Interview: CEO Rafael Museri Details Selina’s Keys to Success and Plans to Scale as a Global Hospitality Leader

Interview: CEO Rafael Museri Details Selina’s Keys to Success and Plans to Scale as a Global Hospitality Leader

Lifestyle hotel chain Selina Hospitality (NASDAQ GS: SLNA) inked a deal earlier this summer with strategic partner Global University Systems (GIS) for a $50 million USD investment. The eight-year-old company, which combines attractive destinations with a range of accommodation levels in each property, is in the process of maturation, moving from growth mode to a focus on profitability.

Photo: Guests enjoy the rooftop pool at Selina’s location in the Casco Viejo historic center of Panama City. (Credit: Jared Wade)

Finance Americas Executive Editor Loren Moss was able to speak with co-founder and CEO Rafael Museri about the company’s plans and the importance of the unique social ambiance where, Museri says, the majority of guests leave having made a new friend.

Loren Moss: I remember the first time passing by the Selina hotel in Cartagena. I remember saying, what is this? Is this a restaurant or a club? It had a whole different vibe. That made me curious, so I started to dig into things and I found out that Selina is a hospitality brand with properties here in Colombia and other locations in Latin America and Europe. But you guys have a kind of a different operating model and your focus is a little bit different. What makes Selina unique in your opinion?

Rafael Museri: First of all, the average age of our customer is 30 to 32 years old. We’re not going after people in their 40s, 50s, and 60s. We’re mixed between Generation Z and Millennials. People who stay in hostels generally average around 20 years old. The big hotel brands have guests in their 40s to 50s to 60s. With Selina, we’re targeting those in their 30s. It’s right in the middle.

In order to get those two generations excited, you need to combine experience, food and beverage, coworking, and places to stay in a very flexible manner. So we offer very flexible accommodations. You have everything from very high-end rooms to family rooms to hybrid rooms to dorms. You can have $500 a night. You can have $300. You can have $100. And you can have a dorm at $20 — and it’s all under the same hub and you always have a comfortable place to work. You have rooftops, you have content, you have workshops. And about 60% of our guests make a friend while they stay with us.

It’s a very safe place for people to travel alone. It’s a place that can almost ensure they’re going to meet new people. We’re facilitating it in the beginning, and we look at it as an ecosystem where people can play, stay, work, interact, and very much collaborate with the local community. Because the experience in Selina is very unique to the local town. I’m not going to have a playlist in Cartagena of an Israeli artist. I’m going to collaborate with the local culture.

That’s our model. And maybe the second part of our model that is very special is that there are thousands and thousands of distressed “mom and pop” hotels around the world. Many of them are tired. They don’t know when to manage it anymore or maybe they inherited it. Selina is leasing those locations very cheap and converting them quickly. That’s what allows us to become the biggest lifestyle player in the Millennial category in the world within eight years’ time since we were born.

Loren Moss: That’s impressive. Now you guys are listed on NASDAQ. I believe you’ve received a significant new round of financing, with convertible debt, from a higher education platform, Global University Systems. That caught my eye. I’m not familiar with them. That’s not the typical name that a private equity or venture fund would have. Tell me about that. Why choose this mode of financing?

Rafael Museri: The majority of the round is equity actually, so it’s an equity round. The convertible debt is just the tranche of the first tenth. So, it’s an equity round of $40 million USD and $10 million USD of convertible debt. So, the total round is $50 million USD, of which Global University Systems (GUS) is putting $30 million USD. And $20 million USD comes from other investors.

You can either fundraise from financial people or from strategic partners. GUS is very, very strategic. We met them to do a collaboration because we have minimally priced beds and students study 7-8 months a year then they travel four months. There is a lot to do with companies that have a database of millions of students around the world. They’re very visionary and successful founder and CEO. It was an immediate click, a good relationship with trust.

Selina went public to NASDAQ. The stock market, you know, was kind of punishing non-profitable companies and they want them to be profitable as soon as possible. Before that, we were pushing through the years to be a growth company and put the brand all over the world as soon as we could. That costs money. But the company, about six months ago since we become public, we shifted 100% of the focus into profitability, and GUS can play a very important role in our past profitability.

