NEW YORK — Successful growth at Davidson Hospitality Group isn't purely about size of portfolio; it's also about maintaining quality partnerships.
Davidson President and CEO Thom Geshay said the strategy of forming the right partnerships has benefited his company during downturn environments.
Geshay said 2021 was a record growth year for Davidson; the company added 23 hotels to its portfolio with nearly an even split between acquisitions and management contracts.
"We did 11 acquisitions and 10 management contracts and then we opened two new-builds," he said. "The real success on the acquisition side was we placed about $750 million of equity for our partners."
Davidson continues to be selective on deals and the partners it chooses to work with, he said.
"We don't set growth goals based on number of hotels. We want to stay focused on working with the right partners," he added. "If you look at the people we work with, it's all sort of the [real estate investment trusts] and private equity companies; we sort of want to stay that way."
Geshay said these partnerships bring "stability during a downturn."
In May, Davidson was selected by global private investment firm Starwood Capital Group to manage seven branded hotels under its Davidson Hotels operating vertical. These hotels include the 298-room Aloft San Francisco Airport, 418-room Westin San Francisco Airport, 275-room Le Méridien Atlanta Perimeter, 600-room Sheraton Memphis Downtown, 403-room Sheraton Columbus at Capitol Square, 194-room DoubleTree Suites by Hilton Columbus Downtown and 506-room Embassy Suites by Hilton Nashville Downtown.
In February, Davidson was selected to operate the 107-room Lorien Hotel & Spa under the company's Pivot lifestyle operating vertical. The hotel is located in Old Town Alexandria, Virginia.
Davidson Hospitality currently has 78 hotels in its portfolio, which Geshay admits is smaller in comparison to its peers, and "that's OK," he said. Most other third-party managers have "200, 300, 1,800" hotels in their portfolios, he added. Upper-upscale and luxury properties make up the majority of Davidson's portfolio.
Operating Verticals Allow for Hands-On Management
In 2021, Davidson restructured and rebranded, which included more clearly defining its operating verticals: Davidson Hotels, Davidson Resorts, lifestyle-focused Pivot and Davidson Restaurant Group.
Davidson's sweet spot is the "more complicated" full-service hotels and resorts that are branded, independent and carry a heavy focus on ancillary revenue generators such as food and beverage outlets, spas, beach clubs and membership clubs, Geshay said. Thus, it requires a dedicated team for each asset type.
Geshay said this helps ensure that owners are getting "best-in-class service." For example, its lifestyle operating vertical Pivot has 30 hotels. The Pivot team can focus just on those.
"They can be laser-dialed-in on making sure those assets perform, do well and those owners are taken care of," he said. "The owners of those properties, they want hands-on management."
However, collaboration among each vertical does remain, Geshay said. Davidson Restaurant Group is dedicated to operating restaurants across the entirety of Davidson's portfolio.
With these verticals in place, Geshay said he's confident that even if the company's portfolio grew to 100 hotels, the hands-on care won't be lost.
Growth Wins
Throughout the pandemic, Geshay has noticed that Davidson's resort and lifestyle hotels have performed a bit better in terms of revenue growth compared to his larger, branded convention-center hotels. As it stands now, with group business returning, those hotels are achieving percentage growth.
"We're seeing good growth today on the revenue side in our hotels division," he said.
Since launching the resorts division in 2021, Geshay has also learned that investors want to be where the resorts are, especially if corporations continue to stall on bringing employees back to their offices.
"Not only do I think resorts are great and we're crushing it on the resorts side, but investors really like that space today, too," he added. "I see outsized growth in resorts."
Davidson is now starting to look at resort locations across Europe and the Caribbean, including all-inclusive resorts. But Geshay said his company has not closed on any deals yet as Davidson is still in the learning stages of this asset type.
"We've always focused on the U.S. As we've become more sophisticated as a company, we have the capability to really operate anywhere in the world at this point," he said. "When you venture out of the U.S., things like all-inclusive, lease programs, you have to be a little more creative."
Tackling Labor Challenges
Geshay said his team believes the key to staffing is retention.
"We're at about 88% optimal staffing now, which is better than where we were about a year ago, but still short of where we'd like to be. And that may be the new normal, I don't know," he said.
What Geshay does know is that if Davidson isn't turning people over, it has a better chance of maintaining a good labor base.
Geshay said promoting employee development is key to retention. Davidson has its in-house Davidson Academy, which includes a learning and development team that helps create content allowing employees to learn and grow through certifications.
"We can turn a great shift manager into a supervisor," he added.
He also knows that environmental, social and governance initiatives are important to employees today. Davidson recently completed its team member engagement survey among corporate staff, and the question that garnered the highest rating was "Do you feel like you work in an inclusive environment?"
"Our diversity, equity and inclusion team is doing a great job. And you can't just talk about it, you have to live it," he added.