Neil Shah on Efficiency & Growth

Dylan Silver (00:00.972)
Hey folks, welcome back to the show. I’m your host, Dylan Silver, and today on the show I have entrepreneur Neil Shah. Neil, welcome to the show.

Neil Shah (00:12.962)
Thank you so much. I’m happy to be here.

Dylan Silver (00:16.268)
Neil, so I understand you’re involved in the hospitality space. This is actually a new niche, a new avatar within the real estate space that I haven’t had too many conversations with. So I’m thrilled to have you on the show here today.

Neil Shah (00:31.106)
Pleasure to be here.

Dylan Silver (00:32.748)
I see that beautiful background. I have a green screen behind me, so it’s just green. I’ve got the black background. But I see you have this beautiful landscape. Where are you?

Neil Shah (00:42.932)
I am in my backyard in Tucson, Arizona.

Dylan Silver (00:46.412)
my gosh, the Arizona. I tell people, Neil, and I say it, there’s something in the water in Arizona. I don’t know, because we’re not that far. I’m in Texas. All the Arizonians that I have on the show, they’re in great moods. look like, if they’re stressed, I don’t see it on their face. They got this beautiful weather. And I always thought Arizona was just a lot of desert, a lot of desert. And now I see on the show that there’s got all these nice landscapes. It’s almost like, and I say this, Neil, it’s like it’s, it’s

Neil Shah (00:54.956)
Yeah.

Neil Shah (00:59.832)
Yeah

Dylan Silver (01:15.886)
country Florida like it’s almost as if you migrated that Florida vibe all the way to the western part of the or Midwest part of the United States

Neil Shah (01:26.176)
I agree. has Tucson definitely has its own beauty. But I will say this. It is about one o’clock right now in the afternoon. I don’t think I will be sitting out here in about two more weeks. So I’m just going to enjoy it.

Dylan Silver (01:42.19)
How hot does it get out there Neil? It gets hot out there huh?

Neil Shah (01:45.486)
Yeah does, gets over 100, 105 at times. Yeah, yeah.

Dylan Silver (01:49.016)
for sure.

Let’s talk about how you got into the hospitality space. How did you get into the hospitality space, Neil?

Neil Shah (01:59.672)
Sure. So like most people, I guess, it was kind of by default. There was no plan. There was nothing in my dreams ever that I would end up in hotel business. I came from India in 97 and then I had done electrical engineering from India. So I initially wanted to continue in electrical, but then I realized on that path, would take a long time before I get into business.

And my end goal was always to start my own business. coincidentally, through my uncle, I started working at one of his friend’s hotels in Anaheim, California. Now keep in mind, I had only been here for a month when I started working there. So I have no idea about how things work. Language was an issue for me in the beginning. Just not knowing how everything works, a completely new world.

Dylan Silver (02:46.318)
Mmm.

Dylan Silver (02:59.235)
Yeah.

Neil Shah (02:59.458)
Quite changing. So I started working there. I really enjoyed the business after the first few weeks of trying to get acclimated to the new place and learning the language and feeling a little more confident. To the point where I felt like I want to stay in this business, grow in this business. So I’m going to go and get a degree. So I went and got a hotel management degree while I was working there.

Dylan Silver (03:13.997)
Yeah.

Neil Shah (03:28.972)
basically lived at a hotel while I was there and then I spent every single possible minute of my day working in the front desk and on property. So I learned a lot of things really quick to the point where I felt confident to go out there and apply for a general manager job somewhere else which would be true, you know, real position, real income, you know, things like that. you know, by the time we got married, my wife and I

moved to Flagstaff, Arizona from Anaheim because that’s where I found an opportunity as a GM at a day’s in. So we moved to Flagstaff. About a year down the road, I meet my now business partner and his cousins who are looking to buy a hotel. So anyway, I kind of showed them around. They ended up buying a hotel in Flagstaff.

And they were kind enough to allow me to invest very little amount of money that I had. So I invested in their first property. That was my first investment. Now this is kind of backwards. Mostly people invest in a property they buy, right? I’m actually investing as an investor. Only difference is I come from operational background and they did not have any hotel experience. They kind of found the deal. They had the money.

So I invested in the deal, but I helped them with the operations while I had my full-time job. So once again, few months, a year go by and I learned how you think differently as, you know, when being a GM versus being an owner now, right? There’s a very clear difference between how your mind should work, how you make decisions, how you plan things.

Dylan Silver (05:01.134)
Mm.

Neil Shah (05:21.518)
So once I went through the process, enjoyed it and gained some more confidence. And then I went to my partner and like, I think we should do more deals. So basically then, you we started looking for hotels and we found a hotel in Tucson. And then in 2004, I moved to Tucson to manage that property. That’s 2004. And then the next property we bought was in 2020-15.

