When it comes to hotel management, there is only one way to truly operate as an owner, according to Tyler Morse, chairman and CEO of MCR, and that is simply to be one. With that philosophy as part of its operational DNA helping to drive performance, MCR continues to add unique, signature assets to its growing portfolio of properties.
As an example, the New York-based company—which is among the largest hotel owner/operators in the industry with 149 hotels in 37 states—recently acquired the Hilton Miami Airport Blue Lagoon for some $120 million. Morse, who founded the company in 2006, detailed what he sees as a point of differentiation for MCR versus its competitive set.
“I think it’s our margins. I’m pretty confident in saying we run the most profitable hotels in the U.S. Our margins are 400 basis points better than any operator. That’s select service, full-service, and everywhere in between. I think it’s because of our platform approach to how we operate the hotels and our vertical integration. The fact that we own them and manage them is the special sauce,” he said.
Morse later quipped, “A lot of people say they think like the owner; yes, but you’re not the owner.”
While acknowledging the advantages of size and scale for companies like MCR, Morse reinforced the benefits of its hands-on approach.
“Scale helps to be sure, but it’s the alignment of incentives and that’s where the third-party managers break down. They’re not owners so they don’t think like owners; they think like the operators. And I think that drives cycle time, drives the speed of execution, and just general motivation,” he said.
One of the hallmarks of MCR’s portfolio is a handful of signature properties, such as the TWA Hotel, which opened in May 2019 as a tribute to the 1960s and the now-defunct airline. MCR won the Development of the Year (Full Service) Award at The Americas Lodging Investment Summit (ALIS), the Urban Land Institute New York Excellence in Hotel Development Award, and the American Institute of Architects national Architecture Award, the highest honor given by the AIA.
Other notable properties include the High Line Hotel, Sheraton New York Times Square, and The New Yorker, all of which are located in New York City. Further examples include the Pasadena Hotel & Pool and Stoweflake Mountain Resort & Spa, located in Pasadena, California and Stowe, Vermont, respectively. Morse stressed the signature assets in the portfolio are very much “by design” and referenced the aforementioned hotels as being “special.”
The company’s portfolio also includes select-service, major branded hotels such as Residence Inn by Marriott and Hampton Inn by Hilton, which Morse described as examples of “the best return on invested capital in the industry.” In addition to independent properties, the company’s portfolio includes some eight Hilton brands and nine Marriott brands.
The most recent addition to the portfolio is the Hilton Miami Airport Blue Lagoon, a 14-story hotel with 508 rooms, which features a waterfront setting and is located just south of Miami International Airport. It’s the company’s 10th hotel in Florida and second hotel in the market following the acquisition of the Hyatt Place Miami Airport East in December 2022.
Positioned to Source Financing
Morse noted the Hilton Miami “fits the mold” of unique assets and insisted that the February acquisition from Park Hotels & Resorts was a direct result of the company’s ability to get financing.
“The deal had actually died about 30 days before we did it, and we got a phone call saying, ‘If you can close this thing in 30 days, then you can have it.’ That is a testament to the fact that a lot of people can’t get either purchases or developments financed right now. The financing died for the prior buyer, and so they had to walk from the deal. So with our reputation, our banking relationships, and our discretionary investment funds, we were able to step in and close a $120 million deal in 30 days,” he said.
Morse added that the company has major renovation plans for the property, noting “there’s a lot of excess land” and suggesting they could possibly put one or two more hotels on the site eventually.
He further emphasized the importance of MCR’s reputation and its impact on the ability to get projects off the ground and acquisitions completed. “I think there are somewhere between 10 and 15 groups that get financed in the U.S. right now, and we’re one of them. If you’re small, on the cusp, or on the margin, it’s nearly impossible for you to get financed. That gives us a competitive advantage,” he noted, adding that the company currently “has a handful of very special unique development projects” in the pipeline.
While the company has grown to be one of the largest owner/operators in a relatively short period of time, Morse pointed out it remains squarely focused only on deals that make economic sense.
“I don’t have a goal, either large or small. There are 65,000 hotels in the U.S., and I still think we’re rather small, all things being equal. Out of 65,000, 150 is a modest number. We may grow, but it’s just opportunistic growth where there are good investment opportunities,” he said.
