Responsibility Pays: How Socially Responsible Hotels Are Also Highly Profitable, with Leo Ghitis

Episode Transcript

Jeff: This is Jeff Weinstein, editor in chief of “HOTELS” magazine. And today I’m excited to be speaking with Leo Ghitis, founder of Nayara Resorts, a Costa Rica-based ultra-luxury eco-hotel brand with an ethos that dictates being a force for good is good for business.

In this interview, Leo will touch on how his company is promoting nature, sustainability, and community restoration. Not only for societal benefits but also as a financial winner. And how he is navigating some of the logistical challenges to develop and operate a cutting-edge model in a world of supply chain limitations and pandemic responses. All in all, I think there are some interesting insights in this conversation that I hope you’ll enjoy.

Woman 2: This green technology podcast is sponsored by Blink Charging. About 50% of vehicle sales will be electric by 2030, and EV charging is the hotel amenity driver’s need. Blink is the leader in EV charging, and offers the most flexible solutions and business models. For more, visit blinkcharging.com.

Jeff: Nice to meet you virtually. Interesting story. I remember reading it, and it said…it just seemed like you just, all of a sudden, got in the hotel business. And did you buy the property? I mean, how did you just drop into the hotel business, how did that happen?

Leo: It’s an accident of life. I’m a boring real estate developer, for me. I was. I don’t do it as much, and I got involved with a little… This was during the Great Recession, I think, 2007, 2008.

Jeff: Yeah.

Leo: A cousin of my wife was involved with a very, very small project in the middle of nowhere, as people used to call it, in the middle of Costa Rica. They’re near Arenal Volcano. A very humble origin, 24 keys. They had 2 rates, $90 and $120, and was a pretty basic 3-star hotel. They were having some issues. They were a bunch of partners, and they were not getting along, so he asked me to get involved. Most of the partners wanted out, so I bought every partner who… I went there. I didn’t know anything about the hotel business, but I liked the [inaudible 00:03:29]. And the real-estate business in the U.S. was horrible then, and I needed someone to keep me sane, so I went down there. I liked them very much, and I bought out every partner that wanted to sell.

So, pretty much, I mean, the majority sold to me. My wife’s cousin stayed until recently. He retired a few years ago. And there was another partner. They were all equal partners, a bunch of equal partners. And one of the original partners is still a partner with me, and he is a remarkable young person who was abandoned as a kid. Never had a chance to get an education, but he’s super smart, super-nice, and everybody in Costa Rica loves him. And so he’s been my partner since I got involved, and we have a wonderful partnership.

Jeff: Nice.

Leo: Yeah.

Jeff: So you just kind of bought out some of the partners. Did you become, like, the majority owner?

Leo: Yes. Yeah, I became the majority partner, and I didn’t know anything about the hotel business. So I got there and the employees, all of a sudden…I mean, there were 15 employees then, now we are close to 450. They asked me, “What shall we do now?” And I had just read a bunch of books on my way down. And I told them, “You know what? You just take care of the guests. Make sure that no guest ever leaves unhappy. You are all empowered, you all have a blank check. Whatever you have to do, do it. But just make sure that everybody leaves this hotel happy.” And my timing was very, very good because that’s when the internet was exploding. And I remember that a year later or two years later, someone called me and said, “Hey, do you see that Tripadvisor named you the seventh most romantic hotel in the world?” And my answer was, “Who is Tripadvisor?”

But, basically, the word got out. It just spread like wildfire that there was this little hotel which had the most amazing service in the entire world. And travel advisors then, not as bad now, were fighting to survive against the Expedias and Bookings of this world, and they loved a hotel where they knew their guests would be taken care of. And my business, we were, again, in the middle of the Great Recession, didn’t have much to do, so every week I would get on a plane, and I would travel and talk to travel advisors. And that’s how I got to know the business. I mean, for several years, I was in the road continuously and almost got a divorce, but I learned the business talking to my clients, and they told me what was important for guests.

