Hospitality Reimagined: Converting Offices into Lifestyle Destinations. Ft. Eric Jafari at AENDRE
Hospitality Reimagined: Converting Offices into Lifestyle Destinations. Ft. Eric Jafari at AENDRE
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Stephen Drew: Hello, hello, hello! 30 seconds and we're going! I can't wait. Grab that coffee, that cheeky wine. I don't know where you are, what you're doing. As long as you're not drinking at work, maybe you're thinking, maybe you're somewhere nice right now. Maybe you're in an office. Or maybe You're somewhere else.
Hello everyone and welcome to this non live livestream special. I'm joined here by a fantastic guest who's actually been involved in creating [00:01:00] some beautiful spaces in London. Perhaps you've been with your partner and you've gone somewhere special and it's one of those places that you go, it's fantastic.
But maybe It wasn't always a hotel or a bar or restaurant. It might have been somewhere someone worked at way back when. And on that note, I have the visionary behind those kind of spaces with me, the fantastic Eric Jafari. Eric, how are you? First of all, are you okay?
Eric Jafari: That's quite the introduction. Very humbling. Yeah. I think I probably don't live up to that to, to that image, but thank you for the introduction.
Stephen Drew: Total nonsense, you do. But maybe for those who don't know you, Eric, you could first of all just tell us a little bit about yourself. Who are you then? No one.
Eric Jafari: So I'm born in Los Angeles. I moved here to London about 15 years ago. My background, interestingly, isn't hospitality. My background is in real estate. But my father was one [00:02:00] of the main architects of Disney. So he designed Paris Disney, Tokyo Disney. So I guess, yeah, so the creativity is probably in the blood, if you want to call it that.
Stephen Drew: I've got to be really careful not to go off on a tangent because I have done the Floridas and we've all been to Disneyland Paris in the UK on a school trip. It's absolutely fantastic. However it's, it isn't, that's world creation, isn't it? You create these environments, these places. So I reckon a little bit has trickled down and I don't know, so you've been in London for the last 15 years.
You're basically a Londoner. That's what happens to us all.
Eric Jafari: Yeah, I have been 15 years. Met, met my wife here. I've got two very British kids five and eight. And listen, travel has always been a passion of mine. Food and beverage, exploring new things. I think one of the things that I've always loved about travel is this recognition when you're in a very foreign country.
Environment that your reality is not the reality. And so it's always been an important [00:03:00] part of my personal fabric. Like I, I don't think I'd be the person I am today if it wasn't for, some of the travel that I've done. And so I think, looking back 15 years ago, we did various studies on the hospitality market through a very U S kind of real estate lens.
And what we discovered is that there was a shortage of extended stay hotels. So think hotel rooms with kitchens. And at that point in time, there was a shortage of lifestyle hotels. So think kind of these cool high design hotels. And so we were trying to decide which one we were going to do and merge the two together.
So think SoHouse or Hoxton having a baby with Airbnb. And so the very first actually the first concept we launched was a concept called Urban Villa, which was in 2014. And then Oaktree Capital saw what we were doing and said, hey, listen, we would like for you guys to do something comparable for us.
And then in 2016, we launched a concept in East London called Lock, L O [00:04:00] C K E. The first of which was called Lehman Lock. And I think it was right place, right time. I wish I could say that I would foresee Locke being as big as it is today. I didn't. No, none of us did. And so we had some amazing capital partners.
We started off with Oak Tree, ended up with Brookfield. And I think there's 16 Locke's to date across Europe. Dublin Zurich, Berlin, Munich. Lisbon and Paris open soon, which are two of probably my favorites. And those are quite exciting. And so I had an amazing ride. I was there for nine years.
And I realized at the end of the nine years, it was time for me to work on the next passion project. And just tail end of last year, resigned to start working on kind of the next big thing. So that's the. The long and the short.
Stephen Drew: I love it. We got the, yeah, it's good to go. We want to get, we want to zoom out and see the whole thing, but I know part of this, we're gonna zoom a little bit in as well. Now, we've got these we've [00:05:00] got this amazing set of questions, which I can't pretend that I've done, because you helped me with them a little bit, because you know this too.
So maybe what we can say is. What the loose theme, because we're allowed to go off of mini tangents as long as I don't go too far down Disney World. But really the, what we're talking about here is the challenges and opportunities in terms of converting spaces. Such as offices, hospitality.
Now I'm guessing this is something that you've done in your career a few times. You've seen this opportunity and I think mentioned that actually it's quite a sensible thing to do. Now the first thing that came up in this list is what have you done in the past. And what have you learned? What did you learn from these projects?
So on that theme of like offices, hospitality, is there a project, one or two projects that come to mind, Eric, in particular, when we talk about that specifically?[00:06:00]
Eric Jafari: So listen, I think over the course of the last 10 years, we've done a total of 20, 30 projects six of which were office conversions. And those were amongst my, some of my favorites. I, one of the things that people don't talk about when it comes to creativity is that I, and I always talk to my team members about this.
Limitation is the mother of creativity. And one of the. Benefits of your office conversions is that you're imposed with a set of limitations that you have to work around. And so I think, and I'm going to take a step back here before I answer this question, I'm going to go on a bit of a tangent. So bear with me,
Stephen Drew: Tangents are allowed on here. Don't worry. You're in good company. King of the tangents.
Eric Jafari: so when people like myself create these new brands creating a new brand is so painful and you make so many mistakes that what brand creators have a tendency to do is that instead of continuing with that level of innovation, they take [00:07:00] that brand and they make little tweaks to it. And so what you end up with is your 10th hotel looking.
