Steve Marcus took over as CEO in 1988 for his father, Ben, the founder of the company.

New Leader, Same Values

With accounting and law degrees and a background in real estate like his father, Greg came back to the family business in 1992 and worked his way to president in 2008 and CEO last year.

Although Greg likes to joke he “came to the attention of senior management at an early age,” he says in all seriousness it wasn't a foregone conclusion he would return to the company. “There aren't great changes with me—he's still here,” Greg says of his father.

“I describe it as my hands are on the wheel, but his hands are on my shoulders. Which is OK—one of the reasons I came back was to work with my dad.”

The wheel is still pointed straight ahead, no matter the hands steering it. The gas pedal isn't depressed all the way, like maybe it was during the early days when Ben was growing the company from one single-screen theater.

What hasn't changed under any of the three Marcus leaders is the approach to taking care of both employees and guests, to thinking long term and building for the future and to maintaining a strong balance sheet.

“I'm not thinking about next quarter, I'm thinking about when my kid is going to be working here someday,” Greg says.

There's something to be said for stability, and it's a major reason employees like Peter Mortensen, the Pfister's chief concierge, has stuck with Marcus Corp. for so long. Mortensen spent 11 years at the Marc Plaza before coming to the Pfister in 1985 and has worked for Ben, Steve and now Greg. Both Mortensen and Ron, the dishwasher, are part of the company's 25-year associates club, which for many companies might be fairly exclusive but is pretty popular here, and includes a lifetime pass to Marcus Theatres properties and other annual parties and events.

“Employees here aren't just a number,” says Steve. Greg learned that lesson after leading the sale of the Baymont system (see sidebar on the bottom of this page) in 2004 when his dad was a “bee in my bonnet making sure everyone who wasn't going to have a job in the new organization would find something else.” The executive team reached out to local companies to tout former staff, even maintaining a list of who was eventually placed elsewhere. “He drove me crazy,” Greg recalls, “but he was right.”

“The last couple years are the biggest testament to why this is a great company,” says Otto, the president of Marcus Hotels and Resorts, who’s been with the company for 17 years. “When times are tough the family is here and they can look back on those 75 years.

“Greg is different than his dad and Steve was different than his dad. They're not exactly the same, but their values are.”

Room to Grow

The balance sheet, which is almost equal parts assets and liability, helps allow Marcus Corp. luxuries others haven't been afforded. In 2009, during the depths of the downturn, Marcus launched massive renovation projects at the Hilton Milwaukee City Center and the Grand Geneva Resort & Spa in Lake Geneva, WI, totaling $30 million.

“If we were another company, those things would have been put on ice,” says Otto. Today, with those renovations complete, the properties are two of the top performers in the portfolio, which on the whole has outperformed the upper-upscale segment according to first-quarter results and statistics from Smith Travel Research.

The balance sheet and a credit line of almost $125 million give Otto plenty of ammunition to grow the hotel division. A major focus is on adding more management contracts, but the capital can help there, too.

“Lots of companies are pure managers for hire,” Otto says. “But the strength of our balance sheet means we can also affect the economics a little if it helps a deal. Where someone else needs repositioning and a new manager, but is short on cash ... we can be a solution to those problems.”

Acquisitions are also a possibility, ideally in situations like the Pfister or Skirvin where the properties can be bought right and repositioned for success.

“We have to be mindful that in most of second-tier marketplaces there is a ceiling on RevPAR, particularly with average daily rate. Even with a premier property, like we have with the Pfister—our RevPAR penetration is enormous—there is a Milwaukee ceiling,” explains Otto. “The price of entry really is critical to ensure success.”

After two years of little transaction activity within the lodging industry, all three executives believe that will soon change. But don’t expect Marcus Corp. to be a bidder at every auction.

“We need to do a value add simply beyond buying a hotel,” Greg says. “Right now there will be a lot of auctions, but to simply buy because of the cycle, maybe, but in most cases the only way you distinguish yourself in an auction is by paying the most. I’m not sure if that makes a ton of sense for us.”

MARCUS' BUDGET IDEA

The Budgetel brand Steve Marcus created in 1974 is no longer part of Marcus Corp. His idea was to provide rooms at the quality of The Pfister, but without the additional cost and offerings like food and beverage and banquet space. His limited-service concept flourished until the segment was flooded with competitors like La Quinta, Fairfield Inn, Comfort Inn and Hampton Inn in the 1990s.

Marcus Corp. relaunched the Budgetel system as Baymont in the late 1990s to overcome the perception of being lower quality. Steve came up with the name as a way to let consumers know it was inexpensive, but with more quality competition, the cheaper sounding name became a detriment.

In 2004 the entire Baymont system—approximately 200 properties, about half franchised—was sold for $412 million to La Quinta, which converted most of the properties after being acquired by Blackstone. What’s left of Baymont now resides with Wyndham Worldwide.

“It was hard,” Steve says. “It was my baby. In limited service, it really became very commoditized and when that happens it becomes purely a marketing game.

“If I had to do it over again we would have franchised a lot earlier. It would have given us some critical mass that was missing when the bigger guys got into it. But I was worried about dilution of price and quality.”