The Evergreen Gang
For a number of months, I've been worried that the lodging industry was headed for a fall. Money is readily available — perhaps too available — to buy, build, renovate, reposition and flip hotels of all stripes and segments, as well as portfolios of properties. The problem, as I saw it, was that most of the hotshots controlling these large wads of cash were still in short pants when the industry went through its last couple of cyclical roller-coaster rides. Many of these financial types are just too young to understand the occasional need for prudence and restraint.
For the most part, I've changed my mind about the short- to medium-term outlook for the business. Sure, some of these financial cowboys may make a mess or two once the cycle turns downward, but there are many experienced, seasoned and downright brilliant entrepreneurs and corporate executives in the business who know when to hold ‘em and know when to fold ‘em. You may be one of them. Read on to see if this sounds familiar.
One group I met at last month's Hilton Focused Service Owners Conference in Palm Springs call themselves the “evergreen gang” because of their collective belief that they have the guts, savvy and fortitude to still build and operate profitable hotels through most any kind of downturn. It's not arrogance on their part; it's merely the confidence that years of both experience and success brings.
The Hilton PR team convened a group of Hilton owners for the press to grill at a luncheon meeting during the conference. The six men on the panel included pure developers as well as owner/operators. One participant, Alnoor Gulamani, is Canadian. The rest are based in the U.S.
And while the talk during lunch naturally veered toward the merits of Hilton as a franchisor (not surprisingly, the owners were very complimentary), much of the discussion was a free-ranging conversation on the ins and outs of hotel development, construction and to a lesser extent, operations.
Rob Schaedle of Chartwell Hospitality, who calls himself a “yield-driven developer,” says he uses different construction techniques depending on location but always seeks to build what he calls “seven-day products,” hotels that can be busy both weekdays and weekends. It's nothing fancy; it's simple blocking and tackling, but it's what ultimately drives this business.
The cost of construction is a hot-button issue with these owners. Some, like Jeff Good of Good Hospitality Services, hedge their bets by operating their own construction companies. Others seek to generate complete construction drawings before they seek bids. The days of simultaneous design and build are gone, say these savvy developers.
Beyond drawings, however, the key to being competitive developers is what Good calls “knowledge of sequencing. It's what hotel construction is really all about,” he told the group. “It's freezer to oven to table. It's knowing when to order what equipment or furnishings so everything comes together in the most efficient way.”
This kind of knowledge isn't found in textbooks at Cornell or certainly in the boardrooms of private equity firms. It's knowhow that's often passed from generation to generation but mostly learned in the field, often through trial and error.
As Tom Arnot of Beachwood Development said, “This is what gives us the competitive edge over all the new people coming into the business.”
All told, the sessions made me feel good again about the future of our business.
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