Almost like an identical carbon copy of your first. And there's three issues with this. One is, a lot of the reason for why consumers fall in love with these disruptive brands is for that reason. They're disruptive. They're different. You've taken the playbook and you've thrown away the playbook.
And so by virtue, and that's why they're willing to pay a premium. That's why you garner that kind of consumer loyalty. However, when your 10th one looks like your first one, you begin to alienate the very demographic that put you on the map. And I can't tell you the number of times I've gone to a hotel, fall in love with it, thought this is so unique.
And then went to, That brand in a different city, it was a carbon copy and that was it. I was like I've been there, done that. Why would I go
Stephen Drew: yeah,
Eric Jafari: And so in response to how that was relevant to log, um, when Brookfield acquired the platform, [00:08:00] I thought what they were going to say is, listen, Eric, you're going to have to create carbon copies the first one.
And I was really privileged because they didn't. They said, listen, treat every property like a brand of one. And the 16 properties we had, every single one of them was in response to that micro location, the fabric of that building. We worked with a different designer, we applied a different food and beverage strategy.
And it was like creating 16 different brands. And the benefit behind that is there were a number of lessons learned that came out of it. What was the optimal room size? What was the best room design strategy? What was the best layout? And so you had live feedback across the 16 properties and what you ended up with is, a summary of lessons learned and there's probably a thousand lessons learned because we were willing to experiment and make mistakes and that's really how you stumble across innovation.
But if I were to summarize the three big [00:09:00] takeaways one, if you can buy an office building. At a discount, which is the kind of the privilege that we're afforded today, which I don't think we've ever been afforded that. Offices have always been the hottest thing out
And you can, what we realize is that these larger, skinnier units lend themselves to extended stay.
Stephen Drew: yeah.
Eric Jafari: A place where you can eat and drink and have your kitchen and your living area, your lounge area, your dining table, and then have your sleeping quarters, which is separate from that.
Stephen Drew: Yeah.
Eric Jafari: When you have these deep floor plates, these office buildings, they lend themselves to create this kind of home in a room.
Which, if you were to try to build from scratch, you would never be able to do it
because it's cost prohibitive. And yet there's a massive shortage of what I call kind of these one bedroom. [00:10:00] Longer, bigger units, and so this office opportunity, because office now, office buildings are now selling for pennies on the pound, now provide us to be able to create these longer rooms that we wouldn't have otherwise been able to do.
So I'd say that's one takeaway. I'd say the other takeaway. Is that when you're, when you've got these office buildings, every single office building is different. And so if you try to take this, set a fixed set of brand standards and apply it to an office building, it's just never going to work.
You've got to work with the fabric of the building. If the room is floor to ceiling height are small, you use that and create a sense of coziness, create a sense of intimacy. If they're big, then play with it, apply vegetation, find what curtains. And so I think people have a tendency to want to just take their brand standards and shove them into these buildings.
And the reality is every single building is different. You've got to treat every building like a brand new one. So I'd say those are the, two of [00:11:00] the takeaways. I'd say the last one and this is where hospitality has a tendency to bifurcate. There's the franchise, there's the operator, there's the developer, there's the real estate owner.
And so in response to that, you have the franchisee coming and saying, these are my brand standards. And you've got the real estate owner, who's got their own set of agenda. You've got the developer, their own agenda, and everyone's pulling in different directions by consolidating all of those functions under one roof.
You're able to really create something unique. And for the first time aligned interest and there just aren't that many groups out there which do that.
Stephen Drew: I love it. Yeah, it makes sense handling the building and, maybe embracing the quirks. Can I just quickly say, before we move on as well, I absolutely love your camera. If anyone's watching on the audio on this, you need to watch the video, because it's like being in an action movie and you're the star, it's just going back.
It is amazing. It is the best. So I am so deep in this conversation. I'm just, [00:12:00] the camera is taking me on the journey as well. Maybe while we're on that journey, the next question that we talked about before when, what went well and what didn't and why? I know that's a big question, but maybe what would be cool there, you talked about, embracing The buildings and all, it's a few things like strategy wise.
Okay, let's not do carbon copies. You talked about, dealing with the existing buildings and stuff. Did you learn a few harsh lessons, Eric, along the way when you were doing projects? Maybe some, there were some good ideas at the time that you went, Oh, actually. We shouldn't really do that. Was there anything that you picked up in your journey of doing these hotel spaces?
Eric Jafari: yeah, I think there's probably a thousand and one, but I would do a few of the takeaways. One of the things that we discovered Is that, when we were first going down this journey, I had a mix of team members working with us. You had the team members who came from a hotel background, who really pushing the agenda of, Hey, it's all about [00:13:00] micro rooms.
Cause at that point in time you had Citizen Am, Hoxton, Seta Hotels, everyone kind of making the room as small as possible. On the flip side of that, you had the corporate housing guys and girls who were really pushing big one, one, big one bed apartments. And it's all about the 30 day length of stay or more.
And, one of the privileges we had is at the end of the journey when I left, we had 4, 000 rooms, trading across across Europe. And we were able to track what was the most profitable room size and what was the most profitable length of stay. And what we discovered is both were wrong.
The most profitable length of stay isn't one to three nights. And it isn't twenty nine nights or more. It's the consumer that's staying four to seven nights. Because the, and the reason for that is because they're willing to pay as much as the one who's staying one to three nights. But you don't have the overheads associated with daily [00:14:00] room cleaning, the amount of people that you used to staff the front of house staff, the list goes on.
