A Good Brand Citizen

Steve Van is understandably proud of his record as head of Prism Hotels, the company that Hilton recently named Developer of the Year for Hilton's rapidly reawakening Doubletree brand. Although Prism focuses on dependable brands like Hilton, Marriott, Radisson and Starwood, it's also involved with independents, like the Bishop's Lodge, a resort and spa in Santa Fe, NM. Prism prides itself in a multi-pronged approach to hotel management that finds favor among brands, owners and investors.

“Basically, we are a repositioning company,” says Van, who is Prism's president and chief executive officer. “We increase the value of the property by doing three things: our number-one strength, and what distinguishes us as a management company, is our direct sales culture. Number two would be remodeling and number three would be rebranding.”

With 30 hotels in its portfolio and clients spanning Apollo Real Estate Advisors, Credit Suisse First Boston, J.P. Morgan Chase & Co., and Washington Mutual, Prism Hotels has become a go-to management company. Prism, along with partners, owns five of those 30 hotels; Van says it's still easier to buy than to build.

“We don't buy anything unless we can manage it. We want to control our own destiny,” Van says. “Owners choose us over brands to manage hotels because they want an independent manager managing the brand. Hilton will want a Hilton flag but an independent company to manage it; many times, owners don't want the brand also managing the hotel because of a possibility of a conflict between what the brand wants and the owner wants.” For example, a brand may want to overstaff in order to boost quality scores, he says. But good management and effective employee motivation can achieve the same goal.

“We're experts in maximizing the brand for the owner, and the reason we've been so successful is what we do for owners,” says Van, who launched Dallas-based Prism in 1983. “Our value-added plan is to buy a hotel, change the brand, change the flag, and reposition it. We haven't sold any hotels yet, but we will eventually. We're in a five- to seven-year hold.”

Among Prism's recent acquisitions is the Plantation Inn and Golf Resort in Crystal River, FL. Plans call for nearly $7 million in capital improvements, including addition of 60 new guestrooms and 3,000 new square feet of meeting space. The resort boasts a 27-hole golf course, a full-service dive shop, and a marina.

Investors like REITs, venture capital funds and insurance companies analyze deals according to those five- to seven-year time frames. “To let the magic work, you've got to have time to buy a property, remodel it and reposition it,” Van says.

STRUCTURING THE MAGIC

Magic takes work, however, and Van makes sure Prism deploys it well. Among his company's tools:

  • A proprietary sales training course
  • Focus on the locale of the property
  • Staff engagement and empowerment.

“We believe we do better than anybody else because we take a bigger bite out of the local hotel market,” he says. “To do that, we have a proprietary direct sales training course and materials, and whenever we take over a hotel, we have both the director of sales and the general manager take the course.” Getting top property-level management involved delivers a crucial message: “Everybody in the company knows that selling the hotel and increasing market share is our number-one mission for the owner.”

That's the key reason Doubletree named Van and Prism Hotels Developer of the Year for 2005, citing his work with the Doubletree Hotel Memphis Downtown and the Doubletree Hotel Wilmington (Delaware) Downtown.

“We bought two hotels and turned them into Doubletrees, and they loved the remodeling we did,” Van says. The one in Memphis was a Radisson, the one in Wilmington a Wyndham.

“From our beginnings with the Doubletree Hotel Memphis Downtown, both parties came to the table with an open mind and a mutual willingness to collaborate and get out of the box, along with the passion to create a more contemporary, residential feel in today's hotels,” says Dave Horton, senior vice president, brand management, Doubletree Hotels.

“Because both of us were flexible and creative in our business decisions, we built upon ideas together, thereby creating more individuality and unique style in Prism's Doubletree hotel products.”

During the past six months, Prism has acquired two more hotels that it aims to convert to Doubletree: a 308-room Holiday Inn in suburban Columbus, OH and a 230-room Radisson in Richmond, VA. They will reopen as Doubletrees in next spring; their respective renovation costs are $9.3 million and $8.9 million.

