From Laid-off Lawyer to Multifamily & Hotel Investor with Jonathan Twombly

In a recent conversation with Jonathan Twombly, a prominent figure in the real estate space, we delved into his transition from multifamily to hotel investing and explored the intricacies of the value-add independent hotel market. Twombly, who has been actively involved in real estate for over a decade, shared his experiences and insights, shedding light on the operational challenges, market dynamics, and potential opportunities in the hotel industry.

The Journey from Multifamily to Hotels

Twombly’s journey into real estate began in 2011 when he found himself at a crossroads after being laid off from his corporate law job. He decided to venture into real estate investment and joined forces with a partner to start a real estate investment company. Although the partnership didn’t work out in the long run, it provided Twombly with the opportunity to gain valuable experience and establish his foothold in the industry.

After starting his own business, Twombly found success in multifamily syndication, primarily focusing on deals in South Carolina. However, as time went on, he realized that he wanted to reduce his travel commitments and explore opportunities closer to home. This realization led him to shift his focus to the value-add independent hotel market in New York and New England.

The Appeal of Value-Add Independent Hotels

When asked about his decision to pivot to the hotel space, Twombly shared a serendipitous encounter that sparked his interest. During the COVID-19 pandemic, he and his wife purchased a house in the Finger Lakes region of New York. On their way to the house, they would pass by a run-down hotel with a breathtaking location overlooking one of the Finger Lakes. This sparked a conversation about the untapped potential of such properties.

Driven by curiosity, Twombly began exploring the hotel market and stumbled upon an opportunity to acquire the very hotel they had been passing by. Recognizing the potential for value creation, he partnered with an experienced hotel operator and secured the necessary capital to embark on a value-add renovation project. This initial foray into the hotel space ignited Twombly’s passion for the industry and opened his eyes to the vast potential within the value-add independent hotel market.

Navigating the Operational Challenges

Operating a hotel presents unique challenges compared to multifamily properties. Jonathan emphasized the importance of assembling the right team and allocating resources effectively. While the staffing requirements may not be significantly different from multifamily properties, the variable nature of costs in the hotel industry allows for more flexibility in managing expenses.

Unlike multifamily properties, where costs are largely fixed, hotels have more variable costs that fluctuate with occupancy rates. Labor costs, for example, can be adjusted based on demand, allowing for greater control over expenses. Additionally, the ability to adjust room rates in response to market conditions provides hotels with a level of revenue management not typically seen in multifamily properties.

The Impact of Short-Term Rentals

One topic of discussion was the potential competition between hotels and short-term rentals, particularly in the era of Airbnb. Jonathan acknowledged the presence of short-term rentals but highlighted the distinct markets they cater to. While some may view short-term rentals as a threat to hotels, he argued that the two serve different customer segments.

He pointed out that hotels already factor in the presence of Airbnb when evaluating market conditions and occupancy rates. Furthermore, he suggested that the backlash against Airbnb, with increasing regulations and bans in certain areas, may actually pose a greater threat to the short-term rental industry. Jonathan’s analysis suggests that hotels, with their established infrastructure and ability to provide unique guest experiences, are well-positioned to thrive alongside short-term rentals.

Targeting a Niche in the Hotel Market

Jonathan’s investment strategy in the hotel space revolves around targeting a specific niche within the market. He aims to position his hotels in the mid-upper scale segment, offering a higher-end experience without reaching luxury price points. By identifying unique selling propositions for each property, such as spectacular views or convenient downtown locations, he seeks to create a brand that appeals to discerning travelers.

His approach involves finding assets with untapped potential and leveraging their unique attributes to attract guests. Jonathan’s vision extends beyond individual properties, as he aims to build a brand that resonates with travelers seeking a distinctive experience. By focusing on properties that offer something different from the competition, he believes there is ample room for growth and success in the value-add independent hotel market.

Jonathan Twombly’s journey from multifamily to hotel investing offers valuable insights into the value-add independent hotel space. His experiences highlight the operational nuances of running a hotel, the potential impact of short-term rentals, and the opportunities that exist within the market. As the hotel industry undergoes a generational change, with independent hotel owners looking to retire and pass on their properties, his focus on value-add renovations and unique guest experiences positions him for success.

While the hotel industry may not have received the same level of attention as other real estate sectors, Twombly’s observations suggest that it is a space ripe with potential. As the market evolves and regulations surrounding short-term rentals continue to develop, the value-add independent hotel market may present a compelling investment opportunity for those willing to navigate its intricacies.

As Jonathan Twombly continues to expand his hotel portfolio and build his brand, his journey serves as a testament to the rewards that come with perseverance and a willingness to explore new opportunities. With a long-term mindset and a commitment to delivering exceptional guest experiences, Twombly’s venture into the hotel space exemplifies the entrepreneurial spirit that drives success in the real estate industry.