And the irony is, and this is where I was really surprised, none of our competitors were pursuing that kind of four to seven day length of stay. And so the question you have to ask yourself as a consumer, forget about being a brand guy or real estate person, What do you need when you're staying somewhere for four to seven days? You want a nice gym. You want to be able to maintain your best habits. As opposed to always having to be forced to be indulging in your worst. The things that come to mind is you want a really nice gym. You probably need a little bit of co working. Maybe, you can work in your room, but that gets lonely and solace.
Yeah, you can take the occasional fall call in your room. But I think a lot of us like to be around other people. So you need a little bit of co working. You need a really nice gym. Some of us really care about our coffee. I want a place that serves good coffee. I want my sleeping quarters [00:15:00] to be separated from my living quarters.
I need a kitchen. I need a table, a dining table, so that if I order my Deliveroo I'm not eating on my bed. I want a nice sofa, to lounge on, so I can decompress and watch a movie. Yeah, it's nice doing it on your bed, but there's a certain psychological pressure So element towards coming home and your room not just being a 10 square meter room.
And so that ties into the second piece, which is the room size. We discovered it needed to be at least a 25 square meter room size. But it's how you design the room. There are rooms that are 40 square meters that look and feel more cramped than a 10 square meter citizen M room. And so it's all about how you approach that design of space.
to create something that creates these zones. And I found the other lesson I learned in this, and I the designers and architects amongst you who are listening to this might hate me for this, [00:16:00] but that the worst partners from a design standpoint that we worked with were the ones who had a lot of hotel experience.
They just couldn't get, take their hotel hat off to, to embrace and listen, if you're staying for seven days, It's different than you're staying for a week. Don't put the bed in the middle of the room. Because if you put the bed in the middle of the room, you're in essence eating up all the space with the sleeping quarters.
I, where is my sleeping quarters? Where's my living quarters? Separate the two, make sure there's some form of division within the two. So psychologically, when I'm sleeping. And when I'm doing, eating, working, playing, socializing, it's in a zone that doesn't look like one's bedroom.
Stephen Drew: Yeah.
Eric Jafari: And a lot of the rule book that works for traditional hotels just does not work for extended stay. And there aren't, and because of the fact that we're all ingrained with treating these like hotels, or even [00:17:00] worse, treating these like residences, it's neither. And and so last but not least, I'll share a couple stats with you.
In 20, Resalvo's released a report in 2008, The average length of stay of a consumer traveling to London from overseas was two days. So they're spending two days in London and then going elsewhere. Fast forward to 2018, it was almost five days. So it means that consumer that was coming here, Big change.
That was pre COVID, now you think about COVID and the number of people who are, perhaps going to work to, coming here to London on a Thursday, meant to stay two days. Now what are they doing? They're extending their stay to five days because they're working they're working away. And so how do you accommodate those consumers who've come here for work, but are not here for play?
It's forcing us to rethink. How these people sell in the traditional hotel playbook doesn't apply.
Stephen Drew: [00:18:00] it's where I can relate more on a consumer level is I had a definition in my head of what hotel was then a B& B came out and it's wow, it's like a house. It's the color totally different way of being within that space. And now. Even in my head I'm going a little bit away from the Airbnb.
I want a bit of that. So it's a bit like what you're saying. It's living somewhere for a certain period of time. I'm interested to know where that trend goes. If I can expand upon one thing you mentioned. You talked about Working with architects in particular. So mini segue on this thing. You mentioned the hotel architect has been doing the Hilton's for goodness knows how many years and all this stuff.
Maybe there's a set way there and then that, and you've liked people that then are doing things a bit different on the other hand, so what's been successful for you then in terms of an architect design partnership with yourself where is it really thrived in your opinion, Eric, and what would you encourage architects to consider?
Eric Jafari: [00:19:00] I listen. I think there's three things here. I think the question is, who's your target market? What is it that they need? And how is the industry not catering to that consumer as we speak? And so once you've really defined who your consumer is, and and their needs, then at that point in time you can shape an experience around their needs.
And part of that process is ensuring that you're selecting a design partner who is part of that target market.
Stephen Drew: Yeah.
Eric Jafari: And so when they travel, where do they stay? What kind of coffee do they drink? Where do they hang out? And so one of the challenges, and this is, I've always wondered this, like how is it that someone like myself, who had no hospitality experience, came and helped develop such a scalable, disruptive brand?
And what I realized over time, and there's various reasons for this, and I probably will spend the rest of my life asking myself that [00:20:00] same question, but I think one of the various right reasons for this. is because what I did is I created a product that met my own needs. And if you're not that consumer, you're an outside looking in, and some of the things that you might want or desire or think are necessary may not apply to that consumer, And so the first thing is making sure that you understand the consumer because you are the consumer.
So that's the first bit of advice that I'd give. I think the second bit of advice is that, as it related to us, the type of designer that I thought worked best for us were designers that had experience and beverage, but more importantly, experiential food and beverage. So I would go to East London or to some of these places and I walk into an amazing restaurant that you could tell didn't have much of a budget, but they use the limitations of the, so they use your [00:21:00] paint and vegetation and art to create this very Like intimate, activated space.
And you knew that, okay, this isn't a private equity owner that owns this restaurant. This would have been someone with a very lean budget with tight timetables and the designer had to work to those budgets. And those were some of the best designers to partner with because one, they knew how to work to a tight budget.
They were willing to think out of the box and they weren't encumbered with, this is the way that Hilton, Marriott do things.
