How Ethan Sargent Is Reinventing Hotels & Making Travel Affordable

Ethan Sargent (00:00)
So it kind of all started around a ski trip. And I was traveling out to Salt Lake City to go skiing and was road tripping across the country. And even in the middle of Nevada, hotel rooms were still $120 a night. And Motel 6 used to be $6, and they’ve just slowly crept up. And the quality hasn’t been improving that much, but the prices have been increasing. for the average American, people do not see that, they simply cannot afford it. so that really allowed me to see that as a problem was able to confirm that that was a problem through a hotel developer gave me his pro forma and I went line item by line item, and there were a lot of questionable charges. What do people actually people don’t care fancy new carpet people really just want a high quality product.

Leo Wehdeking (02:26)
Everyone, welcome to the Investor Fuel Podcast. I’m your host Leo Wehdeking and today I am joined by someone I’ve been looking forward to chatting with, Ethan Sargent, okay, who’s been making serious moves in the hotel industry. All right, Ethan, glad to have you here, man. I think our listeners are really going to take something away from how you’ve been approaching the hotel industry. All right, so let’s dive in and.

For people who may not be familiar with your world, can you give us the short version on what’s your main focus these days?

Ethan Sargent (03:00)
Yeah, sure. Well, thank you, first off. Thank you, Leo, for having me. It’s a pleasure. And so our focus right now is really making hotel travel or making travel affordable, especially on the hotel side. Right now, with all these different brands of hotels, they’re consolidated among five different players in the hotel industry.

There’s just a lot of different players that are… It’s all basically the same thing among the entire tier list of hotels. And right now, we’re really looking to bring in a new kind of hotel that doesn’t sacrifice quality for price, but instead, just makes the space smaller and allows people to convert their office space into hotels and at a much more affordable price.

And we believe we’ll be able to… Yeah.

Leo Wehdeking (03:48)
Alright, that’s cool man. And now can I ask you in what markets are you operating in?

Ethan Sargent (03:53)
So right now we’re looking to start in San Francisco, right near the Giants Stadium down in South Beach. And we believe that this neighborhood that we’re building our first site in or converting our first site is a phenomenal opportunity because a lot of the people in this neighborhood embrace new innovation. We’re on the same block as GitHub and we’re

three blocks away from the Caltrain station that leads right down to Silicon Valley and a block and a half away from the Giant Stadium. And we’re right there in the tech ecosystem where the innovation capital of the world. And so we believe that when we’re able to bring a really great product coupled with a really good audience that embraces change and is embracing

the future of travel, we believe that this will not just be another boutique hotel, but one that will be remembered and really appreciated.

Leo Wehdeking (04:53)
love it, love it, love it. Ethan, something that actually caught my attention about the way that you, you know, about you is the way that you’ve been able to identify the need, okay, of these boutique hotels in your area. Because as you told me, or as I understood, you’re the first one actually doing this in America, right?

Ethan Sargent (05:13)
Yeah, so…

Leo Wehdeking (05:13)
So,

how did you come up with that idea?

Ethan Sargent (06:05)
So it kind of all started around a ski trip. And I was traveling out to Salt Lake City to go skiing and was road tripping across the country. And even in the middle of Nevada, hotel rooms were still $120 a night. And Motel 6 used to be $6, and they’ve just slowly crept up. And the quality hasn’t.

been improving that much, but the prices have been increasing. for the average American, people do not see that,

the average American cannot afford that. I think a lot of people in the hospitality space or the hotel development space or the investment side of things already have money and they don’t necessarily maybe see these problems. And

that $20 increase in price, it doesn’t really impact them. But it impacts a lot of other people and

they simply cannot afford it. so that really allowed me to see that as a problem.

I really was able to confirm that through…

was able to confirm that that was a problem through

actually

a hotel developer.

And it was a…

fairly big name and a fairly big hotel developer. And I was actually very fortunate enough to,

gave me his pro forma. And I went line item by line item,

at a typical development. I’m not gonna say the name, but just a typical Hilton development.

And there were a lot of questionable charges.

this was for the ⁓ budget sector hotel. And it’s like,

A lot of this is thinking of like,

what do people actually

it’s, know,

people don’t care

you know, the interior design or like what

fancy new carpet

there’s going to be. You know, I think a lot of

people really just want a high quality

you know, it’s like going line by line item. You know, I’ll give you a few examples. There was four ice machines totaling $7,000 each, one for each floor.

there was you know there was a

Leo Wehdeking (08:16)
You go to Maldives

and you barely find one.

