Scaling Proprieter-Driven Hospitality: The Palisociety Story - Jorgan von Stiening, Palisociety

Josiah: Let's talk a little bit about the business and the structure of it. We all love the beautiful architecture and the design. But at the end of the day, this is a business as well. How did Palisociety come to be structured the way it did?

Jorgan: Yeah. When I started about five years ago, we were a local hotel company. We had three hotels in Los Angeles. The average room key was about 35 or so. So it was really unique in the sense that they were just small properties that were operated with a sort of corporate layer over it. When I started with the company, I thought that was incredibly compelling because what I saw that we were doing was adding this really powerful corporate engine to these really small hotels. And I thought that was a really compelling business model. I was hired to help take a local hotel company and turn it into a national platform. And we've kept that corporate engine mentality, which ultimately powers these small hotels. So what that means is we have a really big corporate team. We have about 60 people on the corporate team from all functions, from revenue, to accounting, to payroll, to human resources, to social media, IT. It all sort of sits at the corporate level and there's you know, a lot of really talented professionals that drive these typically back-of-house skill sets to the properties to help drive their revenue and growth and give them a lot of power. Typically hotels that are 30, 40, 50, 60, 70 keys just don't have that type of brand power. And we really see it in the performance of these properties are, you know, the industry really driven by RevPAR and RevPAR performance and RevPAR metrics, and we just see incredible success in the RevPAR metrics of our properties compared to their peers.

Josiah: You sort of answered the question that I was going to ask you around what is the advantage of building a corporate engine behind this, right? And so it sounds like you're able to attract talented people on these functions that support the properties and the business performance of the properties.

Jorgan: Absolutely. We're able to get very talented people. We're able to retain very talented people. And the properties are able to benefit from the incredibly talented people that we have at the corporate level. I mean, at the property level as well, but, you know, talking specifically about the corporate team. And, you know, again, there's a lot of brand power that sits at the corporate level. And the corporate team, the corporate engine is really entirely about driving that power to these smaller properties.

Josiah: How do you decide what roles can or should be at the corporate level versus the property level? Some are very obvious, but I feel like there's also a whole sector that might be kind of a gray area.

Jorgan: Yes, totally right. I think at the core, it's what functions are needed within the four walls of the hotel to keep up property maintenance and drive customer service, customer satisfaction. On the operation side, it's pretty clear. Food and beverage side, it's pretty clear. On the property maintenance side, it's pretty clear. So we have hotel managers, general managers, hourly staff. Food and beverage side, we have restaurant managers, chefs. And on the maintenance side, we have engineers. We have a local salesperson at pretty much every property as well. Aside from that, everything else is at corporate because we find that we can be a lot more effective, hire better, more talented people, and deliver a better service at a more cost-effective rate by having pretty much all of the other services sit at the corporate level.

Josiah: It feels attractive to have talent split in that way. I'm curious, though, if you've run into challenges. I've heard for some others where they want to retain that sort of local element of hospitality and don't want to become too, "corporate." Have you run into any of those challenges?

Jorgan: You know, we have. Yes. We have a pretty deep philosophy here that is about empowering the teams locally to deliver the experience that we have crafted at the corporate level. We have very specific protocols, very specific procedures, and very specific brand standards. What I want the local teams and local general managers to do is implement those standards and procedures. I want them to be able to be reactive to local market conditions that impact the ability of the hotel to perform. But what I don't want is I don't want local teams deciding on what is a brand standard. I don't want them to deviate from the very specific parameters that we've cultivated and curated over time because that is really at the soul of what it means to be a proprietor-driven hotel. So from a design standpoint, from a customer service standpoint, from a tone standpoint, it's very, very, very driven by the corporate team. Locally, we need people who think like entrepreneurs and who think like business people to mind the store, to take care of staff, to drive culture. But it's very clear what decisions can and cannot be made at the local level.

Josiah: I wonder, can you speak a little bit more to how you are thinking about brand standards, either how those are created or, you know, I don't know if you revisit them at any point.

Jorgan: Yeah, it's really, it's difficult to say because all of our properties are really neat. If you go to a Hilton or a Marriott, your brand standard is going to be, there's got to be this size closet and there's got to be this dresser. We don't really have that. We occupy a lot of really unique spaces, a lot of old buildings, a lot of historical buildings. From that standpoint, we don't. But we do have brand standards in terms of property conditions. We have something called the iPhone detail guide at every property. It is a very detailed book. of every inch of the hotel photograph. And every day, every week, the property teams have to flip through the book and make sure that the property looks like the Eye for Detail guide. This is a very, very, very important thing to us. And it means, look, if the books are supposed to be on the left-hand side of the dresser, they have to stay that way. They shouldn't be moved to the right side of the dresser. And these are things that seem not important, but when you are a proprietor-driven company, the books on the left side of the dresser are intentional and we want them to stay that way.

Josiah: Does a lot of this come from Avi directly? 

