On the morning of Oct. 20, 2020, Tim Doss logged into his account on the crowdfunding website Indiegogo. He and a group of 3,000 other members of the “Bubble Hotels VIPs” Facebook group had been planning for this day for over two months.
Within an hour of the crowdfunding campaign’s launch, Doss paid approximately $1,500 to become the 221st backer of the Joshua Tree, California, “Bubble Hotel.” The project promised a unique experience sleeping in a transparent bubble under the desert stars. With the help of backers like Doss, the Bubble Hotel’s founders pledged to build a Joshua Tree glamping facility complete with queen-sized beds, private full bathrooms, personal hot tubs and a communal kitchen and lounge.
Doss, a bank facilities manager in Murrieta, California, had come across the project in a Facebook advertisement. He planned to pre-book spots at the hotel for his 50th birthday celebration in spring 2021.
The bubble hotel became a near-instant crowdfunding success. The project met its initial $25,000 goal within 15 minutes of being launched. It has since accumulated over $830,000 from more than 1,700 backers looking to pre-book stays.
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According to the timeline posted on Indiegogo, “permits and applications” for the hotel were slated to be processed in June 2020. The project was expected to break ground in December 2020 and open for business this month.
To date, no construction has begun on the Bubble Hotel.
Site plans for the project were submitted to the San Bernardino County Land Use Services Department last month, kicking off a lengthy approval process beginning with a California Environmental Quality Act analysis.
David Wert, a San Bernardino County spokesman, said it is expected to be “at least six months” before the project will be given a public hearing by the county’s planning commission.
The delays and unclear communications have left some backers, such as Doss, feeling burned.
“I realize with any project there might be issues with plans and getting approval,” Doss said. “But the (inadequate) communications and lack of construction is very concerning.”
“I don’t know when this is going to actually happen,” he said. “I have no idea.”
Shooting for the stars
The bubble hotel is the brainchild of Nathan Resnick, a San Diego-based serial entrepreneur and founder of manufacturer-sourcing platform Sourcify. That venture earned Resnick minor fame as the young founder of a multi-million dollar company.
While the bubble hotel is largely unrelated to his past work, Resnick, now 26, said his lifelong love of the outdoors “organically” led to the idea for bubble-based glamping.
“About three years ago I realized that it was hard to find a good campsite,” he said. “The idea for bubbles came naturally as a way to stargaze on a bed.”
Resnick said he settled on Joshua Tree as the location for his project nearly two years ago. He ramped up work on the project in early 2020, securing longtime Yucca Valley resident Jack Laymon as the general contractor in February of last year. According to Resnick, the team evaluated a number of different land parcels before finally settling on the lot at the southeast corner of Yucca Mesa Road and Douglas Lane.
The bubble hotel founder declined to discuss how much he paid for the land, but property records indicate that a company named “Bubble Hotels LLC” purchased the parcel for $105,000 in July 2020.
The idea for the Indiegogo crowdfunding campaign originally emerged as a way to prove the market for the bubble glamping concept, according to Resnick.
“We have outside investors, that’s where a lot of actual build cost comes from,” he said. “We wanted to prove to investors and supporters that there was a lot of demand for this type of experience.”
Resnick declined to name specific investors but said they included California real estate and technology entrepreneurs, as well as Joshua Tree locals. According to Resnick, most of the roughly $3 million cost needed for the completion of the bubble hotel project will come from these individuals.
Resnick said the huge inflow of funds from pre-bookings on the Indiegogo campaign took the project team by surprise. “It was crazy, to say the least,” he said. “It was way more than we expected … We were almost in shock.”
“We thought the campaign might do $250,000 (total),” Resnick added. “We thought that was a pretty aggressive goal. We did $250,000 in bookings in the first day.”
Reality check
While the initial construction timeline for the bubble hotel was also aggressive, it failed to take into account the realities of the county permitting process.
“We have not scheduled a hearing date for the project at the Planning Commission, and don’t have any anticipated public hearing date at this point in time,” county spokesman Wert wrote in an email. “Grading and building of the project site could not occur until after conditional approval is given by the Planning Commission, and specific conditions of approval have been met by the developer.”
“It’s not uncommon for applicants to be optimistic about how long it takes to go through the CEQA process,” Wert added.
With an anticipated five- to six-month build time, this puts the best-case scenario for the bubble hotel’s opening a year behind schedule. A March update to Indiegogo project backers said that the glamping site is now accepting 2022 bookings for VIP backers with longer stay durations, although an opening date has yet to be specified. Bookings for the remaining VIP backers opened in early April with available dates beginning in June of 2022.
When asked about the delays, Resnick initially said “infrastructure,” such as water and electricity was the main holdup.
“It’s a multimillion-dollar project,” he said. “It’s not something we can put up overnight.”
Laymon, the project’s general contractor and owner of Yucca Valley, California-based Affordable Construction, said that such delays were common for developments in the area. He pointed to permitting, rather than infrastructure, as the central factor behind the bubble hotel’s setbacks.
“It’s a rezoning of the property, reclassifying it from a rural, single-family use to a campground,” Laymon said. “Everything depends on the conditional use permit.”
When asked about the discrepancies with the Indiegogo timeline, Laymon suggested there was a disconnect between Resnick’s ambitious plans and realities on the ground.
“There was just some confusion around that. Nathan (Resnick) launched the Indiegogo and had a more aggressive schedule,” he said. “Then the county got back to us after the launch and told us it was going to take more like four to six more months.”