I was fortunate. I had some great design partners on our team who were able to handhold these individuals and shepherd them. So that way they didn't make, some of the kind of rookie mistakes you would normally make.
And then I was also fortunate that, the original designer that we worked with an individual by the name of Matt Krasinski out of New York, didn't come, he was actually an architect, he wasn't an interior designer, and so [00:22:00] he really understood how to use the fabric of the building as a way to double that up as as part of the interior design, but once again, why did it work?
It worked because he was a designer. He was at the bullseye of our consumer base. literally would get very, he would, you would never be caught dead staying at a Hilton or going to drink coffee at a Starbucks or a Costa. And he was quite scathing about the big brands. And so I knew when I met him, I was like.
This is the guy.
Stephen Drew: That's the game.
Eric Jafari: the guy. And and and he created very unique experiences the type of experience he'd want to stay in.
Stephen Drew: Wow. Okay, cool.
Eric Jafari: know if that's helpful or not. I the other thing I would say is we made the mistake on a couple of occasions of working with some of the big design firms.
The really big name designer, and I'm not going to name them on here, and it was a bit frustrating because you'd have the big name designer show up to the first meeting and the second, and then from there, they just, passed the work down to a junior designer who wasn't in the target market.
[00:23:00] And then you realize you were just a kind of a small cog in the overall wheel. And so from our perspective, you want to create something unique, you want to And you don't have Richard Kering's budget, you really need a smaller group that's going to give their full undivided attention.
Stephen Drew: yeah. No makes complete sense. I'm definitely glad you got you. You found that team in the end to execute that vision that you all had. Now, one of the other things that we mentioned is the. Challenges associated with planning. See, with all the architects and the will and the world and the design behind it, what things did you find then, Eric, that you came up against when you convert in these offices into these hotel spaces?
Was there things you had to overcome with the planning then in, in these design of these amazing spaces?
Eric Jafari: First and foremost, I was lucky I happened to surround myself with a group of team members who probably are amongst the best in Europe when it comes to planning. 11 [00:24:00] of the projects we did had planning risk and we are 11 for 11, To date, so I'd say I'm very fortunate.
With respect to what these team members did right, I'd say there's a few things. One is, they did their homework, meaning that we didn't, we crossed every T we dotted every I, we didn't take any shortcuts. We didn't try to expedite the process. We, in each borough that we entered, we didn't buy the asset unless we were absolutely convinced, having done our homework, that respective asset would get planning.
And so we brought in the right advisors up front. We did our pre op with the local municipality. We honored the, how difficult the planning process was. Because at the end of the day, We acknowledge the fact that the planners are people, the city council members are individuals, and they're trying to do what's best for the local council.
And in a lot of cases, these were office buildings that were paying business rates that the local council relied upon. The revenue, [00:25:00] tax revenue that they relied upon was underpinned by these office buildings. And so when you're going to these individuals and you're saying, hey, listen, we're going to take this office building, And we're going to transition it into a different asset class.
Understandably, the pushback you're going to get is, wait a minute, we rely on those tax dollars or tax pounds in order to survive. And so you've got to have a very compelling reason for why you're doing this. Now, the first reason is a more obvious one. If that office building isn't any longer fit for purpose, And as such lying vacant and not generating that tax revenue, then that's a suitable office building for conversion.
But if it's fully tenanted, then you shouldn't be taking that office building and trying to transition it to a different asset because a hotel is never going to generate the same equivalent amount of tax revenue as an office building would. So that's the first piece. I think [00:26:00] the second piece To it, assuming that it's been vacant and you can't re tenant it.
Then the second part of the equation is how do you get the planners to buy into your vision? And I think where people fall off balance, recognizing that these are people, you've got to sell the dream. What's your vision? What are you contributing to that micro locality? Is it just going to be another branded hotel with a bunch of beds?
Or are you creating something that improves the fabric of that locality? And so from our perspective, the ground floor experience, the rooftop experience, these are the types of things that enhance that micro locality. You go to any locked property across London or in Munich or in Dublin, Zurich, that ground floor is full of locals.
And these are, small startup companies who can't afford it. Going to a co working venue. They're students. We have [00:27:00] underpinned that location with a beautiful place to work so that when the traveler steps foot in that property, they're getting a glimpse of local living. It's an opportunity to meet a local.
And so painting that picture to the planners to go, listen, we are making this place a better place. Because one, the travelers are, people who are coming here aren't coming here for one night and leaving. So from a, from an ESG standpoint, this is a far more responsible way to stay than a traditional hotel.
And two, they're going to meet, they might meet a local. They might decide as a result of meeting a local that they want to move here. It's a, you're giving them an opportunity to get under the skin of the city. And when the planners, we realize that when you convey this vision in an articulate manner, they get it.
Now, some may not, and if during the pre op process, you realize they just don't get it, then that's probably not a property you should probably acquire. But I see in a lot of [00:28:00] cases, people are like, oh they tried to get planning and they got rejected. Yeah, they got rejected because they were going to put another bed factory.
They didn't put any regard for the ground floor experience. And by the way they, that building actually would make for a better office. So don't try to convert it. So that, that's the one thing I'll say. The other thing I'll say is that in a post covid world the local municipalities have become that a lot more sensitive to making sure that what you're creating and helps that locality become less of a kind of a corporate just workspace and more of a 24 7 space.
City of London's really trying the hardest bar the bar of Southern. Love the Hoxton kind of seabird working from ecosystem and they want more of those. And there's just not enough of us out there delivering on those types of experiences.
