WESTLAKE, Ohio — Emerald Hospitality Associates, Inc., was profiled last week in Hotel News Now in an article written by Jeff Higley. The original posting can be found here, and is reposted below:
Emerald executives seek gems for expansion efforts
Emerald Hospitality is taking measured steps on its journey to growth.
The Westlake, Ohio-based hotel management and development company with 22 hotels in its portfolio—with two more under construction—continues to add a couple of properties each year as it looks to expand its employee-centric approach to more markets, according to its executives.
“It’s changed over time, but in its purest sense it’s a hotel management company,” said CEO Jim Gerish. “But we also develop and build hotels and we set up an investment vehicle so we can acquire hotels.”
Emerald’s portfolio includes a number of Hilton, Marriott International and Hyatt Hotels Corporation properties. Emerald looks to add more properties in those companies as wells as adding InterContinental Hotels Group to the mix, executives said.
The company is building its first dual-branded property—a Home2 Suites and Tru by Hilton project in Williamsville, New York. Gerish said the operational advantages continue to expand in the dual-brand space. Among the advantages is most brands are now allowing the hotels to have cross staffing with one general manager and two assistant managers.
“Because they’re connected buildings, you share back of the house, you have one swimming pool, and most of the time they’ll allow you to share a fitness center,” Gerish said. “They might be open to sharing the front desk, but at this point they generally don’t like that. The check-in experience in our business is changing, which is making them think differently about that.”
Emerald executives are eager to get the project open so they can learn more about the dual-brand concept.
“To be able to quantify what those savings are, we couldn’t say right now but there are going to be savings,” Gerish said. “You’re going to have some level of efficiencies from an operating standpoint, but it’s more savings in the development and construction costs.”
The company manages the properties it has ownership stakes in and also has straight third-party management contracts, according to the CEO.
“Typically if we’re going to do a development we’ll partner through our investment vehicle,” he said.
Emerald’s Nimbus Investment Fund allows it to structure deals as single-purpose limited partnerships that act as the general partners or managing member of the limited liability company, according to Jeff Gerish, chief development officer.
“Last year we were able to do a two-hotel fund; this year our goal is to do a three-hotel fund,” said Art Borowski, Emerald’s CFO.
Jim Gerish said the company’s investor group has grown because Emerald has focused on buying quality assets. A primary target for the investment group is people that can invest $50,000 to $200,000 in a fund.
“The biggest challenge for us has been finding a large capital partner, but now we’ve got this group of 40 investors that makes it successful,” he said. “We were always looking for the big insurance company, the big Wall Street company, but were not able to find that. We had to slug it out one investor at a time.”
The appeal of spreading risk and diversifying assets are large attractions for investors, he said.
“Most of them have found hotels to be a good investment,” Jim Gerish said. “They’re always asking Art and Jeff when the next investment is taking place.”
A recent fundraising for a hotel in Florida found the fund oversubscribed by 50%, so it became a fund to acquire two hotels—a Hampton Inn in Florida and a DoubleTree Hotel in Massachusetts, the executives said. The additional hotel was welcomed by investors.
“A good selling point is that they’re such different properties,” Jeff Gerish said.
“Not only do they have two different levels of service, but their seasons complement one another, too,” said Lori Berhent, VP of revenue generation and business development.
Emerald’s bread and butter has been select-service properties, but company executives are not afraid to expand beyond that when opportunity knocks—such as the DoubleTree deal in Massachusetts, Borowski said.
“We’re at a tipping point now where if the industry stays somewhat vibrant and we stay on our tried and true one-, two-, three-hotels-a-year formula, we’re fine,” Jim Gerish said. “If we had a portfolio of 10 hotels that came across our desks tomorrow we have good flexible management team to take what comes.”
The funds have no time constraints to place money or return investments, Borowski said.
“Our growth is concurrently the management side and the acquisition side,” Borowski said. “I don’t think 30 is that far out of reach.”
A hands-on approach
That growth pace is just fine for a company that specializes in hands-on management, according to Borowski.
“One of the unique things about our company is the majority of our 21 corporate employees have worked in hotels,” he said. “That’s very important. We understand hotels, what they need, what the associate needs, and what the guest needs.”
Sharing the knowledge from the top of the management team to general managers to front-line personnel is an important aspect of the company’s success, Jim Gerish said. Emerald also has a strong leadership development program, Berhent added.
“We have story after story of managers who worked their way up,” Berhent said. “It’s about raising the next generation of hospitality professional.”
That task is more difficult than ever, Jim Gerish said.
“As an industry, we really have to think about the labor force,” he said. “Having people to take care of the hotels is a challenge in some markets. (The industry has) to work on creating a work atmosphere and salary structure that makes entry level into our industry attractive. That’s a challenge from an operational standpoint.”
Some fundamental facets of service often need to be taught to millennials because they’ve grown up in an environment that features so much self-service mentality, Jim Gerish said.
“They don’t come to the table like older people that understood service,” he said. “When you’re young, you’ve got to learn to fend for yourself now; service isn’t as natural to them.”
The main message to millennials is that it’s OK to make a procedural mistake, but don’t sacrifice the feeling of hospitality that is provided, he said.
“Young people who really understand hospitality really have a good future ahead of them,” Jim Gerish said.
The executives said they are proud of the company’s Emerald Foundation, which partners with hotels to raise funds for local charitable organizations—another step it takes to empower employees.
“It’s a grass-roots effort and what matters to (property employees) and what motivates them,” Jim Gerish said.
The Emerald name comes from a confluence of three influences: Cleveland’s “Emerald Necklace” park system that drapes the city, the green color of Michigan State University, of which Jim Gerish is an alumnus, and the implied quality of an emerald.
“We didn’t want to name it after ourselves,” Jim Gerish said of the 19-year-old company. “So we looked at three elements—where we’re from, what led me to this point in my life and the focus on quality—and Emerald was born.”