Developer Tim O’Reilly may not have grown up in the lodging industry, but his family knows a thing or two about delivering good old-fashioned hospitality and first-rate customer service.
In 1957, his great-grandfather and grandfather founded O’Reilly Automotive, which started out with one auto parts store in Springfield, Mo. Today, there are more than 4,500 stores nationwide with 65,000 team members. “My great-grandfather and grandfather were all about hospitality, it was just in the auto parts business,” says O’Reilly, CEO of Springfield, Mo.-based O’Reilly Hospitality Management (OHM). “It couldn’t have been a better incubator for me in what I’m trying to do now.”
For a long time, O’Reilly thought he’d eventually gravitate back to the auto parts business and the store where he worked as a kid. “Our family had a rule that you would need to work elsewhere for several years, if you were coming in the company,” he says. “You would come in at the very bottom level just like anybody else, which is a great rule to keep quality over the family name.” There were several crossroads where he considered joining the ranks at O’Reilly Auto Parts, but his entrepreneurial spirit led him to carve out his own niche. In addition to running a budding hotel development and management company, he’s a partner at O’Reilly, Jensen & Preston, the law firm he founded in 1999. (The two companies share the same Springfield address.)
O’Reilly is part of an increasingly common set of hotel owners who started their professional careers in other industries. While some owners quit their first job to pursue their new endeavor, O’Reilly plays dual roles. That’s on top of being a husband and a father of four.
Juggling two careers requires having law partners that can be flexible as O’Reilly’s hospitality company expands. Since 2007, OHM has evolved from a small company with one hotel to an organization of more than 600 team members managing nine hotels and restaurants, with two more hotels scheduled to open this September: a TownePlace Suites in Springfield, Mo., and a Cambria Hotels and Suites in Plano, Texas. “Especially with this latest round of hotel development, I probably underestimated the complexity of multiple hotel projects at the same time,” O’Reilly admits.
Other projects in the works include a 318-key Embassy Suites in Denton, Texas, that will have between 80,000 and 100,000 square feet of meeting space. And once design and permitting issues are resolved, O’Reilly expects construction to begin shortly on the Cambria Phoenix-Desert Ridge, which will be home to the brand’s national training kitchen. The company also has plans to build a Cambria in Midland, Texas.
He’s learned that every hotel project is a different beast, much like every law case is unique. Both require studying up and consulting experts in the field before coming up with a game plan. One of the biggest challenges as a developer is determining the stability of demand generators. “They can disappear and dry up. The only way to do it is with a crystal ball, and I haven’t found one that works yet,” O’Reilly says. “I’m sitting here right now looking at a report on oil production and trying to get up to speed on the Midland market and make sure I understand the dynamics there, long term and short term.”
Jumping in with Both Feet
A long-term goal to build a career in lodging isn’t something O’Reilly had in mind when he made his first hotel investment, but the hospitality industry has fascinated him for as long as he can remember. Between college and law school, O’Reilly spent a year in the Virgin Islands, working in restaurants at small resort properties to get by. When he returned home to study law at the University of Missouri–Kansas City, he continued working in local restaurants to pay the bills. Once he began practicing law in 1995, O’Reilly built up a varied client base that included hotel owners. He enjoyed the window it provided into the industry. “Naturally, I was very interested in it,” O’Reilly says. “I always wanted to talk to them about their experiences, and so then I got involved in franchise negotiations and litigations, business consulting, and legal assistance for several hotel franchisees.”
O’Reilly’s growing enthusiasm for the industry led him to purchase the Hawthorn Park Hotel in Springfield, Mo., in 2006 with no money down. Given his limited experience, O’Reilly hired a management company to execute an extensive renovation and drive operations at his first hotel. “At that point, I didn’t have a grand vision for developing a management and development company,” he says. “I was just happy to practice law and have a real estate investment as much as anything.”
But then his perfectionism got in the way. O’Reilly had trouble standing idle while an outside management company—one that wasn’t even based in Springfield—called the shots for his hotel. “I figured out very quickly in the hospitality industry that you’re either in and controlling every aspect of it or you’re not in the game at all,” O’Reilly says. “I knew I had to make a choice, and that was either get out of the industry or go in it with both feet and both hands, so I chose the latter.”
In 2007, O’Reilly took over management of the hotel and launched OHM. He converted the hotel to a DoubleTree by Hilton in early 2008 and opened a Houlihan’s restaurant within the same facility. The hotel went on to receive multiple awards and a No. 1 ranking in the world in guest service scores among all DoubleTrees in 2010.
“The Springfield DoubleTree has been a great experience—it’s still the hub of our business as far as me training people and trying to explain to them what personality I want our hotels to have,” O’Reilly says. “We bring every general manager back for training at the DoubleTree, we try to immerse them in what we do there and how we do it, and hopefully that serves as a template of what we’re doing elsewhere.”
The Past Informs the Future
Learning the ropes of the lodging industry was no easy feat, but O’Reilly’s law background gave him a leg up. With expertise in real estate transactions, human resources and employment issues, and financing transactions and workout agreements with banks and lenders, he found that many of his skills carried over into hospitality. “That’s one of the reasons it fit so well, because everything I was doing in my law firm translated into what I was doing in the hotels,” he says. “It’s not like I changed full scale. I just had to add knowledge of the different aspects of the hospitality industry that I wasn’t real knowledgeable in, which was a lot at first for sure. I learned all the lingo and acronyms, how the business works, and revenue management.”
He’s not ashamed to admit he also borrows everything that works from the O’Reilly Auto Parts business model. He has adopted the same family-oriented, egalitarian company culture at OHM. Whether you’re the newest employee sweeping the floor or the top CEO, everyone’s ideas and questions are important. “I call my associates ‘team members’ because I like that theory, I like the sound of it,” he says. “We’re all a team; nobody is better than anyone else. I try to get away from the idea of having levels of employees that everybody seems to buy into.”
The bench strength of OHM grew exponentially as O’Reilly picked up a number of ex-employees from John Q. Hammons Hotels & Resorts after a management shake-up in 2010. O’Reilly brought former vice president Scott Tarwater on board as chief development officer in 2011, and others followed suit. Although Tarwater stepped down in 2013, O’Reilly has built a powerhouse team that includes Brian Sims, chief operating officer; Bob Fugazi, regional director of operations; Steve Minton, chief architecture and construction officer; David Horst, director of project development; John Finney, asset and special projects manager; and Scott Schultz, senior architectural designer/illustrator.
The addition of experienced senior management, coupled with the talented property-level employees who manage the hotels and restaurants day in and day out, has yielded a dynamic and successful team. Together, they drive properties to produce impressive results in their communities and comp sets. In addition to his transferable skills, O’Reilly brings a fresh perspective to the equation since he wasn’t brought up in the industry. “One of the things I always thought was positive was I questioned every aspect of it,” he says. “I never just accepted this is how the industry does it; I wanted to do it differently.”
How fast the company’s hotel portfolio grows from here will depend largely on the economy and the lending environment. “Hotel development seems to have exploded now, so I always get wary when construction prices start increasing,” O’Reilly says. “There’s going to be another cycle at some point, so I’m just trying to be very conscious of that.”
O’Reilly thinks back to when he bought the Hawthorn and felt the effects of increasing construction costs, high operating expenses, and a nosedive in demand as the country entered a severe recession. “I was right in the middle of the whole thing,” he says. “That’s still scary for any hotel developer to think about.”
While he doesn’t have specific deals lined up, O’Reilly says he’s exploring opportunities for public-private partnerships. “We’re going to try to be strategic about [growth] and as long as financing is easy. Obviously building hotels requires a lot of capital and requires partners for the equity piece of it. There are a lot of O’Reilly family members that are joining me in these bigger projects, like the Embassy Suites. If they work well, then I have a lot of people that are probably interested in continuing.”
Lenders have more of an appetite for hotel projects coming out of the recession, O’Reilly adds, and his company’s success in other projects has made it easier to get financing. “We have several local and regional banks that know our business, they know we do a good job, that we’re conservative, that we don’t take risks, don’t take chances, that we manage properties well, have consistently high guest service scores, hold money back for future capital expenditures—all those things people want to see, we do.”
O’Reilly has built a solid name for himself, as a lawyer and a developer. But the fact that he inherited his entrepreneurial talent from a long line of successful businesspeople is not lost on him. That’s why he continues to seek the advice of family, many of whom he has collaborated with on development projects. (Take the Embassy Suites project, in which 21 family members have an ownership stake.)
“I have former CFOs and CEOs of O’Reilly Auto Parts that are questioning developments and things I bring to them, and that’s a great opportunity for me,” O’Reilly says. “It keeps me on my toes, and I learn from it every day.”