Stephen Drew: makes complete sense. There's a few things there that I'd love to go into. Earlier you talked about the [00:29:00] opportunity of the extended stay compared to the one to two nights. You mentioned then as well the term that I'll affectionately remember forever of bed farms. We don't want bed farms, right? No bed farms, but when we talk about offices, you've been looking at these extended stay hotels, so something's obviously brought you back to looking at these offices.
So they why are they particularly sustainable then, Eric, for particularly suitable, sorry for conversions to extended stay hotels? Is there something about offices in particular that makes a really good connection? Hotel at the end of the project then, Eric?
Eric Jafari: Yeah I think without having kind of visual aid to show you, I'll have to ask the crowd to close your eyes and picture
Stephen Drew: I can get your website up if you want, if there's a project on there.
Eric Jafari: The website's not going to have the floor plans, but I'm sure you're hopefully, by virtue of the demographic that's listening to this, they can picture things in their mind. And so [00:30:00] if you think about the traditional office building, that doesn't lend itself. to AAA office. These tend to have very weird floor plates, in a lot of cases, very deep floor plates. And for a, if you're going to transition that office building into a hotel property, the question is, what do you do with the core of that office building? And the answer to that, for most hoteliers, is One of two things, either a drop a basically a punch a hole through the core, which is incredibly cost prohibitive.
And so it typically only works if you're willing to do a luxury hotel or B, you're going to do windowless rooms, which really only lends itself to a budget hotel. And which means that everything else gets, doesn't work, except for extended stay. By [00:31:00] leveraging off of that deep core, like I mentioned earlier, we can create these longer units.
And there's a few other things that we're working on that I can't share on this call yet. But when our first new hotel opens, we'll be able to just share. That long, deep floor really lends itself to a long, skinny room, which is the perfect extended stay room. One where you've got a division between where you're sleeping and where you're eating, lounging, working, so on and so forth.
And whereas a hotel room would be half that size, an extended stay room, you can go all, you can eat up the entire floor plate and it's that much more profitable of a room as well. So it's it really is a perfect time. And as I mentioned earlier in the call, if you tried to build it from scratch.
It's cost prohibitive. So the fact that we're able to buy these office buildings at below replacement cost means that we've got this kind of window in time where we can really buy these deep floor plates, [00:32:00] transition them into these longer units. And I don't envision that opportunity is going to be there for very long.
But we're going to take advantage of it whilst we can.
Stephen Drew: Yeah, absolutely. We're good for you, as you should.
Eric Jafari: Oh, and by the way, there's one other piece to this, and going back to What is it that consumers want when they're traveling four to seven days? They want a really good gym. Not the types of gyms that you see in most hotels, where it's four treadmills and a couple of weights that my five year old could,
Stephen Drew: yeah, the rusty machine and the old treadmill which looks like it could kill someone and get scooped it. Yeah, we've been there.
Eric Jafari: Now, what they want is something that's aspirational that rivals any gym that they would have had at home. They want a really good co working venue, something as nice, if not nicer than what you would see at at a WeWork. And being able to leverage off of these deep floor plates to create common areas that can accommodate both of those, [00:33:00] It's really exciting, and I don't know of anyone doing that.
Stephen Drew: yeah,
Eric Jafari: And then you obviously have to have a rooftop bar as well. Everyone likes a drink in a theatrical setting, but that's a
Stephen Drew: oh yeah, if you're in London, you can't beat the rooftop bar. I agree, or if you want to go to the next level, the rooftop pool, that is an obscene. That is the king of obscene, but, I, if you've been in one, it is quite cool. Very interesting. There was a question that you mentioned with me as well, which is So why is this all relevant today in the era of ESG compliance?
Forgive me, ESG compliance I don't really understand it properly. Maybe the listeners don't as well, but can you, like, why do you feel, Eric, more than ever, this is important now? It's clearly as you're onto something. Sounds there's some exciting stuff in the pipeline that maybe we'll see when it comes out publicly, but why is all this stuff particularly relevant today in your opinion?
Eric Jafari: Listen, there's two sides to this. There is there's the consumer, who I [00:34:00] think the biggest the emerging consumer that is not being catered for at the moment is the JEDFA consumer. So there's the consumer and the importance of this to that consumer, which I'm going to table for two seconds.
And then there's especially here within Europe, the governmental acknowledgement that that if we don't do something for our environment, we're going to have serious repercussions. Now in response to the latter the UK government and others have implemented basically rules that require corporates to ensure that their office buildings are ESG compliant.
And most office buildings here in London are not ESG compliant. And in order to make them ESG compliant, and most of them have to do it by 2030 it's cost prohibitive. What's going to happen to all of these office buildings if they don't transition or spend the money? You're going to have a bunch of stranded assets.
Now, the UK government could always [00:35:00] change the policy and that's a possibility, but I'm, I think it's unlikely they will. So that's the first piece and that's table six, but there's another piece from my perspective that's probably far more important and it's this, is that our, the biggest, fastest growing consumer that people aren't talking about is the Gen Z consumer and they care about, they drink less.
And they care about welfare, meaning personal welfare and the world welfare, the green movement, more than any other demographic that we've ever had. And whilst some companies are just going and treating ESG as a tick box exercise, this consumer doesn't care about the tick boxes. They're like, is The Green Movement and how you treat your people at the core of your identity, because if it isn't, we're going to take, and they're the first ones to actually be to be making to be voting with their spend.
To them, it actually does make a big difference. And one of the reasons for [00:36:00] why we like office conversions is because it's a lot more responsible to take an existing building and transition it from what I'd call kind of an ESG non compliant building to one that's ideally, carbon negative would be the ideal, but something that actually contributes to that.
