One-On-One with HVMG’s CEO Robert Cole
What do owners want from a management company and what is the future like for this side of the business. HVMG’s founder, president and CEO has the answers you’re looking for.
There was never a time when Robert Cole, founder, president and CEO of HVMG (www.hvmg.com) wasn’t in the hotel business. Born into a family that operated a couple of mom and pop motels, the lodging industry is stitched into his DNA.
So he understands the business intimately and has a track record of building companies. Cole also founded Impac Hotel Group, which grew to more than 60 hotels throughout the United States in the 1990's, along with being one of Marriott and IHG’s largest franchisees. In both instances, Mr. Cole started each company with one single hotel. In 1998, the company’s portfolio grew to 143 owned and operated hotels through a merger with publicly traded Servico. Mr. Cole was appointed president and chief executive officer of this newly formed company, renamed Lodgian, and subsequently became one of the largest owners of hotels in the country, boasting more than 26,000 rooms in 35 states and Canada totaling more than $1.2 billion in assets at the time.
In 2000, Robert Cole left Lodgian to form HVMG. Under his leadership and strategic direction, the company has grown to 41 properties in 17 states throughout the United States. The organization has received numerous awards and recognition in recent years for notable operational expertise including improved market share performance, Excellent guest service, and quality renovation projects.
The foundation for HVMG’s success comes from more than 20 years of extensive hospitality industry experience that includes management and ownership of nearly 200 hotels. So who better to learn about the state of the industry, what he is doing for his clients and what’s next for HVMG.
Last year was by all accounts amazing. What was your year like?
Overall we had an excellent 2014. We had a very busy year on both sides of the transaction front where we sold a number of hotels, which was positive for us and owners and on top of that we added a number of hotels.
We sold some hotels we had some ownership interest in and third party ones too based on the successful run those hotels have had.
What’s new on the management side?
We recently added many new ones including five in the last quarter of the year. One was a 340-room full service Hyatt at the Houston Hobby Airport, which we are managing for the Carlyle Group. We also have a full service Marriott in Greensboro (the 299-room Greensboro-High Point Airport Marriott) and took over three Courtyard by Marriott hotels.
We were also part of a joint venture in the acquisition of a 240-room Embassy Suites in Galleria Atlanta with True North.
What is your mix of hotels like?
We have 43 hotels in 17 states and growing our portfolio. We have a predominance of full service hotels and about 80 percent are Upscale or Upper Upscale, and 80 percent of those are Hilton and Marriott branded hotels. We are intentionally and strategically gravitating to Upper Upscale bigger box hotels.
We have a pretty healthy pipeline too. We’re involved with a new Indigo in Downtown Atlanta with Portman Holdings and that is 200 rooms and will open in November with us managing. We recently were engaged to develop and manage a Springhill Suites in Orange Beach, Alabama and we have other in various stages of acquisition or development.
In fact we have been more active on the development side than in the past. We haven’t been that involved in development until more recently. They’ll all be with great brands and some soft branded ones are in the pipeline too and we’ll make announcements in the next couple of months.
We’ve been adding key folks like Cory Chambers in the newly created position of VP and Chief Revenue Officer and added a new senior position for Bill Bowen who now heads design and construction.
Why add a Chief Revenue Officer?
The idea of hiring Cory is exciting to us and shows how important we deem revenue and sales. Almost half of our infrastructure is working directly in revenue – digital, sales, and revenue management. We have about 50 directly related to revenue and a quarter of all our employees are in revenue management. That shows our commitment to results and all things revenue because our job is about results above all else.
It is a revenue game today and we are focused on driving revenue and market share. Company-wide we saw same store RevPAR up 10% over last year and we grew share over comp set – which is hard to do. We saw pretty significant movement across a wide range of our portfolio and we have great momentum going on and 2015 will be an excellent year. I’d be surprised and disappointed if we do not top 2014 because it is full steam ahead.
How do you see the state of the development side of the business?
Industry fundamentals have never been better. There is demand growth and rate growth and it is driving a lot possibility for margins and NOI, plus the cost of capital has come down. Interest rates are significantly lower than there to four years ago and it helps with the development model when looking at deals and development opportunities.
Of course there is supply growth, although it’s growing in a way so far that is relatively in check. I won’t be surprised if supply and demand meet in next 12 months. We’re focused on places of opportunity where we can have the right brand, which we feel is just as critical as location; especially when developing a hotel.
So is development where you will put most efforts?
I am not going to say it is going to be a majority of our growth, but may be 20 to 25 percent will be development. We are still acquisition focused and look for opportunities where we can create value for us, owners and investors and maximize through margin improvement, quality improvement and market share growth.
What percent do you own?
Our ownership interest is in 25 percent of the portfolio, the rest is third parties and we will stay close to that. We do like joint ventures and put in equity and manage. We like partnering with people we have done business with in the past and who have same deal criteria as us.
What changes are coming to the real estate side of the business?
It’s a highly competitive market out there and a lot of folks who are looking at the same opportunities and in some cases is driving up price. We tend to not get involved in auctions or highly competitive deals on sale side. We prefer to source opportunities that are not quite off market, but we have the inside track with folks you know that are looking to sell and don’t want to go through a PIP and refinancing. We can find leads through brokers we have good relationships with and get great leads with our brand relationships.
Those relationships comes in handy and a lot of times we’ll look at deals others may not look at too, such as one sin secondary markets. Take the Marriott Greensboro. Others may say ‘hey that is NC, not a top 20 market.’ We don’t mind going into secondary markets and many times we can make better returns in those markets.
Charlotte, Nashville, we’re up in the northeast in Portland, ME and we have a good cross blend of top markets, as well as secondary markets.
What about the full service market everyone said was stalled?
We have the skill sets and business model and apply that across multiple brands and asset classes. On the full service side we work with Hyatt, Hilton’s Embassy Suites and others because we are in good position to create value.
We like to go into properties where we can maximize results, it doesn’t have to be distressed. They can be stabilized or running good margins. We have a customized solution and business plan and wherever we see opportunity – guest satisfaction, market share, all of it— that’s where we act. We recently took a property which was already number one in its comp set with a 110 index and moved it to 125 in pretty short order.
Also, we are one of 12 approved to manage full service Hyatt hotels and we have four of the ones that are managed.
So what motivates you as a professional and how did this business become your calling?
I literally grew up in the business. It was the prototypical scenario where mom and dad were in the motel business as it was called then. They were the typical mom and pop operator with couple of properties. My mom worked the front desk and dad did back of house and maintenance work and drove the airport van.
My sister and I lived at the property and cut grass and cleaned the pool and did what it took. So it’s in the DNA and I took that work ethic my parents gave me and went from there. It is all about working hard and getting some luck along the way.
I am very fortunate and a big believer in hiring people smarter than you in any given area. Then we come up with mutually agreed on goals and objectives for that discipline and I let them run their area. I’m here for advice and council but I am a big believer in having the right team who believes in the vision and let them execute accordingly.
I also strongly believe this is a GM oriented business and I spend time, effort and resources to recruit, retain and develop GMs. The way I see it is we have 43 CEOs in the field. We give them much, if not more, than anyone in business and they are held accountable to agreed upon goals for results. But it’s up to them to make the day to day decisions.