A Hospitality Startup’s Promises Fall Short for Hotel Customers

Doyle said she inquired about terminating her Life House contract, but the startup told her she would have to pay nearly $200,000 to get out early. “It is just a nightmare,” she said.

The ​​Taos Motor Lodge isn’t the only Life House customer that’s unhappy with the quality of the services they’re getting from the company. Of the roughly 50 hotels that are actively using Life House to manage their operations, at least a third have attempted to terminate their contracts with the startup in recent months, according to interviews with six current and former Life House employees, four hotel owners and internal company documents viewed by The Information.

The customers have cited a combination of factors, including mismanagement of hotel budgets, underpricing of rooms and software that fell short of the hotels’ expectations, among other issues. In the past, some hotel owners have been successful in terminating their contracts with Life House. In most cases, though, Life House has rebuffed such requests, according to several current and former employees and customers.

Three years ago, Life House even sued one of its customers in New York Supreme Court after the owner of three hotels in Miami tried to terminate its management contracts with Life House for alleged poor performance, according to the complaint.

Many startups have emerged in recent years, promising to deliver innovative new approaches to helping small businesses, including through technology that helps them reduce costs and increase sales. Often the results have come up short for those businesses. In the case of Life House’s customers, weakness in the travel market in some parts of the U.S. last year could accentuate their frustration with the startup.

When asked about the Taos Motor Lodge’s issues, Life House said it could not comment on specific employee-related incidents “except to note that we have taken every action necessary to protect the interests of Owner and protect our employees.”

The company dismissed other specific customer complaints as baseless and uninformed and said that customers’ decisions to terminate their contracts were unrelated to Life House’s performance. It didn’t dispute individual examples of hotels that have recently attempted to terminate their management deals with Life House, though it challenged the accuracy of The Information’s calculation that they represent a third of the total number of hotels it’s providing such services to.

In its initial response to The Information’s questions about complaints from its customers, Life House provided links to explanations that it generated through ChatGPT. One of the prompts that it submitted to the AI chatbot—which Life House CEO and founder Rami Zeidan appeared to have submitted—read: “Do Hotel Owners often terminate or point the finger at their [operators] when their business plan doesn't go to plan?”

Part of ChatGPT’s answer: “In some instances, owners may point fingers at operators as a way to find a scapegoat for deeper, systemic problems with the property or its market positioning.”

Life House said it has another 70 clients that use a software product to help manage their revenues and that customer satisfaction is high for that product. Life House’s lawsuit against the owner of the three Miami properties was eventually resolved “amicably,” the company said.

Life House is the brainchild of Zeidan, who pitches the company to potential customers as a full-service hotel “brand, management and software platform.” In some cases, clients hire the startup to redesign their properties from the ground up in addition to managing them. Those locations have become officially branded Life House hotels.

For example, in early November Zeidan invited throngs of influencers to celebrate the reopening of its newest outpost: Life House Palm Springs, a 1960s-era motel that the startup had transformed into a trendy desert hideaway. As with the other Life House–branded hotels, which are located in Nantucket, Miami Beach and elsewhere, the owner of the Palm Springs property paid Life House to provide interior design services. Life House employees helped pick out the upholstery colors for the restaurant and selected the appropriate number of DJ booths for the property (two), but the property owner ultimately footed the bill for all furniture and renovations, according to three former employees.

Most customers keep their own brands, hiring Life House to manage their operations, provide software or both. Zeidan has portrayed the company’s technology as an important part of its secret sauce. In a 2022 interview with Forbes, he described it as a “proprietary software platform to automate the back-office components of hotel operations like finance, accounting, and revenue management.”

Some Life House customers have been surprised to learn that the company relies on software created by others rather than building its own.

Last October, the owners of five hotels mostly in the Southwestern U.S. that Life House has managed since 2021—the Loyal Duke Lodge, Salida Inn and Monarch Suites, Amigo Motor Lodge, Casa Secoya and Taos Inn—sent a joint letter to the startup, accusing Life House of misrepresenting the nature of its technology, according to a copy of the document viewed by The Information. In the letter, the hotels requested that Life House terminate their contracts. (The Taos Inn is unrelated to the Taos Motor Lodge.)

The owners of the hotels said Life House sales representatives had promised them the startup’s software would reduce their operating costs by 50% and increase revenue per room by at least 35% and earnings before interest, taxes, depreciation and amortization by at least 70%, according to a description of the pitch meeting in that document.