From an ESG standpoint, how do we take, make this as green as possible and make it profitable? And so one of the ways of doing that is, taking office buildings and transitioning them into these hotels. And then the second part of it is once it is a hotel, what is the greenest type of hotel you can make?
And the reality is, and that no, you take all the tick boxing exercises aside, the greenest form of travel. is one where you're staying longer. If you're jumping on a plane and traveling and staying for one night and coming back, which I do from time to time and I feel incredibly guilty about, you're causing a lot of harm.
So you might as well take more [00:37:00] time when you're traveling. And the Gen Z consumer is doing that. They're, if they've got an opportunity to spend two days, instead of spending two days, they're spending four. And so it's part of the way that they're approaching travel because they recognize, all right, if I'm going to emit that much carbon in the air, let's make it worthwhile.
Stephen Drew: Garlic.
Eric Jafari: I think back to the way my parents used to travel. They would fly to London, take pictures of the Big Ben. Then go to La Paris and take pictures of Eiffel Tower. Then move on to that. There was no real connecting with the locality and living like local. And I think Airbnb has gone a long way in helping people discover that there's a better way to travel.
There's so much more fun. You get so much more out of a city when you're not just visiting the sites and moving on, but getting under the skin of the city. And you really need five to seven days to do that.
Stephen Drew: Yeah, maybe, hopefully you dodged the bullet by If you'd been in London for 15 years there was the whole Butlin's experience here in the UK, Eric, [00:38:00] before, which is which is a product of its own time and it should firmly stay there, but I
Eric Jafari: I've heard stories. I've never had the privilege of going to a butler's unfortunately. So I'll have to take your word for it.
Stephen Drew: Privilege is not the word I would say. Excuse me. Experience for one way or another, it had a time and a place in the, or in this country caravanning. Can you imagine that? Last minute tangent on that. You get a mobile home, which is completely immobile, and hundreds of people go there to a place, presumably to drink, and the kids are in one area.
What a nightmare. I'm glad that you say Gen Z. We're moving away from that. It's completely different. That's the great rundown of our questions. If you, before you go, I had one or two quick little ones I'd love to pick your brains on because you're seeing all this stuff happening, but also in the news, we're in an exciting time in 2024, and especially like When we recorded this, for example chat GPT, OpenAI, a release, new algorithms, all this technology is [00:39:00] coming.
Do you see any exciting things that could happen, Eric, where this technology could influence the hospitality space or what you do? Do you think there will be things that will change or do you see this very much that maybe the world won't blur just yet? Or I'd love to know your thoughts on that.
If the tech is creeping in to what you do and what and what you predict.
Eric Jafari: Listen, it's a good question. I think there's two areas, and by the way, this is, this might not be in the next 12 months. This might be in the next 10 to 20 years, and so the two things that I think are likely to transform hospitality, one of them is tech, the second one is wellness. So I'll touch upon tech first, and then we can circle back on wellness.
With respect to tech and I'm going to give you a, an interesting anecdote. One of my friends he went to a very nice, beautiful luxury hotel in the British countryside, which I'm not going to name. Spent a lot of money, when he told me how much money he spent to stay there I found it eye watering.
And they [00:40:00] showed up. And he had booked a picnic for him and his wife and they forgot about the picnic. They didn't refer him, refer by his by his first name. And his response, and I remember talking to him about this. I was like, listen, it's a, it's an amazing venue. What are you whining about?
He's listen, he goes, it's my second time there. Here's I, they don't have that many rooms. I would have assumed that they would have remembered my name and had some form of a log of the last drink I had there, would have remembered the the the picnic basket and so on and so forth. And I looked at them and I said, listen, one could argue that's a training fail, but I would argue that's a tech fail.
At some point or another, what will differentiate. The luxury from the non luxury will be training, but it will also be tech. Tech that notifies the front desk that, hey, Stephen's showing up today. And when you walk in the door, there's face recognition. It notifies [00:41:00] the front desk and lets them know that, hey, last time this person, Stephen, was here, you ordered a flat white in the morning and had a Negroni at night.
Comp him the flat white, let him know that he's got, he's got a flat white waiting for him at the bar in the morning and a Negroni at the bar at night. That it's a level of personalization that's based on tech, technological automation. Are we there yet? No. But the irony is that a mid scale product that's able to implement this form of tech will have a competitive advantage over the luxury product that doesn't.
Want to be acknowledged. We want to be treated as special. And so there are training modules that are out there that does this, but we've you know, we've got, we're dealing with a labor shortage and rising labor costs. It's becoming that much more difficult to train, to find team members who can deliver that level of [00:42:00] service.
So how do you supplement that through technology? So that, that's the first thing. That I think is likely to transform technology. Nobody's really talking about this, by the way. I have these dialogues with people. I haven't heard anyone come and say, Hey, listen, I've got a tech that can deliver this. In fact, most tech I find in hospitality is antiquated, behind the times, fragmented.
You've got 15 different systems you're trying to use and bolt them together. It's an absolute mess, and everyone I speak to is in a worse state than the other. From a tech standpoint, I've yet to meet anyone that has nailed the tech to date. The second part
Stephen Drew: No, carry on, please.
Eric Jafari: No, because the second, I'm going to go off on a completely different tangent.
If you have any questions on the tech.