Meanwhile, Morse noted that a point of emphasis in recent months for the company has been on the digital side with what he termed “a number of software investments.” He further explained the need for the entire industry to “modernize the decrepit tech stack that exists today.”
Morse said the focus of the company’s tech efforts has been along the lines of vertical integration and tying hotel operations and property management systems together. Part of the goal is to improve operations from a housekeeping perspective.
He further highlighted the importance of training—particularly in light of all the industry turnover in recent years—which he identified as a significant issue. “The other aspect of the hotel industry that is going to become a bigger and bigger deal is our turnover is increasing. If you talk to anybody in the industry, the tenure is decreasing and turnover increasing, and that changes the dynamic on the playing field. You had better be able to train people faster, get them up to speed faster, because they’re not going to stay with you as long,” he said.
Corporate culture is, of course, a major consideration in an associate’s decision to work for or leave a company. Morse described the culture at MCR as being “fun and entrepreneurial” and “eschewing the status quo.” Finally, Morse made it clear that he’s still having plenty of fun leading the company.
“I skip to work every day; I like what I do. I don’t see changing anything, probably ever,” he concluded.
Winging It: Tyler Morse Speaks Out on Everything From Bleisure to Lifestyle Brands
Over the past several years, Tyler Morse of MCR has earned a reputation as one of the more interesting and outspoken hotel executives taking part in panel discussions at various industry events. Whether it’s his views on “fake grass” or what he refers to as “NUG” (net unit growth), the company’s chairman and CEO does not hold back on his opinions.
During the interview with LODGING, Morse offered his thoughts on the topical industry issues listed below.
The bleisure trend “It’s here to stay, unfortunately. I say unfortunately because I don’t believe in work from home. I don’t think people are productive working from home. Our employees have to go into a hotel, and so does everybody on our team. It’s a dirty little secret that there are 156 million employed Americans, and only 20 percent of them work in an office building. . . . Unfortunately, a lot of the people that do work in an office building will work from home. They’re going to combine their trips with a Monday and a Friday because their employers are going to let them, and this is probably the best thing that ever happened to Sunday night. Sunday night previously was the total loser. Businesspeople didn’t travel on Sunday, leisure people didn’t travel on Sunday; it was just a bagel. So bleisure is the best thing that happened to Sunday nights ever.”
The impact of Airbnb and home-sharing sites “They’re doing great and will continue to do great. However, even with the fact that 12 percent of all occupied room nights are home sharing right now, the [hotel] business still continues to grow like a weed. Travel as an experience is growing with huge tailwinds. Broadly speaking, in the 2000s somebody came along and stole $200 billion in value from the hotel business; we now call them Expedia and Booking.com. The business didn’t miss a trick; it just kept right on growing through that on a macro level. In 2015, another entity [Airbnb] came along and stole another $100 billion from the hotel business, and again we didn’t miss a trick. It’s a good business; it’s got strong tailwinds from a demographic level globally, and I don’t see any of that changing anytime soon.”
The host of new lifestyle brand launches in recent years “Meaningless—these are not brands. Tide is a brand, Cheerios is a brand; these things people are calling brands are not brands. There’s too much nonsense. Coke is a brand, Marriott and Hilton are brands, but these other bizarre new names are not brands. It’s all about NUG. It’s all the Wall Street guys want to talk about, give me the NUG. All the new ‘brands’ are just a way to get NUG.”
Fake grass “It’s the innovation of the 21st century. I would invest in a fake grass farm if I could. It never talks back to you, it never dies; it’s a wonderful product.”
Rising interest rates and economic headwinds “I’m not worried about the recession or anything like that. The inflation is going to be around for a while. Is there a technical recession? We’re probably already in one, but I watch the flow of funds and liquidity. American consumers have $4 trillion in their checking account, and in 2019 they had $2 trillion. The government gave out $2 trillion of free money and they’re going to spend it. . . . People are out there living it up. YOLO [you only live once], it happened after the 1918 pandemic as well as with the Roaring ’20s. So, I think we can have another spectacular decade ahead. I think what’s driving experiences is people want to go see their friends and family, and they’re happy to be alive.”