How We Cut Costs, Boost Margins in Tough Market Conditions - Roman Pedan, Kasa

Josiah: It seems every hotel owner and operator I talk with these days is talking about costs getting out of hand, and it's becoming increasingly difficult to run their hospitality business. That's why I want you to hear from Roman Pedan, CEO of Kasa, explain not only how they cut costs, but have structured their whole company to be as efficient as possible, to thrive in any environment, and do all of this without sacrificing guest satisfaction. 

Roman: I was at multiple conferences. I've heard, I heard like a few different themes that came up over and over again, where we're at the kind of intersection of helping to solve. So we're sort of like the demand and RevPAR of lifestyle hotels combined with the margin of extended stay hotels. Those are two kinds of things that usually are disparately talked about and we sort of unite them. And the margin of extended stay hotels comes from the fact that we are really dramatically lowering the cost of operations. That's most valuable to owners in cities that have difficult regulatory environments and higher costs across labor, taxes, and insurance. I'm thinking of Seattle, Portland, San Francisco, LA, Santa Barbara, Miami, New York. All beautiful cities. Great cities. But really hard to operate in. Yeah, it's like running a hotel in these cities is like training in the hardest gyms in the world. It's really, really difficult. And so what we have done is especially applicable to owners in these cities. One of the reasons it's valuable is we reduce fixed costs. So if revenue is really down in Portland or in L.A., we're still generating margin because there are not as much fixed costs at the property where no matter what you need an accounting team at the property or a revenue management team or a housekeeping supervisory team or people staying idly at the front desk, your fixed costs are much lower. And then your overall costs are much lower. The way that we cut costs for owners is by, we essentially went through, this is to your technology question, we went through every line of the P&L and we asked ourselves, what can we do to improve it? And there were really three main motions that we chose. We either centralized a cost, we removed the cost, or we automated the cost. And again, technology is one of the tools to help reduce costs, but there are other tools as well. So we, for example, clean once a stay, not once a night. We have really significant data on this and find that guests do not penalize us on reviews our properties. This property is the number three ranked property on TripAdvisor in San Francisco We have the number one ranked hotel on TripAdvisor in Chicago in Denver top three in a number of other cities Austin I get really excited about this. So whenever I speak about it

Josiah: I used to work in guest satisfaction management and you would not believe, well, you would believe actually the amount of effort and cost that goes into earning these positive reviews for a good reason, because it affects demand. It affects so much, you know, likeliness to return all this good stuff. For sure. Right. And so it is a huge driver of demand, but being able to do this in a way that actually is cutting costs is the holy grail. Totally.

Roman: And how did how did we get to such a light service model, but great experience, you know, guest reviews? Well, it goes back to the categorization of every part of your stay. Oh, we got a bad review in one location; we know the categories that those people reference the reason that they reached out if there were any issues, we have that data across every property across every stay, And we systematically basically address issues across the portfolio that have caused what you might call defects in an assembly line. And we remove defects one by one until you're delivering a really pristine stay. And then you go above and beyond relative to expectations in terms of proactive hospitality. And so that's what leads to those really, that's among the things that lead to those really great reviews, obviously, a resonant approach to delivering hospitality. that resonates with a growing set of consumers who want a digitally native approach. But going back to the cost question, so we eliminated centralized or automated line items. Eliminated is nightly cleaning. Eliminated is the front desk. Centralized is revenue management, as an example. It's accounting and finance, it's corporate sales, and automating is also accounting and finance. There are certain things that you can just do, and obviously some of the customer service elements that I was mentioning. Each line had one of those approaches, and sometimes that approach is with technology, automating accounting, some of that is operations. So, not doing nightly cleanings is not a technology-driven approach. However, how we clean is really deeply infused with technology. So we don't have housekeeper supervisors or housekeepers have a system, an app that so there is an app for housekeepers, though the app for guests is not one they have to download. And the app or housekeepers has been taking and going through a checklist. and taking photographs before and after the cleans. There are a lot of things, details, you know, the app is in Spanish as well as in English and one of our markets in Polish as well. 

Josiah: Did you make this app yourself? 

Roman: We actually integrate deeply with a third party on that, but it needs to seamlessly work with the property management system that we built ourselves. And so that app is a third party system that goes like really hand in glove with our operations.