“But Life House never created or provided any cutting-edge, proprietary software, and never earned the Hotels the higher revenues and lower operating costs it promised through use of that technology,” the hotel owners wrote in the memo. “To the contrary, Life House simply purchased—with the Hotels’ money—widely available software, then mashed those programs together so that they were housed within Life House’s user interface…which had the effect of reducing the functionality of the off-the-shelf software.”

“The Hotels would never have agreed to do business with Life House had they known the true setup,” the owners wrote. Each of the hotels that signed that letter said it had seen decreases in Ebitda margins through August 2023 compared to 2022.

Three current and former Life House employees familiar with its technology said the startup has largely relied on off-the-shelf software from other companies for its tech platform. As of January, that software included a property management system from another startup, Mews, as well as a product for listing hotel room inventory on online booking platforms from SiteMinder and accounting software from Airbase and Xero, the current employee said.

In a written statement to The Information, Life House general counsel Chris Perré said the startup’s use of off-the-shelf software is intentional and its proprietary technology includes “back-end automation, complex integrations with third party systems that enable automation & reporting advantages, among other things that are not always visible to users or owners.”

Perré described the complaints raised by the owners of the five hotels in the letter as “untrue and posturing.” Life House acquired the contracts to operate the hotels from Imprint Hospitality, a hotel management company that had previously listed the hotels in its portfolio, in late 2020 for “a substantial sum,” he said.

“Imprint was provided significant due diligence materials and ample opportunity to fully vet Life House, its software, and its management approach before closing the deal, and Life House has at all times operated within the scope of its contractual obligations,” said Perré, who added that the hotel owners were “self-operating with no proprietary tech (with higher labor costs) before Life House acquired the contracts and assumed management.”

“All contracts remain in full force and effect and there is no contractual or legal basis to terminate, alter, or amend the agreements,” said Perré. “We feel this letter was taken out of context and doesn’t represent the nature of the relationship and ongoing discussions between the parties.”

Matt Seim, managing partner of Imprint Hospitality, declined to comment. The owners of the five hotels also declined to comment.

Shared Origins

When discussing the origin story behind Life House in the past, Zeidan has said it was his experience as the son of Lebanese immigrants growing up in a “pretty homogenous” Minnesota town that led him to found the company. “This led me to build a brand that celebrates the core of what travel is meant to be about—discovering our collective sense of belonging to the universe, which can bring a tremendous amount of meaning to a life,” he told Shoutout Miami in a 2021 interview.

‘The Hotels would never have agreed to do business with Life House had they known the true setup.’

Before he incorporated the company that became Life House in 2017, Zeidan had a contentious split with another business he worked with. He spent nearly a year as an adviser for the startup Couchsurfing, which at the time was developing a new hospitality-focused business called Share House, according to a 2017 lawsuit Couchsurfing filed in San Francisco Superior Court.

Zeidan worked with Couchsurfing from August 2016 to May 2017, and during that time he had access to sensitive company information, plus the names of potential investors Couchsurfing had identified for the new business, according to the complaint.

But in May 2017, Zeidan incorporated a separate company of his own with a similar name, Shared House, and forwarded confidential documents to his personal email account and one tied to the new company, according to the complaint. The same month, he shared his new plans in a text message to a Couchsurfing investor.

“I wanted to let you know that I will be pursuing Share House on my own with a couple former colleagues and without the Couchsurfing partnership, which I’m happy to explain,” wrote Zeidan in the message, according to the complaint. “I’m also raising a round, but less $ and at a lower valuation cap that may be a better fit for your capital. I’ll be in SF early this week if you would like to catch up.”

In July 2017, Couchsurfing sued Zeidan for, among other things, misappropriation of trade secrets and breach of contract—the advisory board agreement he’d signed required that he provide Couchsurfing with prior written notice before directly competing with the company. The lawsuit was settled in 2018, and Zeidan dissolved Shared House, which he had incorporated the year prior.

“This was a frivolous & meritless lawsuit, fabricated in a failed attempt to block Rami [Zeidan] from starting Life House and raising capital,” said Perré. He said Zeidan was pursuing “a general idea in the affordable accommodations space” prior to working with Couchsurfing, and decided to abandon the partnership and strike out on his own after he had a dispute with Couchsurfing executives in early 2017.

“Rami was never an employee of Couchsurfing nor had any access to proprietary information of any sort,” said Perré, who added that Zeidan “repeatedly offered to return or destroy whatever confidential information or IP the Plaintiffs could point to.”

