WCLC: Have capital, must deploy
VANCOUVER — In today’s markets in Western Canada, larger is not necessarily better. David Larone of CBRE moderated a panel consisting of family-owned small- to mid-size hotel companies, to get their take on the best ways to deploy capital.
Ron Mundi, from Mundi Hotel Enterprises, started in Kamloops 16-17 years ago, and now has four hotels in Alberta and B.C. Key people are the main ingredient to his company’s success, he told the panel. When looking for deals, their strategy is to buy and reposition hotels.
“We’re looking for properties with low (30 to 40 per cent) occupancy and low ADR, that we can make successful. I can make a difference,” he said, adding that they had already done that with 16 properties. “I’d love to build a new hotel, but I don’t have that experience. I don’t want to take the risk of construction — I want a turnkey deal.”
“We learned three primary things out of 2014,” said Ryan Pomeroy, president and CEO of Pomeroy Lodging LP, whose company started with his father in the mid-'90s, and has now owned and operated 40 hotels. They currently have nine in B.C. and Alberta for a total of 2,200 rooms, including the Delta Hotel in Kananaskis, and are based in Grande Prairie, Alberta.
“First, the balance sheet can always be stronger. We made some changes after 2009, and now have even more constructive ambitions. We also learned that vertical integration is wonderful when times are good. Our strategy was to have several different product types within one market — corporate, crew, business and leisure. In 2009, that separation went out the window and about half of our properties really suffered.”
Barry Remai is vice-president of Remai Hospitality Group, which has been in business for 50 years, and currently has four properties in Alberta and one in Saskatchewan. Four are branded and one is independent; they manage two and co-manage three.
“Before 2014, we were searching for land and looking for off-market deals,” Remai said. “We thought RevPAR would go up forever, and were looking for the best assets at reasonable prices. Post 2014 we are not looking for land. We don’t want to catch a falling knife by getting in too early. Now we’re asking, is it too early to get in? We realized that we’re not very diversified, being in Saskatchewan and Alberta, pinned in by resource prices.”
Carolyn Genest is chief strategist at d3h Hotels, based in Saskatoon, which has 14 hotels in Saskatchewan and Alberta including Days Inns, Motel 6 and their own brand, Home Hotels. “We have a group of investors come in — the investors have confidence in us. We are an ownership and management company — we are investors ourselves,” she said.
Asked where her company is looking for deals, she answered, “We’re looking at Manitoba. From the CBRE reports, it looks pretty attractive, although it is hard to gauge three years down the road. We have looked at the U.S. too — but in Saskatchewan and Alberta, we know people’s buying habits. Eighteen months ago, we looked at financing, and we got it. Lenders see us as being a good operator and are willing to work with us,” she said.
Plans for the future
So what’s next? asked Larone.
“We’re looking to diversify our geography,” said Remai. “Do we really want to put another chip in [the Alberta and Saskatchewan economies]? Not really — we will try and do a deal somewhere else.”
Genest says their immediate plans are conservative. “If you have a market like Saskatchewan, it’s good to pay down debt. Our oldest property is 19.5 years old. We’re being conservative, which gives us the ability to take advantage of opportunities. That’s a good place to be during a downturn market."
“In the 2009 downturn, we learned that we had a good deal. We had a lot of cash available and we put it all on red!” said Pomeroy, talking about their acquisition of Kananaskis as a hedge to all their resource-based Alberta properties. “If we hadn’t found that opportunity, we’d be paying down debt or putting our money in the banks.”
“I always think positively. If there are deals outside of B.C., that’s great,” said Mundi. “You should do your due diligence, put in a full effort and have a great team — if you don’t have the right team and the right franchise, it won’t be a success.”
“I love the hotel business,” Genest summed up. “We’ve seen 20 years of change and uncertainty. Have patience that the cycle is not the same as 10 years ago. A deal will be coming up — make a decision!”
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