¶ Meet Rocco Bova, Luxury Hospitality Expert
Hi everybody . It's no Show starring me , matt Brown and Jeff Borman , from New Delhi to the Yucatan jungle , from the Indian Ocean to the Caribbean . Our guest today , rocco Bova , has crisscrossed the world defining what luxury hotels are and can be .
The hospitality consultant , passionate hotelier and luxury tourism specialist , has been working in the industry for over 30 years Four Seasons , hilton , st Regis . He's worked for everybody .
He is the founder of my Humble House , a hospitality management company which manages and owns real estate to build truly sustainable hospitality businesses , mainly focusing on hotels , residences and glampings . It is a profit-sharing hospitality company putting people first .
Rocco once said that a traveler is someone who discovers , learns and lives the visited place down to its roots . Only then have you experienced the place . We couldn't agree more . Welcome , rocco , to no Show .
Wow , wow . Thank you so much , Matt and Jeff . It's been a hell of an introduction . I've got responsibilities now .
That's actually the only thing we do well Really good intros . After that , people really kind of tune out .
Well , I can only say that it's true what you said , all of it .
The part about tuning out early , we know .
There are no lies , basically . So , yes , it's all true 30 plus years of experience in 11 countries . I cannot say counting , because probably it's time to say stop . You know , after 25 years of traveling , we decided with my wife to throw the anchor and stick to Mexico . We've been living in Mexico now for about nine years .
It's a lovely country with lovely people . In fact , it's probably the best place we have been so far , because that's what pushed us to really say , okay , we're going to stay here . And I was lucky to lead and open a resort which is called Chablé Yucatan , which happened to become one of the best in the world .
And then , three years ago , three and a half years ago , I decided to start my own consultancy company and begin working on my humble house concept and deliver it , hopefully in the next two to three years , with the first master plan opening here in Mexico .
Rocco , what first caught my attention was the following description of my Humble House the world's first profit-sharing hospitality company , putting people first , making them not only employees but responsible for the success of the business . Matt , you mentioned that in the intro , rocco . How does that work ?
¶ My Humble House: A Profit-Sharing Revolution
Well , you see , I've worked in different parts of the world and different companies . They apply different rules in their business model and , after 30 years of learning , you try to get the best out of each company and then you put all together in a mixer , in a blender , and you make a nice cocktail . We all know what happened in the past five years .
You know , during pandemic , a lot of companies say I'm so sorry , there is no more money , we have to let you go Correct . So a lot of companies and I'm talking about the big companies . First , they let go of thousands of people from one day to the next because there was no money . Now , how come these very same companies today still exist ?
Not many people can answer me this question , because it's politically incorrect . And the answer to the question is that there was money , of course . Otherwise this company today will not be flourishing again because everyone is now celebrating success , profit sharing , opening champagne , best occupancy rate , best growth rate , and so on and so forth .
Five years ago there was no money and today there is money by managing . So this really pushed me to start working on my humble house as a business model , not just as a concept . You know , a hotel is a hotel . I'm not reinventing anything here . You know , a hotel is a hotel .
We can have a different logo , a different name , a different color paint on the wall , but a hotel is a hotel . Nobody can change that . I have not seen anything innovation recently other than the co-living and co-working you know , and maybe Airbnb some 10 , 15 years ago . So I decided to work on this concept because obviously I was of the idea .
I am of the idea that , yes , a company can be sustainable financially sustainable all the time if resources and I'm talking about profit here is well-managed and well-operated .
And so thus came the profit-sharing path , as well as a 10% of the net profit actually be preserved into a piggy bank that cannot be touched by anybody , so that my handballers cannot say there is no money . The more profit we make , the more money will be in the piggy bank . And when there is a situation , the more money will be in the piggy bank .
And when there is a situation , we can break the piggy bank and then use this money for whatever time it can be used maybe three months , six months , a year , I don't know . But at least there is something , there is a little pillow . So if we fall . At least we know it's not gonna be so painful .
