Unbranded to Unforgettable: How Korosh Farazad Reinvents Hospitality | Ep 210 with Korosh Farazad Founder of Farazad Advisory

0:00Hey everyone, welcome back to Founder Story. Today we have Karosh Farazad, the Managing Director of Farazad Advisory. and we're going to talk through all things real estate, hospitality, investments. I know you're in Europe, North America, Asia Pacific. You are a veteran in structure financing, engineering, challenging structures within real estate transactions. We're going to go into all these things. I'm very interested to hear the state of how everything is. I know you recently moved to Switzerland. We can talk through that too. but first though I'd love to understand what what was the spark around your obsession with hospitality and real estate and was it was it a specific moment that influenced you?

0:46That's actually a very good question I've always been involved I've always had a passion for real estate but I've always had even more of a passion for hospitality seeing you know seeing different hotels when I try I mean I travel a lot but prior to getting engaged with the hospitality arena and on the real estate side, I just had this passion that putting real estate and hospitality into one sentence just sparked my attention. One of the elements was there's a lot of work that goes behind the scenes to create a value of a hotel. And that's really what that drove me into getting involved in the business.

1:24And more specifically, being in the hospitality industry, you have to be hospitable, so to speak. So that was also another drive because I'm a people's person, or at least I think I'm a people's person. And it carried weight for me to explore the idea and tap into it. And I tapped into it about almost two decades ago. Hey, well, that's nice. If you're into hospitality, you can travel around the world and going to all these amazing hotels is really information you need. So you're kind of working and having fun at the same time. When it comes to hotels and hospitality, when you look at what you want to invest in, are there certain things that you're looking for?

2:06Yes, 100%. First of all, we look for opportunities that are value-added upside. We don't look for core assets. And what that means in plain, simple English is any hotel that is just brand new and is already stabilized, it's not for us. We look for hotels that don't have a brand on it, like your Marriott's, your Coors, your Hilton's, so on and so forth. We go in, we look at the opportunity, we see how we can revamp the opportunity by bringing in a franchise operator. We don't deal with long-term relationships like hotel management agreements. We look for 10-year operators or 10-year franchises implementing food and beverage concepts that correlates with that hotel, with that region, and gives options for the guests to have a variety when they come in to experience the hotel.

3:01And then we keep it for about minimum three to five years is our objective and mostly gateway cities in Western Europe. We do case by case other destinations, but it's really the gateway cities where there's a high penetration of inward tourists. So let's say you have some hotel owners out there who are like, I would love to be involved in this. I would love to get either an investment or roll up or however you would structure it. What would you say to these owners as to something that you're looking for? Do they need a certain amount of locations? Does it need to be a certain amount of rooms?

3:38Are there certain metrics that you're looking at? Very good question again. Yes, we look for at least a minimum of 85 rooms and above. Maximum is 200 because anything above 200 becomes a room factory, as we call it. It's just you're not going to be able to get that relationship, the hospitality experience. Of course, the larger hotels can, but we're not those large groups. We are more smaller and we're leaner and we care for the assets. And therefore, what our objective is, if a hotelier, a current owner says, listen, I don't have the bandwidth to do what you guys do, okay? We don't go and purchase the hotel 100 % outright.

4:23We give a minority stake as our local sponsor unless we have other local sponsors within the parameters of that hotel or within that region, I should say. And if it makes sense, then we keep them on board for, let's say, 20 or 30 % of the ask price. So, for example, if a hotel is, for the sake of this conversation, if it's$10 million, we say, okay, we will pay you$8 million,$2 million we won't pay you, and the 20 % remains yours, but then you get the upside of it. What is that upside? It's post-stabilization and the value-add, the elements that I've already described by re-revisioning the food and beverage concept, putting a brand in there, putting it into a reservation motor or engine.

5:13then what happens is that you automatically generated a good revenue post your post the investment. And that is, you know, that can range from subject to jurisdictions. It can go from anywhere from 1.8 to 3 % or 3x of your money. Okay. So that's a pretty good return. If you think about it, is it always like that? No, it's not always like that. We, we, we try to be very, very very conservative with our numbers but achieve the end results and and to make sure that not only we're satisfied but the exit buyer that's going to purchase that hotel from us is satisfied knowing the fact that they're getting something that can run for a at least a decade post the post us selling it to that uh being in the hospitality industry previously myself So I can relate to the fact that many of these companies, they don't stay up with technological trends or like you said, building a brand, marketing.

6:13There's a lot of things that they don't do. I know a lot of people that say, I want to just open up a hotel, but don't realize how hard it is and how much work goes into it. So if you were to look at the perfect hotel that you visit, what are you looking for or maybe even an example of a hotel that really wows you? Customer experience or guest experience is the most important thing. The moment the guest enters to check in, that's when you've caught the guest's attention. If you let that guest go, check in, and then go out to have their cocktails or to have their snacks, you've lost that guest.

6:52That's the way I look at it. So technically, it's like a mousetrap formula. Once your guest enters your premises, you have to hold them there for 24 hours. By doing that, meaning you have to have options for them. Okay? So options means what type of all-day dining is your hotel providing? What type of a signature restaurant that correlates with the brand, that correlates with the region, and the story within that hotel is providing? And on top of that, you had the nightcap. You know, every hotel must have a decent bar, okay? Because these are revenue generators. You can't just rely on the RevPAR and the ADR in your occupancy.

