MILWAUKEE—Under new President Kirk A. Rose, Marcus Hotels & Resorts is ready to grow. According to Rose, that growth will come in a variety of ways: ownership, partial equity investments and even third-party management.
“We’ve got quite a bit of activity in our pipeline, some of which is through classic developer or fund relationships, but we’re also looking at other opportunities,” said Rose, who joined Marcus in January from Salt Creek Hospitality, a private equity group where he was a partner.
“We see opportunities in urban areas as well as in tertiary markets and suburban areas of major cities. While we have a lot of existing relationships in the Midwest, we also want to grow in markets in the South, Southwest and Southeast.”
A good example of Marcus’ tertiary market strategy is a 2012 deal that pre-dates Rose joining the company. In September, Marcus and its affiliate, MCS Capital, purchased the Cornhusker Hotel in Lincoln*, Nebraska. The company added the Marriott brand to the 297-room hotel and launched a multimillion-dollar renovation that will be completed later this year. The company declined to say how much they paid for the hotel.
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Kirk A. Rose Marcus Hotels & Resorts |
“We’re in those (tertiary) cities now, and we’ve had success,” Rose said. “There’s a bias, especially with investor capital from the East Coast, to shy away from those markets. You must be one of the top two or three hotels in your competitive set, but there’s no reason to shy away.”
He added the service model might need to be different and the product doesn’t need the same kinds of finishes as do hotels in top 10 markets.
“You can’t build The Plaza in Des Moines (Iowa) and think you’ll make money,” he said.
Growth through third-party management contracts will be selective, Rose said, depending on properties’ locations and profiles. With 20 properties in the Marcus portfolio, he said it wouldn’t be prudent to quickly add 10 more hotels.
“We wouldn’t take (a management) agreement in Seattle just to grow, but we would go to Seattle if it made strategic sense to do so,” he said. “One of my fears is that we grow too fast. We won’t want to risk our reputation as a good operator and partner just to add another hotel.”
Select-service lifestyle
Rose also has interest in the burgeoning lifestyle hotel niche. He admires brands like Hilton Garden Inn and Hyatt Place for their abilities to steal market share from traditional suburban full-service hotels. He also sees value in the service models of branded boutiques such as Aloft Hotels and Hotel Indigo. For Marcus, the opportunity might be in lifestyle hotels that embrace the select-service operating model, Rose said.
“We’re in the exploratory stages for this kind of product,” he said. “It’s even something we could do ourselves.”
While Rose doesn’t see Marcus expanding to markets outside of the U.S., he believes the company could find opportunities in resort properties. Again, selectivity is the key, he said.
“We would be interested in value-add opportunities where we could use our balance sheet and operating expertise to reposition properties and make them more competitive,” he said.
A family connection
For Rose, the move to Marcus was a natural progression. Before Salt Creek, which was headed by former Global Hyatt President Douglas Geoga, Rose spent nine years at Hyatt, including six years as senior VP and CFO. Like Hyatt, Marcus is a firm founded by a family that’s still very involved in the company.
“It’s very similar to Hyatt in that it is a family culture where the Marcus family is very involved in the local community,” he said. “It creates a dynamic that’s less based on short-term profits and more on long-term investment success.”
He’s optimistic for the future of Marcus and for the hotel industry, despite ongoing uncertainties in the economy.
“The leisure traveler continues to travel and business travel remains strong, but group business hasn’t come back from 2007-2008 peaks,” he said. “It’s been a time of slow, steady growth without a lot of new supply, which has helped us, but if supply comes back, we could have some hiccups.”
*Correction, 2 April 2013: The original version of the story incorrectly stated the Cornhusker Hotel is in Omaha, Nebraska.