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How micro-targeting helped land Life House US$70M

Rami Zeidan says he finds his inspiration in data as the conclusions he and his Life House team draw from number crunching greatly influence their decisions to operate more profitably.

So it should come as no surprise that the experience-driven, locally-rooted, accessibly-priced, Life House brand with smaller footprints has a primary operating philosophy that focuses on technology and digital marketing to reduce the cost of guest acquisition, while tapping into what guests truly want today at what Zeidan considers that sweet spot in the rate scale. Combine that with a vertically integrated structure that allows the team to develop and design these smaller properties where the competition is not as sophisticated and it is clear why Zeidan is very bullish about the potential to quickly ramp up development of the Life House brand at a reduced cost as well as third-party manage with their plug-and-play proprietary systems to help quickly turn around struggling independents.

Founded in 2017, New York City-based Life House has a price point sitting between about US$150 and US$190 for hotels with smaller guest rooms and efficiently-designed but still roomy communal spaces. The first property opened in December in Miami’s Little Havana neighborhood and South Miami Beach is set to follow. The fledging group, founded by Zeidan, who has operations and real estate experience with the likes of Starwood Capital and the Sydell Group, and software entrepreneur Yury Yakubchyk, plans to open 20 hotels initially and has its sights set on 200 hotels inside five years.

Life House has 10 signed contracts under construction, from Denver to Los Angeles and Nantucket, Rhodes Island, to Brooklyn, New York. Its focus on smaller properties allows them to do several properties in the same market, therefore increasing opportunities to scale.

“Google's incentivized to drive business and keep cost-per-clicks down so that they can compete against the OTAs because if the cost is too high operators will just list on the OTAs.” – Rami Zeidan
“Google’s incentivized to drive business and keep cost-per-clicks down so that they can compete against the OTAs because if the cost is too high operators will just list on the OTAs.” – Rami Zeidan

Mostly, Zeidan said, the group has focused on easy conversions. “Almost all of our hotels except for Denver and Brooklyn have been existing, operating hotels that really just need cosmetic uplifts,” he said.

Acquisition model

Life House’s secret sauce is a proprietary technology platform, which provides guests with a frictionless direct booking journey, a mobile app and an opt-in social network. Most importantly, the group has developed what it believes is a customer acquisition model that keeps distribution costs down. On the direct booking side, which already accounts for 55% of the business at the first hotel in Miami, costs stand at 9%, and Zeidan expects that to go down with time and experience.

The distribution model focuses on meta-search and Google channels. “If you buy keywords for Miami hotels, for example, you’re paying US$5 a click, and you’re getting a ton of eyeballs, but you’re going to probably lose your shirt because the clicks are too expensive,” Zeidan explained. “It’s about creating the analytics to figure out not only what keywords to buy, but on what dates to buy them and what audiences to buy them from. That’s ever changing, and it’s very dynamic. Technology powers that.”

Marketing dollars initially are focused on high-intent clicks, and Zeidan said many of those dollars are currently going to Google’s new Hotel Finder, which has a lower cost per click. “We integrated directly onto Google’s Hotel Finder, which shows us at the top of the official site, and that’s been where a lot of our traffic is coming from.”

Zeidan is even willing to go as far as to predict that Google will take over from OTAs. “People who know how to use Google effectively can compete with the OTAs,” he said. “Google’s incentivized to drive business and keep cost-per-clicks down so that they can compete against the OTAs because if the cost is too high operators will just list on the OTAs.”

Life House leadership has also developed an in-house digital marketing team, and that team requires technology to track its guests and users. “If somebody looks at our website and clicks onto dates and searches a specific date range, that’s a higher-intent user than somebody who just scrolls down the page and then leaves,” Zeidan said. “They’re re-targeted with different campaigns afterward. It’s really about, ‘how do we micro-target?’ That will increase our conversion and therefore reduce our marketing costs. If we don’t micro-target, then we might as well just sell on OTAs like everybody else.”

In addition to the back-end technology, the booking experience is comforting to potential guests as it operates similarly to other direct-to-consumer brands.

It is that business model and an asset-light approach that has allowed Zeidan to first tap into US$70 million in venture and real estate capital from the likes of Global Founders Capital, Comcast Ventures, Trinity Ventures and Henley Investments, among others. He has additional US$50 million in discretionary capital sitting on the sidelines from an unnamed hedge fund to invest over the next two years in projects that Zeidan believes will offer strong returns.

Life’s inspirations

Zeidan was first inspired to create Life House after his brother, a doctor who was spending a lot of time in Uganda helping educate women to become nurses, died in an accident. “It was a rude awakening that what I was doing was not particularly meaningful or valuable to the universe,” he said. “I started to think more about how I could make a living and do something that’s impactful. To me, there was an obvious connection to travel.”

Outdoor patio at the first Life House in the Little Havana neighborhood of Miami
Outdoor patio at the first Life House in the Little Havana neighborhood of Miami

His other inspiration came from growing up as a Middle Eastern family in Minnesota. “I found the people that got to know me and were exposed to my family didn’t judge, and those that didn’t definitely did judge,” Zeidan added. “I felt that travel could break down barriers via exposure and help people understand their place in the world, as well as everyone else’s.”

Those life experiences are reflected in the Life House brand, which focuses particularly on historic buildings where there’s the most value to be derived from being responsive to what’s there to activate social spaces. In addition, a community manager walks the lobby to interact with guests and make sure their stay is more experiential.

F&B is localized but isn’t overdone as a destination space. There is a café, bar and small, thoughtful restaurant in each hotel, but generally speaking amenities are kept simple. “The size of that space doesn’t need to be enormous, it just needs to be available,” Zeidan said.

Most of the projects are too small for a fitness center, for example, but management will bring in a local yoga instructor to conduct a session in the hotel’s courtyard. “We’re doing morning meditations in our courtyard now, and it’s really resonating. That’s something that’s super low cost that our guests appreciate,” Zeidan said.

There is no bellman or front-desk check-in and no traditional concierge service – even in a 4-star environment. “We’re replacing a front desk with kiosks,” Zeidamn said. “So we should have a service there that helps educate people on how to use the kiosk, even though it’s pretty self-explanatory. Then, replacing transactional staff with actual value additive staff to a guest experience.”

Zeidan believes there are travelers who want a high-end physical experience, but doesn’t need all the services, which allows the team to operate more efficiently in a smaller box. “Traditionally, you can’t really make the P&L work at that small of a hotel,” he said. “We started automating other mundane tasks to take out other costs in the hotel. We automated financial reporting and got rid of revenue management, which is centralized at the corporate level.”

The typical 50-room Life House is smaller and more intimate, so guests don’t have a choice but to run into other guests. “People just organically get along,” Zeidan said. “We have a free happy hour, wine and beer, and breakfast in the lobby. Everyone’s interacting, generally has been a really cool, interesting mix of people.”

Ultimately, what drives Zeidan and why he’s really passionate about what they’re doing is his feeling, particularly in the current political environment, that there’s a social good to connecting people and encouraging people to travel and experience new cultures. He wants them to spend less money on a luxury product and more on experiences. “It has a net ROI to one’s life, and the fulfillment that they can derive from their life,” he said.

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