Adventure Stays sought a White Paper exploring the multi-dimensional conditions that made their unique business model possible.
White papers are typically handled by a team of writers, researchers, and designers.
This research-heavy document was quite the feat for a one-person team (me!).
Adventure Stays loved the results. Jake Volin, President, founder, and CIO said, "Working with you has been a really pleasant experience. I really appreciate you being so easy to work with and committed to actually making a good product.”
Adventure Stays: Bridging the Gap in South Lake Tahoe’s Blossoming Boutique Hotel Market
Executive Summary
South Lake Tahoe is a rapidly growing mountain town nestled on the picturesque southern shore of Lake Tahoe – the largest alpine lake in the United States. Boasting a regional annual economy of $5.1 billion generated by a year-round flow of more than 15 million tourists, South Lake Tahoe’s hospitality space is poised for major growth in a post-pandemic world.
Historically, South Lake Tahoe has been overshadowed by other popular lakeside destinations. Its characterization as the "grungy" and "party" side of the lake has garnered a relatively less positive public image. As a result, tourist behaviors in South Lake Tahoe have been unpredictable, leading to a fragmented lodging market; luxury or budget without much in between. In practice, this looks like luxury resorts next-door to run-down and inefficiently operated motels.
This brings us to the stone that was uncovered by Adventure Stays with the acquisition and renovation of their first South Lake Tahoe motel, The Moose and Maple Lodge, in June of 2021. Adventure Stays identified and capitalized on a hidden opportunity in the market by leveraging a technology-enabled business model to bridge the gap between flagged hotels and smaller, locally owned establishments that bilaterally have dominated the hospitality sector in South Lake Tahoe.
Adventure Stays has demonstrated the efficacy of its business model through the successful acquisition, renovation, and rejuvenation of two hotel properties in South Lake Tahoe, each realizing profitability and positive net cash flow within one year of launch.
The South Lake Tahoe Opportunity
South Lake Tahoe is a hospitality and tourism juggernaut, historically dominated by two types of players.
< chart/graph showing South Lake Tahoe’s hospitality/TOT #s >
Luxury properties prioritize an amenity-focused experience, offering upscale features and personalized attendance like day service housekeeping, onsite coffee and restaurant facilities, complimentary bicycle rentals, and more. They also provide well-appointed meeting spaces, state-of-the-art fitness facilities, and access to private beaches. These establishments emphasize quality of guest experience and pay meticulous attention to every aspect of guests’ stays.
On the other end of the spectrum are smaller, family-owned and less sophisticated establishments. They rely heavily on a single online booking platform and walk-in guests during the peak seasons to fill their rooms. With limited amenities, these hotels primarily serve as a place to rest and store luggage while venturing out to explore the captivating beauty of Tahoe.
Adventure Stays is carving out its market share in between these two types of businesses. By running professional, high-tech operations, it has separated itself from larger competitors by managing smaller properties in higher volume while maintaining focus on guest experience.
Historical Background
The City of South Lake Tahoe was officially incorporated in 1965, but the city's founding can be traced back to the late 19th century when the first hotels and lodges were established in the area to cater to recreational visitors. Even back then, Tahoe’s beauty attracted investment into local hospitality. The bulk of the hotel inventory was built before city incorporation in 1965. As a result, older properties are primarily set up to accommodate walk-in guests. These properties include a dwelling unit for an onsite manager to live and run the property and are limited in size to 10-25 units. With modern tourism habits and year-round seasonality, this model has become outdated. In order to grow a profitable business in this growth market, a new model must take the place of the old.
Why South Lake Tahoe?
The first and most obvious reason is the unparalleled natural beauty. Additionally, with a vibrant nightlife and plenty of family-friendly activities, the city has something for everyone.
Easily accessible from the east via Highway 50 and from the west via Highway 89, South Lake Tahoe is a year-round tourist destination that provides a welcome respite for those looking to escape the fast-paced tech culture of the Bay Area or the scorching summer heat of California’s Central Valley. Over 60% of Tahoe visitors come from within California and 72% have visited three or more times in the last 5 years.
Tahoe’s four-season demand attracts an extremely diverse range of visitors. This yields a well-rounded seasonal market and ultimately results in a more sustainable and profitable tourism industry.