So that was the third property. And from 2015 to now, we currently own 10 hotels. So in last 10 years, we acquired 10 additional hotels.

Dylan Silver (06:02.52)
Ten Hotel seems like a lot of real estate Neil, congrats on all your success.

Neil Shah (06:05.262)
Thank you so much.

Dylan Silver (06:08.46)
Let’s talk about a lot of the different experience you have, diversity of experience. So you have multiple degrees. You have the engineering and then you got the hotel management. And so a lot of times when a young person goes one path and then it doesn’t end up coming to fruition, it can really throw people off.

Neil Shah (06:19.981)
Yep.

Dylan Silver (06:28.738)
But you didn’t end up kinda keeping your head down and saying, the engineering thing isn’t happening, what do I do? You actually found passion in an opportunity that was really almost divine intervention. You didn’t see it happening, right? You went to school for engineering and pivoted to something entirely different.

Neil Shah (06:45.132)
That’s a really good question. Nobody has asked me that question. But I would say, I think that decision was driven by me wanting to be in business. Yeah, was a little impatient, I guess, when, you know, when I was young, when I came here, and I didn’t want to wait, whatever, five, six, eight years before I can start my own business. So then I’m like, what’s the next best thing I can do?

So the plan was to try different businesses until I find something that I liked and wanted to be in that business and grow in that business. I guess I was very fortunate to start in hotels and I actually liked it and I am very grateful to have grown in this industry and in my journey.

Dylan Silver (07:33.176)
I think a lot of people, Neil, when they hear stories like this, they can relate to it. Like, for instance, for me, I knew that I wanted to get out of automotive. That’s what I knew. I was in car sales, customer facing, and I had done that for five years or so. And it was a lot of time, and I didn’t see a way, much like you’re saying, for me to become an owner in any short order. Unlike real estate, there wasn’t a lot of creative ways where you could

Neil Shah (07:46.283)
Yeah.

Neil Shah (07:57.677)
Yeah.

Dylan Silver (08:02.934)
own a car dealership, a major car dealership. I’m not talking about a used car. I’m talking about a major car dealership, right? So and then to scale to be a GM of a car dealership, it takes many, many, many years and you really have to spend your time more or less getting kicked in the face over and over and over again. And I said there has to be a way for me to shortcut this process. So that was two years ago almost today. Almost. It was July of 2023 that I left. And much like you,

Neil Shah (08:08.152)
Yeah.

Neil Shah (08:18.946)
Yeah.

Neil Shah (08:24.226)
Yeah.

Yeah.

Dylan Silver (08:32.482)
my mentality was I could wait, I could wait this out. could see maybe I have a rental portfolio and maybe I slowly start to see my income exceed my income from my job. But I said no, I’m just gonna go and dive right in. so frankly,

I don’t necessarily know that that’s the right approach for everybody. Certainly if people have lots of expenses and responsibilities, family of course. But look, it worked out for both of us.

Neil Shah (09:05.698)
You know, there is no right or wrong, right? Everybody’s journey is unique in its own way. And everybody has different priorities. They are a different stage of their lives, right? So when you are single and young, you can take lots and lots of risk. But when you have family, you have kids, then your risk tolerance is different. It’s much lower, right? So yeah, I congratulate you on your success and your journey. I’d like to add one more thing though.

Neil Shah (09:34.114)
People ask me something like how does being electrical engineer help you being a hotelier? And it’s an interesting question. I think it has helped me tremendously because when you come from engineering background, your mind is very logical, right? You think through analytics when you are assessing anything. When you, before I execute, I am going to think through the entire process of how things should flow, right?

I’m not going to pull a trigger until I am 100 % sure that I have explored all possible successes and failures, right? Carpenters rule is measure twice and cut once. Engineers do the same thing. They plan everything meticulously and then they execute on their plan. So I think that alone and I think the other thing might be ability to learn maybe faster because I don’t know.

Again, I’m just saying from my point of view, when you’re an engineer, your brain gets wired differently. And I’m thankful for that. I think it has allowed me to learn lot faster, to grow a lot faster in the business I am in.

Dylan Silver (10:46.818)
Problem solving, Neil, that’s what it comes to mind for me is real estate entrepreneurs and investors are major problem solvers. I’m paraphrasing here and I’m sure I’m butchering this, but I’ve heard some version of applied sciences are physics, applied physics is engineering. And, you know, when I think about problems in the real estate realm, you have to…

Neil Shah (10:49.571)
Yeah.

Dylan Silver (11:10.968)
There’s huge problems that people come across all the time. I can’t even imagine the hotel, right? Being GM of a hotel, all different kinds of issues that could come up and I can only imagine. And rather than freak out, you have to detach, you have to say, okay, this is a problem, what’s the path forward? What’s the solution? Might not always be a perfect solution, but how do we get through this? And it takes a very much a problem solving analytical person to be able to do that.

