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Lodging Luminaries with Robert Cole
Lodging Luminaries Episode 7: Robert Cole
Read the transcript of Lodging Luminaries Episode 7 with Robert Cole below. You can also listen here or on your favorite podcast app.
[00:00:28] Announcer: Welcome to Lodging Luminaries with Jason Freed, a podcast that spotlights individuals making their mark in the hospitality industry. Lodging Luminaries is a one-to-one conversation between Jason and his guest, who provides advice and inspiration to industry veterans, as well as aspiring hospitality professionals.
And now your host, Jason Freed.
[00:00:52] Jason Freed: Hey everyone, and welcome to this episode of Lodging Luminaries. Today, we're joined by Robert Cole, president and CEO of third-party management group HVMG. As an operator, HVMG is in tune with today's biggest challenges, and Robert is candid about how his company is approaching new hurdles like staffing and heightened customer expectations.
Learn how HVMG is centralizing many operations, including HR, to reduce costs; what new performance metrics they're constantly monitoring; and how they're preparing for what Robert says could be a permanent reduction in meetings and events business. Thanks for listening.
But before we get into today's episode, I want to take a quick opportunity to remind you to tune into Lodging Leaders podcast, our sister program on Long Live Lodging's multimedia platform. Lodging Leaders is the hospitality industry's longest-running weekly podcast, founded by Jon Albano and dedicated to in-depth reporting on the news, trends, and issues that impact the hospitality industry. Lodging Leaders is an award-winning free podcast that launches a new report every Wednesday. To subscribe, go to lodgingleaders.com/subscribe. To listen to past podcasts and read related content, visit lodgingleaders.com or longlivelodging.com. Now let's get to today's episode.
So, Robert, start off by giving me a sort of the high-level overview of HVMG. Tell me about HVMG and the role you serve there.
[00:02:17] Robert Cole: I appreciate that, and yes, as you mentioned, I founded HVMG in 2001. This is my third company that I've been a part of.
I founded a company called Impac Hotel Group in the early nineties. We grew that from one to about 60 hotels, ended up doing a merger with an existing public company. I stayed on board for about 18 months following that merger in the late nineties. And then I left to form HVMG. And so, as I said, this is the third company.
I'm the president, CEO, founder. And today we have approximately 45 hotels in our portfolio. We've done more than a hundred total transactions. Like a lot of my peers as operators, doing business, especially as a third-party manager and also as an owner, you tend to work yourself out of a job when you do a great job, creating value and owners sell and take money off the table.
So, a lot of hotels have sold, a lot of our portfolio like others. So, there's that "churn factor" that a lot of us operators call in the industry. And so yes, as my role as president and CEO to make the tough decisions, make the big decisions. Stephen Covey through his 7 Habits of Highly Effective People talks about the big rocks.
And so, I think CEOs, and in my case in particular, tend to live that out and make the key decisions, make the tough decisions, obviously through collaboration and communication with your key team members. And so, yes, I provide the day-to-day direction, vision, strategy of the company and am chief firefighter.
[00:03:42] Jason Freed: Yeah. That's a great way to put it. So back to what you said is your role as chief firefighter there and making the big decisions, right. And some of those, as you mentioned, are difficult decisions. And I would imagine they've gotten a lot more difficult over the past 16 months. So how has HVMG's thinking evolved over the past 16 months, pre-pandemic versus now. What areas are you guys sort of thinking about differently in the current environment than maybe we were when things were running amazingly in 2019?
[00:04:11] Robert Cole: Great question, Jason. And so, there's a lot to unpack in that question. I think certainly our industry's known and has a lot of clichés out there. One that I think is used quite a bit is - especially in good times - you know, "a high tide raises all boats." When things are going great and revenues are ramping up, sometimes it's hard for management companies and operators to differentiate their services and their performance and their metrics. And so, when things get tough and especially in a downturn - there was nothing like the COVID-19 downturn, certainly, that kicked in last March of 2020.
And I think that's where, through last year, and even as we move forward through the recovery period and we still - listen, things are ramping up and certainly business is recovering - but we've still got a long way to go as an industry. It's probably going to be a couple more years before we're floating around 2019, at least as an industry, RevPAR levels.
