Now in its second quarter-century of business, The Hotel Group has emerged from self-described "accidental hotelier" to become one of the industry's top lodging companies. While the Seattle-based firm is a leading management company (it ranks number 43 on Lodging Hospitality's list of Top Management Companies on page 28), it is really a triple threat, excelling as owner and asset manager as well as third-party manager.

The company's longevity, growth and success can be pegged to what CEO Doug Dreher calls "a combination of people and product." In an industry where job-hopping is more the norm than an oddity, The Hotel Group has been able to retain a cadre of key management and operations personnel, many of whom have been with the company for decades.

"We believe we have the best group of managers and associates in the business. We have some really smart, talented people whose hard work has enabled us to gain market share even in a difficult environment," says Dreher. "It's that kind of corporate culture and indefatigable spirit that has mitigated the effects of the downturn to the maximum extent possible."

Dreher joined the company in 1989 as a general manager and quickly rose through a variety of property-level and corporate positions before being named CEO last summer. Lara Latture, Dreher's right-hand person and executive vice president, is a 12-year veteran. The firm's two other principals have similar backgrounds: CFO Randy Meyer started with the company 22 years ago as a rooms division manager at a Hilton in California. Vice President Rob Lee has worked in the company since his high school days.

Meyer believes his extensive experience in THG operations before moving to the financial side of the company is a distinct advantage. "I'm able to look at what happens at our properties through two sets of eyes," says Meyer. "While from an investors' point of view, it's the financial statements that are our ultimate report card, the business is also about serving our guests and putting heads in beds. I'm able to work more closely with the people in the field because I've walked in their shoes."

The longevity among THG officers reaches further down the executive ranks: The IT director has been with the company for 17 years, the human resources director 15 years and a regional controller 14 years.

Formulas for Success
A strong component of the company's culture is homage to work/life balance for its employees, managers in particular. One small example that dates from the company's beginnings is a weeklong shutdown of the corporate office during the December holidays.

The company also allows and encourages some executives to work outside of the Seattle headquarters. When Latture was a rising star on the firm's operations team, she and her family decided to move back to her native Tennessee. Instead of losing her to another hotel company, THG allowed her to make Nashville her base of operations.

"Another example is Jake Fischer, our real estate director, who lives in Orange County, California," says Dreher. "It makes sense because we buy and operate nationally so he can travel wherever he needs to go easier than if he were in Seattle.

"But beyond that, it's a matter of trust. We have a number of working mothers on our team, including Lara, and at times they need to pay attention to family matters," he says. "We offer them the flexibility to balance work and their lives because we know they're going to get the job done."

THG's multi-disclipline strategy is another key advantage it has in the marketplace, believes VP Lee. "We take a close hands-on approach with our clients to give them a sense of order while maximizing their investments," he says. "And unlike with some large management firms, owners who hire us don't get lost in the shuffle."

Accidental Hoteliers
The company formed in 1984 when founder and current chairman Ed Lee acquired four management companies as a byproduct of an amicable split with a business partner.

"It wasn't by design, but The Hotel Group began its life as a third-party management company," says Dreher. "Throughout the 1980s we grew through traditional management contract work and as the operator of lender-owned properties and new-build hotels developed by partners. We also became one of the RTC's (Resolution Trust Corp.) largest hotel contractors, with two portfolios of assets worth $460 million."

The company's watershed moment came in 1993 when it purchased a Comfort Inn in El Paso, TX that it sold a few years ago.

"During our RTC experience, we saw a lot of properties being sold at 10 cents a dollar, so we thought it would make sense to get on the ownership side of the business," says Dreher. "We didn't have a lot of capital, but we were able to leverage what we had and joined with a number of partners to buy some properties."

Several other milestones occurred in 1998. That year, THG linked with A&A Construction & Development, a Spokane, WA-based hotel builder. The Hotel Group assumed management of A&A six existing properties and has managed its lodging portfolio since. That same year, THG bought a Holiday Inn in Galveston, TX that became key to the company's future for several reasons. Latture was director of sales for the property and, thus, her career at THG was launched. The company was so adept at operating the hotel it eventually sold it at a 76-percent internal rate of return, its best investment performance to date.

"Perhaps more importantly, we were able to build our experience and track record in Galveston and in the other properties we bought to enable us to start our first opportunity fund in 2002," says Dreher. The investment fund's first purchase was a distressed Hilton in Tennessee on which it was later able to realize a 54-percent return on investment. "We're now on our fourth fund, and we've grown from nine managed and owned properties at the end of 1990s to 26 today. Clearly, this century has been very good for us."

Coping With Recession
With all its success and momentum, THG has had to wrestle with the realities of the recent and ongoing economic recession and industry downturn. And like many other hotel companies, it had to tighten its belts, shift marketing dollars and reduce staff.

"We had to make some really tough cuts last year and if not dig into everyone's pockets, then everyone's lifestyle to an extent," says Latture. "We sat down with everyone in the company in groups as small as five or as large as 65 to tell them we had to make changes and cuts. It wasn't all about layoffs, either. In some cases, we had to eliminate things like hot lunches or dry cleaning."

Marketing was another area in which the company made adjustments, moving away from traditional methods to more cutting-edge and less-expensive strategies.

"I've spent more time talking about social media in the last three months than I ever could have anticipated," says Latture. "We have a Facebook page and we're tweeting, and while social media is kind of a free venue you must make a commitment to it. It's a living, breathing entity that someone has to manage every day."

The company still had the resources to move forward during the past few years. While most of the projects were underway before the downturn hit, THG was able to complete nearly $40 million of renovations in the last couple years, including $15 million of work on its Crowne Plaza in Billings, MT and $15 million to redo and rebrand a downtown Cleveland hotel as a Doubletree. That project and a similar rebranding of the Doubletree Arctic Club in Seattle earned THG Developer of the Year honors from Hilton Hotels. The firm also opened two managed Crowne Plazas in 2009 in Kansas City, KS and Anchorage, AK. Finally, two Hilton Garden Inns, one in Washington and one in Oregon, are under construction and due to open this year.

Brighter Future
Now that business is improving (RevPAR is up 12 percent this year, and EBITDA has climbed 50 percent), the executive team can reflect on lessons it learned from the hard times.

"The biggest lesson is to remember to treat the good times as though the bad times are on the horizon," says Lee. "We've got to not overextend ourselves or get too excited about increases in our scope. Of course, it's hard to put some of these things into practice once good times return."

Dreher believes THG is well-positioned to exploit opportunities—both on the management and ownership sides of the business—as the industry eases out of its funk. "We should be able to refine our portfolio by being smart in what we buy and be mindful of our risk," he says. "As the cycle turns, it will be smart of us to be a little more conservative."