Tourist Core
The Tourist Core of South Lake Tahoe, adopted by the Tahoe Regional Planning Agency in 2013, aims to become a central destination, offering comprehensive services with a focus on unique outdoor experiences. The revitalization plan seeks to transform the area into a sustainable, pedestrian-oriented tourist center, incorporating active streetscapes, accessible transit, and diverse entertainment options. The Area Plan focuses on development standards, transportation, recreation, public services, land use regulations, and environmental improvements to facilitate this transformation.
Adventure Stays exclusively operates within the Tourist Core and focuses solely on acquiring properties in this area. The Tourist Core strives to be a well-planned regional hub, catering to the needs of residents and visitors, and serving as a gateway to outdoor tourism. By encouraging mixed-use development, it will enhance convenience, economic vitality, and overall quality of life while improving access to facilities and services. Development and design standards intend to enhance pedestrian and transit orientation, elevate visual appeal, and create captivating character along its mixed-use streets.
Tahoe Lodging at a Glance
Real estate pricing and lack of existing competition in the South Lake Tahoe hotel space make it an ideal market for investment. While the larger hotels in the area are typically operated by flagged corporations, smaller properties are primarily run by family-owned “mom-and-pop" businesses. Hotels considered small elsewhere – think 40 rooms – are mid-size in Tahoe. Even these operations are typically family-owned and operated.
As competition in the area grows, the larger chains are capable of tapping into institutional resources and offering more amenities and on-site services. In contrast, smaller operations with limited budgets and less sophisticated strategies do not have the capability to scale up and have fallen behind. The lack of in between players in this niche market has left a significant gap that Adventure Stays has stepped-in to fill.
Competitive Advantages of Tahoe
Tourism accounts for more than 60% of Tahoe’s regional $5.1B economy. After a brief lull caused by the global pandemic, tourists have returned to the region in numbers greater than pre-pandemic levels.
< All numbers back up above pre-pandemic levels…and then some [STR report #s] → infographic >
Measure T
Passed by voters in December of 2018, citizen-initiated Measure T requires the phase-out of all VHR permits in residential areas and multi-family properties and prohibits the issuance of new VHR permits in residential areas. The purpose of Measure T was to balance the region’s tourism-based economy with maintaining community character.
With Measure T in full effect as of Jan. 1, 2022, competition from VHRs has been effectively eliminated. Despite this, regional tourism continues to grow year-over-year. With the first quarter of 2023 in the rearview and an expected busy summer ahead, South Lake Tahoe officials, agency leaders, and business owners are reflecting on what a post-Measure T city looks like.
Roughly 1,000 South Lake Tahoe vacation home rental owners lost their permits in the past year, yet lodging numbers have remained stable. Despite the loss of VHRs, visitation to the region has remained high and transient occupancy tax will meet the projected budget through March. Average daily rates have gone up and there has been a greater demand on hotels and motels. The increase in rates has allowed the city to see consistency in TOT despite the loss of VHR income.
It is imperative to note that Measure T is specific only to South Lake Tahoe. Incline Village has no limit on VHR/STR (short term rental) permits. The South Shore Nevada area within Douglas County allows for just 600 VHR permits. The North Shore area (Tahoe City, Tahoe Vista, Kings Beach, Carnelian Bay, Squaw Valley and Northstar) and some areas on the West Shore (Homewood and part of Tahoma) together have a cap of 3,900 VHR permits available to homeowners. And to the North, Truckee has a cap of 1,255 permits. South Lake Tahoe now presents a more attractive investment opportunity than ever.
A Diamond in the Rough
South Lake Tahoe has been overlooked by investors in favor of long-established nearby areas like Emerald Bay, King’s Beach, Incline Village, and Tahoe City, to name a few. In these markets, you find extremely high real estate prices, tight grid cell density on well-established plots of land, and frequent land transfers within families, making entry to these markets extremely difficult. In contrast, South Lake Tahoe is much less densely packed and offers more open space than some of its neighbors that are further along in the growth cycle.
South Lake Tahoe is distinctly attractive among the region’s many popular destinations. Despite unforeseeable factors like wildfires, record-setting snowfall, and the coronavirus pandemic, the sustained demand for South Lake Tahoe proves that Adventure Stays identified a market with serious growth potential.
