FAIRFIELD, NJ -- The Paramount Hotel Group, the newest player in the hotel management arena, recently landed its first management contract through a deal with Dallas-based Olympus Real Estate Corp. Paramount will retain a percentage of ownership in 27 Chalet Susse hotels that Olympus acquired last month and re-position the properties through interior and exterior renovations.
The agreement included a “significant” capital investment by Paramount, which, according to CEO David Simon, plans to enter into franchise agreements with several chains and put national flags on the properties.
“We will look to reflag these hotels as Holiday Inn Expresses, Courtyards, Comfort Inns, Fairfield Inns…these type of brands,” he said.
Founded in 1967, Chalet Susse is currently the largest company-owned, limited-service lodging chain in New England, with properties in Connecticut, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island and Vermont. As a result of the deal, Olympus owns a total of 34 hotels, as well as the Susse Chalet, Grand Chalet and Chalet Savers names.
Prior to the acquisition, the properties were running low-60% occupancies and charging mid-$50 room rates. According to Simon, they were performing below the competitive set and “need a significant amount of capital to properly position them in the market. On the operations end, I think there is an upside,” said Simon, “but the major problem is in the capital.”
He explained that the acquisition was attractive to Paramount because the hotels are located in the Northeast/Mid-Atlantic market and the company, which is just under six-months-old, plans to grow within that sector. Over the next year-and-a-half, Paramount will to build three to four upscale limited-service hotels and also plans to manage several other full- and limited-service properties. Simon pointed out that its interests are not limited strictly to management.
“We would like to invest in most of, if not all of the properties we end up managing,” Simon said. “We don’t necessarily have to own a big piece, but we would like to have some equity in them.”
Although Paramount’s long-term plan is to make most of its money in development and ownership, it expects to generate most of its revenue over the next six months from management and construction. While the Northeast is a high-barrier-to-entry market, the company is optimistic about establishing a foothold in the region, given the experience of its executive team.
Its senior management roster is comprised of hospitality players who have years of experience and share a common denominator -- former employment at Prime Hospitality. In addition to Simon, ex-CEO of Prime, Paramount principals include President Ethan Kramer, former Prime Senior Vice President; Senior Vice President of Construction Stephen Siegel, who handled all of Prime’s capital improvements, construction and renovations; and Senior Vice President of Operations Peter Marino, who was in charge of the operations of Prime’s hotel portfolio and has more than 20 years of hospitality experience.
Paramount recently signed a contract to buy a piece of land in Alexandria, VA on which it will develop a Courtyard property, and is currently looking at sites in PA, NJ and Long Island.