Laymon said he anticipates the project being completed in “roughly” spring or summer of 2022.
Some backers left confused
Some bubble hotel backers say these delays and the status of the project were not clearly communicated, leaving them uncertain and anxious about the project’s future.
“I feel like I took $500 away from something else and it’s being held somewhere else without any notice or warranty,” said backer Ron Visconti in an interview.
Visconti, a 42-year-old photographer and video producer in San Diego, said he backed the project after finding it in an Instagram advertisement. “I wanted to make it a surprise to my wife,” he said.
Visconti said details provided on the project’s progress were often high-level and gave an inaccurate impression of its current status.
A December update on the project’s Indiegogo page – which was removed in April – read: “We are currently working on putting in our water wells, septic system, and electrical access.”
San Bernardino County officials told the Desert Sun that no permits for water wells, septic system, or electrical access were provided at that time and that “no permits have been requested or issued for any work to be done on the property” to date.
Resnick confirmed that, in accordance with the permitting requirements, no infrastructure has been installed on the property. He said any apparent discrepancies were an issue of semantics.
“‘Working’ for us is working with EHS (County Environmental Health Services) and working with engineers to make sure we build a safe and environmentally responsible development,” he said.
Visconti said that that interpretation was completely different from his. “I thought they were working on it like they were physically working,” he said, “not doing paperwork.”
Doss also cited what he called misleading communications to backers as a serious concern throughout the project. He described an April email to the project’s VIP backers, reviewed by The Desert Sun, as “very misleading.”
That update in part read:
We started in August with our Pre-Approval applications. These got green-lighted relatively smoothly. Once we had the pre-approval confirmation, we decided to launch on Indiegogo.
After nine months, we’ve got to the final step! Our team has worked closely with the county, Building and Safety. (sic) and environmental consultants to ensure what we’re creating is safe and protective of Mother Nature.
Since the project has only recently begun Environmental Quality Act analysis and does not have a public hearing date scheduled with the county planning commission, Doss said the April update implied that the project was much further along than it actually is.
“I’m not sure if it’s due to willful ignorance or purposeful deception,” Doss said, “but the project’s leaders need to be more forthcoming and knowledgeable with their updates.”
Other project backers expressed similar concerns about communications and project progress through the bubble hotel’s Indiegogo page. Of the 27 comments posted to Indiegogo in the last two months, 18 cite concerns about inadequate updates or the project’s status.
Resnick said it was “surprising to hear” that backers were concerned about communications issues with the project. He wrote in an email that “hundreds of backers” would say “communication has been great.”
He directed The Desert Sun to one such backer, Karl Sowa, president of an online lawn care management company in Salt Lake City.
Sowa said he learned about the bubble hotel from Resnick, whom he met through mutual friends last year.
“I would say they are excellent,” Sowa said of the project’s communications. “They’ve nailed it.”
Sowa said he was unconcerned about the project’s delays and added that he thought the 2022 timeline was “probably better” due to concerns about COVID-19.
Do real estate and crowdfunding mix?
Some of the disconnect between the perceptions of the project’s backers and its leaders may stem from the structure of crowdfunding platforms, according to Milan Miric, a University of Southern California researcher who studies online marketplaces like Indiegogo.
“There are many positive things about these platforms,” Miric said. “(Without crowdfunding), the cost of building up a project is really high. The cost of gauging interest is high.”
“In one sense, crowdfunding solved a lot of these problems,” he said.
Crowdfunding works especially well for things like “small gadgets” and other manufactured products, according to Miric, since it allows them to bypass traditional retail sales channels – quickly building and delivering goods to a ready-made customer base.
“In those cases, they are kind of building a business around a technology,” he said. “Through traditional (retail) chains that probably wouldn’t be possible. In that sense, it opens a lot of doors.”
Miric said this dynamic benefits both project owners, who gain quick funding and reduced friction in bringing their products to market, and customers who gain access to a product that might not otherwise exist.
The researcher said that many of crowdfunding’s benefits to customers can dissipate when the project touches on areas that require government or regulatory involvement.
“In something like real estate, the frictions are not necessarily being solved,” said Miric. “You are not going to get permits, zoning, or construction any faster because of (crowdfunding demand). So it becomes a faster way to sell things.”
“By (backing) a real estate (project),” he added, “(customers) aren’t getting that much more from the platform, but they are getting much less protection” than a traditional real estate transaction.
Miric said that even for the types of ventures crowdfunding is best suited for, long lead times are “relatively common.”
“In this ‘after phase’ where you are waiting for the company (to deliver the product),” he said, “they can really drag it out.”
Miric said that, unlike bank loans or many traditional funding avenues, crowdfunding capital does not come with interest payments that compensate the investor for the time their money is held.
“If the gadget costs 50 bucks and it’s six months from now that’s usually fine,” he said. “But (over $1,000) is not negligible for many people.”
Miric added that dissatisfied backers on individual projects can be a problem for the crowdfunding industry as a whole. “If someone feels burned,” he said, “they probably won’t come back.”
This may be the case with Doss and Visconti, who both say their experiences with the Joshua Tree bubble hotel have made them more cautious about backing crowdfunded projects in the future.
“I wouldn’t recommend it because it didn’t work for me,” said Visconti. “It is risky. You don’t have a warranty.”
“That’s something people might want to think about,” he said.
James B. Cutchin covers business in the Coachella Valley. Reach him at james.cutchin@desertsun.com.
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Source : USAToday