Neil Shah (11:17.928)
you

Neil Shah (11:38.144)
Yeah, yeah, that is very true and very well put. It’s a living breathing business. Something’s happening at all times in your business, in my business. So if you don’t have proper processes, SOPs in place, it could be overwhelming. And I have seen GMs in my experience when I go out with them having a drink or play a round of golf or whatever that may be.

I can measure how good the GM is by how many calls they’re getting from the hotel. If they are constantly being disturbed in a sense, right, interrupted in a sense from their staff all the time, that tells me it is not a very well operated hotel. The team is not, one, they may not be the right people. Second, they may not have provided the right training. They may not have the right processes in place.

Dylan Silver (12:27.884)
Mmm.

Neil Shah (12:36.812)
and that is the result of them having to keep asking questions all the time. So, yeah, a lot of moving parts, but it’s fun.

Dylan Silver (12:41.89)
Yup. That’s a huge-

That’s a huge point. You mentioned acquiring these hotels and coming in initially as an advisor or a way as a GM, but while also being a GM at the place that you were working at. And that sparked my interest because I thought I’m a wholesaler. I’m a realtor here in DFW. Where do investors even go to buy hotels?

Neil Shah (13:12.258)
There are multiple ways of doing that. The easiest way is you reach out to hotel brokers and they will, once you connect with them, they’ll send you deals all the time because they want to find a buyer for the properties they have listed. There are other websites like Loopnet, Cruxy, so people can look for available hotels there. Another creative way of doing that is literally knock on doors. Like you have

a city or an area in mind, you have a type of hotel you want to buy, you literally just walk, go to the hotel, just walk in, talk to the owner and say hey, this is who I am, this is what I’m looking for, I love your property, would you be interested in selling? Be ready to hear a lot of no’s, well that’s one way to find one of the best deals honestly.

Because sometimes people don’t know they are ready to sell until somebody asks them a question, then they have some time to reflect. They’re like, you know what, maybe it is time to sell. Maybe this is the right price. So, a variety of ways of approaching that.

Dylan Silver (14:17.484)
Have you had exits? Have you sold any of the hotels you’ve been involved with?

Neil Shah (14:22.294)
Yes we have. We have sold three properties here.

Dylan Silver (14:25.27)
And what’s the days on market or what was the days on market for selling a hotel?

Neil Shah (14:31.156)
It is, it varies a lot. And because of lot of factors, the timing, the economy, interest rates, the price you are asking, right? If you’re asking, you know, like a price that is like far away from what’s fair, then it’s going to take you a lot longer. Property condition is another, you know, another obstacle. But I don’t know, I probably, if I was to guess, I would say 60 days to…

as long as it takes sometimes, right? might take years, it might take years, yeah, depending on what the condition is.

Dylan Silver (15:02.382)
Yeah, as long as it takes.

Dylan Silver (15:07.278)
Are the hotels that you have owned all over the country or specific to the area that you’re in out there in Arizona?

Neil Shah (15:14.126)
Arizona and California

Dylan Silver (15:16.366)
Okay, so let’s talk a second about being a real estate investor in the hotel space and what you’re personally looking for. What’s your buy box? So you have California, you have Arizona. In my mind, these are two very different areas, very different markets. And I’m curious to hear how your buy box differs maybe in those two areas and then also what your buy box is.

Neil Shah (15:46.498)
So my buy box is not very rigid in a sense.

variety of reasons. I don’t even have markets identified to be honest. I know what markets I like, general sense is or things that I look for are I want properties that are between 25 to 100 rooms. I don’t want more than 100 rooms because then it’s too many rooms. Price would be between 2 million to I don’t know, 12 to 15 million dollars.

Dylan Silver (15:57.101)
Okay.

Neil Shah (16:19.854)
I want the property to be in a high demand market. It property should be within two to three hours of major metro, right? So it’s drivable distance from high populated area or a large city, which can be a bigger biggest feeder market for the market I’m going to get into. I like underperforming properties that are dated.

Dylan Silver (16:25.42)
Right.

Dylan Silver (16:42.222)
Mm-hmm.

Neil Shah (16:49.504)
mismanaged, pretty much ripe for repositioning. So either we want to buy the property, improve operations and increase revenues and performance, or buy the property, renovate, reposition, rebrand and increase the valuation of the property.

Dylan Silver (17:07.99)
Neil, when folks are buying properties, they, and it’s probably hard to say because I’m sure there’s so many, but is it more common for syndications and groups of people to come together and buy properties? Is it more common for a specific company to go and buy a hotel or is it a lot of individuals?