We’re building the business plan together. We are working together and we are building the infrastructure to, as quickly as possible, get to this desired point. So, yeah, I’m very, very excited I have a real partner to work with.

Loren Moss: Did I read correctly in the company documents that you and your co-founder are personally seeing the companies’ obligations?

Rafael Museri: No, just this. Just the debt, the $10 million USD debt components add to it an additional guarantee. The equity has no additional guarantee at all, just the debt component.

Loren Moss: Well, that expresses a lot of faith, too. That would keep me up at night. But I guess that expresses your confidence in your company — but also your commitment to the company. But wasn’t that kind of a scary move? What’s that feel like when you put yourself on the hook like that?

Rafael Museri: First of all, I don’t look at it as “putting yourself in the hook.” I think that, sometimes — when the market is shaky and the interest rate is very high and investors have many other opportunities — sometimes investors want to get this extra level of confidence from founder groups.

I think that me and Daniel [Rudasevski, Selina co-founder] felt comfortable to do it, as we believe that, first of all, it’s relatively small. The debt is representing a small amount out of the total deal. But, at the same time, yes, we are very confident about this brand and we have just finished an era where the interest rate was zero for many years.

Capital was cheap. Then capital became expensive. The market changed and that was the fastest interest rate increase in history in the United States. That’s a big deal when something happens so fast. It’s so big it changes the mentality of investors. So, I think we were here exactly at the time of this transition. So, it’s fine. Every company has to do what they need to do, but overall we feel comfortable about it.

Loren Moss: That’s pretty impressive. Now you guys reported Q1 2023 revenues of just over $54 million USD and that’s up significantly from the year before. So you’re growing revenues and you mentioned shifting the focus to profitability. What do you need to do operationally to turn that revenue growth into real net income and profit?

Rafael Museri: Look, it’s always a combination of two things. First of all, we grew 100% last year over the year before. Then, our Q1 gross this year was up 30%. So we’re definitely growing a lot compared to other companies — but we’re growing much less compared to ourselves in the past. This is number one.

Second, in order to reach profitability, there are always three things to do: You need to drive the top line higher, you need to be a better controller of your expenses, and you need to manage your liabilities in a very smart way. And Selina is working very hard around the three topics.

We separate ourselves from others around the world through efficiency. We become more efficient in operations — in the workforce — and on top of that, we are successfully reducing rent around the world. We are negotiating rent prices in expensive assets, getting our landlords to, basically, support the mathematics by understanding that in order to have a sustainable relationship in the long term, you sometimes need to make an adjustment. We are landlords for other businesses, and we’re doing the same thing.

So it’s coming from some rent discount, it’s coming from other liability management the company is doing, it’s coming from increasing top line. As you can see with the close to 30% gross, and you’ve seen in Q1 it was 26% GOP versus 20% GOP (gross operating profit]. It means that you’re also a much better controller of the business.

So, each and every parameter is getting better. We need to continue to do it with discipline. The full profitability, not just the unit level, the full profitability is going to happen.

Loren Moss: Tell me about your long-term vision for Selina — not just your long-term vision for the Selina lifestyle brand but also for an operational and business structure.

Rafael Museri: So first of all, the vision has been — and remains — to inspire meaningful connections between people globally. We want to stay this.

We want to be the number-one brand in the world for young travelers —millennial travelers — that combines experience with accommodation and allows people to trust the place where they stay and to allow solo travelers to trust us. We want to maintain a company where 50% — even more than 50% — of the guests make new friends and we become a social hub. And we want to locate Selina everywhere on this planet where that experience can be delivered. We want to be there.

I believe that there are many great brands that control the industry for many years. Hilton or Marriott or Hyatt. They’re all brands and dominant as the market players. But I think the relevancy of the product is less in terms of what the new generation is looking for.

We would like to be the new player basically that becomes the standard to what those two generations are looking for. For a young company — we’re just eight years old — we just joined in a quite challenging time, but we’re patient, our shareholders are patient, our employee’s patient, and I think we have no questions about the direction the company is going. So I’m very excited about what’s coming.

This interview has been edited for length and clarity.

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