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Eyeing Expansion

McNeill Hotel Company Looks To Grow Portfolio Following Infusion Of Capital

Wednesday, July 25, 2018
Dennis Nessler
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With a leadership team well versed in building hotel portfolios and a substantial amount of capital at the ready, McNeill Hotel Company is well positioned for expansion within the next few years.

Founded in 2014 by managing partner and CEO Phillip McNeill, Jr., the Germantown, TN-based company has already grown its management portfolio to some 17 properties through a mix of new development, acquisitions and third-party management deals. Underscoring its plans to grow its hotel collection, the company recently raised roughly $150 million in capital from an institutional partner.

CFO Chris Ropko—who earlier this year joined the company’s executive ranks, which include McNeill Jr. and President and COO Mark Ricketts—noted the management trio has high expectations. “We all kind of conceptually feel like doubling our portfolio size over the next 36 months is absolutely reasonable,” he said.

McNeill and Ricketts worked together previously at Equity Inns, a Germantown, TN-based REIT, as EVP and VP, asset management, respectively. McNeill helped grow the company from 8 properties to 138 hotels before its real estate fund was sold to Goldman Sachs in 2007. It was through that deal that the two executives were introduced to Ropko, who was part of the team at Goldman Sachs that took Equity Inns private. Ropko’s most recent position was as managing director at RobertDouglas, a hospitality-focused banking firm where he was responsible for structuring and raising debt and equity capital for lodging and specialty leisure properties.

Ropko elaborated on McNeill’s approach to bolstering its portfolio through acquisitions. “We want to be thoughtful and we want to be methodical about going out and deploying our capital. At the same time we don’t want to sit on our hands when we see the opportunities that we deem check all of our boxes and meet all of our criteria. We’re not going to be shy about transacting and trying to get a deal done,” he said.

Specializing in premium-branded, select-service properties, the company’s sweet spot has been in secondary and tertiary markets with strong demand generators, such as universities, regional hospitals or drive-to destinations. “That’s where we thrive and do well,” said Ropko.

“We’ll have that amount of new dry powder, if you will, to go out and make new acquisitions, but I think the thesis is still the same. It’s business as usual in the sense that you’ll probably never see us with a presence in top 5 urban infill locations,” he said, specifically citing markets like New York, San Francisco and Los Angeles as examples.

The company—which got its start with a Residence Inn in West Virginia in 2014—last summer expanded to the mountain states by completing a portfolio deal acquiring three hotels. The properties included the 110-room Homewood Suites in Boise, ID; the 107-room Hilton Garden Inn in Twin Falls, ID; the and 106-room Hampton Inn and Suites in Salt Lake City, West Jordan, UT.

McNeill also has a Homewood Suites in Athens, GA—which is slated to open in October—currently under development.

Ricketts, meanwhile, pointed to the company’s culture as a point of differentiation from other management companies. “We feel that the culture is what sets us apart. We have the mantra of ‘people serving people’ and it kind of starts from the top and moves down,” he said.

Ricketts described the company as a “strong corporate citizen” and noted it looks to match the charitable efforts of its properties either in terms of dollars or hours. In addition, the company offers time off for employees to volunteer.

“We’re involved in the community, we try to put our money where our mouth is. We think it starts there and the properties take a very grass-roots approach. They’re very involved with the community and I think that’s what given us success,” he said.

As an example, in May the company’s Fairfield Inn & Suites in Destin, FL, received Marriott International’s Bruce Reed Rally to Serve Award in recognition of its community contributions.

In addition to its local efforts, Ricketts emphasized the company’s people as a critical component of its success.

“We also believe in promotion from within. We definitely believe the associates are our greatest asset so we do spend a lot of money on training and we have a monthly newsletter. Recognition is huge,” he said.

Ricketts continued, “we have various incentives that are out focusing on what we call the balanced scorecard. We’re looking at guest satisfaction. We’re looking at revenues and profitability. We’re looking at brand satisfaction and I think in doing so we have a lot of committed people. We have low turnover, particularly from our general managers.”

Ropko offered his perspective having joined the company some three months ago.
“Phil and Mark are probably two of the most honest and trustworthy people that I’ve ever dealt with in my career and that whole kind of philosophy and mindset certainly permeates down through the organization. From the vp, revenue management to the hourly part-time housekeeper, I think everybody feels like a team member under their purview. That level of integrity and partnership really helps up thrive from an operational perspective and set ourselves apart,” he stated.

From a performance standpoint, Ricketts noted the company’s portfolio has seen RevPAR growth in the neighborhood of 5 percent, which is above the industry average. He attributed much of that growth to three or four markets as well as some of its newer assets.

As an example, he noted the Hampton Inn & Suites Memphis/Germantown—an upscale custom product which opened last April and is part of a master development located just around the corner from the company’s corporate office— has been a top performer.

Ricketts framed the current third-party management landscape while touting the company’s ability to drive local performance and compete acknowledging “there are fewer great operators today than in the past.”

He concluded, “It’s great that we have the $150 million to go out and grow. We can definitely grow in size with money, but we can’t grow in greatness. Just because you have money doesn’t make you great. So we’re not going to be 850 [hotels] or we’re not going to be 400 [hotels], but we can create our own little niche and we think that’s with quality, communication and nimbleness."

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Dennis Nessler    Dennis Nessler
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