When asked about Zeidan’s comments regarding the legitimacy of the lawsuit, Patrick Dugan, CEO of Couchsurfing, said, “It is disappointing to hear how Rami is characterizing the dispute, but I really couldn't care less.”

Blown Budgets, Outdated Photos

Life House began with lofty aspirations. When it opened its first hotel in late 2018—Life House Little Havana in Miami—Zeidan said he planned to have 20 additional hotels under development by the end of 2019. “Our loyal guests will want a Life House wherever they travel and we are very mindful of protecting our brand and growing it without diluting it or losing sight of our values and theirs,” he told Forbes at the time.

In an interview with The Points Guy in 2018, he described Life House’s target audience as “cool parents” and “mature millennials” who want a boutique hotel experience at a more budget-friendly price point. Life House aimed to achieve that by using its technology to reduce the amount of staff needed on-site at properties—for example, by replacing front desk staff with computerized self check-in—and to use those cost savings to lower room rates.

Today, the startup has six active Life House–branded properties, with several more in the works, and has pivoted its business to focus primarily on offering comprehensive hotel management services for independent hotel owners and software for revenue management. In internal company meetings and public interviews, Zeidan has described this latest incarnation of Life House as “Squarespace for hotels.”

“We’ll manage your entire hotel, from revenue management to financial reporting to hiring & training the staff,” reads the startup’s website. “Owning a hotel has never been simpler.”

But for many of its customers, the experience of working with Life House has been disappointing, according to interviews with four owners currently under contract with Life House, six current and former employees, and internal company documents viewed by The Information.

Among those customers that have sought to get out of their contracts with Life House is the White House Inn, an 18-room Greek Revival–style mansion in Vermont that the startup has managed for the last two years. In late December 2023, the property’s owner, Ellen Bissett DeRiggi, sent a contract termination letter to Life House accusing the startup of “systemic” operations failures and “irretrievable neglect,” stated a copy of the document viewed by The Information.

According to the document, Life House failed to consistently apply rules regarding minimum room rates, minimum nightly stay requirements during peak periods and other charges related to guests’ bookings, which had a “significant negative impact” on the revenue the property earned per available room. The document also stated that Life House regularly exceeded the expense budgets it set for the property, which the owner pays. In 2023, the document said, Life House exceeded its budget for employee benefits at the White House Inn by 317%, payroll taxes by 220% and payroll processing by 135%, as of December 21, when the hotel sent the letter.

The website Life House runs for the White House Inn has outdated photos, which don’t reflect updated decor and renovations that took place in early 2022, and the booking engine displays “several incorrect photos of rooms which do not correspond to correct room number/room types,” the letter says. Life House has repeatedly refused requests from the owner to update the website and offers to have the property staff maintain the site.

“Not only is [Life House’s] own proprietary technology sub-par, Life House fails to operate the property in the tech-savvy manner in which it claims to excel,” wrote DeRiggi, noting that Life House has not properly set up much of the costly third-party software it charged her property for, nor has it integrated the software with the appropriate platforms or trained key staff to use it.  “The utter failure of [Life House] technology implementation has had a detrimental effect on efficiency, growth opportunities, public perception and staff morale,” the letter concluded.

DeRiggi has so far been unsuccessful in her attempts to terminate the Life House contract, a person familiar with the dispute said. In her contract termination letter, sent on December 21, 2023, DeRiggi wrote that it was the White House Inn’s intention to terminate its agreement with Life House and take control of the hotel’s management no later than February 20. But shortly after she sent the notice, she received a cease-and-desist letter from Life House, according to the person.

Her contract with Life House isn’t due to end until December 2025, that person said.

“Life House vehemently disputes and denies each and every one of the allegations contained in the owner’s letter,” said Perré, the Life House general counsel.

In a formal response to DeRiggi, Life House described her allegations as “baseless” and wrote that they were “predicated upon the owner’s lack of understanding and/or failure to read relevant materials provided to them before making such allegations,” Perré said.

“Following Life House’s response, Owner has engaged in no further efforts to terminate the agreement and has no basis to do so,” said Perré. “Life House continues to operate the Hotel in alignment with the agreement between the parties and industry standards, and will continue to do so.”

In an interview, DeRiggi said she still plans to end her hotel’s relationship with Life House. “We are in the process of terminating our management agreement with Life House, and I am hopeful that Life House will cooperate in good faith throughout the process,” said DeRiggi. “It’s our policy not to publicly comment on the details of pending legal matters, and it is unfortunate that Life House has chosen to do so.”