With a sizable portfolio of properties already assembled in the U.S., Hotel Equities is targeting international locations—specifically north of the border—as the next area of opportunity for the company to grow its distribution.
The Atlanta-based owner/operator and developer made its initial foray into Canada last month assuming the management of two Marriott-branded hotels in Edmonton, Alberta. Armed with a proven track record of operating for the major brands in the U.S., Joe Reardon, SVP, business development and marketing, Hotel Equities, explained why the company identified potential in Canada.
“We saw Marriott and Hilton starting to take an aggressive approach to growing brands in the Canadian markets. We took a look at it and we spent about a year-and-a-half understanding [the market.] We had to figure out ‘is this an opportunity for us? And, if so, what would that look like?’” he said.
Fortunately for the company it looks like an opportunity for significant expansion. In addition to the two aforementioned properties, Reardon noted the company is currently “working on four new builds either in or around the Toronto area.” While deals have not been finalized on the four Marriott select-service hotels Reardon is hopeful that ground will be broken in the spring. He also added the company expects to open an office in Toronto by mid-year, which would likely include both operations and sales and marketing personnel at a minimum.
Reardon elaborated on the company’s expectations as it relates to Canada.
“We’re committed financially. Our strategy would be to have to 8 to 10 [hotels] locked in by the end of the year. We’re ready to continue our growth, but it is strategic. We’re not interested in taking on 20 this year. But we think that 8 to 10 mark by the end of year is very doable. Hence we want to set up an office in Toronto and literally have boots on the ground in Canada, which is important to us.”
Located in Alberta, the western region of Canada, the new Fairfield Inn & Suites by Marriott Edmonton North and the recently built TownePlace Suites by Marriott Edmonton South are owned by Iliyan Hospitality, Inc., and located some 20 minutes apart. The latter property is a few minutes from Edmonton International Airport, and provides easy access to South Edmonton Commons for upscale shopping, the Nisku Business Park and West Edmonton Mall. The hotel has an ample amount of meeting space, according to the company. The Fairfield Inn & Suites Edmonton North is near Rogers Place Arena and includes 861 square feet of event space and one of the only indoor water slides in Alberta.
Reardon talked about the company’s potential impact on the properties, both of which opened within the last two years. “We’re being asked to come in and really drive the top line and be efficient on cost control. We have a great partnership with the current owners,” he said. Reardon later added, “we’ve already seen some nice movement on the top line within just a couple of weeks and we certainly anticipate to continue to bring that down to the bottom line as well.”
Reardon pointed out that being named as one of Marriott’s preferred operators in Canada really opened the doors for the larger opportunity. “That was a huge feat that we accomplished; being invited to the dance, per se,” he added.
Reardon elaborated on how that brand experience is not as easy to find north of the border. “I think what management and owners are finding in the market is there’s not as many Marriott or Hilton brands in that area. So having a management company that understands how to navigate through those brands has been a challenge for some of the owners. I think that’s the value that we bring in,” he said.
Meanwhile, the company—which has more than 100 properties in the U.S.—recently restructured its vertical alignment to support both domestic and international growth. Reardon noted the company created five new regional teams representing various disciplines, including sales, revenue management, accounting and human resources. “It was important for us to make sure we had boots on the ground and alignment based on geography,” he said.
The realignment notwithstanding, Reardon did point out the company is keeping its full-service division intact. According to Reardon, the full-service side represents roughly 21 percent of the company’s overall portfolio in terms of key count and the company has designs on growing that ratio.
“That’s a continued focus for us. We’re really uber-focused on growing the mid-size, full-service boutique portfolio. We’ve got the players to do it. Everybody on our senior team has been in the full service, resort or conference center space and we like our continued growth in that area,” he said.
In terms of overall growth, the company has grown at an aggregate rate of roughly 25 percent over the last four to five years. Reardon estimated growth in 2018 will be in or around 30 percent, but noted that’s only part of the story for Hotel Equities.
“We’ve changed our mindset too; it’s not about hitting a milestone and being at 150 hotels. We’ve done a fantastic job of educating our existing owners and realigning ourselves to make sure that we’re committed to only deal in projects where we’re aligned with the owner. That’s when we serve ourselves and the ownership better,” he said.