New Hospitality Start-Up Leverages Obsolete Retail

Los Angeles-based start-up Stay Open is planning to build pod and private-room hotels by repurposing vacant and obsolete retail and office space. The start-up has secured $2 million in seed funding, led by a European family office. The model includes four to eight private sleeping pods, high-end shared restrooms, large common areas for work or play, food-and-beverage outlets and access to local amenities.

“I started seeing all of this empty retail and office space, predominately in Los Angeles, which is where we are based,” Steve Shpilsky, co-founder of Stay Open, tells GlobeSt.com. “At the same time, there were a lot of people booking hotel rooms for a single night, so they were only using the bed. I started to think about a way to efficiently repurpose empty real estate into hospitality use.”

Stay Open is reimagining the hostel concept—which is popular overseas—but making it more accessible. The company will accomplish that goal by focusing on the guest experience. “We wanted to eliminate the pain points that people experience in hostels and actually embellish on the overwhelming positive attributes of shared accommodations,” says Shpilsky. “We thought this was a good way to democratize travel while repurposing the existing real estate that, even pre-COVID, was starting to come online.”

Technology will also play a crucial role in the property’s operations and experience. “Everything from the design to the guest experience to the operations will be wrapped in technology,” says Shpilsky. “We saw that there was a void in the way that tech was looked at in hospitality. It was really just using your phone to open a door or to make a reservation, but there is so much more than needs to be done in terms of social engagement with the guests and community.”

In addition to the seed funding round, Stay Open’s European family office partner is also investing in the company’s first conversion project, the transformation of a Budget Rent a Car facility into a 240-bed hotel. While Stay Open will play the role of both developer and operator on the project, in the long-term, it plans to focus solely on operations. “We are doing everything soup-to-nuts on our first project,” says Shpilsky. “Long term, we don’t want to continue developing and being the brand operator. It is not as scalable and it is much more capital intensive. We also wouldn’t be able to expand as quickly as we would like to. With our first few properties, we are developing, but our long-term strategy is to be an operator where we aren’t even taking long-term lease liability. We want to have a brand management franchise model.”