Ethan Sargent (08:19)
Yeah, well, it’s just like, the point being is that these hotel brands, you have to build whatever the brand specifies. And so a lot of the time in this hotel industry, you have a star rating. So when you had like AAA or you would just read through the newspaper and find, okay, well, I’m going to go and I’m going on vacation. Let’s go find the three-star hotel or the four-star. It wasn’t based off customer satisfaction. It was just based off of a checkbox.

of, does this hotel room have a desk? Does this hotel room have these lists of things? And so without actually customer feedback, they just made a list of, OK, this is how we classify different hotels. And what that leads to is you really have a lot of extra space. You give any hotel room, take any hotel room,

It’s around 600 square feet if you add up all the hallway space, everything. you have the extra bath. Hotels right now are basically just glorified bathrooms. Most of it is just bathroom space. You have an entire bathroom to yourself that you might use once or twice. And so right now, the idea is super wasteful. mean, there’s plenty of other. You can go to an Equinox, and you don’t have your own private bathroom. You have a shared bathroom.

It doesn’t have to be either a hostel where you have to share bathroom and it’s dirty and disgusting, or budget hotel where it’s $100 a night and still dirty and disgusting, but at least you get your own private space. Instead, it’s like, okay, let’s actually just make this, let’s consolidate these bathrooms and let’s save on the construction costs.

And then really rethink, what do the customers actually want? Not what does a rating system want, but what do the customers want? And you can see this through the… You look at the net promoter score of all these major hotels and they’re all just absolute garbage. They’re all in the negative. So you survey 100 people and you ask, okay, are you gonna be a promoter, neutral party or distractor? And majority of people are saying, I would not, like they’re gonna be a distractor. They would not…

They want to avoid quality in, Motel 6, Choice, Red Roof, Travelodge, Dayz Inn, Super 8. There’s so many different brands, but they’re all poorly rated. also, they all make billions of dollars every year because there’s no other options. So it’s like not only is it really crappy industry, but it’s also a really big industry that’s just been untouched and really hasn’t had much thought or innovation going into it.

Leo Wehdeking (11:19)
right yeah that’s actually not easy to do especially in this climate. Now let me ask you something Ethan, what’s been the recipe all right or the key to keeping your business running smoothly so far?

Ethan Sargent (11:32)
would say that having the patience to go through and really question everything and really going into it with not a lot of fear. There’s a lot of just kind of figuring it out. And when I first started this out, I had really no idea of how any banking worked, like nothing. It’s just like, OK, I got to get some money.

Walked into a bank. And I kid you not, I did this multiple times. Just, hey, I need some cash. I have the whole pro forma right here. so I walked into the bank and they’re like, well, you can’t just have 100 % loan to value. You can’t just loan out 100 % of the property. You’re going to need to have money. And I’m like, OK, well, how am I supposed to get money? And so kind of working backwards and unshamefully just going in and

figuring it out. even though we have made mistakes and we’ve learned a lot, I think every single time I go to an event or I meet someone, if I can just learn one thing, even if it might not have to do with the direct problem that I’m trying to solve, that’s a win in the books. those wins compound over time. And it really allows us to re-question, rethink this whole thing from the ground up.

Leo Wehdeking (12:44)
Alright, alright. That’s good Ethan. Now, let’s, you know, changing the subject a little bit. I know that every operator has a moment where things got real, alright? Maybe a deal that went sideways or a time that they had to pivot fast, alright? Do you mind sharing one of those moments?

Ethan Sargent (13:00)
Sure.

I will say that I think right now we are not there where we are going to have to pivot or we’ve had to really pivot. would say that there hasn’t, so far, when we first started out, we were thinking we were going to make these pods in-house and focusing more on the manufacturing side. then slowly but surely we realized, okay, well,

Maybe it’s not the most efficient thing to be making these in-house. So I would say that that… At first, my hunch was, how do we really… We want to pack as many people as we can into one space. Density is going to be the key to this, and we need to have as many people in one building as we can. And really figuring out that actually, you know what? I don’t think so. I think it’s going to be where we’re going to save a lot of money is consolidating the bathrooms.

And so that really, that one, think really allowed us to, you know, it wasn’t a huge shift in the business plan or anything, but that one change really allowed us to unlock a lot more property, potential properties, because once you start stacking these pods on top of each other, it’s really challenging to have a locking door and stack them just because you need, you know, all these, you know, fire life safety requirements. And so doing

just simplifying that and just having a single phone. Think of like a phone booth where you just extend the phone booth out. Just having that and it’s just off the shelf components. And then we just put them in any space. that really simplified the business and really made it that unlock where we can scale. Once we prove out the first concept that we believe that we’ll be able to scale really much quicker than any other brand because there’s just a lot less TI and

that we have to do to each location.