And I love to travel. I’ve been all over the place, and I’ve been to some really wonderful hotels. And especially in Southeast Asia. And I was… And 14 years ago, it has changed a little bit, but 14 years ago I was surprised that there were no kind of this super high-end, super ultra-personalized boutique hotels on this hemisphere, so I set out to basically build that in Costa Rica. So I kept acquiring property and I renovated the hotel that I had purchased, and I built two new hotels trying to do something that was pretty unique. And I’m a good listener, even though I’m doing all the talking now. And I just did what travel advisors told me to do, and I was lucky that a bunch of travel writers like you and a bunch of magazine editors were willing to talk to me. So I just picked everybody’s brain, and Nayara is basically the result of implementing the advice that everybody gave me.

Jeff: Yeah, being a good listener matters.

Leo: Yeah. And the one thing that did not change is the number one hotel…I mean, we are, as a brand, a number one brand in terms of customer service. For us it’s an obsession. People joke with me that it’s a religion, that we are a sect because all we talk about is customer satisfaction. And that’s the foundation of all of our success is that.

Jeff: The second two came in Costa Rica as well, correct?

Leo: What we have is we have three hotels in Costa Rica.

Jeff: Right.

Leo: Very different. I mean, each hotel has a different identity and a different audience. We have another hotel under development in Costa Rica. We have two hotels in Chile, and two hotels under development in the Caribbean. And I cannot tell you why I’m going to Israel, but I guess you have a feeling.

Jeff: Where in the Caribbean?

Leo: I cannot say it yet. The reason for that is because it’s island. This is a big deal for this island. We’re hoping that these are going to be the two most spectacular hotels in the Caribbean. And we’re going to do a big launch with the government of this island, so they want to keep everything under wraps. But I can tell you, it’s one of the biggest islands in the Caribbean.

Jeff: But I assume bigger than 20, 30 rooms. These are gonna be little bigger.

Leo: Yeah. One is a tented lodge, roughly 60 tents. And the other one is more of a standard hotel, and that’s also close to 60 keys.

Jeff: Got it. Ultra-luxury, a lot of service?

Leo: Ultra-luxury. We’re building it in the middle of the rainforest. This is the highest point in this island. And I apologize that I cannot tell you the name of the island, but it’s probably the best-known island in the Caribbean.

Jeff: Okay. Interesting. So you’ve got a lot on your plate, which is exciting especially now. What is it that speaks to you? Supposedly, you know, you just have fallen in love with the hotel business. Service is a beautiful thing. The reason I do what I do is because I really love the art of service and caring for people, and that’s what the hotel business is all about. What spoke to you? What is it that brought you [crosstalk 00:09:37]?

Leo: Yeah. I’m a very fortunate person. I started from zero. I’m originally from Columbia, South America. I came to the U.S. with nothing, and I’ve done very well as a real estate developer and as an investor. And, basically, the company that I started is still going strong. We develop all along the East Coast of the U.S. and we invest. But as much as I love the business, I felt that that was a stage in life where I have to think more about how I impact the world and my legacy and it’s not about just money at this point. Obviously, money is important because it’s the only way that things are sustainable. But what happened is, 20 years ago, I went to Costa Rica for the first time, and Costa Rica is an incredible country. Costa Rica was almost completely deforested, and in 1980, 80% of the forests in Costa Rica had been destroyed. And then they realize what had happened, now it is the opposite, 78% of the country is forest and has 4% of the biodiversity around the world.

Costa Rica is the most successful case in the world in terms of becoming sustainable. And I learned the story about Costa Rica, and I got inspired and I said, “I want to play a part in this incredible success story.” Our hotels embody the sustainable spirit of Costa Rica. And it’s our brand philosophy, it’s what we care about. And we built the whole… I mean, the hotel is built. I mean, obviously, customer service but also what we call our regenerative travel mission. And the idea here is that being sustainable is not enough. When you talk about being sustainable, what people understand is that you’re not doing any damage to the environment. We feel that that’s not enough. And, I mean, this is something that also happened to me. I have grandchildren now, and I’m very, very concerned about the world that we’re leaving for them, so I felt very strongly that we needed to do more than being sustainable. We needed to improve the world that we’re leaving for them, so we’re doing things that are very unusual. And I’ll tell you something that is a good example of what we are all about.

