In Business: Q & A Stephen Siegel
October 22, 2010
Stephen Siegel, CEO of the Siegel Group, says, “I think things are happening in downtown.”
By Buck Wargo
Stephen Siegel at Rumor
Dropping out of school is never a good idea, but that didn’t seem to hinder Stephen Siegel.
Siegel, the 39-year-old founder and CEO of the Siegel Group, dropped out of the ninth grade in Los Angeles, where he grew up.
Siegel worked several jobs as a teenager from a stint at McDonald’s and pizza places to a messenger service.
But it was the purchase of a 1984 Volkswagen GTI that Siegel learned of his entrepreneurial abilities and success in adding value to something and reselling it for a profit. He added some of the latest accessories and found a niche of buying and selling cars. At 21, he bought a one-bay mechanical auto repair shop that he grew into a $2 million business and used the proceeds for other ventures. That led to real estate and has put him on the map in Las Vegas.
Siegel owns and operates more than 30 Las Vegas properties with nearly 1,000 full-time employees and twice has been named by Inc. magazine as one of the fastest growing companies in the country.
Siegel is the owner of Siegel Suites extended-stay hotels and has opened five boutique hotels, including the Artisan Hotel, Rumor, Gold Spike, Oasis at Gold Spike and the Resort on Mount Charleston.
IBLV: Why did you drop out of school?
Siegel: I couldn’t focus. I couldn’t pay attention. For me, it was tough to sit in a classroom and learn that way. I’m more self-taught.
How did your business career get started?
When my first car, an Audi Fox, broke down I had to buy another car, a Volkswagen GTI. I got the car, and it needed some work and I had a friend who owned an auto mechanic shop. I started to hang out there a lot and learned how to fix cars and started doing it myself. I started buying and selling more cars. I’d go to the wrecking yard and buy them and fix them up and sell them.
How did that go?
I’d make $1,500 here and $2,000 there. I did that for a few years and then opened a stereo and alarm business. I partnered with a shop. I was 17 and sold out, and then started doing more stereo and alarm when I was fixing cars.
Where did you go from there?
I bought my first condo in 1992 when I was 21, and after I bought it I started going through the newspaper looking to buy and sell stuff. I found a mechanic shop for lease and started fixing cars. People asked me to do auto bodywork, but I didn’t do that. I was in an automotive center, and there was a guy who did auto bodywork. I struck a deal with him to bring the cars in and sublet them out to him. I started learning how to write estimates, and it was a lucrative business. I was driving down the street one day and saw a big auto body shop for lease. Right away, I called the guy and leased the facility. It was rundown. We cleaned it up. We hired some guys to bring in business. We were doing work for insurance companies and dealerships. I sold that and went into the children’s manufacturing business.
I used that to buy 50 percent of Uncle Howie Products (a manufacturer of children’s furniture). The business was struggling, and I walked in and saw the showroom, and my mind was going where I thought I could take this to another level. He had maybe 10 to 15 employees. He was a sales guy, but didn’t know how to run a business. I took it to that to more than 300 to 400 people. We were selling to Wal-Mart, Sears, Toys R Us.
I sold him back my 50 percent and got my money plus a profit, and the business closed up not long after that.
Where did you go from there?
A friend introduced me to someone who had a bunch of new car dealerships, and he wanted me to open a body shop to service all of his vehicles. I found a big automotive body shop that was going out of business and struck a deal with the owner and in 60 to 90 days it went from $60,000 to $80,000 in sales to a half-million dollars a month in sales.
What were you doing in real estate?
At the same time I was buying and fixing up houses and selling them on the side. Someone approached me and asked if I was interested in buying an apartment building. It was right down the street from the body shop. What I did was have my employees live in the apartment building, so I know they will be close to work. I got approached to sell it and sold it, and started buying and selling apartment buildings like crazy. I bought maybe 25 to 30 of them between 2000 and 2004. I was doing it like cars. I was fixing them and flipping them. The same principle I applied to fixing a car or fixing the furniture business I applied to the apartment buildings.
What attracts you to doing that?
I think I have an eye for things that are undervalued that people don’t want. I see them done before they’re done and know what it takes to get them done. When I see something I want, I’ll sit across the street for hours and stare at it and picture what I can do to it. I have it all in my head. I envision what it can be.
Why are you no longer in California?
It started getting tough in 2004 in L.A. to buy things. It was getting very expensive. I came to Vegas and went to Texas and Phoenix. I bought some shopping centers. I came to Vegas in 2004 and bought my first property (an apartment building) connected to the (Las Vegas) Convention Center that no one wanted to touch. I fixed it up and sold it to the Convention Center.
What is it about Las Vegas that you like?
I love Vegas. It’s so much easier to do business than it is in L.A. Vegas is pro business. Even in this economy, there are a lot of opportunities long term.
When did you buy your extended-stay hotels?
