Main Street Talks, a panel held on March 17—the second day of this year’s Hunter Conference—convened leading owners and developers to share insights and strategies that can help their colleagues navigate an environment of rising pressure on profit margins and headwinds to development. Moderated by Teague Hunter, president and chief executive officer, Hunter Advisors, the panel consisted of Alpesh Patel, CEO, Kana Hotel Group; Bo Patel, COO, Coury Hospitality; Mitch Patel, founder and CEO, Vision Hospitality Group; and Azim Saju, CEO, Ark Holdings.
From an operational standpoint, there are “so many variables” that can make the difference between mediocrity and success in hotel performance, observed Mitch Patel. “But what I love about this industry [is that] there are so many variables. So, there are so many levers that you could pull—unlike office, retail, multifamily, and industrial [sectors].” One of the key levers that the panelists focused on is human capital.
Putting People First
“It’s pretty simple. It’s a people-serving-people business,” noted Saju. “So first and foremost, every single day, we take care of our people, and it has to start with me.” Mitch Patel echoed that imperative. “This is a service business, a people business that’s layered on top of the real estate,” he said. “My friends who are [on] Wall Street often tend to forget that this is a people business. So, what does the culture look like in your organization—your associate engagement?”
Indispensable to building high-performing teams are great leaders who can inspire associates, said Saju. “A great leader should build that admiration and respect from the team. And if you’re putting deposits in that emotional register, it’s amazing what kind of withdrawals you get back from your team. When you take care of your team, they’re highly engaged, happy, and motivated, especially in this world … where every single guest feedback is [practically] going to be announced to the world. It’s just so critical that you get that piece right and take care of your team.”
That approach breeds employee longevity, especially when coupled with the robust career advancement opportunities that hospitality offers. “Where [else] can you have opportunities where the housekeeper can become executive housekeeper and an assistant manager general manager in a very short time frame?” Mitch Patel pointed out. “We just had our leadership conference, and the General Manager of the Year was a housekeeper who joined our company in 2017.” Another poignant example came from Alpesh Patel: “One of our flagship hotels, an urban Embassy Suites, is a very high-volume hotel that’s ranking in the top 5 percent of the brand in terms of guest satisfaction scores. The general manager [at the hotel] was our breakfast hostess at a small roadside Hampton Inn about five years ago. That just exemplifies the beauty of this industry.” Bo Patel added that four of his first-time general managers could relate to the frontline employees at Coury Hospitality on a different level “because they’ve walked in those shoes recently versus 10 years ago.”
Panelists also advocated more transparency with associates about business performance, as it’s important for them to realize they have a stake in the company. “The P&L … impacts their long-term growth and career opportunities, even housekeepers, and we try to really make an effort to educate them on what is GOP and why it matters,” said Saju. And when business performance is strong, it’s important to reward the team’s performance, which works as an incentive, Bo Patel added.
The Entrepreneurial Spirit
On the investment and development side, panelists acknowledged the current environment is challenging, with a lot of “noise in the marketplace.” As a result, “there are so many people that are just putting their heads in the sand and saying, ‘I want to completely get out of this business.’ … But we leaned in. We have about 89 hotels, and we developed 14 hotels from 2011 to 2014. Those are some of the best hotels in our portfolio today,” said Mitch Patel.
While construction costs remain high, he noted that they are tapering. “There’s a little bit more clarity now than two to three years ago. … We have a much better idea today of what it’s going to cost with construction,” he said. And with the industry at the lowest number of hotel rooms under construction in terms of percentage of the total pipeline since 2011, “contractors and subcontractors that were not calling us about three or four years ago … are calling us today,” said Mitch Patel. “And so, they’re hungry; they’re sharpening their pencils. So, you’ve got to believe in where it’s going a couple of years from now.”
While it takes courage and conviction to launch new hotel projects in the present climate, those qualities distinguish many successful developers. “The risk in our business is very real. I think Wall Street’s job, at least in my eyes, is to assess that risk. But ultimately, it’s about the entrepreneurial spirit,” Saju maintained. “It’s about the conviction you have in the deal. And if there was no risk, there’d be no reward. So, you have to take the risk. The risk must be calculated, but you’ve got to take your swings and then bet on yourself as an entrepreneur to figure it out. Bet on your culture, bet on your ops team. But that entrepreneurial spirit … must continue to prevail because we bet on ourselves.”