Rigid Plan for a Rigid Market
The hotel industry in Tahoe is competitive. Adventure Stays postured itself to “capture this exciting niche. My goal is to grow a sustainable, efficient operation through deliberate growth and strategic acquisitions,” says Jake Volin, President and Founder of Adventure Stays.
Adventure Stays first proved the success of its business model in the South Lake Tahoe boutique hospitality sector with the purchase of the Mark Twain Lodge (now Moose and Maple Lodge) in June, 2021. Renovations ensued with a complete redesign and rebranding of the property taking shape in only two months. The new property was an immediate success, returning positive net cash flows to investors in its first operational year.
This was no small feat for a non-local, non-flagged startup in 2021 – a year marked by significant challenges that stress-tested Adventure Stay’s operational capabilities. Their success in the face of such adversity proved the effectiveness and strength of their modern approach.
The Adventure Stays Business Model
South Lake Tahoe exhibits many trend markers moving in favorable directions, including revenue growth, occupancy rate, ADR (Average Daily Rate), and RevPAR (Revenue Per Available Room) trends increasing year-over-year.
< Graph of ADR, RevPAR, Rev. Growth, Occupancy Rate increasing y-o-y >
Adventure Stays utilizes a progressive approach of marketing commercial assets on modern booking platforms like AirBnB and VRBO, in addition to Expedia, Booking.com, and HVMI. Expanding visibility enables Adventure Stays to pull in higher occupancy from a larger, more diverse group of guests, meeting them at their preferred hotel booking site.
Despite a drastic decrease in local VHR supply after Measure T, the number of visitors to the region continues to grow. Expedia and Booking.com still command a large share of the market, but the past 10 years have seen major growth in competition from third-party booking sites such as AirBnB and VRBO. While other hotels have adapted their models to allow for the capability to list on those sites, Adventure Stays has built them into their primary business strategy.
< infographic highlighting relative booking data >
The Adventure Stays Difference
According to Jake Volin, “If you could distill it down to one thing, it would be our entire team’s emphasis on guest experience that sets us apart from our competition.”
Adventure Stays knows that ensuring a quality guest experience is the ultimate goal of a successful hospitality operation. Adventure Stays supports an entirely in-house team responsible for all aspects of hotel operations: from property management, maintenance, landscaping, and laundry, to guest communications.
This approach alleviates pressure that otherwise builds in a region hard pressed for reliable, quality labor. Likewise, Tahoe’s sustained, year-round demand eliminates cash flow and labor problems associated with highly seasonal destinations. This alleviates common issues with labor management and provides a stable workforce throughout the year, rather than hiring and laying off staff according to seasonal fluctuation.
The significance of this achievement cannot be overstated. It allows for greater control and consistency, yields an extremely high-quality product, and achieves above-average margins.
< margins graph >
Additionally, Adventure Stays features a high-tech approach to guest relations featuring a masterfully trained guest experience team. It invested heavily in a robust tech-stack and software suite to augment established processes, improve efficiency, and better serve customers and company partners alike. This includes a range of reservation management tools, customer relationship management software, marketing automation, analytics, dynamic pricing software, and more.
Conclusion
Adventure Stays has positioned itself at the forefront of the thriving South Lake Tahoe hotel market. The company presents an exceptional opportunity for investors seeking to enter the growing hospitality and tourism industry. South Lake Tahoe’s picturesque location, diverse range of entertainment options, and natural beauty appeals to visitors of all types, ensuring sustained demand in a market noted for year-round seasonality.
Despite the loss of vacation home rentals to Measure T, visitation to South Lake Tahoe continues to grow, providing a positive outlook for the hospitality industry. Adventure Stays has leveraged the legislative protection assured by Measure T to solidify its successful growth trajectory.
Adventure Stay’s operationally focused renovations and modern approach to management of properties positioned it to capitalize on the South Lake Tahoe opportunity. Selecting properties within the blossoming Tourist Core ensures that the business will grow in tandem with the city’s ongoing plan for expansion.
Marketing larger commercial assets on non-traditional booking platforms provides a much-needed middle ground in a growth market. Adventure Stays has demonstrated its firm commitment to establishing itself as a valued local asset that investors and guests of South Lake Tahoe can enjoy for many years to come. Adventure Stays has proven the effectiveness of its forward-thinking, technology-enabled approach and cemented itself as THE boutique hotel operator in South Lake Tahoe.
