Ocean House Assumes Management of Seaside Sister Property
Dual management produces synergies in marketing, staffing and guest amenities
Complement, not competition. That’s the best situation when two hotels serve the same basic market. The benefits are even greater when the same management company operates both properties, as it is with the Ocean House in Watch Hill, RI and its nearby and soon-to-open sister property, the Weekapaug Inn.
Ocean House Management, headed by President and Group Managing Director Daniel Hostettler, will also operate the new 31-unit Weekapaug Inn, which reopens in October following a $20-million renovation. Charles Royce, investment fund manager and owner of the Ocean House, is a partner in the new hotel.
While the two properties differ in look, style and levels of luxury, the combined management will yield benefits to both hotels, says Hostettler, who adds that the synergies will be both significant and subtle.
“We’ll be providing the management resources of the Ocean House, but the Weekapaug will be branded independently and maintain its own feel and look,” says Hostettler. “It’s more barefoot elegance and family oriented than the Ocean House.”
Shared resources will include sales and marketing, reservations, communications and most back-end operations, but the biggest advantage of the shared management, says Hostettler, is in staffing. “We’ll have the ability for staff to move back and forth between the two hotels. More importantly, it gives them the opportunity to grow with the company.”
As example, the assistant managing director of the Ocean House is now GM of the Weekapaug, Ocean House’s executive sous chef will be executive chef of the new hotel, and the assistant executive housekeeper moves into the top housekeeping job at the Weekapaug. The arrangement also enables the properties to expand their management roster. Since the two hotels share a human resources director, the Ocean House has been able to hire a full-time director of training.
“That’s a luxury we wouldn’t have been able to afford on our own,” says Hostettler. “But it’s affordable now that we have a sister property to share the burden.”
The partnership creates some economic advantages, as well. The Weekapaug’s 31 rooms, added to the Ocean House inventory, gives the sales team more than 90 rooms to market to corporate and social groups. The new hotel can serve as both an overflow property for the Ocean House, as well as a place for guests who can’t afford rates at the Ocean House, which in season are above $700 a night.
“This provides a way for us to drive our rate at the Ocean House while having a place to send guests who are a little more rate resistant,” he says, noting that the Weekapaug’s rate schedule is about $100 to $150 lower than the Ocean House. “And the Weekapaug realizes some great economies of scale. A 31-room hotel wouldn’t otherwise be able to have catering managers and sales executives and the strengths we have in accounting and public relations.”
Guests of both hotels benefit, too. A shuttle service ferries guests from one hotel to the other where they can sign for meals or the spa services at the Ocean House. The Weekapaug has a naturalist on staff to lead nature trips and kayak tours of the Quonochontaug Pond, which faces the hotel. The Ocean House, on the other hand, has a food forager that provides culinary education for guests of the hotel, as well as Weekapaug guests when the hotel opens.
The Ocean House and Weekapaug Inn share a similar history. Both hotels date back to the 19th century and for decades served as landmark summer resorts for generations of New Englanders. Both faded over time, closed and required massive renovations ($140 million to rebuild the Ocean House and $20 million to revive the Weekapaug) to become modern resorts that appeal to today’s travelers.
The Weekapaug project fell victim to the economic downturn of 2008. Ocean House owner Royce stepped in and bought 50% of the hotel and partnered with Langdon Wheeler, a hedge fund investment manager who lives near the hotel and assumed the role of managing partner of the project.
Calling himself a “serial renovator,” Wheeler and his wife have rehabbed 21 buildings together. “We really like to fix up old buildings and it’s something we’re good at,” says Wheeler. “The actual design and construction of the hotel is a skill I’m very familiar with. On the other hand, the operation of the inn is completely unfamiliar territory, which is why we turned to Daniel and Ocean House.”
Like Royce with the Ocean House, Wheeler embarked on the project as a personal gesture to the community with which he has fond memories. Despite the injection of historic tax credits into the financing package, Wheeler admits the project isn’t really a “rational investment decision. The value of the Weekapaug Inn as an income-producing property won’t be as much as Chuck and I put into it to get it going.”
Still, Wheeler is a businessman looking for long-term success with the hotel. He calls it a two-part problem.
“On one hand, the question is whether you can make it cash flow positive, which we’re confident we can do in a couple of years,” he says. “Then the question is whether it can produce an accounting profit. We think we can do that too, but that just provokes taxes and we’re not in any rush to get there.”
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