Stephen Drew: I just, what I thought was interesting about that is where the tech kind of meets the old school part, isn't it? We all have that restaurant or the place we go with the person knows your name and you're like, Oh. [00:43:00] I feel part of it. So I find it interesting that a new age solution could fill that, is actually the, it could be one of the answers.
So that was it. It was very interesting. That was what I was going to say. Please carry on with part two of what you're going to say, please.
Eric Jafari: The second part, I think, is likely to transform wellness. Now, if you ask a Gen Z consumer to define wellness, often what you find is that the image that they depict is one that is them lying by, lying. By pool, by themselves, not being bothered, getting a spa treatment in isolation, what I call horizontal, so Martin from Future Labs calls it horizontal versus vertical.
It's horizontal decompression. When you ask a Gen Z consumer to define wellness, that is not the image [00:44:00] that they depict. It's literally the opposite. It's vertical. It's communal. It's loud. It's high intensity. It's CrossFit. It's SoulCycle. It's Barry's Bootcamp. They, this demographic the wellness venue has almost become the new nightclub, the new cocktail bar.
It's where they meet, make their friends. It's where they get their endorphin highs. It's where they forge community. They're not drinking as much as we, we do. And so in response to this Wellness, and we almost need to find a different word for it. Venues, whereas in my heyday, it was all about the hotel that created the nightclub and the pool.
I'd go get hammered and then I'd be hung over the next day, laying by the pool. We almost, they're reinventing itself. The way some of these wellness concepts look like, they look like the nightclubs of old. It's, that's where they're getting their endorphin high. That's where they're meeting their friends.
And so when they're traveling, [00:45:00] they want to maintain. They want to, find places where they can meet new friends and get the endorphin rush. And so that's going to revisit everything. Because if you think about the traditional lifestyle hotel, the formula is now saturated. It's beautiful design, bar, restaurant.
There are, how many hotels in London, in Paris, in Berlin that are implementing that formula? It's a saturated space. But then, when you ask a Gen Z consumer what is it they want, and what is it they're looking for, none of these hotels are delivering any of that. And it'll be very fascinating to see how that plays out.
That need, and the importance thereof, begins to transform how hospitality is able to cater to that need. Because every time I get on the phone, oh yeah, we've got an amazing wellness venue. And here, by the way, one last rant. Every time I hear wellness, it's always some five, six star luxury [00:46:00] hotel that is doing some cryotherapy, doing all this stuff.
And the irony is they're catering towards a Gen X or older demographic, which is in the 1 percent of spend, when the consumer that cares about it most can't afford that.
Stephen Drew: yeah. No I, I. I do agree what you say. It's more like active communities. So I know what you're trying to get at is, I see it as well as I, of course, run a small business, trying to get the perks, trying to get all that cool stuff. And, all the hype and the buzz of where people want to hang out is They're like, you look at the gyms and they're like, I wouldn't say a nightclub.
They're like another level. It's just like this event, this place to go to. So it, it does make sense. The last question I was going to ask you, which could be around this, or maybe it's a slightly bigger as well. I always found Disneyland Paris exciting, so I got to try not to constantly Message you.
But what are you excited about at the moment? I know you've got one or two top secret things coming in work wise, but it could even be bigger than that. [00:47:00] What excites you at the moment, Eric, then, at the moment?
Eric Jafari: I'm going to okay, so I'll tell you a story. Which is a anecdotal story that'll answer this question. So it was March, April of last year, April 4th, which was my birthday. And my sister, as my birthday gift, we were in New York at the time. She's listen, I'm going to take you to Toronto for the day.
Okay. Interesting. Toronto of all places. I wouldn't have crossed my mind. And so she spoke to my wife. My wife was kind enough to, she took the kids back home and then I went to Toronto with my sis. And we show up at this place at 9 PM at night. Now, mind you, at 9 p. m. at night, I'm typically, if I'm going to have a wild night out, it's typically a cocktail bar or of that venue.
And I notice it's a wellness place. Now, once again, I'm going back to the wellness but I'll get to it in a second. This is why I'm excited about this. I show up, and And I was like, and I asked the guy, I'm like, this is a wellness. He goes, yeah, and we're about to go come in. I was like, huh? I was like, how [00:48:00] many of these things do you guys have a day?
And he's oh, we have 10 of these a day. I was like, how many people attend? These things. And he's 40, 50 per, per per event. And so I, my mind, my, my business mind is going through the numbers. I turned to my sister, I'm like, how much did you spend on this? She's 65. I'm like, okay.
I was like, can we book something for tomorrow? And he's he starts laughing. He's You're kidding, right? I was like, no, why? And he goes, we were fully booked two, three weeks ago. And I was like, okay. So we walk in and I'm asked to wear my baby suit. And so there's, welcome to this communal changing area where the lighting is low.
The music makes me feel like I'm in Ibiza or Mykonos. And I was like, wow, and I noticed everyone around him, he's in their young kind of 20s, 30s, everyone's in good shape. Everyone's friendly, outgoing. We go from there into this communal lounge area and I was like, Oh, okay. And there's two [00:49:00] people walk out and they say, Hey, listen, welcome to Othership.
You've come on the South Social Hour. It's our favorite event. We've got two hours and mind you, at this point in time, looking at my sister, I'm like, okay, what is this place? And they're like, you guys are going to get a chance to meet one another. They're like, we're going to do a little bit of breathing exercises.
And then from there, we're going to take you over to the sauna. Okay. So we do some breathing exercises and I'm incredibly skeptical at this point in time, because I'm really questioning my sister's judgment. like, wow. I thought my sister obviously doesn't know my brother and my sister at midway through can see that I'm skeptical.
