Apart-hotel Kasa Living continues to grow

NEW YORK CITY – When Roman Pedan was at KKR in his mid-20s building out a real estate portfolio, his team bought quite a few hotels and recognized there was a great opportunity to make them operate more efficiently.

At the same time, Pedan wasn’t excited about the hotels service delivery compared to other consumer products. For him and his contemporary consumers, digitally friendly would be more relatable and familiar.

Four years later in 2016, Kasa Living was formed in San Francisco – a tech-powered, flexible accommodations brand and operator that partners with real estate owners to transform investor-owned multifamily apartments, boutique hotels, and single-family homes into professionally managed accommodations. It leverages advanced technology and deep industry experience with a team from Airbnb, KKR, and Apollo to “improve property profitability by >50%.”

Pedan said the average GOP across the Kasa portfolio for the trailing 12 months is in the mid-50s with apartment-style properties outperforming hotels.

Kasa virtual front desk screenshots

“The problem we’re solving for owners is the tyranny of costs that have gotten out of hand for a lot of them,” Kasa Living Founder and CEO Pedan said. “It’s a combination of taxes that are growing because municipalities are underwater, insurance costs that have been growing across the country, debt service that has ballooned in the last few years, and then the labor costs have really increased. We solve labor costs for them in a meaningful way. We also solve with the digital delivery of a guest experience.”

He added that buying into the model requires a leap of faith by owners having to lean into digital and a self-guided guest experience. “It requires a little bit of capex investment. It’s not a lot, but it requires a bit of capex,” Pedan added.

Pedan, now 36, said his learnings at KKR resulted in understanding the need to do one of three things to every property-level line item – either automate it, centralize it or eliminate it.

For example, on-site accounting costs are often quite high, especially at smaller properties and still meaningfully impacts margins at bigger hotels. Kasa has centralized accounting at all properties. There are no night auditors, and by centralizing the data and functions, it started to automate as much of the reconciliation process as possible, systematically making accounting more efficient.

Kasa Living Founder, CEO Roman Pedan

They also removed the need for a 24/7-staffed front desk. The staff that is there is focused overnights on what Pedan calls “proactive hospitality.” They even share front desk staff across multiple properties.

As for housekeeping, Kasa typically cleans once per stay.

For example, at a 75-key hotel with between 15 and 20 staff members, the Kasa model reduces FTEs closer to eight, according to Pedan, some full-time and others part-time. “We can scale that down even further, and that would be without compromising on service,” he said. “In fact, in some ways we are enhancing it because we have people more proactively handling customer, guest experience, and obviously halving the labor costs greatly improves the bottom line.”

Kasa to-date

So far, Kasa Living has raised $125 million through three capital raises and has a mix of almost 80 hotels and apartment-style products open. In 2024, Kasa opened 33 properties and Pedan expects to pace similarly in 2025.

The Series C fundraise closed in October 2023, adding $70 million with Citi Ventures and FirstMark Capital leading the all-equity round with participation from new investors New York Life Ventures and Fireside Investments. All major existing investors, including RET Ventures, Zigg Capital and Ribbit Capital, participated in the twice upsized and oversubscribed C round.

The model is not unlike Sonder, but Kasa Living operates only with hotel management agreements and does not take master leases on the properties.

Kasa Jules is located in the heart of Savannah, Georgia's Historic District

Kasa has three inventory types – apartment, apartment style and hotel style. Within apartment style, Kasa sometimes runs the entire building or a portion of the spaces – usually on dedicated floors that are zoned and licensed as hotels. Pedan said today about 60% of their inventory is apartment style (about one-third are full buildings) and 40% hotel style at 10- to 250-room boutique hotels in major urban markets.

Kasa has 20-some hotel-style properties in high labor cost-markets such as San Francisco, Los Angeles, San Diego, Miami Beach, New Orleans and New York City. “The value we drive for the owner, fundamentally, is lowering the cost of operating the properties while delivering a compelling guest experience,” Pedan said. “We soft brand those properties, for the most part. So, they retain their local identity. We just opened at the Frenchman in New Orleans as the Frenchman by Kasa.”

Among 2024 openings, about six were new development projects in markets ranging from San Diego to Athens, Georgia, and Austin, Texas.

We’re solving an acute problem for owners whose costs have gotten too high. We have clear data demonstrating improved margins and reduced cost structures. That’s a need I don’t expect goes away in the next few years.

Roman Pedan

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Systemwide, Pedan said Kasa currently has around 2,400 keys open and another 350 signed. He added that they roughly doubled their inventory in 2024 and have an even stronger pipeline going into 2025.

While most all deals are strict management contracts, Pedan said he is excited about another iteration of the brand called Powered by Kasa, which is more like a franchise for owners building their own brand or a unique boutique-style asset with a specific vision on the site experience who also understand how costly it is to build a management business. Powered by Kasa is a white label brand that includes all Kasa infrastructure technology and services.

Pedan said Powered by Kasa started when Starwood Capital had a vision for a brand in the furnished apartment rental sector and started operating it themselves using off-the-shelf systems. “They’re obviously extremely good at operating hotels,” Pedan said. “Apartment hotels are a little bit of a unique beast. We took over operating those under their brand and improved the revenue and review performance by a significant amount. We have since launched Powered by Kasa with four other properties or brands. It started with three properties and we’re opening three more in January.”

Looking further ahead, Pedan said the apartment hotel side of the business will be the most dominant force for growth. “There’s not enough of the product, and consumers really want it,” he said.

In the near term, however, he expects growth to be more evenly split and perhaps slightly more in favor of hotels. “And the reason? We’re solving an acute problem for owners whose costs have gotten too high,” Pedan said. “We have clear data demonstrating improved margins and reduced cost structures. That’s a need I don’t expect goes away in the next few years.”

Bottom line, Pedan said Kasa Living is close to profitability and would be profitable if R&D was excluded. But for the moment, he said, R&D remains crucial to their growth and success.

“We’re excited about the opportunity to lean into artificial intelligence. If you close your eyes and imagine hotels 5 to 10 years from now, you can expect a lot more automation driven by large language models. For us, that means even more efficiency and customer service, even more personalization in the experience.”