So, this is where we as an organization made the decision, "You know what? We can't feel sorry for ourselves." We can't control the pandemic. We can't control what's going on in the market, but we certainly can control what goes on at each and every one of our hotels. And so, we did make some tough decisions, starting last March, around labor reductions and benefit reductions, and even some wage reductions and eliminating services and other costs and third-party expenses, as much as we could with things that were within our control.
And we have, I believe. You know, I'm a pretty humble person, but I'm also very proud of the team and the results that we've generated since the onset of the pandemic. We produced, I think, some incredible numbers, all things considered. Our house profit as a company through the pandemic period is about three times what the industry average has been.
Even in the last few months as the recovery's occurred, we achieved 42% house profit in March versus the industry average of 30%. April and May, and the June forecast numbers are also, we're around 41%, 42% also for the past 90 days. Our house profit margins are bumping along where they were in '19.
Obviously, revenues are still down a little bit. And in some cases, our house profit is higher than it was in '19. We really focus on how much of the revenue decline can we flex to the bottom. You know, it's easy for us to have the ideas and provide that strategic direction, but [the hotel teams] are the ones that executed and really did, and are doing, an unbelievable job right now.
[00:06:35] Jason Freed: Well, let's talk about that, Robert. Let's talk about the staffing issue, and this is probably the most difficult question that we're going to have during this conversation. But you mentioned some of the things you had to do last year, right? I'm sure you had to furlough some employees. I'm sure you had to let some go, you had wage reductions.
You know, now fast forward a year later and we've got leisure guests, at least, coming back through the doors, and you've got to ramp that staff back up. right. You got to get people back at work, and, across the industry, we're seeing hotels struggle with that. How have you guys been affected by that; is the labor issue as strong for you guys as I've heard it is for others; and where do you stand on that?
[00:07:14] Robert Cole: Absolutely by far and away, the number one, two, and three issue that we are facing, our peers are facing, everybody in the industry is facing who's running hotels. And so how we have tackled that through a myriad of different approaches. One of the more strategic efforts that we've done over the last couple months is as we have actually centralized talent sourcing and talent retention and the onboarding process as a resource for our hotels. Now you may say, "Well, it doesn't everybody do that?" Well typically, we as third-party operators, we'll source, you know, general managers, directors of sales and other maybe key leadership team members at the properties. But typically, management companies do not get involved sourcing hourly associates like housekeepers and front desk associates and engineers at the property. So, we've actually hired, I think we'd gotten now six people that we hired, as talent sourcing experts and all their number one and only focus is to - literally they're on the phone all day, on social media, driving the sourcing for our hotels and then providing leads and reference checks and back.
We're doing all, we're trying to take all of that, or most of that, off the hands of the general managers of the properties. Because they're fighting enough battles is that is let alone the talent shortfall. So, uh, we've got roughly across our portfolio close to 400 opening, you know, so if you do the math, that's average about 10 or so per property, plus some obviously have more, some less, depending on the size.
And that's not all needed today, that's what we've anticipated needing to hire over the next 60 or 90 days. And so we are trying to take as much of that as we can off the hands of the properties and basically serve them up associates that they may not have the time or the expertise, or the marketing. It's really a marketing effort, you know, to try to find talent.
And that, you know, obviously in addition to that, we've done wage surveys and we've been creative with things like we looked at higher wages on the weekends where a lot of the business is today, you know, especially in housekeeping, when you got to turn the house on the weekends. And signing bonuses and retention, bonuses, and referrals, if you know, to associates who recommend someone that they know that needs a job.
We were pulling out all the stops, like all of our peers, my peers, and it's the number one issue.
[00:09:38] Jason Freed: So how do you feel then about sort of the changes in housekeeping that we're seeing that maybe guests set the opt-in now for daily housekeeping? Is that something that's kind of helpful? My guess is from your standpoint, that's driven a lot by the brands, right?
So I don't know how many branded hotels you have versus independents, but they're making those decisions for you, I'm guessing.
[00:09:59] Robert Cole: Yeah. Most of our hotels are branded. We have a handful of independent properties, but most of our hotels are, are certainly branded and, and yes, the, the opt-in process has certainly helped that situation.
