Calif. Hotel 'World's First' to Crowd Fund for Improvement

Guests become partial owners and get VIP treatment.

April 17, 2014— -- Turns out crowd funding can be used for way more than the creation of hands-free cookie dunker.

For the first time, a hotel is using crowd funding to make guests partial owners and, in the process, expedite improvements the property wants to make. Since announcing the crowd-funding platform on Wednesday, the Hard Rock Hotel Palm Springs has received hundreds of thousands of dollars -- much of which will be used to add a nightclub and update the pool and pool area.

The minimum investment is $10,000. But whether a person invests at the rate, or ten times that amount, the VIP benefits of being a partial owner are the same. Hotel investors will have free use of the hotel owner poolside cabana, 25 percent discounts off the best available room rates, free room upgrades and priority and prime seating at the hotel restaurant.

Hotel crowd funding, said Andy Carpiac, the hotel's majority owner, is a "winning formula."

Sophisticated investors are looking for a home way from home, he said. "They come and visit and spend money and the more they visit, the more their investment appreciates. It attracts the exact kind of customers we want."

He called the crowd funding concept "cutting edge" and said that's why it's the perfect fit for his hotel.

"We're a destination hotel, an entertainment destination," he said.

The crowd funding for the hotel is being handled by Realty Mogul, a real estate crowd funding company. Jay Samit, Executive Chairman, said it's a way for people to pool investments and diversify, plus get access to something that was previously reserved for the "big boys."

"It's going to fundamentally change the hospitality industry," he said. "The [hospitality] business is perfectly suited to [crowd funding]. "You go to Palm Springs, go to 'your' hotel, and you're spending money that's going back into your own pocket."

Samit predicts this is the next trend in hospitality. Since making the announcement on Wednesday, Realty Mogul's been "flooded" with inbound calls, from "the biggest chains you can think of" to "famous boutique hotels." He's fielding calls from hotels in Las Vegas, New York and Los Angeles. He said he imagines this working especially well for a place with a loyal following and repeat visitors, like a hotel in a college football town that people tend to visit repeatedly anyway.

"It's another way to diversify and make money from your desktop." And from your travel.

Clarification: On April 17 this story ran with a headline stating the Hard Rock Hotel Palm Springs was the first in the world to crowd fund. While it is the first to crowd fund for improvements and the first to crowd fund in an online property marketplace, it is not the first to crowd fund at all. Two hotels, the AKA Wall Street and 17John, both in New York, used crowd funding as a means to open. The AKA Wall Street has been fully funded. The firm behind the crowd funding for both hotels is Prodigy Network.