“I really enjoy the relationship Doubletree has created with Steve Van and Prism, because our culture and style of doing business complements one another,” says Doubletree chief Horton. “We share an entrepreneurial approach to business, where both of us truly believe that flexibility and collaboration are the keys to success.”

After Prism assumes management duties, it drills down deep locally.

“We have the sales staff and general manager make sure they know all sources of business within a two- to five-mile radius. We then bring in our outside group from the corporate office and do our corporate sales blitz; we'll bring in five to 10 of our best sales people — we've got 2,500 employees and about 150 sales people scattered through the properties — to turbocharge the property by helping local sales staff.”

Often, local sales people are conditioned to marketing a tired property and have difficulty changing their mindset to promote a refreshed one. Because Prism upgrades the property, it's geared to charging a higher rate, which can pose an internal challenge: “Once it's remodeled,” Van says, “it's hard to get sales people to start asking for $150 a night instead of $90 a night.” Meanwhile, Prism retains control over online pricing. “In the Dallas office, we have Internet experts on hotel markets and they set the price,” he says. Prism Hotels has centralized revenue management, eliminating the bias that accompanies local revenue managers who may be psychologically tied to dated rates.

Enhancing the sales effort isn't the only way Prism beefs up the local effort. It also mounts intensive seminars that it calls “employee life cycles” in which staff is trained and learns about guest service and employee liability. One reason Prism is so successful is that it cuts down on lawsuit expenses, says Van.

“We save the owner lawsuit expenses,” says Van, a lawyer himself. “We protect the owner's assets through preventive maintenance and increase market share through these direct sales efforts.”

A GOOD TIME TO BUILD

While it's still cheaper to buy than to build, developers are doing fine, too, particularly in such good times — and particularly with new brands, like Starwood's aloft. Van's in the thick of that effort, which is just getting under way.

While W, aloft's big brother, will target larger, gateway markets, aloft will be in many smaller ones. Van says plans call for 500 alofts but far fewer Ws; already, 30 alofts are under development, with Prism involved in nine. One is under construction at Chicago's O'Hare Airport and Prism is seeking sites for others in Scottsdale, AZ and Tampa, FL. Besides site selection, Prism will provide development advice and construction advice, pre-opening and managing; the only thing it won't do is the actual building.

Prism also is involved with six other alofts in the Southeast, along with a Westin proposed for the Atlanta area. That Westin, a smaller property targeting high-end suburbs, will contain a residential component and will be built in Alpharetta as part of a high-end lifestyle center also featuring retail, according to Kevin Gallagher, Prism Hotels' vice president of business development.

On the Hilton front, Prism is spearheading a $57-million renovation of a 290-room Hilton in Baton Rouge. This full-service Hilton connects two formerly independent hotels and aims to be a magnet for the redevelopment of a downtown that essentially shut down in the ‘80s, Gallagher says. Prism will manage the Hilton for the Baton Rouge Area Foundation, the force behind the revitalization.

No wonder Van is upbeat on lodging; he's survived three cycles, “which is why I have no hair.

“It's all good news because every dynamic is in balance and harmony,” Van says. “There has been the largest three-year growth in RevPAR since 1981, and supply is still half of what it normally is. You've got huge demand growth, moderate supply growth and tons of capital to buy hotels, so everybody's happy. It's like somebody put something in the water at the New York hotel conference.

“If you can't make money during these times, get out of the hotel business.”

Visit www.LHonline.com for more information and related articles.

THE BIG IDEAS

Empower the locals. Get everybody on the same marketing page so local sales people can execute targeted Prism sales strategies.

Centralize revenue management. Retaining control of revenue management at the corporate level can minimize local bias when a refreshed property requires fresh marketing.

Strike when the market's hot. Prism buys hotels opportunistically, remodels them- — and gauges the right time to sell them.

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© 2014 Penton Media Inc.


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