Structurally it sounds like an FF&E reserve right . Where you're taking part of your profits every year and saying you know , in year five we're going to have to do a big renovation . We can't afford that all out of our operating budget in year five .
So , years one through five , we're going to set a little aside every year so that when we have to do that , it's there for us . Are you using that same concept , then , only for profit sharing for employees ?
No , Well , let's talk about what happens in real business in hospitality . So there are three ways on how employees can steal from a business , literally
¶ Employee Efficiency and Financial Model
steal . They steal in time , so they're not efficient . They don't really work the eight hours or nine hours that we actually pay . They maybe work three , four , five and the rest of the three hours they actually do nothing or do other things which are not relevant to their workplace .
So we lose time by employing people a certain amount of hours every day but they don't perform the full hours shift that they should work . The second is stealing cash . We we know that where there is cash handling there is an opportunity to steal , and here in Mexico they call it robo hormiga .
So the hand stealing A little bit today , a little bit tomorrow , but imagine $1 today , $1 tomorrow , over a year it's going to be $365 . But I worked in places where some employee were caught actually stealing up to a hundred thousand dollars or you know , on credit card fraud .
The third and the last thing people steal is actually in things , amenities , a little beer from the from the fridge , when people you know even I'm talking about equipment from the fridge , when people you know even I'm talking about equipment from the maintenance warehouse , you know , light bulbs or even tools . So these things happen because the employee don't care .
It's not their money , it's not their company , so why should I care ? So why should I care ? Now , if we make people responsible for that , the more is preserved and is kept in the company , the better the result will be for everybody .
So everyone will be watchful over other people that don't do that and they will eventually push them out of the business slowly , slowly . I don't want to put anyone in jail for that . I don't want to , you know , accuse people of being criminals , you know , because they're stealing .
But I want to make sure that the majority of people that are honest , they have integrity and they work eight hours a day , they push away these people that they don't . Simple as that .
So if you're recruiting employees , management , your prospectus as management is extremely light . And in part I'm filling in the blanks here . You didn't say this , but because employees are more incented to work well , you probably need less management . But the idea that you will compensate the employee more , what does that come out of ?
My assumption is that the top line of my humble house is not outperforming the top line of a neighboring hotel of the same size . So if they're performing at the same level , same revenues on the top , but employees are getting more of a financial interest , what's not happening in the middle ? Where do you find that extra bump for them ?
You know , it's the efficiency . You know again , why should I employ 300 people , for example , for a 500-room hotel , when I can employ 250 instead of 300 ? Because I increase efficiency . Number one . Number two when a team work together and truly have a teamwork , that they help each other , that they watch for each other , you actually need less management .
You just mentioned that you don't need as much supervision , so you can cut already some middle line managers or supervisors . So imagine this on the payroll how much of this is going to save 2% here , 1% there , 3% here , another 5% there . People become more aggressive in sales . Part of my handball is also training people now to upsell .
Actually , we will train people on how to manage a business . We want our employee to become an entrepreneur , Because the only way to become an entrepreneur is to actually learn how to be an entrepreneur . You don't become an entrepreneur because you have an idea and maybe you have some money .
You have to know how to manage an entrepreneur . You don't become an entrepreneur because you have an idea and maybe you have some money . You have to know how to manage a business .
Would the average wage then of my humble house employee be better than the very same job at a hotel next door . It may not be better in terms of wages , but it will be better in terms of after what you get in terms of benefit and profit sharing and other things . So you know , in terms of wages , there is a maximum you can play with .
You don't want to start paying people more just to get the best talent . It doesn't work like that , for example , in Los Cabos . I mean , it's very , very competitive . Whoever pays you $50 more , you just leave . People don't care .
But people don't start considering , instead of giving more money and talking together between company and hotel association and so on and so forth , what else can we do ? Instead of paying people more money , we should start to be more creative and actually appreciate the team members
¶ Investment Strategy and Timeline
in other ways rather than just paying more money . Money is very important and don't get me wrong , if we pay peanuts , we get monkeys . We all know that . But also , on the other side of the medal , it's not what is going to work for the long term paying more money . For example , in China 20 years ago , the average Chinese person would earn $30 a month .