Neil Shah (17:27.726)
It’s a mix of all and I think it depends on the size of the deal, right? Syndications are not or the large investors’ REITs, they’re not going to look at properties that are worth anywhere, anything less than $10 million because they have too much money to deploy. Those are too small of a deal. So for them, the challenge is it would take them same amount of time and effort to do a deal that is $10 million versus $50 million. So they’re going to divert their efforts into bigger deals because they have more money to deploy, right?

And that is the reason we are looking for deals that are, you know, anywhere from two to 12, 15 million dollars, because that’s not the buy box for institutional buyers. Right. And then you have individual buyers where they have, they come from other STRs, they’re sold bunch of STRs and they’re transitioning into hotels. They might be coming from long-term rentals. They may have sold one or two apartments. They want to deploy that fund, maybe do an exchange and get into a hotel business.

and variety of reasons hotel business might be more appealing to them from STRs or LTRs. So, and then sometimes there are JVs. So let’s say you and I, or we have some friends, we are all looking to invest into hotels. We are in a business in a sense of I might be an operating partner, you might be capital partner, and we join forces and say, all right, let’s find a hotel.

We put our own money down, we have some friends and family that are to put some money down, small group of people, friends and family, and you buy a hotel. So those are a few of the variety of ways that people execute on acquiring hotels.

Dylan Silver (19:08.522)
Neil, when I think about all of this and I think about your journey in this space, it seems like you worked your way up, right? Being a GM and then now owner of 10 hotels. And I think about almost selfishly, I’m involved and speak with many single and multifamily investors. They might not have an opportunity or it might not be in their goals to buy a hotel. But a lot of them do the short term rentals, the Airbnbs. I know that there’s maybe some competition or maybe some

level of friendly, how would I say this, conflict between the hotel industry and the Airbnb space. I’ve traveled abroad quite a bit and I see Airbnbs are just as big abroad as they are here. And so as someone who’s in the hotel space, of course it’s not necessarily favorable to have a lot of Airbnbs out there, but I’m curious what your perspective is generally on these short-term rentals and

Neil Shah (19:41.634)
Yeah.

Dylan Silver (20:07.851)
opportunities for folks like Airbnb.

Neil Shah (20:11.394)
So that’s one of the things I look for when I’m looking at a new property or new market. I want to be in a market where there are some regulations there or in process of coming to limit Airbnb. It is what it is. Airbnb exists. There is a place for them in the industry, right? But I have to protect my investors and my investment. So I look for those type of markets.

Another thing to keep in mind is there is a real shift happening in the industry where a lot of either single Airbnb’s or multi Airbnb owners are wanting to transition into hotels. Because of the regulations, because how things are becoming more difficult for them to be as successful as they used to be right after COVID happened. know, those anybody can just open up an Airbnb and guess what? We started to make money day one. It’s no longer the case now.

Dylan Silver (20:52.974)
Hmm.

Neil Shah (21:10.082)
There’s so much competition. Airbnb owners have to focus so much more on design experiences. They are actually getting into branding to my surprise. Like if you have maybe one big house, they want to go work on creating branding for that house. Or if you’re multiple Airbnb’s, they actually spend time, effort and money. So that’s becoming a real business. That means what happens is little guys who are trying to be like, I got a two bedroom.

one bath house, I can do Airbnb, they no longer have space because there’s a real competition happening in that industry.

Dylan Silver (21:48.234)
Neil, thank you for your perspective on that. I’ve always wanted to ask someone in the hotel space exactly what the perspective is. I echo it. You know, have to let you have to look out for your best interest, right? As an investor, as an asset manager. And to the same point, if I had an Airbnb in a city and I knew that they were discussing very potentially eliminating Airbnbs, it’s probably not the best strategy to do that. Some might want to look into corporate housing or long term rental.

Neil Shah (21:54.05)
Yeah.

Neil Shah (22:10.626)
Yeah.

Dylan Silver (22:14.158)
or something else entirely. But Neil, we are coming up on time here. Where can folks go to get a hold of you?

Neil Shah (22:22.638)
People can find me on LinkedIn just look up Neil Shah, N E I L last name Shah S H A H You can also find me on IG my handle is NILANG007 and I’ll spell it for you it’s N I L A N G 007 I have started doing

mentorship and coaching for people that are going to want to come into like transition from Airbnb or long term rental to hospitality. So I do that. I have also started doing consulting, which basically I offer that in any stage of the deal. If somebody’s somebody needs help in identifying property,

They need help in underwriting the property to make sure the numbers make sense. This is really an opportunity to explore or not. I can help them with closing, taking over operations, branding, renovations, marketing, revenue management, refinancing, things like that. for anything, if anybody’s looking for any help, guidance or support, feel free to reach out to me and I’m happy to provide my guidance.

Dylan Silver (23:46.934)
Neil, thank you so much for coming on the show today, for giving us some great value, for talking to us about hotels and the hospitality space, and congratulations on all your success.

Neil Shah (23:57.538)
Thank you so much, thank you for inviting me.