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Sabatier Settling in as Destination President

Q&A with Destination Hotels & Resorts President and Chief Operating Officer

Jamie Sabatier left the branded world and became the president and chief operating officer of Destination Hotels & Resorts in April, and he hasnít looked back. The 14-year Starwood Hotels & Resorts executive is now running one of the largest hotel management companies.

It seems like a stark contrast to his time with Starwood, but Sabatier says heís drawing from that experience to better create individual brands at Destinationís portfolio of 40 hotels and resorts. He also aims to grow the companyís third-party business with partners other than Destinationís parent company, Lowe Enterprises, Inc., and also focus on growth in urban locations away from the companyís traditional resort focus.

Sabatier recently chatted by phone to discuss his start with Destination and what he sees ahead.

How has the transition from Starwood to Destination gone?
Itís been a little over six months and itís gone very well. There are similarities with Starwood and obviously some differences. This company has been in business for 40 years, and has a lot of key people and strategies and a culture that has been developed and is in good shape. For me, itís more about fine-tuning and tweaking as opposed to making wholesale changes.

What are some of the similarities between the two, and how are you taking advantage of those?
The branding work we did for a multi-property brand is just as applicable for an individual property in really defining that asset. That applicability is one of the things Iíve tried to focus on: Making sure each property has a real brand identity, a real positioning that resonates with consumers and with meeting planners. Frankly, a lot of the positioning work and brand work I did at Starwood has come in great use to really define the independent nature of our assets.

What I like about where the world is going is thereís greater focus on authenticity, ó a greater focus on having a localized experience and weíre not constrained by a hard brand that requires specific standards. We can customize our properties to be most successful for our owners in their local markets.

Is it easier to be an independent today?
Ten years ago, if someone was looking to go on a vacation or put on a meeting, the information and ability to get that information was much more limited than today. Independent properties really benefit if theyíre delivering on customer experience and promise. Anyone in the world can see on a very real time basis how youíre doing. It actually gives a lot more opportunities for independent properties. Where we are positioning ourselves is being able to provide that authentic experience and drive the top line, because we are so well positioned in the local marketplace.

Have you had the chance to visit all 40 of Destinationís properties yet and whatís been your takeaway?
Iíve seen about 95%. The quality of the properties has been great. The culture and engagement the associates have at the property level is really high, which you can see in guest satisfaction and associate satisfaction. You really see and feel it when you visit. We have a collection of very unique properties.

Where do you see opportunity?
We can continue to define each one of our properties even better, so thereís greater traction with our customers. The second is to continue to drive operating performance: Really basic blocking and tackling, which we do very well, but thereís always opportunity to do better. We have a very owner-centric perspective, but one of the things not known about us is half our properties are owned by third-party owners. We want to continue to grow, not just with Lowe Enterprises, but also with third parties.

The portfolio is about 50% owned versus third-party managed. Is there an optimal mix?
We donít have a hard and fast rule. Weíre going to be around a 50/50 mix, but weíre more focused on the quality of the opportunity and quality of the capital partner. Our growth will come from LEI, who we work with to help acquire hotel properties, as well as doing third-party management deals with REITs and others. Our mix has traditionally been more oriented to working with LEI and doing acquisitions with them and the capital theyíve raised, and going forward we are going to grow the third-party management business.

The Hotel Derek in Houston was the most recent addition. Are you looking to add more urban properties compared to Destinationís traditional resort focus?
When you look at the deals weíve done in the past 18 months, the focus has been urban properties and expanding that geographical footprint. We see significant runway in terms of our ability to grow into the major MSAs. Weíre also looking to expand beyond the U.S. There are plenty of growth opportunities in high-end cities and resort markets in the Caribbean and Mexico.

How did the portfolio perform this year?
Some of our resort properties in the mountains were impacted by a light snow season this year, but if you take that out of the equation, overall it performed well. Looking at industry RevPAR metrics, I think we performed a little bit ahead of the industry. Given that our portfolio is a little more biased toward resorts, and resorts have lagged urban properties from the performance standpoint, I feel very good about what weíve been able to accomplish in 2012 and are well positioned for 2013.

How is group business?
We started to see rate on the transient and leisure side start to move, especially with our urban assets, but also in the resorts some. On the group side, itís been more occupancy driven. Thereís a little less pricing power on the group side. Weíre certainly seeing more demand, which is good news, but pricing power is really a market-by-market discussion. But Iíd say itís not unlike other cycles, where demand has come back stronger than price with groups.

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