A month . There were very , very low wages those days . Today the market is so competitive that the only way to attract talent is actually to pay more . Now it's almost more expensive to build or to fabricate things in China than it can be in Mexico , because the wages have gone so up .
Cost of manufacturing may be less because machine use and mechanization or automatization and the logistic is obviously more efficient , but the cost of wages is actually not cheaper than it could be in Africa , for example , in India or even in Mexico .
If we can stick with the financial model here , but to the investor side . So if the top line of a MHH is the same as a hotel next door to it , and is the profit from my Humble House expected to be the same as a hotel next door ?
So the hotel next door ? It depends how it's managed . At the end of the day , like every business , it depends how you manage it . It's not a brand that's going to bring you better profitability . Brands normally even the big names , the big five they only promise you a better occupancy and a better average rate .
They don't promise you GOP Never , because this all depends on costs and expenses and how these costs and expenses are managed . But they promise you , or they commit to , a better occupancy and a better average rate . Now , my humble house is not different than that , but different from other companies .
Part of my humble house , which is a component of a master plan , is actually having a higher ratio of branded residences and a lower ratio of hotel components . So that's where really the return on investment can be much faster , because we are talking about here almost a 70-30% . So 70% branded residences and 30% hotel .
That's where really we all know that this business model is a no-brainer . It works . It's now very much in demand . A lot of companies are entering the branded residences market and this is a no-brainer . This has been done for 40 years . It's been working very well so far .
Middle , high-class and very high-net-worth individual is actually growing around the world and to have capital in a bank or to have capital in real estate , we all know is the way to go . So I think that this is a strategy that doesn't need to be a genius . You don't want to do it .
You mentioned that an investor gets a negotiated rent of the real estate plus a profit share and therefore getting an expected ROI and the appreciation of land and property . Of course , the operating profit or a portion of those are all very normal components of a hotel investment model .
What is the IRR and the timeline for an investor to recoup the investment , as you are pitching this to investors ?
no-transcript . Now , in the worst case scenario , I'm looking at a 70% return on the investment within three years . In the worst case scenario , in the best case , it can be the 95% I just mentioned , can be the 95% I just mentioned and with the operation and everything else , you start , basically start getting net profit immediately after that , do you ?
have investors lined up yet , believe it or not . I'm talking to a number of people in Mexico and there is a lot of interest . There is a lot of interest from a company , particularly that they just opened their first hotel with residences about three no , four years ago , just in the middle of the pandemic .
There is a lot of wealth in Mexico and also international wealth coming into Mexico and wanted to invest in Mexico .
You describe your investors with a couple of words that really stand out because it's unique . I've never seen this in an investor description Disruptive , angel investor , family office , but socially responsible . Another sentence is true socially responsible Not usually the words that you hear when you're out asking for cash .
So it's kind of an interesting approach that you put that so straightforward that this is an investor with a different attitude .
Totally Investment with a purpose . You know purposeful investment are coming more and more on the market . Okay , more and more socially responsible companies that can still make money but can still produce goods
¶ Sustainable Business Beyond Recycling
for the community or the industry that they represent . Because sustainability is not just about recycling and whatever , separating rubbish from plastic to aluminum , because you can only do so much . Sustainability is also about business . If you cannot make your business sustainable forever ideally , that's not sustainability .
Where's the point to do something for three or five years and then shut down because there's no money , because you cannot produce further business , you cannot grow or improve your efficiency . I mean there's no point .
So for me , purposely invested money is also about being sustainable as a business for the long term , and I think more and more investors are getting into this field as well .
Rocco , do you have investors who question whether or not they can actually be profitable by being sustainable ? I oftentimes we look at hotels who have an organic design . They use local materials and they really commit to a regenerative way of business . I think on the surface those things all tend to be extremely costly , especially with the local materials .
Part of it because that stuff is going to be costlier than prefab materials that are sourced in other ways , and all that eats away at profits . Do they give you pushback , saying , look , we'd love to do this , but there's just no way . How could we ever make the numbers work ?
Listen , it is true that using local material can be difficult in certain countries . For example , in an island in the Maldives , there is little opportunity to use local material because there is no local material available . The closest local is India or Sri Lanka . So you cannot cut a palm tree and make furniture out of it . I mean it's not possible .
Otherwise you're going to have a bare sand pit . That's all . That's not sustainable at all . Now , a country like Mexico definitely you can A country like many countries in Europe definitely can . Africa can , india can . Many countries cannot do because of the resources that they don't have and therefore they need to import .
Whether they like it or not , they need to import material from other countries . That's where it becomes expensive and not so profitable after all , because obviously , instead of paying I don't know $300,000 per key , you might need to spend $400,000 per key , so this $100,000 going down the drain . But in a country like Mexico , you definitely can do that .
The sustainability part has a cost , you know , and cost in manpower , cost in time , yes , I agree with that . But again , I'm looking for that 1% of investors , I'm not looking for the 99% of investors . So if I come across a traditional investors , then I tell them you know , go invest with Marriott or Hilton or Accor , you know they do very good job .
Okay , it's time for the mystery question Are there secret destinations in either Italy or Mexico , or both , that you would direct people to instead of say the Tulum's and the Venice's
¶ Secret Destinations in Mexico and Italy
of the world ? What are two places ? What's a place in either country that could use a little more tourism and deserves a little more tourism traffic ?
Listen . I mean in Mexico , for example , you can definitely look at Yucatan as a destination . You know a lot of people they look at . You know Quintana Roo , where you have Cancun , riviera Maya , tulum , playa del Carmen and so on and so forth , you know , and that's not Mexico .
To me , that's already so vandalized by tourism I mean literally vandalized by tourism . So it's actually not the real Mexico one should expect and should visit , should expect and should visit . So places like Morelia , michoacan or even Mexico City Believe it or not , mexico City is touristic , but it's a huge city . You need a lot of time .
Coahuila I lived in Coahuila , in Cuatro Cienegas , for a year and a half . I mean it's desert , desert and mountains , but the scenery is so unbelievably nice . I mean I had some of the best time . Valle de Guadalupe , which is one of the best wine regions in Mexico , is amazing , and I can go on and on about Mexico .
Now I can go less on and on about Italy , because I didn't travel a lot within Italy . I come from Calabria , which is still unexplored from a region point of view .
Basilicata , which is also between Campania and Calabria , actually sandwiched in between , basilicata , is also another very beautiful region , region , but still unexplored and not as much affected by over tourism . Marche , also on the Adriatic side , for example , is also a very beautiful region Great wine , great food , great coastline and still unexplored .
So yeah , there is a lot to see , but most people they go because the transportation is easy you have an airport Within an hour , you get to your hotel and Bob is your uncle . Why should I drive six hours to go to a different place where I don't know ?
And perhaps that's precisely why you should go there , because it's a six-hour drive and you might find what's really happening in the country .
You see , jeff , at the end of the day , my kind of customer , my kind of client is the traveler , is not the tourists . You know you have travelers and tourists . You know the tourist is where everyone else is going and that's okay .
Okay , maybe for comfort , maybe because you've been there , because somebody told you to go there , but for me the travel is the explorer , is somebody who actually go to visit with a purpose and not just go to the same place over and over again because they've been there and because they know they will take care of them .
Yeah , I'd rather prefer the traveler and discoverer .
We wish you the best with my Humble House . It's a business model unlike anything I've ever heard of or seen in this industry . It's the potential to shake things up . I cannot describe how afraid other businesses should be if this gets off to the start you plan for it to have .
Shake it up .
Imagine that , imagine , imagine if this works , it's going to be a mess . It's going to be a real mess for a lot of people .
A beautiful mess .
As they say , throws a Spaniard in the works .
I can't wait for that day . So I'm getting very close anyway . So I've got a lot of things on my side which makes things going the right way , and I'm only 54 , so I still have a good time ahead of me , so I won't give up very quickly .