A N.J. Couple Opened a Beach Hotel. Covid-19 Struck. Business Boomed.

(Bloomberg Businessweek) -- Editor’s note: This article is part of a package about entrepreneurs who are trying something new.

After more than two decades building a residential rental business in Philadelphia, Amy Santana and her husband Nick were ready to switch gears. She says they were increasingly frustrated that the city’s government was making it difficult for landlords to survive, and they were looking to spend more time with their children. “Child care, as you know, is outrageous,” she tells Businessweek.

In 2015, the couple bought a highly distressed hotel in the island resort town of Wildwood on New Jersey’s shore. They started renovating the 22-unit property in 2018, investing everything they had to transform it into an 11-unit boutique hotel, including buying an additional property for overflow parking to comply with the town’s zoning rules.

After spending about $2 million and booking roughly $100,000 in advance reservations by March, they planned to open it in April 2020. Santana, who had done design work for a hotelier with boutique properties in Miami’s South Beach, was excited to unveil what she had learned. “There’s no other hotel like it on this island,” she says. 

Then Covid-19 struck, forcing them to delay their opening and spooking guests. Adding to their worries in May, the local convention center, a major source of guests just four blocks away, canceled all events for the remainder of 2020. To bring in extra cash, they rented out their own home in South Jersey, temporarily moving to a smaller place they own in Wildwood. “Everybody panicked and wanted a refund, which we gave,” she says.

The Santanas first got into real estate in 1997, buying and renovating properties in Philadelphia, and then renting to students near Temple University. Over the years, they focused on serving low-income residents while working full-time jobs. Santana, who has a PhD, in education, became a school principal. Her husband worked in line construction for utility contractor Asplundh. “Our mantra was always quality housing for quality people, regardless of their economic standing,” Amy Santana says. “We’d both come from inner city, very humble, poor beginnings.”

Their hotel, 5100 Vacation Club, aims for a different market: Families that can afford to take multiple vacations and seeking an upscale, Disney-like vibe at the beach, along with quality amenities and lots of space. Amy Santana had to adjust to the coronavirus pandemic fast. To coax would-be guests who were skittish of traveling during the pandemic, Santana lowered prices and offered a few of the hotel’s smaller units as seasonal rentals for professionals who were sick of working from home. “Hedging our bets” is how she describes it. 

She emphasized the hotel’s steady Wi-Fi, cleaning regimen, and clutter-free units that she says are “designed to be cleaned properly.” (Instead of floor lamps and throw pillows, think recessed lighting and fancy tile backsplashes.) Bookings were tepid when the state’s lodgings were allowed to open in June, but they brought in enough to cover the Santanas’ utilities and taxes. Their lenders—Liberty Bell Bank, Pursuit, and the Small Business Administration—helped them defer payments. “They were instrumental,” she says.

Bookings grew stronger than she had been expecting and eventually filled the hotel through September. Santana says she’s been giving tours to wedding parties and church groups that are seeking to rent the entire property at times in the next season. She makes a point of highlighting the bamboo-dotted courtyard, where guests can gather outdoors and stage events to assuage concerns about viral spread.

The Santanas’ roughly 30 properties, in Philadelphia, on the other hand, aren't performing. Tenants owe about $56,000 in rent, plus $80,000 in water and gas bills. Philadelphia has changed the rules to make landlords vulnerable to liens on those bills, she says. The Philadelphia Housing Authority has extended its eviction moratorium into March 2021.

Santana, her husband, and her oldest son, who recently turned 15, have been running the hotel themselves, using a trusted cleaning company that lost much residential work because of the pandemic. Originally, Santana had planned to operate year-round. But because area venues are closed through 2020, she closed the 5100 Vacation Club at the end of September and will play by ear as to when to reopen in the spring. She doesn’t want to make advance bookings and then have to return guests’ money, as the Santanas did back in April.

In the meantime, the couple is taking advantage of remote schooling and preparing to travel across the country with their five kids. They’re also figuring out the best way to deal with the Philadelphia properties—which might include selling half of them. Their next step could be to expand the Wildwood hotel. “God willing, we may build part two in 2022,” she says.

Amy Santana’s advice for anyone forging a new business, or revamping an old one:

Stay on top of local regulations. If you run a hotel on the Jersey Shore, you’ll need to know about beach openings and closings, because they'll have a material effect on your business. You'll also need to pay attention to trends, she says. For example, in Philadelphia, Santana is seeing homeowners flee crime while developers build homes that sit vacant. “It’s a fake bubble,” she says.

Get tighter with your lender. “Make sure you have a good relationship with your lenders,” she urges. Expectations should be clear so you can plan to navigate uncharted waters. “Without our lenders' help, we wouldn't have made it,” she says. Santana makes it a point to email financial updates regularly and ask the lenders for help when necessary. Without good communication with a lender—or a lot of your own cash—you can’t move forward as adeptly as you’d like, she says.

More reading: A California Family Comes Together to Sell Pandemic Supplies; How to Launch a Pandemic-Proof Business; and Six Small Business Leaders on What It Takes to Survive the Pandemic Economy.

For more stories, strategies, and advice for Main Street business owners, check out the Bloomberg Businessweek Small Business Survival Guide.

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