The hotel industry wants Sam Leccima. The experienced real estate developer recently launched Leccima Hospitality Trust, a real estate fund that aims to buy as much as $300 million in hotel product in the next few years. Leccima is also an African-American, one of the groups of minorities many U.S. hotel chains are working feverishly to attract as owners, investors and franchisees.
“When I first looked at the business, I was shocked at the dearth of African-American ownership in the hotel industry,” says Leccima. “If you take away Bob Johnson's portfolio, it's less than 100 properties, or about one percent of all hotels in the country. Yet, as consumers African-Americans spend more than $40 billion annually in hotels.”
Hotel companies have recognized this imbalance, and nearly every chain has a proactive strategy to attract African-Americans, along with Hispanics, Native Americans and women, as investors, owners and franchisees.
“It's not a charity exercise or a market-share exercise,” says Jim Freeman, vice president-business development at Cendant Hotels. “Rather, we view the process as a market expansion strategy.”
Cendant is currently formulating a 15-step plan to expand its base of minority franchisees. The goal of the Cendant initiative, says Freeman, is to develop both in-house solutions and third-party relationships to overcome the challenges to minority ownership of hotels, such as management.
SUCCESS BREEDS SUCCESS
For the most part, the chains look for potential minority franchisees who are already successful in other businesses.
“We always want to attract winners to the InterContinental Hotels Group family,” says Roslyn Dickerson, the firm's senior VP, diversity, in the Americas. “We look for minority investors who have proven themselves in business, perhaps but not always in other franchised businesses, such as fast food or auto dealerships.”
As example, IHG recently signed franchise agreements for two hotels with The Roberts Group, a St. Louis-based $650-million firm operated by African-American brothers Michael and Steven Roberts.
The chains use a variety of approaches to attract minority franchisees to their brands. Often, it's a combination of financial incentives, education and mentoring. While some companies shy away from across-the-board monetary incentives, others use the strategy in a tactical way to promote specific brands.
“While we'll provide dollar incentives on specific one-off deals, we don't believe in throwing money at this issue,” says Bill Fortier, Hilton's senior VP of franchise development. The company emphasizes educating potential minority owners on the basics of the business and what it takes to be successful. “After all, there is a huge minority group that owns many of our properties for whom we didn't give any incentives.”
Choice Hotels has a robust financial incentive program, along with education and networking opportunities for minority franchisees. The company has 40 properties open or under development that are majority owned by African-Americans or Hispanics.
For qualified minority Sleep Inn franchisees, Choice offers a generous incentive package: reimbursement of costs for a feasibility study, a 50-percent discount on affiliation fees, a forgivable loan for some hotel expenses, a subsidy to cover part of the first-year cost of a management company and a copy of the chain's Profit Manager software.
“This kind of incentive combats two barriers — lack of experience and lack of capital — faced by many minority entrepreneurs,” says Brian Parker, Choice's vice president of emerging markets and new business development. “Sleep Inn is a good point of entry for new franchisees since a new-construction brand offers a lot of advantages for developers.”
Marriott International has one of the oldest and most far-reaching programs to attract owners from underrepresented groups. The company also has strong diversity programs in human resources and procurement.
The company has an ambitious plan to increase the number of properties owned by women or ethnic minorities from 300 currently to 500 by 2010. Backed by strong management and board of directors' support, point person Norm Jenkins has created a multi-faceted plan to reach the goal.
“We look to partner with seasoned and experienced minority business people,” says Jenkins, who is senior VP of North American development. “Access to capital is the price of admission, and while it's great if they have real estate experience, it's not a requirement.”
The company offers a day-and-a-half educational session for potential minority franchisees to explain the nuts and bolts of hotel ownership — everything from feasibility and costs to operations and marketing. At the seminar, several existing minority Marriott franchisees tell their stories of success.
Marriott also provides a variety of financial incentives, depending on the parameters of each deal. In some cases, the company will waive or discount fees; for key projects, Marriott will consider putting equity in projects.
“We try to treat each deal separately,” says Jenkins. “This kind of program can't be meaningful if it's structured as one-size-fits-all.”
Accor North America believes in mentorship as a way to increase its share of minority owners. Under the chain's Ambassador Program, Accor provides an on-site corporate manager to train a franchisee for several years.
“Many minority entrepreneurs have been very successful in other businesses, such as fast food and others,” says Dean Savas, Accor's senior VP of franchising. “But hotels are a much larger investment, and some lenders are nervous about lending to franchisees who don't have a lot of hospitality experience. The Ambassador Program bridges that gap and gives lenders some comfort.”
Accor recently signed its first contract through the Ambassador Program with Carl Manning, an African-American businessman who will develop a Motel 6 in South Carolina.
Through his hospitality real estate fund, Sam Leccima hopes to draw a pool of high-net-worth African-Americans as investors. He says many will come from the sports and entertainment business. He plans to raise $100 million in four stages.
He intends to acquire and later develop a series of limited-service properties, initially in the Atlanta area and throughout the Southeast.
“While limited service may not be the most glamorous segment of the business, it's the industry's sweet spot and has the lowest barriers to entry,” says Leccima in explaining his investment strategy.
Reprints and Licensing
© 2014 Penton Media Inc.
Acceptable Use Policy blog comments powered by Disqus
Enter a City:
Select a State:
Select a Category: