How Michelle Russo Built HotelAVE from the Ground Up

After leaving her job as a leisure analyst at Deutsche Banc, Michelle Russo started driving around New England in her Jetta, looking for small roadside hotels she could afford to buy. During her three years on Wall Street, Russo garnered significant capital markets experience and became very forward focused. But she felt 50,000 feet above the hotel industry, when she’d rather be closer to ground level.

Russo saved up enough money to live comfortably for a year while she figured out her next career move. Looking back, Russo realized she felt most fulfilled while doing in-house asset management for John Hancock. Although becoming a hotel owner sounded appealing initially, she shifted gears after imagining herself behind the front desk and making beds. Her hotel experience had been more institutional, working with bigger-box, higher-value properties. She recalls thinking, “How do I try to get a little of a lot versus a lot of a little?” And then two lucky things happened that sealed Russo’s fate as a small business owner.

Lee Pillsbury, CEO of Thayer Lodging Group, called Russo about a problem asset in his investment company’s portfolio. “They had exhausted their thought process, so he asked me to take a look,” Russo says. Shortly thereafter, broker Lou Plasencia, CEO of the Plasencia Group, introduced Russo to a number of clients who needed assistance improving their operations so they could sell their hotels for a higher value. “Those two men inadvertently launched my business without me knowing it,” she says. “All of a sudden, I said, ‘OK, I guess this is how we’re going to do it. We’ll just build our own track record and get to ownership that way.’”

Russo took the plunge and founded Hotel Asset Value Enhancement (hotelAVE) out of her Rhode Island-based home in 2003. As the company grew organically by word of mouth, Russo hired two employees and rented office space in a former daycare center. (“One of the toilets was only about 6 inches off the ground,” she recalls.) Starting an advisory practice didn’t require a lot of capital—Russo just needed enough money to buy computers and comfy chairs and make payroll.


Of course, hotelAVE’s payroll costs have risen significantly since its daycare-center days, now that the company has more than 25 employees and added satellites in New York City and Los Angeles, in addition to its home office in downtown Providence. With more than $4 billion in assets under management and advising on more than $4 billion of hotel real estate annually, hotelAVE has built a successful track record in asset management and institutional ownership. Save for a flat year in 2009, the company has been averaging 15 to 20 percent growth annually, Russo says. Last year, she hired a president to formalize hotelAVE’s growth and roll out a business plan, and a new CFO came on board in July. Russo also plans to add an office in Europe in 2016.

Now that hotelAVE has become an established player, clients occasionally invite the company to co-invest in projects. Most recently, hotelAVE invested a bit of equity into The Gregory, a boutique hotel in New York City’s Fashion District that opened in July, and The Renwick, its sibling property that’s launching this fall in Midtown. Interstate Hotels & Resorts, hotelAVE, and Meadow Partners collaborated on both repositioning projects.

Despite its steady growth, hotelAVE maintains a low average ratio of 1.7 hotels per asset manager, Russo says. These managers conduct rigorous market and data analysis to identify new opportunities to maximize value for clients. “We’re very analytical and data driven, we have a tremendous amount of data and market intelligence, and we believe that leveraging that data to support our recommendations is how we connect with the property teams and how we get results,” Russo says. “You can’t hide from numbers; they’re not confrontational.”

Armed with a plethora of data from such sources as STR, PKF, and PWC, asset managers have become much more commonplace in the hotel industry, compared to 15 to 20 years ago. “Access to data has really evolved our industry and enhanced the involvement of the owner in the real estate and operations,” she says.

The challenges asset managers face today have also shifted, especially with the rapidly changing distribution landscape. “Ten years ago, I would say the biggest challenge was this head butting between owner and operator,” Russo says. “The majority of challenges we’re concerned about today are external.” These include the effect of online rental marketplaces like Airbnb on the hotel industry, managing wages and benefits expenses, and third-party intermediaries taking a bigger slice of the transient and group business pies. “In the past couple of years, there has been so much more alignment between owners, brands, and managers to solve these issues together,” she says.

Though more international groups are entering the market, traditional opportunity fund buyers remain hotelAVE’s core client. “We’re still seeing them continue to buy versus sit on the sidelines,” Russo says. Back in 2009 and 2010, the company’s client profile shifted toward lenders foreclosing on assets, but hotelAVE has cycled through what Russo refers to as “unintentional owners.”

Russo’s introduction to the hospitality industry dates back to the 1960s and ’70s, when her father worked for Howard Johnson’s. “It’s the only thing I knew,” she explains. “He’s so passionate about what he did. If my dad was as passionate about being a heart surgeon, I guess I would be a heart surgeon.” He started out as an assistant manager trainee in one of the company’s restaurants and progressed to president of restaurants and lodging. (In fact, that’s how Russo’s parents met—her mom was a “fish fry girl” in a Howard Johnson’s restaurant.) Russo’s family moved 12 times before she hit the sixth grade, so she recalls staying many nights in Howard Johnson hotels until her mom found the family a new house to live in.
When Russo entered Cornell University’s School of Hotel Administration, she had aspirations of owning a restaurant. She soon discovered there were many more facets to the industry, from accounting and finance to architecture and design. “I realized I like the numbers and analytics better than being in the weeds of the operations,” she says. “That’s how it all started.”

Russo’s first job out of college was with HVS, where she quickly advanced to vice president. Founder Steve Rushmore always involved junior-level employees in all client meetings, and that tactic has certainly influenced Russo’s leadership style today. “If everyone is included, then everyone knows what’s going on and there’s greater buy-in and commitment.” Russo pushes her team members to get involved in the hotel industry and network to create their own personal franchise value. She also doesn’t set age boundaries within the company when it comes to climbing up the ladder. “People grow at their own pace; I have someone under 30 who is a senior vice president,” Russo says. “Including people so they can grow their experiences as much as possible makes them more valuable not just to me but to themselves.”

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