And that seems to be - at least what I'm hearing through the brands - you know, likely at least for now going to be a more permanent solution, not just through the pandemic and through the recovery. As long as the guests kind of allow that to happen and our, you know, everybody's doing it and people don't panic, so to speak and go back to not doing it.
But the opt in process has helped, and so that certainly helps productivity, and it also takes some of the pressure off housekeeping. And there's also been things that the brands have been great at, like Hilton, for example, Embassy Suites is going with for now anyway, allowing use of paper products for glasses, as opposed to glassware.
So that saves time on, you know, washing glasses every day from the guestroom perspective. And that's just one example where the brands are certainly highly sensitive to what we're all battling every day.
[00:11:00] Jason Freed: Yeah. So, it sounds like there is going to be some changes as guests come back. You know, these travelers who were traveling heavily in '18 and '19 and had to take a 12-, 14-, 16-month break from traveling.
They're now coming back. Do you see their expectations changing at all, Robert, now that they're coming back, or do they remember their best trip that they took in '18 and '19 and want to see that replicated or even better when they come back now? And how are we sort of managing those guests' expectations?
[00:11:31] Robert Cole: Yeah, again. Great question. And, uh, you know, certainly I think the guests, again, some of this is anecdotal, some of it is things that I'm hearing, you know, from our properties, but the contactless solutions, I think all guests are, most guests are accepting that. So that does take a little bit of pressure off the transactional side of the equation, whether it's checking in the front desk or it's in the restaurant and so forth.
So, I think that is definitely allowing our associates - and I say ours, I mean, as an industry - to focus more on providing that personal attention and doing the things that guests will make their stay more memorable. And so, we're looking at ways to remove again, the transactional piece of it and focus more on the service aspect and things that the guests will certainly takeaway as something that we're doing different.
[00:12:24] Jason Freed: Yeah. Sure. So, we're getting into the topic of the guest journey, right? And I'm curious your thoughts around whether that guest journey is evolving. And let me pose that question to you in this way. So, when you book travel, Robert, how do you book accommodations?
[00:12:38] Robert Cole: Like most everybody today it's depending on if it's business or vacation travel but certainly if I'm taking my family on vacation somewhere, I'm doing what most guests do. And if I don't know any of the properties in the location we're going to, I'm going online and looking at reviews and going on TripAdvisor and, you know, going on the internet and finding out as much as I can about the properties and looking at the website and the pictures.
And so, you know, it comes right back to how important digital marketing is and social media and booking online.
[00:13:09] Jason Freed: And one of the challenges I think, Robert, that brings, is, you know, we may not know as much about our guests when they book online between the time they book online and the time they show up at the hotel, especially if they booked through a third party, like an OTA. How are you guys sort of tackling that challenge, you know, this idea of building better connections with their guests along the guest journey so that their trip is a memorable one. And you can, you know, make it more of an experience than just a place to rest their head.
[00:13:38] Robert Cole: Well, certainly like a lot of folks, you know, we do the pre-arrival emails and make, you know, and, and address each guest that's coming in, in advance and asking them for any specific requests that they may have and what we can do to personalize their stay, whether it's a certain kind of pillow. Or, you know, whatever it might be. And so that helps. And then on check-in again, it's really trying to set it up. A lot of folks, they like to text or chat. So, we make it easy for them to, if there's an issue, they can chat with an associate at the property or provide a text number and they can text somebody 24/7 and get their questions or issues solved, you know?
And so again, it comes back to, you mentioned use of technology and folks, especially the people who are younger than me, they avoid at all costs, sometimes, human contact and talking on the phone. And so, the younger you are, the less, I think you're inclined to call somebody as opposed to text or chat.
[00:14:35] Jason Freed: So, let's switch gears a little bit, Robert; let's move away from the guest-facing stuff, and talk a little bit about the back of house operations.
You mentioned something earlier. You talked pretty extensively earlier about profitability and how you guys measure that and driving as much to the bottom line as you can, and, you know, measuring your house profit, not something that I think everybody across the industry has gotten to the point where they can do. How has that process come together for you guys?
I mean, as a management company, obviously you're looking at the bottom line probably more than most companies, although I'm sure owners are looking at the bottom line even more, but you know, how have you sort of transitioned from looking at top line revenue and benchmarking against your competitors on the top line revenue side to the profitability or the bottom line?
