IRVINE, California—Pacific Hospitality Group’s latest purchase, the Ko’a Kea Hotel & Resort on Kauai, Hawaii, illustrates the company’s focus on curation of its own collection and how it plans to grow its portfolio.
The company has a portfolio of 10 hotels and resorts that it owns and manages, said Kory Kramer, CIO for PHG. The company started in 1987 in Orange County, California, with some smaller DoubleTree by Hilton hotels it built. It has since grown to having $1.5 billion in assets and more than 3,000 employees.
“We’ve grown from a very small company to one of the bigger boys over time,” Kramer said.
A strategy for growth
The purchase of Ko’a Kea Hotel & Resort was the first hotel outside California to join PHG’s lifestyle and boutique collection called Meritage Collection, Kramer said, but it fits with the company’s plans for growing the collection.
“Our acquisition strategy going forward is to continue to purchase Meritage-style properties,” he said, adding the company also will look to develop. “We want high-barrier-to-entry markets like Hawaii and the California coast.”
Being an owner in those markets helps mitigate the risk of additional supply coming in, Kramer said, so PHG can maintain and grow its rate. Conversely, that also means it can be difficult to expand or buy new properties because of the limited supply, he said. Still, that does increase the value of the hotel assets, he said.
Aside from its new Hawaii property, PHG has its Meritage Collection resorts in Napa Valley, Santa Barbara, Huntington Beach and other Californian locations, said Steve Arnold, president and COO. The new resort in Hawaii fits the collection’s guest demographic, he said.
While expansion is the company’s goal, Arnold said that executives are careful about moving and growing too fast.
“We’re taking a careful, considered approach,” he said. “We’re looking for just the right opportunities.”
Mixing branded and independent
Meritage Collection complements PHG’s branded properties, Arnold said. Of the 10-hotel portfolio, the company has two DoubleTree by Hilton properties and one Wyndham property. Arnold said executives have been exploring the more boutique- and lifestyle-oriented brands, such as the AC by Marriott.
“Although it’s branded, it fits well with our independent resorts,” he said. “With our type of guests, that’s how we became interested in AC. We want to continue growing that brand.”
In 2015, PHG purchased the AC Hotel New Orleans Bourbon/French Quarter Area, Kramer said, which was the first AC property to open in the United States.
“We’ve been operating it since August,” he said. “It’s exceeded our pro-forma expectations.”
Arnold said company executives are actively looking for additional AC development opportunities and acquisition opportunities.
Looking ahead
While PHG has a “fair number” of projects in the works in 2016, Kramer declined to share details.
“I can tell you that we will be making some announcements early this year on additional deals,” he said.
There’s a property in Huntington Beach, California, due to open in May, Arnold said, and it will be similar in quality to the other resorts in the portfolio.
PHG is expanding the Napa Valley property to add a wine tasting village for its partnerships with local wineries as well as adding an event lawn and 143 guestrooms, Arnold said. Renovations are being completed on the company’s resort in Newport Beach.
Arnold said more projects will come.
“We’d like to acquire additional resort properties, primarily in coastal areas is what we’re looking at,” he said.