Jorgan: Absolutely. Absolutely. I think the books on the left side come from Avi. That is why are the books on the left? Why aren't the books on the left side come from Avi? The process around making sure the books stay on the left side over the course of, you know, two, three years that comes from, you know, me and the rest of the team who put those processes in place.

Josiah: I'm curious, you talk about building this corporate engine. I think for me, what comes up is competitive differentiation. How would you describe being a proprietor-driven company as opposed to some of the other players in the space? What advantages does that give you?

Jorgan: Look, you know, I think that there's some other brands who I think do it incredibly well and who we see as sort of aspirational for us. You know, I think the brand that we talk about the most in terms of, wow, they're doing it really well is Soho House. The level of attention to detail and the level of intent that goes into seemingly everything that they do is really impressive. I think one of the best hospitality experiences I've had is the Soho Farmhouse in the UK. They have captured the essence of upper class, countryside, British living and style so well. And you see it reflected in every detail of the property. And it's so inspiring. We get a lot of inspiration out of things like that, out of companies and brands like that. And that's what we try to put in to all of our projects. And every project that we have, I think, is a little bit better than the last. We're always learning and elevating the craft. And I think that's what you get from a proprietor-driven brand. It's an emphasis on always doing better. It's an emphasis on the most minimal details of a property because that property is just, the property at the end of the day is a reflection on him, on Avi, on me. And it's important. It feels very personal.

Josiah: It's fascinating talking with you about this because it does seem to be a thread throughout some of the most compelling brands that I know. Sometimes these brands get sold and it feels like they lose some of their soul in what created them, in what made them so special. I think there is something about that innkeeper's mindset, that proprietor-driven hospitality. But it's interesting talking with you about how do you scale that because it seems as a guest here, it seems like that has translated still into there's some scale that is possible.

Jorgan: Yeah, you know, it's it's so funny because that's when we were a younger company, that was a concern. How do we take this very personal level of attention and scale it? But the fact of the matter is it's gotten easier as we've gotten larger. And I think, you know, that's not to say that, you know, if we hit 75 hotels, it won't get hard again. But it's gotten easier because we have really great people. We have really great systems. We have really great processes. We've got these eye for detail guides. We have the tools that allow us to do that. We have a team that is just exceptional in what they do, and a team that's really in tune with the vision. We rely on them to execute and repeat, and repeat, and repeat. So seemingly it's gotten easier to maintain that level of integrity. That's not to say that, again, that's not to say that that doesn't change when you hit 100 hotels. But for now, I think it's going pretty well. I love it.

Josiah: Do you want to speak a little bit to kind of where you see the organization going from here and kind of like what success looks like if there's an endgame? What are you most proud of building here so far?

Jorgan: I am most proud of, we've scaled the company tremendously over the last five years. Going back to something we talked a little bit about before is people take a lot of pride in working here. It's a brand and it's a company that people have a lot of pride in. We have a lot of employees who have a long tenure at the company and being in a position where we are responsible for the careers and the professional growth of these employees feels, again, it feels really personal, it feels really special. I had an employee recently who, Maybe because it's almost bonus time, but he he he reminded me that he was there are some groups that have that have asked him multiple times to come on board. And he said, but I'm not I'm I'm not leaving you and I'm not leaving this company. And it feels if it feels. It feels good. It feels good knowing that we're fostering a culture that empowers people, that allows people to grow in their career. And, you know, there's a lot of people who were relatively junior when I started, and now they've become vital to their organization. It's an incredibly proud feeling.

Josiah: What do you chalk that up to? Because so many organizations in hospitality are really struggling with retaining their talented people. How are you seeing success in this area?

Jorgan: I think we have a really good culture here. I think the people, especially at the corporate level, and it, look, it's a tone from the top thing. So the culture at the corporate team absolutely trickles down all the way down to, to the line staff. And that's, that's something that we've taken a lot of time to nurture. I think people really enjoy working here. I think they feel empowered. They feel a sense of responsibility. They feel accountable for their actions. And I think we have a team of A plus talented people that have seen the company go from a three-hotel company to now almost a 30-hotel company. And they all feel like they have a part of it and they played a part of it. And it's absolutely true.

Josiah: Is there anything that comes to mind on anything you and Avi do? It could be a very, very small detail in how you interact or communicate. You talk about kind of leadership trickle or the culture trickling down. How does that reach frontline providers of hospitality, any way that you operate?

Jorgan: Yeah, I think it's about It's about enjoying the time that you spend during your day. It's about enjoying your job. It's about enjoying the interaction that you have with your coworkers and the people who you report to. It's palatable. You feel the excitement. You know, we've had a busy year. We've opened six hotels in the last 12 months. So people work really hard, but they really enjoy it and they see the product of all their hard work. At the end of the day, when you open a hotel and it's beautiful and people love it and the team is functioning, you just see the result of all of your hard work and people see it and they feel a lot of pride.