We’re excited to introduce you to the always interesting and insightful Robert Rauch. We hope you’ll enjoy our conversation with Robert Rauch below.

Robert Rauch, appreciate you joining us today. How did you scale up? What were the strategies, tactics, meaningful moments, twists/turns, obstacles, mistakes along the way? The world needs to hear more realistic, actionable stories about this critical part of the business building journey. Tell us your scaling up story – bring us along so we can understand what it was like making the decisions you had, implementing the strategies/tactics etc.

One day, my wife said to me, “you are making so much money for other people–wouldn’t it make sense for us to buy a hotel and take advantage of your knowledge?” She was right, I had assisted clients in development, acquisition, management, finance and marketing of their hotel projects. I got paid a nice consulting fee but I was going to have to work forever to make a living that would create a retirement nest egg. I went out and found this small hotel of 52 units. It had 3 of the 4 characteristics I was looking for: a need for branding, renovation, and management as well as a good location. It was called the Ocean Inn and was one block from the Pacific Ocean. Location solved. It needed a branding because there was no brochure, no online presence (though this was July 1, 1997 and not too many people had that) and it needed management. It was already in good condition so renovation was not needed. The strategy was to evict the guests on day 1 by raising the rates $50. The guests were all prostitutes and drug dealers. They all checked out after telling me I coudn’t raise the rates and then hearing me say, “I already did. You may check out early for no penalty.” That was a meaningful moment.

Raising the capital was painful as I was asking family members for $50K each to raise $400K. That was the 20% downpayment toward the $2M hotel. It took the development of a comprehensive feasibility study that I did myself thanks to training done at Deloitte and skills honed doing consulting work for others. We closed the transaction by borrowing the debt from the seller and operated it for just over three years before an unsolicited offer came in August, 2000. We set up a 1031 exchange to use the proceeds to acquire a great 4-acre piece of land. Mistake #1? When borrowing dollars, assume a catastrophic event is going to occur–9/11 struck as soon as we had a loan to build our new hotel.

Sitting on two million dollars of debt and no income, it was time for dialing, flying and begging for dollars. I was the only passenger on one of my San Diego to NY trips. I made presentations to lenders in NY and DC and finally got a loan at 25% interest. That’s right, 12% current pay, 25% internal rate of return on the borrowed funds. One might think the big mistake was the interest rate, but we started getting offers to acquire the land. We decided to hang in there and find an equity partner. We met a partner and built a Homewood Suites by Hilton that opened in May, 2005 on 2.5 of the 4.0 acres. Shortly thereafter, we built a Hilton Garden Inn on the adjacent remaining 1.5-acre parcel. We opened in March, 2008 after building the hotel twice. The first construction job was perfect until a jerk (prior fire felon) torched it with gasoline. We started over, thankfully having insurance coverage that paid for everything.

The decisions along the way included staffing, borrowing dollars, managing construction, managing the hotels and marketing the hotels. We kept our partnership group intact and would buy out any partners who ran into cash crunches.

Awesome – so before we get into the rest of our questions, can you briefly introduce yourself to our readers.

I got into the industry as a banquet dishwasher who was told he was overqualified for the first job until I said, hey, I speak Spanish, too, does that help? I was a college student at the time and I moved up the hotel industry ladder to become a General Manager of a hotel at age 25. I learned every possible discipline including food and beverage, purchasing, front desk, accounting, sales, catering and banquets. I got my undergraduate degree in Hospitality and went back for my Master’s Degree in Tourism and Recreation as I settled in the Phoenix area for 12 years. I worked around the clock, attempting to become an expert at all things hotel and restaurant. When I was at Hyatt as a Restaurant Manager, I even went and bought a restaurant (my wife paid off my expensive debt when we got married).

Getting the education was something that was ingrained in me by my parents. It took awhile as I worked around the clock even while attending night school but it gave me the confidence to pursue jobs I never would have received without the degrees. Director of Training at Best Western International and Manager of the Hospitality Consulting Practice at Deloitte are two good examples. The combination of my years of service and my knowledge of each hotel industry discipline allows me to develop, own and operate hotels and provide guidance to partners and clients on how to optimize hotel products.