Seven years ago, we bought a mountain that had been decimated by cattle ranchers, and the mountain is in the middle of the rainforest. In Costa Rica, there are very strict laws and you cannot do it. But the people who did it, or who sold it to us, or the people that sold it to people who sold it to us basically destroyed everything. And this mountain, I mean, even though they had cattle there, the cattle were starving because there was not even grass. It was pure, pure mud and horrible erosion when it rained.

We took it upon ourselves to plant 20,000 trees and plants, and what we decided to do was that we were going to bring back the rainforest. And we failed at the beginning miserably because there’s a whole technology to bring back a forest, it’s not just planting trees. I mean, you have to do it in a certain sequence. You have to plant certain trees, and those trees are not sold because what greenhouses sell are flowers and things that people want to buy. Nobody wants to buy green trees. So we finally found someone in Australia who is the kind of the foremost expert in these reforestation efforts. Nowadays, that mountain is where we built the Nayara tented camp. And if, hopefully, you’ll come to see it or at least you can see Google Earth, and you’ll see that, all of a sudden, there is… I mean, we are on our way to have a true rainforest. It’s going to be years.

Jeff: Yeah.

Leo: But I remember when I used to go to that mountain before we started the process, I wanted to cry. Besides the mud and besides the cows, there was nothing else. There were no butterflies, there were no birds, there was nothing. Nowadays, you go up to the Nayara tented camp, and there’s lots. There are monkeys, there are birds, there’s everything. Which proves that if we bring the forest, the rest of the wildlife will come back. I tell you this story because this kind of exemplifies what we are. We want to make this a better world. And when people talk about sustainability or regenerative travel, they’re really focusing on nature. And nature, obviously, is super important. I mean, it’s crucial for all of us, but there are two other components that people do not focus on as much. One is the community.

We really worry about the community where our hotels are located. For example, we hire from that community, all our suppliers, as much as possible, come from those communities, we help the institutions in those communities. And something that we do that has really paid off for us. We invite our guests to come and visit this and to partner up with us. For example, we have an orphanage that we support next to our town. And not too long ago, a couple came. And after seeing the orphanage, they wrote a huge check. So that’s the second leg of the stool to help the community.

And thirdly is our employees. And our employees are family, and we care deeply about them. We promote from within. Most of our employees come without any training, all the development happens at the hotel. And, you know, we pay good salaries, and give people good opportunities, and give an opportunity to learn the business. So it’s a wonderful business in the sense that guests are very happy, the communities are happy, our employees are happy, and we are taking care of nature. So if you ask me why I do, it is because of that.

Jeff: How do you maintain it, I mean, everything, you know, the three legs of the stool? A lot of people want to do that, but easier said than done.

Leo: Yeah.

Jeff: How do you maintain it? What’s the key to keeping everything going and still keeping the business functional at the same time?

Leo: What I found is that being sustainable. I didn’t do it. When I did it, I did it because I thought it was the right thing to do. But much to my surprise, I found that being sustainable is very good business. It’s wonderful business. I’m so surprised how when guests call the hotel to make reservations, I’m blown away. And this is what the reservation teams tells me. Normally, in other hotels, they ask about how much they’re charging, are there discounts? People call us because they want to learn about the things that we’re doing in terms of sustainability. We’re very lucky that our guests believe in the same things that we do, and they care about the things that we do. And, basically, that story about…I mean, what I just told you about this reforestation efforts appears in all the major magazines in the U.S. and Europe, so people…I mean, it resonates with the people that…I mean, I guess the people that care about the things that we care about wanted to come to Nayara.

Jeff: Yeah.

Leo: And so I think that helped us. The other factor to answer your question. We’re very lucky that people in Costa Rica are wonderful. And I’m not in Costa Rica. But I can tell you having been in so many countries and having lived in many different countries, people in Costa Rica are warm, caring, and they love to learn, and they love guests from other parts of the world. That makes our life very easy. The fact that we hire from the local town also helps. The fact that most of the employees have not worked anywhere else helps because I think they appreciate what they do for the local community.

Jeff: Do you, outside of the first hotel that you have your partners in, do you own everything else? Do you buy the land and develop yourself, or do you have partners?

Leo: I own, with this person that I told you about, I own the hotels in Costa Rica. The hotels in the Caribbean is a joint venture with the property owner. The hotels in Chile, I operate them and, I mean, we have a strategic relationship with a company in Chile, a very large company in Chile called Tánica, who basically developed the two hotels.

