IRVING, Texas—Omni Hotels & Resorts is on the lookout to double the size of its 50-hotel portfolio primarily by expanding its presence in the U.S. While infill sites are hard to find, that’s what tops the wish list for the privately held company, according to Mike Garcia, the company’s CFO and senior VP of acquisitions and development.
“The ultimate goal is to continue to grow the company and grow our niche in the U.S.,” Garcia said during a phone interview. “We also considered expanding outside the U.S. but our focus is to fill in the gaps in the U.S. and pursue the opportunities that are currently available.
“We’re going to continue to be opportunistic investors and expand our management portfolio.
We’d like to have 80 to 100 hotels, and we’re working for that.”
The brand, which is owned by TRT Holdings, has four hotels under development, including the 800-room Omni Nashville in Tennessee, which is scheduled to open late next summer.
“The preference would be to buy an operating asset,” Garcia said. “It makes the returns a lot easier when you are getting cash flow off an operating asset. In most markets it doesn’t make a lot of sense to build new hotels. The new build costs are higher than building a new property.”
The executive said Omni’s recent purchases, including the 2010 acquisition of the Omni Amelia Island Plantation (249 guestrooms and 335 villas) in Florida, have been calculated additions to the portfolio.
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Mike Garcia Omni Hotels & Resorts |
“We have been pretty opportunistic buyers to this point—we have looked at deals off market that have been successful,” Garcia said. “Our return thresholds are typically higher than most folks raising equity in public markets.”
Filling in the gaps
Garcia pointed to specific markets that are holes in Omni’s offerings in the U.S., including Seattle, Phoenix/Scottsdale and Miami.
“We have a property on the outskirts of Denver (the 390-room Omni Interlocken Resort in Broomfield, Colorado) but we’d like to be in downtown Denver as well,” he said. “And there are certainly other locations we would like to have an additional Omni in, and we have been looking in those markets.”
The company’s website lists Boston, New York, Washington D.C., Miami, Atlanta, Chicago Houston and Los Angeles as markets in which it would like to expand.
“There are enough secondary locations and submarkets in those large cities to support growth in them,” Garcia said.
“There’s not a lot on the market—there’s still a gap between the buyer and seller on pricing,” Garcia said. “There’s still a lot of uncertainty about where the economy is going, but we think the next two or three years will be good for us and the industry, and we’re going to have some really good pricing power in the next couple of years.”
Forty-seven percent of the company’s business is on the group side, while business travelers comprise 36% and leisure travelers represent 17%, according to Omni literature. While that mix requires a fair number of large hotels, Omni is also striving to fill a niche with smaller hotels, according to Garcia.
Recent projects including the opening of Dallas last year (1,000 rooms), the new Nashville hotel (800 rooms) and Fort Worth (614 rooms) “gives the impression we’re all about big boxes,” he said. “We would like to have smaller executive retreat type of resorts with very good meeting space coupled with the amenities of a resort.”
He pointed to the acquisition of the management contracts of the 365-room Omni Mount Washington Resort in Bretton Woods, New Hampshire, and the 216-room Bedford Springs Resort & Spa in Bedford, Pennsylvania, as prime examples of that philosophy.
Omni would also like to increase the number of management contracts in its portfolio and is using its Allegiance Hospitality Services division as a way to do that.
But make no mistake, Omni plans to remain entrenched in the convention-center hotel space.
“The hotels are complementary to the centers, but they’re also in great locations in financial districts or around the entertainment areas,” Garcia said. “It helps in the shoulder times to drive additional demand when the conference center isn’t in use.”
A regional flavor complements hotels
That’s where the added regional aspects and local flavors of the hotels prove helpful, according to Garcia.
“We like to bring local flavor into the hotels—for example, Nashville will be connected to the Country Music Hall of Fame (and Museum), and in Dallas we had 7,000 individual pieces of art commissioned to local artists in the hotel to show off the hotel … many local people use our facilities on the weekend because they feel it’s part of their environment.”
Garcia said there is no “perfect fit” in terms of the size of hotels it is looking to buy or manage.
“Nearly 50% of our business is group so we want to make sure there’s a good ratio of rooms to meeting space,” he said. “It’s got to be something that fits well into the local market, a high-quality asset and a good location. For the most part that means downtown, urban areas with some resort destinations mixed in.”
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| The 614-room Omni Fort Worth Downtown in Texas is an example of why the chain’s business mix includes 47% group business. |
Garcia said international growth isn’t entirely out of the question, particularly in Mexico and Canada.
The brand has two properties in Mexico (Cancun and Puerto Aventuras) and Garcia said it eventually would like to add more resorts there. Omni’s website lists Cabo San Lucas, Guadalajara and Mexico City as target markets in Mexico. It also places Puerto Rico, the Virgin Islands and Grand Cayman Island in that category.
Omni has a property in Montreal and lists Calgary, Edmonton, Toronto and Vancouver as target markets in Canada.
Meanwhile, the chain has some offshoot brands that it wants to grow, but has no plans to acquire or develop a select-service brand, Garcia said. It has explored adding to its Mokara signature spa offering but won’t rush into a rapid expansion.
He said Mokara works well when it’s sitting beside an Omni, and they can combine some of the sales efforts and management structure. Coupling that with a small hotel with about 100 rooms to attract high-end leisure business is the direction of that product, he said.
Garcia said Omni’s goal is to fill some of the markets that it doesn’t have a presence in rather than adding another brand to the mix.
“If we think there’s the right opportunity there and it’s a good investment for us, we would do that,” he said. “We’re long-term holders. Our ownership likes the real estate piece of it. A complex deal that takes 18 to 24 months, being long-term holders, we can view transactions like that a little differently.”