Any stories or insights that might help us understand how you’ve built such a strong reputation?

There is no single piece of magic that works, however, there is one mindset that worked for me. It starts with family–my parents always over-delivered and under-promised in everything they did. My dad had a successful supermarket industry business and my mom was a highly successful Director of Guidance in multiple high schools. They guided me and provided me with opportunity but I took the proverbial ball and ran with it on my own. My wife and I have two wonderful daughters and I believe I helped them along by coaching all of their sports teams, by helping to build their confidence and by treating them with respect. We took them to ballgames, provided experiences and they have become both independent and successful. For my 50 years in the hotel business, I have always had a “servant leader” mindset. I will cook, clean, serve food and beverage and do whatever it takes to make our employees and guests feel special. In my consulting, I always provided conservative proformas so that my clients would either say, “your projections were lower than our actual performance” or even better, “we are building another hotel, can you help out again?” My goal was always to be a thought leader in my industry and that mindset requires constant reinvention of our budgets, business plans and training/development of our teams. It requires a sound grip on the guest market, a quantitative and qualitative approach to brands, marketing and financial performance as well as the ability to provide leadership to a team that is too large to control. This requires allowing the management team to grow on their own and I am really proud of our executive team. All employees must feel your energy or the guest doesn’t feel it. Each of our hotels has had financial success because of the multi-disciplined process we must have to attract guests, train staff, execute our plan and have agility in today’s changing market. We were first to market with robotics and will continue to embrace technology, AI and robotics as the world churns out change.

Building a reputation includes giving back as often as possible. I teach Tourism and Recreation Entrepreneurship online at Arizona State University. The students are often already in the industry and just want to learn how to create their own business. I have been teaching this subject for over 20 years and it keeps my knowledge of the industry sharp, keeps me in touch with my students and hence some potential employees and hopefully keeps me young. I also sit on multiple boards of directors. While this will be my last year on the boards of the San Diego Tourism Authority and Carlsbad Tourism Business Improvement District, I am a founding board member of Women in Tourism & Hospitality (with a great wife and two great daughters, it is hard to not notice how smart women are!)

Can you tell us the story behind how you met your business partner?

First, my wife is a real keeper. I met her on the beach 35 years ago and we have been through the highs and lows of entrepreneurship together everyday. Her intuition in both life and business is incredible. I also have had three business partners over the past 20 years. The first one I met at a family picnic when our kids were playing soccer and we joined in. He was better than me at soccer but despite that, he responded to an ad I ran seeking a partner for a hotel and he found I was better at running hotels than he might be. We are still together and have two highly successful hotels in San Diego. We survived a fire that destroyed one of our hotels, we got through the Great Recession and the lockdowns of 2020-2021. We meet frequently for lunch and a review of our hotels and have always been able to get along. The second one I met through our synagogue where we both served as President at one time. About 11 years ago, he asked me what I thought of a piece of land and I came back and said, “I like it,” and here is what I would build. A few years later, the hotel opened and has been a tremendous success. We are currently looking to add at least one more hotel in that market. The third partner I met while doing a consulting assignment for a local investment firm. We were tasked by the investors to analyze the Phoenix hotel market and put together a partnership plan. We did that and the hotel and partnership are both standing, however, he joined me in our management company and we scaled the management company by working together to analyze, advise and close deals. We built the company up to 24 hotels/projects and sold the company on February 20, 2020. We are currently working on forming another entity that would only manage hotels that we are invested in. We would never want to run someone else’s hotel again–too much brain damage and liability for limited reward! Here, we will take our up and coming rock stars and make them partners from the start.

Contact Info:

• Website: www.hotelguru.com
• Facebook: www.facebook.com/hotelguru
• Linkedin: www.linkedin.com/in/robertrauch
• Twitter: www.twitter.com/truehotelguru