Jeff: Okay, so you’re the management company?

Leo: Yes. So we are flexible. The important thing for us is we want to make sure that the hotels are on the Nayara level, and all of our hotels are in unique locations. So one hotel is in the Atacama Desert. Atacama is an incredible location. It really feels like the moon. It is that dry. It’s the driest desert in the world.

Jeff: Yeah.

Leo: And then the other hotel is in Easter Island, which is also a super interesting location.

Jeff: Yeah.

Leo: And our hotels in Costa Rica overlook active volcanoes. So and the new hotel that we’re building in Costa Rica is built in the middle of the… On a rainforest that descends down to the beach, so each location is very unique.

Jeff: Got it. So how much more growth are you looking for? The bigger you get, the tougher it is to maintain.

Leo: Yeah. The idea is not to be very big. Because when you are at this level…I mean, when the goal is that you cannot have any guests whoever, ever leave the hotels unhappy, its quality control becomes incredibly difficult, so we don’t want to overextend ourselves. So the idea is not to be the biggest, but have the most special hotels anywhere in the World.

Jeff: But I assume you wanna grow beyond the two programs in the Caribbean? You still have further aspirations.

Leo: Yes, we have a lot of… I mean, we’re very fortunate that because of our success, a lot of property owners come to us all the time wanting to build Nayaras, so we have six hotels in different stages of development.

Jeff: In Chile and the Caribbean?

Leo: Yes.

Jeff: All in the Americas or are you branching out?

Leo: Except one in the Middle East.

Jeff: Gotcha. Interesting. You’re working at ultra-luxury. What are your development costs? Can you share, like, cost per key on your development side?

Leo: It really varies. Totally, it depends on the location, it depends on the topography. But I would say that it ranges, on the low end…this is just a room, not all the infrastructure, but a room could go between $300,000 and $600,000 depending on the location and the type of [inaudible 00:21:09].

Woman 2: This green technology podcast is sponsored by Blink Charging. Did you know electric vehicle sales are predicted to increase from 3 million in 2020 to 14 million in 2025? Providing electric vehicle charging is a hotel amenity EV drivers need. Blink is the global leader in EV charging, and has deployed over 30,000 charging ports in over 18 countries. Attract to higher-income demographic, brand your hotel as forward-thinking and stand out from the rest. For more information, visit our website at blinkcharging.com.

Jeff: How has it been developing since COVID? You know, there’s so many challenges between inflation, supply, trying to forecast.

Leo: We are building. We’re finishing construction now on a hotel in Costa Rica, and we try to be as authentic as possible to get as much as possible from local artisans, but there are certain things that you can’t. Certain things that you have to bring from the outside, so we import a lot from Indonesia, and a lot from Africa, and also a little bit from China. So to give you an idea, containers in Indonesia used to be $5,000 per container, now it’s $30,000.

Jeff: Wow.

Leo: And that’s if you’re lucky. When there are containers, there are no ships. When there are ships, there are no containers. Finally, I got my hand, a couple of weeks ago, on containers and they were all full of holes, so I had to find…

Jeff: Full of what?

Leo: Holes, openings.

Jeff: Okay.

Leo: So we are wrapping all the furniture in plastic. But it’s not enough because you’re going to get sea salt going into the container, so that didn’t work. I’m doing things that I never thought I would be doing, so I had to find a company in Indonesia where they could fix containers. Where they could weld the containers to make them water-tight. I never thought that was part of being a hotelier to get into the business of… So I’ve become now an expert in containers, so I know how water-tight the container has to be, how you weld it. In South Africa, we’re bringing lots of things, and throughout Africa as well, and we bring a lot of fabrics. And, you know, many, many things, and a lot of…the canvas for our tents, and there are no ships out of Africa. During the pandemic, there were no ships because Omicron started in… Was it Omicron or Delta? I think Omicron was the one who started in Africa.

Jeff: [crosstalk 00:23:55] in South Africa.

Leo: In South Africa?

Jeff: Yeah.

Leo: Then I think it was Delta. So South Africa basically…

Jeff: Shut down.

