worms” for the hospitality industry.
It’s not only a way for films, non-profits and political agendas to quickly raise money; but could this be the solution for hotels looking to make renovations, or even for investors looking for start-up capital to launch an entirely new hotel project?
I was fortunate to spend some time discussing this unique approach for hotels with Jim Burba and Bob Hayes, Co-founders of Burba Hotel Network (BHN); and clearly two of the most knowledgeable experts in the field today focused on hotel investments and development.
“We spend a lot of time in Palm Springs, and when it was announced that Hard Rock was coming to town, there was a lot excitement,” says Jim Burba and Bob Hayes. “The hotel is a vibrant and trendy addition to the city. This makes it a good candidate to try crowd funding, as there may be enough ‘funders’ who want to be part of the Hard Rock club.”
How It Works
For a relatively small investment of $10,000, you too can be an “owner” of the Hard Rock Hotel Palm Springs. Of course, like so many sports franchises that have people going around and publicly saying they are one of the owners of the team, when in reality they own a small fraction of a percent; the Hard Rock Hotel Palm Springs will surely have multiple “owners” taking advantage of the perks that come with hotel ownership when the renovations are complete.
“Hotel crowd funding is a ‘winning formula.’ Sophisticated investors are looking for a home away from home,” says Andy Carpiac, the hotel’s majority owner. “They come and visit and spend money and the more they visit, the more their investment appreciates. It attracts the exact kind of customers we want.“
Jim Burba says, “We operate our business with a similar philosophy. We aim to have people who are involved in our hotel investment events feel like stakeholders, with the hopes that they become our best cheerleaders. It seems that Hard Rock is doing this literally by having their customers become actual investors/partners. Who better to go out and promote the hotel than those who actually own a piece of it, albeit a small piece.”
What You Get
So, what does hotel ownership get you when you’re involved with this crowd funding investment? For regular guests, even hotel “ownership” at this level is quite rewarding. The primary perks are the same for the investor who contributes the minimum $10,000 as they are for someone who elects to take a gamble with a larger investment. For the investors, they are to receive VIP treatment when visiting their hotel that includes free use of the hotel owner poolside cabanas, 25% discounts off the best available room rates, free upgrades and priority seating at the restaurant.
“The crowd funding concept is cutting edge, and that’s why it’s the perfect fit for his hotel,” says Andy Carpiac. “Hard Rock Hotel Palm Springs is a destination hotel… an entertainment destination.”
Bob Hayes adds, “This crowd funding plan sounds like a great way to strengthen and involve the hotel’s regular customer base and encourage that customer base to go out there and promote the property.”
What Is Next For Hotels and Crowd Funding
Realty Mogul, a real estate crowd funding company, is handling this particular crowd funding project, and is certainly impressed with the initial launch of this endeavor. Jay Samit, Executive Chairman of Realty Mogul says, “It’s a way for people to pool investments and diversify, plus get access to something that was previously reserved for the big boys.” Samit adds, “This is going to fundamentally change the hospitality industry, which is perfectly suited to [crowd funding]. You go to Palm Springs, go to ‘your’ hotel, and you’re spending money that’s going back into your own pocket.”
Amazingly, since this crowd funding opportunity was open to the public this past Wednesday, the Hard Rock Hotel Palm Springs already has hundreds of thousands of dollars to put towards their large-scale renovation project to enhance the pool area and add a new nightclub. Thanks to the new “owners” of the hotel because of crowd funding, the renovations can be fast-forwarded, and begin almost immediately.
Samit feels strongly that this is the beginning of a definite trend in hospitality. Since the announcement, Realty Mogul has been “flooded” with inbound calls, from hotel chains, famous boutique hotels and more. “I imagine this will work especially well for a place with a loyal following and repeat visitors, like a hotel in a college football town that people tend to visit repeatedly anyway,” says Samit.
“Because of the statutory limits on the amount of money that can be raised through crowd funding, this doesn’t appear to be ‘game changer’ on how entire hotel deals will get put together – at least for today,” says Jim Burba and Bob Hayes. “But we also wouldn’t bet against any new ideas or trends that are developing, which tap into the shared society movement and social media. Crowd funding is a trend worth watching.”
Stay alert, as there might be an opportunity for you to be an “owner” of your favorite hotel in the future.