Generation Start-up: How Stella Stays is changing the hospitality landscape
21 November, 2021
Extensive travelling and flying from one global business centre to another was part of Mohannad Zikra’s life for a decade. The former high-flying corporate executive, who started his career with Ericsson and rose in ranks to become its sales director in Canada, stayed at plenty of hotels around the world over a decade. It’s an experience he did not enjoy.
“I was gone for 320 days of a year,” Mr Zikra says. “When I leave, whether for a week or a month, I was always stuck at these hotels and when I came back home to Canada, my friends would say 'man you are living the dream, must be great to travel', but I absolutely hated that experience.”
After moving on from Ericson in 2015, he joined UXP Systems, a tech start-up in Toronto as director of sales, again travelling extensively. However, instead of the corporate-allocated, high-end hotels, this time he chose cheaper options including Airbnb, which was gaining popularity in North America.
It was a much better experience, offering a personal touch and homely feeling, but sometimes services were unprofessional and inconsistent.
"It was a hit and miss," he says.
After experiencing both ends of the hospitality spectrum, Mr Zikra thought there has to be a better way to manage the business of vacation and long-term rental properties. The whole model needed reimagining to offer guests – whether vacationers, corporate executives or residents seeking longer term and hassle-free stays – a personalised hospitality experience that was much lighter on the pocket.
"I realised there was a huge opportunity," he says. "There was a huge shift in people's minds and they were transitioning towards staying in apartments that were furnished instead of hotels."
That realisation was the foundation stone for Stella Stays, a Dubai-headquartered hospitality start-up that offers individually designed and equipped homes and provides end-to-end digital services to guests. It's a value proposition, which, its founders say, is better than a hotel.
Mr Zikra, who grew up in Kuwait and moved to Canada at an early age, has a computer engineering degree. After UXP was acquired in 2017, he decided to move on from the corporate sector. With a group of friends he put together a portfolio of a few properties in Canada and ran them in 2018 as short-term rentals, experimenting with improving hospitality experiences.
However, it was a chat with an old friend in Dubai, a former Ericsson colleague, about the emirate being the real estate and hospitality capital of the Middle East that convinced Mr Zikra to bring his model of personalised hospitality to the emirate.
"Within a week, It was myself and one of co-founders, we jumped on a plane. We didn’t have a plan, we didn’t know what was going to happen," he said.
Mohammed Al Ghussein, an Emirati entrepreneur and an old acquaintance of Mr Zikra, was among the first people in Dubai to learn of the idea to revolutionise the hospitality sector. A day later, Mr Al Ghussein, who is now a very hands-on chairman of the company, decided to join the team.
The founding team bootstrapped the venture, pouring in about Dh1 million ($272,479) of their savings into the venture. The company was formally launched in March 2019 and like most start-ups, it wasn't an easy journey.
"Even with Mohammed as our initial investor it was very difficult to raise funds," Mr Zikra says. "It was either we were going to make it or break it."
Running operations from a tiny office, Mr Zikra, along with co-founders Hassan Al Saadi, Marc Diab and Hamza Al Saadi, visited a lot of properties trying to convince homeowners to let the company rent their units, furnish them and re-rent to tourists in Dubai.
"They [homeowners] thought we were ludicrous. They thought we were absolutely out of our minds and nobody wanted to talks to us", Mr Zikra says of initial struggles when he and his cash-strapped Canadian compatriots survived on the cheapest meals in Dubai.
Stella Stays landed its first penthouse in the marina, when a homeowner with "entrepreneurial spirit" decided to let the company manage the property.
"He decided to take a risk on us and so far he has been really happy. He has been there from the day one," Mr Zikra says.
At the end of last year the company had 85 properties in its portfolio and is growing rapidly, now taking whole floors of buildings, where each unit is individually furnished to avoid “cut-paste” décor themes of hotels, he says.
Stella Stays made a major pivot during the pandemic that brought the global travel and tourism industry on its knees amid travel restrictions. As the number of tourists dried up, the company shifted focus to UAE residents looking for managed accommodations to steer the company through the rough period, Mr Al Ghussein says.
“When you get hit with something unpredictable and unique like a pandemic, there are only two possibilities for every start-up: either the company shuts down or it is forced to develop a brand-new strategy to stay afloat,” he says.
The company did the latter, and it also revamped its business model, marketing, pricing and “everything in between” to survive through the lean patch and ultimately grew as a business as markets recovered and travel restrictions eased, Mr Al Ghussein says.
However, despite rapid growth, Stella Stays has delayed its funding round as much as possible as “getting to a valuation that makes sense”, was difficult, with investors valuing Stella Stays at “pretty much nothing” initially.
The company, which is now profitable, reinvested revenue generated from operations back into the businesses and earlier this year expanded into Bahrain. It currently has a portfolio of 300 managed properties dotted around the UAE, Bahrain and Canada, and plans to increase that number to 1,000 in 2022.
To fund its expansion, the company is in talks with investors for a “large” Series-A growth financing round next year, Mr Zikra says, declining to give the potential size of the financing.
Stella Stays is also open to bringing strategic investors on board to expand its footprint to other regional markets in the Middle East and beyond. Part of the potential fundraising will be invested in improving its technology platform and hiring staff to keep up with the pace of growth, he says.
Q&A with Mohannad Zikra, co-founder and chief executive of Stella Stays
What other start-up do you wish you might have started instead of Stella Stays?
During the initial phase, while we were discussing business ideas, there were a lot of opportunities around real estate and around property technology. I have always been interested in the idea of technology enhancing the broker and agent experience. This was one of the potential start-up projects I was looking into that would have really solved a critical problem which exists today.
What would you do differently if you had to start over?
Stella Stays came through quite successfully. So, we wouldn’t necessarily do much differently but the one advice that we would have been grateful to receive while just starting out, is to never underestimate the potential for the growth of any business idea, especially in a market that is still growing. I know many entrepreneurs are afraid of taking big decisions early on but that’s what’s important. Sometimes it is okay to jump into things that you might think you are not ready for, but don’t be afraid. You will be pleasantly surprised at the outcome.
What skills have you learned in setting up your business?
The most essential skill I have learned while setting up the business is sales. Sometimes all you have is two minutes, or maybe 30 seconds, to sell your idea. You have to figure out and execute a good pitch as fast as possible, especially when you are at the early stages. The other crucial aspect I brushed up on is finance, as it is essential to understand the end-to-end finances as a start-up. As entrepreneurs, we understand the product, company’s operations and what needs to happen, but finances are kept aside as an afterthought during initial stages. Eventually, you will need to deal with it and dig in deep.
What is the one quality that an entrepreneur should have?
You have to be a salesperson or just really have that skill to sell your perspective and your idea to somebody else, whether an investor, an adviser, a client and even to the first set of people you hire. If you do a great job at selling your product and your dream, then you’re up for something great. If you can’t, that’s when you’ll see your company struggle.
What advice would you give to entrepreneurs who are struggling?
There are a couple of things: focus and prioritise. That’s what we learned as a growing company. Think about ‘what’s the best effort that will get you the best return?’ Focus on small steps, think carefully and take one step at a time. Don’t look around and simply follow trends, calculate your own moves and create your own timelines. Also, feedback is crucial. One of the things we do is that we send updates to our investors, showing them the good and bad bits, and also the really ugly side of things. Entrepreneurs are afraid to talk about the ugly bits, but you have to be able to put it out there to obtain quality feedback.
Name: Stella Stays
Founders: Mohannad Zikra, Hassan Al Saadi, Marc Diab and Hamza Al Saadi
Year started: 2019
Amount raised: Bootstrapped Dh1m, plans Series A funding round in 2022