Leo: …shut down, and, basically, nobody wanted to go to South Africa. The boat crews didn’t want to go to South Africa, so there were no ships. And we were trying to open this hotel, so we said, “You know what? We don’t have a choice. I’m going to bring these tents by plane. Which is outrageously, outrageously expensive because all the planes charge you per weight also, and the tents have a metallic structure. So we said, “Well, I have to bite the bullet, otherwise, I’m not going to be able to open the hotel.” So believe it or not, it took three months to get a plane. So that’s the pandemic, and what happened after the pandemic has basically been the supply chain has been destroyed. And the shippers in Indonesia claim that the containers are being hoarded by the ports in China, and China says the same about Indonesia. Bottom line, it is terrible and everything costs five or six times as much. So, yeah, it’s been an absolute nightmare.

Jeff: But you’re getting great rates, right? When you get open, I mean, is getting the $1,000-plus a night rate everywhere?

Leo: Yeah. But we always did.

Jeff: Right.

Leo: Always did.

Jeff: Well, not when you first bought in.

Leo: That was $90.

Jeff: Yeah.

Leo: Yeah. But, yeah, Costa Rica is wonderful. I think the pandemic changed the way people think about taking time off. And our hotels. First, our hotels are all free-standing villa products. Our hotels, typically, they have oversized punch pools, private gardens, outdoor showers, so if you don’t want to leave your room, you never have to leave your room. So we always appeal to that traveler that wanted privacy, and luxury at the same time, and being in contact with nature, but we were a niche product. That’s the difference. We were, kind of, a unique weird product that people love. We are now mainstream. We’re main [inaudible 00:26:02]. So once in a while, we deserve to get lucky. And we got lucky with the kind of product that we built because it happened to be the product that people like during the pandemic and that they like now. So we are taking away market share from cruise ships and massive hotels because people want, after being cooped up in those apartments, they want to have a lot of space. And our villas are big, and our restaurants are all open-air, and our hotels have walking trails, and a lot of privacy, so we’re lucky what the public is looking for right now.

Jeff: And you still only have a couple of hundred rooms, correct?

Leo: Correct.

Jeff: So to do it, but returning to COVID, how has it changed your business? I mean, not on the development side but on the operations side? Or have you really not had to do much of anything?

Leo: I’ll tell you a quick story. And unlike the U.S., most of the countries in the world have a lot of trouble getting vaccines. We’re very lucky in the U.S. I don’t know if we realize how lucky we are.

Jeff: Right.

Leo: So we convinced the government in Costa Rica when you couldn’t get vaccines in Costa Rica or anywhere else in Latin America, we convinced the government to get us the vaccines so that we could vaccinate our entire staff. Because we get so many people, we told the government, “If our people get sick, we’re going to get everybody sick.” So the government of Costa Rica sent two doctors with vaccines, and very early on, our entire team got vaccinated. We were the first hotel in Latin America to get the vaccine. Much to my surprise, a percentage of the employees said no. I mean, I don’t want to get vaccinated. I mean, I guess they read the same disinformation that people do in the U.S, so we really struggled.

We had doctors come and give talks to the people in the…to the employees. We explained to them that nobody was putting chips in their bodies, that this was not a conspiracy to control anyone, that this was amazing technology and that it was a miracle of science. But we are lucky that everybody in the hotel is vaccinated and everybody has been vaccinated for a little while. But on top of that, everybody wears face masks. We check everybody before they arrive at the hotel, so we take this very, very seriously. I think around the world, people are becoming more lax and more complacent. We do not believe in that, so if you come to a hotel, everybody is wearing face masks. And real, real face masks.

Jeff: Good. It’s still too early.

Leo: Yeah.

Jeff: So you seem to have a love for this business. What do you like about hotels? And you’ve traveled and you’ve stayed in a lot of hotels. What is it that you like and what do you dislike about hotel experiences, you know, and how do you bring some of that to your properties?

Leo: When I go to a hotel, I want to learn about where I’m going to. I don’t have patience to just… I mean, I don’t like to lay under the sun. I like to learn about the people that I’m interacting with, I want to learn about the community. And I want to make sure that when I spend dollars, that my dollars are helping the people that work in that hotel, the community, and the places where I’m going.