7:38You also have to rely on what other revenue generators or models you've implemented in the hotel. And to answer your other question with regards, what experience have I seen? one of the best experiences I've had goes to the SLS Dubai. From the moment, and this hotel was built several years ago, and it's magnificent. From the moment you enter the hotel, you have options. And the customer care is just mind-blowing. Of course, everyone says, well, Dubai has the best service all around the world. It's like Singapore, blah, blah, blah. Yes, it does. But customer attention is important. Just by providing a service and not attention to detail is not the same thing.

8:32And this is where SLS would probably be one of those hotels that I really enjoyed. And it has my heart. Of course, there are other hotels that I could think of. But that one, yeah, that captivated me to use that as the first brand. It's amazing how when you think of a trip, I don't really remember much about that trip, but I always remember the hotel. Like, you know, I see so many castles or churches or sites that to me, they all start to feel the same. But I really, really pay attention like you like what you're saying to the hotel. And if the experience of the hotel is great, then I tell people to go back to that city.

9:10It's not even just about the hotel. Sometimes it's like the whole city is represented by the hotel. I'm curious about your experiences just in business in general. Was there ever a time where you said, you know what, I'm just going to give up? Or maybe a challenge that was just so big, but you were able to solve it? A zillion times. And if I told you no, I would be lying to you a zillion times. I have fall flat in my face many times. And I've managed to get up and just clean myself up and get back to business as usual. And I think this is one of the reasons why some people call me a bit too abrasive.

9:48It's not being abrasive. I just know the business. And that's only because of the experiences I've had, both bad and good, more bad than good. And those elements of bad experiences and bad decision makings or bad investments puts you into a better perspective when it comes to the opportunity. so there is no business that in my experience at least and I think the right players if you speak to them they will probably say the same thing without failure there's no success and those failures are what got me into the position that I'm gratefully I can say today you know relocating the company to to to Switzerland was a was a very quick decision and that decision was based on the fact that we weren't beginning to see limited value add, or as I call it, not to be disrespectful towards the UK, we outgrew UK markets.

10:42So we needed a little bit more opportunities in terms of transactions, in terms of assets, and in terms of mindset. UK was a little bit, or it still is, is going through a correctional phase. And I think that correctional phase is going to take at least seven, eight, nine years before it revamps itself. So therefore, we didn't want to ride the negative wave. And that's why Switzerland was one of those ideas. And with that said, we physically moved everything and relocated in December 2024. And we signed up our first assets in Switzerland last month. So it kind of shows you how quickly things can move if the right decisions are made.

11:28And the same type of a story when it comes to Switzerland versus the UK, a transaction this magnitude in London would have taken us six months. Over here, it's taken us five weeks. So it kind of tells you the story in a nutshell. One, great partners. Two, great location. Three, efficiency. And four, transparency. These four elements or these four elements within the formula got us to where we are today. And we're super grateful for it. Yeah. I heard some news around 10 ,000, 11 ,000 millionaires just left the UK. There is a lot of truth in it. I mean, we still have offices in London. So it's a rep office now because most of our people have been relocated and actually to Switzerland.

12:15We still have a few more people there, which the relocation process is going to take place. But going back to your initial question, you're not hearing false information. When you're physically on the ground, and now when I go back, I see what's going on on the ground, and I'm like, oh my God, I used to be one of them. Everyone's just miserable, and I feel really bad for them. I was one of those people. I would go to work like, you know, another day at the office lie. You're just kind of freaking out because you don't know where this is going. So So it is a, unfortunately, as charming as London is, and as always will be a charming city, it's just going through a process.

12:56And it just needs a little bit of tender, loving care, TLC. Yeah, we were just in Switzerland and a friend of mine, he had moved to Zug and he was like, I love it here. My kids walk to school and it's super safe and it's amazing. And we went around the lake and I was like, this is a beautiful, an absolute beautiful place to live. probably the most expensive place I've ever been on vacation. It was pretty, Zurich was quite, it was quite expensive, but great experience with hospitality. People were amazing. I'm curious though, my last question to you is around inspiration. So if somebody comes to you and they say, look, I'm not, maybe I haven't started my hotel or restaurant, or I don't have the real estate for you to invest in yet, but I want to get there.

13:42I want to get to a place where you see us as something, I'm just starting out. What advice would you give to them? Start small and believe in what you're doing. That's really what I can say. Just start small. It's, you know, a baby doesn't start doing, you know, marathons from the day they're born. They have to crawl first and then walk and then start walking. When you realize you need to hire, it's usually already too late. I've been there wasting weeks waiting for decent candidates. If I had used Indeed, I could have hired way faster. So when it comes to hiring, Indeed is all you need. Stop struggling to get your job post seen on other job sites.

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15:40Just learn, read, understand. You can't have a passion without knowing what you have a passion for. That's how I look at different things. And hospitality, you must either really have thick skin for it because it's really hard. And more importantly, you must have a good passion for it. I can see that. Shout out to all those people that work in hospitality. It is not easy. You have to put up with a lot of things and then And you have to, at the same time, make everyone's experience. Like I was saying before, it's really right. Their entire vacation or trip is riding on you and your service. But if people want to get in touch with you, they want to find out more information, how can they do so?

16:20They're welcome to send me an email. And they can contact ferrizadeadvisory.com. One word. Amazing. Well, this has been great. I'm super inspired. Maybe one day I'm going to create that hotel and then we can chat about it. You never know. So always welcome to you, my man. I'll see you out in Switzerland at some time, but I really enjoyed it today. And congrats on the move, all the success. I can't wait to hear from a year from now, how just amazing all the things are that you're working on. And thank you so much for joining us today on Founder Story. Thank you very much, my man. I appreciate you.