[00:15:23] Robert Cole: No, and I do want to be clear. Obviously, at the end of the day, we do have ownership interest in many of our hotels. And even if we didn't and the ones we don't, we treat every hotel the same. And we have that owner mentality. I grew up in the, what was then called the motel business. My family was in the business.
So, I learned from my mom and dad at a very early age that you can't take top-line to the bank. And so, what really matters is the bottom line. And certainly, I'm a big believer that revenue cures all evils. So certainly, you got to start with revenue, but we as a company, even pre-pandemic, our number one revenue metric on a pure room revenue standpoint is RevPAR.
Again, we talk to our GMs all the time, that again, you can't control new supply. You can't control what goes on with some of your demand generators in the market. They come, they go, they reduce, they increase their room count and so forth, but you certainly can control what goes on in your street corner and how are you doing against your competitors?
So, most of our incentive plans are geared around, and our metrics are geared around, how are we doing vis-a-vis our comp set and not only as a company, but certainly each hotel, the way we run each, we have 45 different business, 45 different CEOs out there as general managers. And so, we really don't get too hung up on overall portfolio results.
What really matters is how each and every street corner, each hotel, is absolutely performing. So, from a RevPAR Index standpoint, we really are laser focused on those metrics and not just overall index, but how are we doing weekday versus weekend? Are we losing or gaining share on group, is it transient, is it base business or contract business?
So, we really, our team, our revenue team, which are 12 strong, we had - a quarter of our overhead are all revenue people, you know, sales, marketing, revenue, managers, analysts, and so forth. And so, we're a revenue-focused company, and I know we are up about 25% from a total revenue per room standpoint - vis-a-vis we compete mostly in the upscale segment. And we're way outperforming our competitors on the top line as well. So certainly, that helps drive those house profit margins. It's not the only answer, but it's a big part of that answer.
And even right now in June, and, you know, I looked at the numbers last night as I do every day.
And as a portfolio, I will speak to a portfolio number, we're only down 7% right now through last night in June versus 2019 in RevPAR. So now we certainly have several hotels that are way outperforming even '19 levels. So, we got hotels on the beach in Florida that are up 70% versus 2019. Our Hard Rock in Daytona beach is probably a hundred dollars in rate over 2019.
And we got other examples like that as well. So certainly, we've got a lot of outperformers, but our portfolio in general is pretty symbolic of the industry. We have hotels in urban markets, tertiary markets, leisure markets, downtown. Markets where we've got group hotels, we've got select service. We have extended stay.
So, we have a very wide cross-section, and we've been seeing these trends every month. And it's really, I can't speak for the rest of the industry, but we're really focused on rate right now. And our ADR will likely finish up probably a dollar over 2019 as a company in June. So, we're still down, obviously, in occupancy like everyone else, but we're certainly seeing each month we are seeing month-over-month favorable trends, where back in the first quarter RevPAR may have been down 40% versus '19. And then I think we started seeing March and April where it dropped down to about 26%. And then I think May was down around 17% and June is even less than that. So, we're certainly seeing a trajectory versus 2019 on a revenue standpoint that's creating some momentum.
Now, some of that is certainly being driven by the amount of leisure business, this time of year, that you're getting not, you know, as an industry. So, I think come September, it'll be very interesting to see if these trends continue, but we're cautiously optimistic that the recovery is going to be happening maybe sooner than original projections were done. You know, they looked at 2024, '25, even before the industry completely recovered. It's hopefully we'll see an acceleration of that.
[00:19:47] Jason Freed: Yeah, well, congrats on that, Robert, that's amazing news. And thanks for that context on those numbers. I mean, I think we all know the importance of pricing power in the industry and being able to push rate even versus 2019 was fantastic, so congrats on that.
I want to ask you a quick follow-up on something you mentioned there, you mentioned HVMG being sort of a revenue-focused company. I've been hearing a lot - oh, my gosh - we've been talking for what decades about these, these siloed departments, revenue, sales, and marketing, but I guess post-pandemic really accelerated the breaking down those silos, if you will, breaking down the walls between those departments. And I've, as I've been talking to hoteliers over the past couple of months, I hear more and more of them putting sort of a chief commercial officer or a chief revenue officer role in place that oversees all three of those departments, maybe at the corporate level.
