Winston Hotels’ executives Joseph Green and Mathew Jalazo share their vision with Hotel News Now on the reincarnation of the company and how they will pull inspiration from the original Winston Hotels.
RALEIGH, North Carolina—Winston Hotels is back again.
The name Winston Hotels might sound familiar to some industry veterans. In 1994, Robert Winston III and Joseph Green co-founded the publicly traded real estate investment trust Winston Hotels focusing on developing, buying and renovating premium limited-service and upscale extended-stay hotels, and the two ran the company until it was sold in July 2007 to Inland American Real Estate Trust.
Winston also founded Winston Hospitality in 1991, which was initially created to manage the hotels owned by the REIT, but that too was eventually sold in 1997 to CapStar Hotel Company.
Now, under the leadership of Winston, Green and Mathew Jalazo, Winston Hotels is re-forming as a development and acquisition company with a very similar business plan as before, according to Green and Jalazo.
The history of Winston Hotels
The decision for Green and Winston to take the REIT public in 1994 was clear, Green said.
“I asked Bob, ‘Why do you want to take this company public, and he said well, I’d love to have a lot more capital, we can grow the business, grow the assets and have a substantial hotel company,” Green said.
After running that company for several years, Green said Winston Hotels had “a number of suitors,” which started them down a path of considering and engaging in offers.
At the time the company was sold, Green said it was an interesting period because there was no inkling of the Great Recession pending. But thankfully for Winston Hotels’ shareholders, it was “a phenomenal execution in terms of valuation for the company,” he said.
Green, who was not part of the Winston Hospitality formation, said he stayed in touch with Winston throughout the years after exiting Winston Hotels, and the two decided a few months ago to embark on Winston Hotels 2.0—and they’re making it happen. Winston will serve as executive chairman of the board and co-founder and Green will serve as the CEO and co-founder.
Green noted that the new Winston Hospitality, which was re-established under Winston’s leadership in 2007, and the reincarnated Winston Hotels, will not have any cross-ownership of properties and will not be affiliated.
The path for Winston Hotels 2.0
Though it’s been 24 years since the first Winston Hotels, Green said there really won’t be any “shift or change” with the company’s strategy.
“We’ve found that public company (the first Winston Hotels) was a very successful business strategy in terms of asset class … premium, limited-service projects have a very high operating margin,” Green said.
Jalazo, who has been brought on to serve as EVP of development for the new Winston Hotels, said the company will again focus on select-service and some compact full-service hotels under premium parent companies such as Marriott International, Hilton, Hyatt Hotels Corporation and InterContinental Hotels Group.
However, they won’t ignore the new disruptors emerging in recent years, Jalazo said, such as technology, ridesharing services and Airbnb, which he said have changed how the company will look at potential sites across the U.S. and Canada.
“I think one of the areas where we’re differentiating a little bit is, while we’re looking at major markets as well as resort destinations, we also have a very big focus on what some might consider secondary locations where we see a lot of early indicators and trends … and seeing where future growth trends are so we can be proactive in our approach to markets,” he said.
Jalazo added that it’s not the goal to just “dump another hotel in a saturated market where everybody already has a presence and there’s 10 more properties in the pipeline.” Winston Hotels will be keen on markets that have substantial public and private investment in the pipeline, a business-friendly local government and available tax credits, which are things that will “make that market prime for future growth and long-term trends in economic growth,” he added.
Jalazo explained the company’s tactic as a bit like an oxymoron: “we’re taking a broad, focused approach.”
On the acquisition front, he said Winston Hotels will pursue hotels in those specific markets where there’s an existing hotel that is declining in net operating income due to several reasons such as “the property has fallen off, they haven’t put the capital into it, they haven’t maintained it (or) inferior management,” he said.
“We can acquire it, renovate it, reposition it with a new brand and we’re even looking at some opportunities right now where it’s adaptive reuse,” he said.
And on the development side, Jalazo said the company will initially focus on those emerging markets in the eastern half of the U.S., but “as we continue to grow … as we come across opportunities outside of that geographic footprint, we’ll obviously consider them.”
What’s in the works
Green said his team has been able to pull together very quickly due to the relationships and experience they have built over the years since the first Winston Hotels.
He said the company currently has “probably *$150- to $200 million-worth of projects both in development and heavy value-add … I would say we’re looking at, I think a very strong possibility to put some projects under wraps at least pretty soon.”
Jalazo said just in the past 30 days or so, the team has been able to put together a pipeline of “roughly three to five deals” that he thinks will materialize “whether it’s development, opening or renovation completing over the next 12 to 18 months.” He said that will give Winston Hotels a great starting point and he plans to grow off that momentum in 2019.
However, the goal will be to focus on quality over quantity.
“The focus here is to make sure what we’re doing is targeted, is thoughtful and will ultimately result in … that quality portfolio that we can really be proud of,” Jalazo said.
He said since development is a big part of the new Winston Hotels’ business plan, the group has made sure they have the infrastructure and executive team in place to be able to serve as the developer of everything “ranging from limited-service ground-up to a compact full-service hotel on a funky site in a complicated township, as well as these heavy renovations and repositioning projects.”
“All of that can be handled with the team and the infrastructure we have in place today,” he said.
Green said the company’s short-term goal is to reintroduce Winston Hotels to the industry through acquiring and developing projects. Then long-term it will be all about building a “very high-quality portfolio of premium select-service and compact full-service hotels,” he said.
Jalazo said he sees substantial growth opportunities for the company in the long term.
But for now, he said, Winston Hotels needs to work through this initial pipeline and continue to build on that momentum and “let it take on a life of its own.”
“We think that a few years down the road this company could be a substantial entity that will be a major player in the industry,” Jalazo said.
*Correction, 29 November 2018: This story has been updated to correct a dollar amount.