When then-president of Marriott Hotels Fred Malek brought Lee Pillsbury into the senior executive ranks in the early ‘80s, Pillsbury was general manager of the Lincolnshire Hotel in Illinois. “He not only had a really strong record as a general manager but had exemplified creative change and innovation in his work,” explains Malek, chairman of Thayer Lodging Group, a Brookfield Company.
Pillsbury became Marriott’s SVP for strategy and planning, and was soon promoted to an EVP. Under Malek’s leadership, Pillsbury played an integral role in launching a number of Marriott initiatives, such as the company’s first awards program for frequent guests and its own lucrative timeshare business.
During this period of innovation, Malek says they learned that guests wanted a hassle-free stay more than anything else. “We’re the ones who originated sliding the bill under the door at 3 in the morning, so you don’t have to bother to stand in line and check out like you used to,” Malek describes. Marriott’s preference among frequent business travelers went from fourth, when Malek started the job, to No. 1.
These successes laid the groundwork for Malek and Pillsbury to team up in 1989 to establish the Thayer Lodging Group. The REIT was formed after Pillsbury approached Malek with an opportunity to purchase the Annapolis Hilton. “We bought the hotel, and then I went out and raised some equity capital for a hotel fund, which was hard because hotels had a very bad image at that point,” Malek says. “They were at the low point of the real estate cycle, so it was a contrarian play.”
So Thayer focused its investments primarily on underperforming hotels. “We thought we had the ability to sharply increase the earnings over a short period of time through either capital improvements or other improvements in the hotels, market segment improvements, and change of brands, flags,” Malek says.
To date, the REIT has completed 49 hotel investments with a total acquisition cost of approximately $3.5 billion. Since being bought in early 2014, Thayer invests in hotels with the backing of the Brookfield Property Group. Thayer’s funds currently own a portfolio of 13 hotels. Through its joint venture in Interstate Hotels & Resorts, Thayer has ownership interests in 34 additional hotels.
Thayer gravitates mostly toward full-service properties. “We felt that in limited service, you were just kind of riding the wave of the economy,” Malek says. “With full service, there were many more levers to pull to garner improvements, allowing us to build a much more complex business.”
Earlier this year, Thayer Lodging launched its seventh hotel real estate fund.