Is that something you guys have explored or how are you working to sort of break down those silos between those departments?
[00:20:44] Robert Cole: Well, we did it almost seven years ago. And maybe that's why we're outperforming a little bit. We have a gentleman by the name of Cory Chambers, who is our chief revenue officer. And he's been our chief revenue officer ever since we hired him, but he had a similar role when he was with White Lodging Services, and we recruited him away from White Lodging to lead our charge, so to speak.
And so, he has all - he calls it the three-legged stool - sales, revenue management, and marketing. All things marketing, digital marketing and the old-fashioned marketing. So, all of those disciplines report to him. And that's the team I mentioned about, like I said, about 25% of our head count in our corporate team is in one of those revenue disciplines.
And so, we are a revenue-focused company, and Cory and his team do an excellent job. And even through the pandemic, we had four consecutive years of stabilized RevPAR Index growth across our entire portfolio. And this year we certainly expect to have another year where we're growing share. These would be our comp sets as a company.
[00:21:46] Jason Freed: That's awesome.
So, we've got a few minutes left. Robert, I want to tackle one last topic with you, and it's this idea of full service versus select service. I think HVMG - correct me if I'm wrong - used to be primarily full service, maybe has trended a little bit more in the direction of select service or around 50/50 at this point. For our listeners who might not know the difference, correct me if I'm wrong, full service means you've got maybe a restaurant and maybe some meeting and events space, whereas select services is mostly driven by rooms revenue.
So, looking at how those two sort of verticals are trending moving forward, I'm curious, and I'll just ask you sort of, frankly, Robert, it looks the restaurant business is not coming back as quickly post-pandemic and especially meetings and events. Right. It's tough getting people together. I mean, although we are starting to see glimmers of hope there. How long until that's back? Is it going to come fully back? Does it still make sense to have hotels with meeting space?
[00:22:43] Robert Cole: Short answer is yes. We are seeing, certainly, freestanding restaurants in particular are certainly bouncing back. At least in Atlanta, they certainly are. I can't speak for all the cities and so forth, but as far as the hotels are concerned, I think hotels are somewhat still probably lagging freestanding restaurants from a recovery standpoint for different reasons, in terms of... most of the time, you know, hotel restaurants rely on hotel guests. And so, occupancy levels, where they'd been, you're going to obviously be down proportionally as well in your own hotel restaurant likely. But I personally believe there's probably going to be a small segment - and I think hopefully it's very small - that may decide, you know what?
I don't want to travel. I don't want to be, I don't want to go to a convention or I don't want to be a part of a meeting or I don't want. I'm not going to take the risk of, I don't, you know, maybe it's not the risks, maybe it's saving money or whatever it may be, but I really believe it's just a matter of time before groups rebound and recover.
And when I say that I'm not being unrealistic, it's certainly not going to happen as nearly as quick as, as the leisure business has picked up. We are probably truly looking at, because of the lead time in booking bigger groups and conventions, you know, we probably are looking at maybe another three years or so before the group segment recovers, close to 2019 levels, but I believe it's going to recover.
Maybe it's 90%, but certainly there'll be other segments of our business. All said, probably that slight permanent drop in group business. There's certainly going to be, I think, more leisure people. There's going to be more folks willing to do both at the same time, go with their family on vacation, but yet obviously have to do business at the same time.
I'm pretty optimistic and bullish on that segment recovering. It's just going to take longer.
[00:24:29] Jason Freed: Hey, Robert, I really appreciate the time. It's been really insightful.
Thanks for listening to Lodging Luminaries and thanks to our guest, Robert Cole, president and CEO of HVMG. You can find the show notes and links to more information lodgingluminaries.com.
[00:24:46] Announcer: This is the Lodging Luminaries podcast produced in conjunction with Long Live Lodging, an online multimedia news organization for the modern age of hospitality. You can subscribe to the Lodging Luminaries podcast on Apple Podcasts, Spotify, or wherever you get your podcasts. You'll find links for subscribing at lodgingluminaries.com/subscribe. Until next time, stay luminated.