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Flexibility A Key Factor

By Dennis Nessler | September 3, 2020

Leading hotel owner/operator executives stressed that location and the experience offered are the most critical factors for any property to succeed in the current climate, but they also maintained the added flexibility and ability to shift strategies quickly can give independents a leg up in this challenging environment.

The industry leaders weighed in during BITAC Independent Virtual Connect 2020 in a panel session entitled “President/CEO Perspective: Owner/Operators Dissect Key Independent Issues.”

Daniel del Olmo, president, Sage Hotel Management, noted that the company’s independent properties have recently outperformed relative to its branded portfolio in terms of RevPAR index.

“A lot of that we think is attributed to the fact that you’re attracting a guest that is on a leisure occasion and they’re looking for experiences, especially now. They’re craving that special detail and special occasion that I think independents can deliver,” he said.

Rick Takach, chairman/CEO, Vesta Hospitality, further reinforced the point in discussing the company’s independent portfolio.

“The last four weeks we have run at least a 60-point premium over our branded competitors. The interesting thing is not only are we running very high occupancies, but our rates are up 50 to 60 dollars over last year. If it’s a leisure destination and you have the right product in the right destination things are going pretty well right now,” he said.

Chris Green, president/CEO, Chesapeake Hospitality, described it as a “really level playing field” between branded properties and independents.

“It’s less about the brand and more about the offering you have in this current environment. The segments that are traveling are really kind of brand agnostic. They want a good room and they have a specific purpose they need that room for,” he said.

Del Olmo further noted the company put in place caretaker teams for all of its independent properties while emphasizing the importance of having key personnel cross departments and take on a number of duties from the valet to the front desk.

“Today that’s sort of the norm. I think as an independent you have the freedom and the flexibility to do that. What I’ve found in some cases brands just lag because the systems that they have to operate in are so large. Some of the decisions that we made immediately as of day one just took longer for the brands to react to. I would say that the main advantage is that ultimately as independents the destiny truly is in your own hands. If you have the capability to act swiftly and you can rely on teams that can be across the board and can do multiple things across the various departments, I think that’s helpful,” he said, adding that the brands have managed to catch up on many of these strategies.

Mehul Patel, chairman/CEO, NewcrestImage, meanwhile, acknowledged that brand support has been hard to come by in the wake of massive layoffs and furloughs.

“In the last six months our team has tried to reach out and the brands are not there to provide [help] because they don’t have any staff. They did provide relief with standards and they were also helping with fees. The brand was there as a partner but at the end of the day they were not there to police [things] or to provide us support mentally,” he said, later adding “they provided as much support as they could based on the resources they had available.”

When it comes to asset values, while Green acknowledged the “independent assets were rapidly climbing as far as per key value and cap rates over the past several years” he noted it’s more about the individual asset now.

“Hotels are inherently a long-term investment. Primary locations with great attractions, whether branded or independent, are going to still be highly sought after,” he said.

Takach noted that independents have made considerable progress from a financing perspective. “It seems like there’s confidence from the lending community and investment community in independents more than there has been. Depending on the asset, the value can sometimes be greater than a branded hotel, but it’s a pretty equal playing field,” he noted.

The panelists concluded by talking about the most surprising aspects of operating hotels during the past several months in the wake of the coronavirus pandemic.

Del Olmo referred back to March when the company started to track the virus and do some scenario planning.

“When the team came to me and said ‘we probably have to start planning for zero occupancy for a while’ that was something I never heard in my entire career. Thankfully, we’re not in that environment [anymore] and I hope that we never go back there. That’s certainly something I wasn’t expecting across my entire career,” he said.

“For us with all the meeting and event space we have it’s looking at mothballing major parts of large city-center hotels that have 18,000 or 25,000 square feet of meeting space. It’s simply going unused. Who could have ever imagined major huge city-center hotels having empty banquet space for 3-6 months and maybe longer?” said Green.

Patel and Takach both focused on the impact of layoffs.

“The most surprising thing when you look at our industry is shutting down worldwide. I think of companies like Marriott and Hilton and the massive layoffs they had. Obviously, everybody says the same thing; it’s pretty surprising. But the most difficult thing was laying off almost 90 percent of our workers,” said Takach.

“The hardest thing was listening to our team say we had to shut down 80 percent of our portfolio. That was just a heart breaker and it was just hard to comprehend and hard to understand. How could we do that? Closing a hotel, that’s one thing but how are we going to take care of our people? That was the biggest thing on our mind,” Patel commented.

ALSO WATCH: Operational Outlook: How to Manage Hotels in the New Normal

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Dennis Nessler
Editor-in-Chief

Dennis Nessler is Editor-in-Chief of Hotel Interactive, parent company of Hotel Community Forum. Nessler brings more than 28 years of editorial experience to his position, including some 17 years in the hospitality industry. As part of his duties, Nessler not only covers the industry editorially but moderates various high-level panel sessions at hospitality events and frequently conducts one-on-one interviews with C-level executives.


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