And she's listen, if you don't like this after an hour, we can leave. I was like, okay. So we walk into the sauna and it's this beautiful, amphitheater style overseeing this enormous. Square thing of rocks where, the heat's emanating from. And what's interesting, the first thing I noticed is, when you go to saunas in, in Scandinavia or in Germany, [00:50:00] they, the lighting's really bright and everyone's quiet and everyone's asked to sit there and not say anything.
And there's two things, there's three things I noticed, the lighting is very dim, like mood lighting, and the music is loud. It's like the best speaker system I've ever seen in my life, and everyone's talking to one another. It's wow, they've taken the formula and they've flipped it upside down.
This is odd. And I'm sitting there and it's layered, and I'm talking, and 15 minutes, 20 minutes into it, I realize I've, almost forged new friendships with people from Toronto, from Montreal, from New York, people come from all over and then the person walks in and goes, all right, for those of you now, we're going to do the cold plunge.
And I look at them, I'm like, what do you mean cold plunge? And they're like, Oh, it's minus three degrees,
Three degrees. So think a layer of ice. And so my knee jerk response is I'm not doing that. I can't even do a cold shower. And so there's, I walk out, there's four coal plunges next to each other, and there's two people going in at each [00:51:00] point in time, and you're asked to go in at two minutes a clip.
And so because other people are doing it, you feel a sense of peer pressure. And although I wanted to say I'm not going to do it, I was like, fine, I'm going to do it. And you go in, And the music's amazing. It's building up and it's progressively getting better. And the moment you step out of the cold plunge, and there's obviously all these studies behind it, but your endorphin levels are so high.
You feel like you've taken some form class A drug. you compound that with the Munich music, the community, the lighting. And my sister looks at me at that moment in time and goes, We can leave. And I remember thinking to myself, It's one of the best highs I've ever had. I've met some great people.
The music's better than anywhere else. The lighting, the design. It's like, why would we go to a cocktail bar when I could do this?
Stephen Drew: Yeah. Yeah.
Eric Jafari: And so I the last thing I'll leave you with is when I came back to London, I was trying to explain this to other people. I was like, you know what, I [00:52:00] need to bring a few people here.
And so I convinced a couple of very high profile people in the food and beverage space to come with me to to Toronto to check the place out. And I'll never forget. I was sitting there watching them thinking to myself, I've literally just flown two of the most high profile people in food and beverage across the world to come sit in a sauna with me.
Have I lost my touch? And and at the very end of it, both look at me and I'm thinking, Oh my God, maybe this isn't going to set in with British people, maybe, North Americans, sitting in a sauna, maybe this works, but, will they talk to people? And they were like deadpan the whole time.
These are quite conservative guys. And I look over at one of them and I'm like, so what do you think? And he looks at me, he's That was the most incredible experience I've ever had, because this is the single best business model, and I was like, oh my god, okay, I haven't lost my touch,
Stephen Drew: yeah. Don't worry. Yeah. The stiff upper lip of the Brit. But yeah, maybe if I'm not, if we know an ice plunge works, then that's what it takes. Minus three just to get [00:53:00] people speaking about their feelings. I see you need an emergency ice plunge in your London office. Do all that before you go to the meetings, but sounds fantastic.
Okay, I get it. It's perfect. Let's see which way it goes. Maybe that becomes a common, more common thing, and you won't have to fly people to Toronto, but , focusing on yourself and your business for one second. If people have enjoyed this or they wanna see some of the projects you've done or, and you, I know you got one or two exciting things coming up, so where can they find you and the business, the Andre Group and everything, do you wanna tell everyone so they
Eric Jafari: Yeah so my, so yeah, so my LinkedIn is Eric Dari. The website is, ander group.com. By the way, I, everyone always asks me how do I pronounce it, and what on earth does it mean? So we pronounce it Ander and what it means, it, it actually is Danish and Norwegian for the word transformation.
So the whole idea is the transformation of these kind of ESG, non compliant office [00:54:00] buildings into, these green ecosystems, the transformation of hospitality, the transformation of people's lives. And that's the mission. I think there's enough from our perspective, there's enough bad factors out there.
We want to create something that's meaningful. And so I I'm very proud of what we've done in the past. And these are some of the projects we've done in the past. I think the best anecdote I'd give you as to why I left Locke is that, Mozart used to say, there's what I hear in my head and then there's what's played.
And rarely, although what's played is beautiful, rarely does it match what I hear in my head. And in the same thing, there's what I see in my head, and I've had this crystal clear picture of the type of hospitality concept I've always wanted to deliver. And like I said, as proud as I am of what I've delivered today, it's never manifested or been close to what I have in my head.
And that's really what I want to work on next. Yes.
Stephen Drew: This looks pretty good, so let's see. And I want a cold plunge, [00:55:00] and if you can weave Disney in there somewhere then I would be really impressed. Probably not. Your core audience, but there you go. Maybe there's a room for me in the corner somewhere.
Jokes aside, Eric, I really appreciate your frank chat. Actually, all that insight I find super valuable and I'm sure the audience will as well. So thank you so much for being here. I really appreciate. And for you, our audience, which are watching the live stream, not live, don't worry about it. It's all the replay world anyways, maybe you're on your phone and you're about to take the.
The puns back forever, but do drop Eric a note, and thank you so much for your time. as well as my guests here. But on that note, I'm going to end the live stream now. Thank you, everyone. Have a fantastic day and speak soon, wherever you are. Bye bye, everyone.
Eric Jafari: Thanks a lot, Stu.