I’ll tell you a story that, for me, exemplifies this. In Africa, in those safari lodges, around them…I was in Botswana not too long ago, and the villagers used to kill elephants because the elephants would tramp on their harvest. And they felt that wildlife was their enemy because it threatened their livelihood. Since the advent of the hospitality industry in Africa, and the travel, and the safari lodges, these same villagers realized that the way that they can basically make a living is by protecting wildlife.

Jeff: Right.

Leo: Because if there are elephants, if there are lions, then people from all over the world will come. And when they come, there are jobs for these villages and they can earn such a better living than what they were doing before. So that’s what our industry does. Our industry is wonderful, especially for the more agricultural, more isolated places around the world because that’s where a lot of our hotels go. So that’s what’s important for me. And perhaps they say that movie directors do not enjoy movies because they’re always seeing the bad stuff, so that probably applies to me. When I go to hotels, I just want to make sure that the place I’m going to is a force for good.

Jeff: Good. What else inspires you or where do you look for inspiration when it comes to further developing your hotel business?

Leo: I look for unique locations. I don’t need to go where everybody else is going, so I want to be in deserts, I want to be in rainforests, I want to be in incredible beaches that are private. I want to go to places where there are native people that have an incredible culture. I want to go to places where there’s a lot of history, where there archeological remains. Anything that makes the hotel… I want people that come to the hotel to learn, so I want them to go to places where… I mean, obviously, people are not going to go to school, but people want to enjoy themselves. They want to eat…

Jeff: Sure.

Leo: …well. Wellness is super important. But we are so time-starved that I think that every time we want to take something from our travels. That’s what I’m hoping to provide.

Jeff: Is your model recession-proof?

Leo: What I’m going to say is a little sad. The reason why it is recession-proof is because there’s such inequality in our societies nowadays. Unfortunately, we cater to people that can pay $1,000 a night, and those people do not suffer as much when there are recessions. So when there are recessions, the people that are not as well off are the ones who suffer and the people that come to our hotels manage to continue with their lifestyles.

Jeff: Yeah. Just a few more questions, Leo. If you were standing up in front of your contemporaries. And I know that it’s a pretty small group that’s doing what you’re doing. If you were standing up in front of luxury hotel keepers and ultra-luxury developers, what would be your message? What would you want them to know about what you’re doing, and what you’ve learned, and what you think the takeaways are for the people you’re standing in front of?

Leo: My message to them would be sustainability being a force for good is good business. So even if you don’t have it in you to do it. I mean, even if your motive is purely dollars and cents and it’s just economic, just know that you will do so much better if you take care of the environment, the community, and your employees.

Jeff: Are you optimistic about that message?

Leo: Yes, I am. And I am optimistic because people in our generation, I think we’re a little bit hopeless. Although, some of us are…well, a lot of people are changing. But what gives me a lot of hope is the new generation. Younger people really care about this, and they will go to hotels that are doing the things that I just described, so I think that we have a wonderful new generation that is going to help us save this planet. This planet that your generation and our generation is destroying day by day.

Jeff: Yeah. You know, I just wanna backtrack you. You mentioned you still have a separate real estate business. Can you share the name of that business?

Leo: It’s GPC Partners. And, basically, we do projects as far north as Washington, D.C., and as far south as Miami. And we’re also a little bit in the Southeast. We’re all along the East Coast.

Jeff: Commercial?

Leo: Yeah. Office buildings, apartments, industrial parts. But I’m not as involved anymore. My colleagues and partners think that I went crazy and I left my business of so many years to spend my time opening hotels outside of the U.S.

Jeff: Yeah. Well, good. I think you made the right call.

Leo: So do I.

Jeff: Yeah. What else? Anything I haven’t covered that you think is important to note? My readers are your contemporaries, so…

Leo: I think you did a great job. I think you covered absolutely everything. And if you think of something that… I guess, what I would like most than anything is for you to come and visit Nayara because as they say, “Talk is cheap,” and I would like for you to come down and see what we do.

Jeff: Thank you. Until then, I wish you continued success.

Leo: Thank you so much.

Woman 2: You’ve been listening to “The Innovative Hotelier Podcast” by “HOTELS” magazine. Join us again soon for more conversations with hospitality industry thought leaders.