When I bought the first apartment on Sierra Vista, they were dealing with a hybrid of monthly/weekly. I said, “what is this weekly thing? We have to get rid of that.” And we got rid of our weekly. We started to look at it, and it made sense. We just didn’t understand it. It is easier for people in Vegas to pay by the week than it is at the end of the month. They don’t have that amount of money at the end of the month. We said let’s keep them as traditional apartments, but let’s be flexible with the people. We went back to a hybrid and we looked at places like Budget Suites and how they did it. We didn’t want to rent it by the week. We wanted to let them pay by the week. One day, Judy, who worked for us made a joke, and suggested Siegel Suites. And we started to do it. We started to create a logo and we rolled with it and had fun with it. We kind of fall into things.
How many Siegel Suites do you have?
Seventeen. We have one in Mesquite and one in Reno, and 15 in the valley.
What about your entry into the casino market?
We thought it would be great if we could take all the tenants we have who frequent these local casinos. We have all of these people, and we don’t have to market to them. They’re in our apartments, let’s give them value and have them come into a casino. That’s how that started.
So it was about serving tenants?
It was about tenants, but also fixing something that was an eyesore. I’m attracted to that. If I drove by this today (Rumors, where the interview was conducted), I wouldn’t be interested in buying it at all. Once I got there and buy the property and fix it up, my interest is there to manage it, but I’m not so much into maintaining it than the excitement of bringing something alive like this.
Once you fix them up, you don’t want to keep them long term?
I do. Part of what I set up is management to run these things. I’m really into making sure the properties are clean and run right. I’m known for driving around at night making sure the lights are on and my security guards are out there. I’m psycho about that.
Do you have any regrets?
Obviously, you can’t look back on the economy and things happen, and there is nothing I could have done to change that. Everyone got caught in what happened. I don’t think there is anything I have done wrong.
Has that put you in a financial bind?
Everyone has issues. I have issues I have to resolve with lenders, which I’ve done now that they’re extending. They know my properties are clean and run right. I’ve done nothing wrong. Lenders are willing to work with me on that.
What’s your view of downtown Las Vegas where you own the Gold Spike?
People like downtown. There is value there, and there is a customer for downtown, and we’re starting to build customers. We’re building up clientele. We don’t have all the booking of business like all of the other hotels do years out, but we’re starting to get that now. We brought in a new gaming operator. That company is going to bring the value there that is aggressive in helping us market the properly.
Are you worried about the future of downtown?
I think things are happening in downtown. In every city, the place to be is downtown, and it’s only a matter of time.
How is Rumor doing?
We’re getting a lot of good feedback. We’re getting out there. People who come here love the property. I believe, and people reinforce it, that it’s one of a kind. They don’t have anything like this in Las Vegas. It’s Palm Springs meets L.A. People that come here appreciate that. They have this sort of product in New York, San Francisco, L.A. or Palm Springs. I think between this and the Artisan, which I love, we have a true niche for boutique. Mandalay Bay is not boutique. This is boutique.
Who are your customers?
Our customers are younger and hipper and people that want to go to a cool environment. That is artsy people. I’ve been going to the Strip forever, but some people want to go to something different. You have the cookie cutter here and big box in the middle. We’re something in the middle. We’re a third choice to somebody.
What about being across the street from the Hard Rock?
I think we complement the Hard Rock. We add value to the Hard Rock and that hurts the Palms. We’re just an extension of the Hard Rock. Our customers can use both facilities, and it just helps the corner.
What are the challenges of marketing boutique hotels in Las Vegas?
I think there is an advantage when everything is the same. When you have something that’s different and cool, it’s easier to promote. If I had another Strip property that would be hard to promote because I would be competing with everyone. Once people know we’re here, they love us, they’re returning back and telling their friends.
How do they know you are here?
We’re doing a lot of marketing in L.A. We’re doing radio promotions. We’re doing a lot of giveaways and social media.
We’re closing on an apartment building at the end of November. We’re looking for stuff. I wouldn’t mind putting together a themed hotel I have in mind for the Strip. You never know.
So you have a long-term strategy in mind?
I don’t sit down and write out a business plan. When the opportunity comes, I have to be prepared for the opportunity. If I feel, there is potential in the property, we are going to find a way to execute it.
What’s the future of Las Vegas?
Now is the opportunity to pick up stuff if you’re able to hold it long term. Vegas is Vegas. It’s one of a kind. It can’t be duplicated. Even if the market was hot, I’d much rather be in Las Vegas than Phoenix. This is the hotel capital. We have the best restaurants and the best shopping. Everyone comes here and they want to own a piece of it here.
Does the economy create problems or opportunities?
Both. It has created problems because a lot of people have lost their jobs. It trickles down to everybody. When people lose their jobs, it creates opportunities because when someone losing something, someone will take advantage of it.
When will it turn around?
My feeling is that it’s on the bottom now. It’s going to take a few more years to generate people coming back and buying houses again like they did because it was so inexpensive to come to Vegas and retire. Businesses will want to be here for the tax advantages. Jobs have got to be created, and as they’re created the people will come back.
You are known for fixing things up and adding value. What would you fix about Las Vegas?
The negative press that comes out of Vegas. The press needs to promote Vegas and not hurt Vegas. When they put out articles about Vegas, people that are not in Vegas read it and think it is collapsing. Vegas is not closing and now it’s time for them to enjoy all of the things that are on sale. The press hurts it. If someone says something negative, let it come from New York or L.A. and the press here should defend it, but when it comes from the press, it is counterproductive.