Leo Wehdeking (15:25)
All right, all right, all right. Now, let me ask you this. What are you most focused on solving or scaling next? What’s the next real goal for you?

Ethan Sargent (15:36)
Yeah, so I think the right in front of us, we’re looking at that property near the ballpark over by the Giant Stadium. And so that’s right in front of us. And then I think right there, we really want to focus on making sure that that is the working model that is really good. Before we scale or I think…

There might be like, I’m sure there will have other competitors come to the space, but before we really try to scale, really make sure that we’re dialed in and make sure we’re really valuing our customers first and not going in with any assumptions of like, hey, they really need a breakfast bar. Especially in today’s day and age with DoorDash and dietary restrictions, we believe that maybe we don’t need a hot bar.

those savings on to the customers. And the $100 that they save from us not serving breakfast, now they can spend $20 on whatever meal they would like prepared by real actual chefs. I think that that’s our really figuring out. maybe a bunch of our customers would like breakfast and then we bring it back. figuring out exactly what we need to do. then I think either offering

Leo Wehdeking (16:34)
Exactly.

Ethan Sargent (16:50)
bringing out a franchise or we’ll probably do a few more developments ourselves or renovations ourselves and get a few more in-house and then really franchising out the model. And then I think possibly going and targeting the rest of the country, I think a lot of the motels, that’s where lot of, there are a lot of budget hotels.

on the side of the road. we think that there’s over 800,000 budget rooms right now. And so we think that we can really make a pretty big dent in that space and really, really decrease the price.

Leo Wehdeking (17:24)
That’s face.

All right, all right. Well, let me tell you something. Now that I’ve seen that you got everything already in place, all right, that next move that you’re looking to, OK, can either compound things or create chaos depending on how you play it. All right. Because it’s you’re trying to insert something new into a model that already exists and it works. And the most important thing.

people already know it, all right? So that’s just one of my opinions, all right? Okay, that’s cool, man, that’s cool. Now, Ethan, I think that a lot of people that are listening to us, they’re either early in their journey or they’re just looking to level up. And I think they will benefit from hearing this coming from you, all right? Now, when it comes about…

building relationships and growing your network. What’s made the biggest difference for you?

Ethan Sargent (18:19)
Yeah, I would say that really being

I would say that really asking for help, really. then also being willing, you know, a lot of people, it’s really hard to ask people for help in this beginning, especially, I think it’s like, how am I gonna, you know, ask, you know, this person that might have known me for a while and seen me as a kid, how am I gonna ask him, you know, for, you know, advice or just, you know, ask for help, right?

Leo Wehdeking (18:44)
guys are free to

Ethan Sargent (18:47)
especially like you might think like, you know, people worry about what they’re going to think of, you know, what is he going to think of me? Or, know, you really just have to put yourself out there and really kind of do it. And then I would also say that like your first idea or your first, you know, project, is not my first business that I’ve started, you know, so you are going to have to try and try and try and like go into it thinking, you know, I want to fail as quickly as possible so I can just get back up and then just keep going. You know, the, the, goal is to learn.

And that’s, know, I’ve tried to take the approach of, okay, this is to learn it. And, you know, if, you know, eventually something will work, you know, you don’t have all these other successful people that, you know, it’s all impossible. So somehow it’s possible. And if they could do it, so could I. And, and you just have to, you know, just be, you know, ear, know, open ears and, and, and learn as much as you can.

Leo Wehdeking (19:35)
Alright, alright. Yeah, I totally agree with you, man. It’s not about falling. It’s about how quick you can get up. Am I right? Perfect. Perfect. Alright, alright. Ethan, before we wrap up, if someone wanted to reach out to you, connect with you, or maybe collaborate, or learn more about what you’re doing, what’s the best way for them to reach out to you?

Ethan Sargent (19:43)
Yeah, yeah, yeah

I

mean, I really like to keep the comms open. So I will say that you can shoot me an email at [email protected], or I will give out my phone number. It’s 415-419-1478. If there’s someone who’s very interested and wants to work or collaborate or has ideas on how we can improve or potential sites that might be a really good fit for the community.

I would love to get any advice or feedback and feel free to call me or text me. So we really like to have transparency and keep the columns open around here. So I’ll leave it that. Yeah.

Leo Wehdeking (20:38)
Alright, perfect,

perfect, perfect. Well, listen, Ethan, I really appreciate your time, your story and your perspective. Alright, we need more people in this space who are actually doing it the right way. So thanks again for being on the show. And for those of you just tuning in, alright, if you got value from this, make sure you’re subscribed. Alright, we got more conversations coming up with operator with operator just like Ethan, okay, who are out there building real businesses. Alright, until then, we’ll see you on the next episode.