For hotel management company HHM, with its diverse portfolio of branded and independent properties, 2017 and 2018 represent more firsts, including new brands and new locations.
ATLANTA—The last few years have been pivotal in terms of growth for management company HHM, and 2018 will be no exception, with several notable projects set to open this year.
As an operator of both branded and independent hotels across the United States, HHM has to stay on top of all of the challenges affecting hotel management today, from training to distribution to renovation, and everything in between, said HHM President and CEO Naveen Kakarla.
Naveen Kakarla, HHM
“I am a very positive person, but this is a tough operating environment, and it’s been a tough operating year for all of us in this industry,” he said.
Despite the challenges facing the industry, HHM has learned a lot over the years about how to make the tough decisions and stay true to its vision, Kakarla said.
HHM’s branded hotels
About 60% of the company’s approximately 135 properties under management are branded, ranging from select-service to full-service and soft-branded hotels.
“We tend not to overthink that branded vs. independent discussion—we think about a hotel and what it needs to drive distribution,” Kakarla said. “But it’s exciting when we take on a brand we haven’t partnered with before.”
He pointed out several firsts for HHM within the last year on the branded side of its portfolio, including taking on management of two Westins—HHM’s first with the brand—the Westin Philadelphia and the Westin Dallas Fort Worth Airport. The company also is in the process of converting a former Sheraton in Pleasanton, California, into its first AC Hotels property.
Kakarla said it’s exciting to work with brands new to the company, but he’s equally excited about opportunities to make traditional brands relevant again—as is the case with the company’s Sheraton Miami Airport Hotel & Executive Meeting Center, which it purchased last year and spent $10 million on the renovation.
“I’m on the advisory board for Sheraton with Marriott, and we’re working to give feedback and support for their focus on revamping the Sheraton brand,” he said. “An issue with Sheraton is the disparity between the best ones and the less-best, so it’s been about consistency. What Marriott is doing to renovate and reposition the existing portfolio will be very impactful. It has some of the best flagships in the U.S. and the challenge will be to focus in on (revenue per available room) index and customer loyalty and make sure they pick a swim lane.”
He said HHM’s work repositioning and renovating the Miami property was supported by the fact that the hotel’s proximity to the airport means lots of inbound travelers from Latin America, where the Sheraton brand has a lot of integrity.
“Airlift and investments in Miami Airport is at historic levels,” he said. “Sheraton is internationally renowned. I’ve been to the Sheratons in Rio and in Argentina, and they’re beautiful. Those are feeder markets from which people are basing their buying decisions. So much of my inbound travel in Miami comes from (those Latin American) markets, so I feel protected.”
Independents and soft brands
While independents and soft brands make up the minority of HHM’s managed portfolio, Kakarla said there’s a big focus within the company on setting these properties apart on all levels, from service to food and beverage and more.
“Coming through the recession, we learned our independents were more sensitive to the drop, but they recovered (better),” he said. “So we’re thoughtful about how we own those hotels. As we’ve grown, we’ve learned that through marketing and e-commerce, we’re able to drive a lot of loyalty to individual brands, and today’s consumer is much more accepting of a hotel validated through their own research. Customers can differentiate very well today.”
The company launched its first independent hotel in New York City in 2007. In the 11 years since, HHM has been growing its Independent Collection portfolio across the U.S. and defining the strategies that work best for these hotels, Kakarla said.
“Today we have many people doing e-commerce, F&B, setting some standards, training around service and so on,” he said. “The end goal is web-direct bookings and return guests and high GSS and TripAdvisor scores. Today, the web-direct (bookings) at most of our indies is approaching 30%, and we have learned how to sell into channels that are more focused on independents.”
Distribution strategies have been a big focus for Kakarla and HHM, and that plays heavily into the company’s decisions to affiliate a hotel with a brand, a soft brand or collection, or to keep it independent.
“We’re agnostic as to the ways of gaining distribution and find ourselves mostly driven by (net operating income) per key,” he said. “The science of distribution for us is driven by size of hotel, location and soft brand options. The calculus is simply the cost of the brand vs. the contribution of the brand.”
Beyond that, service levels and F&B are big focus areas for HHM’s independents, Kakarla said. The company hired Josh Levine as SVP of restaurants and bars in 2017 to help the company set F&B apart as a differentiating factor.
“It can be a Michelin-rated restaurant or a food truck—what matters is that it’s real and interesting and something your guests want. We’re pushing hard in that area,” Kakarla said.
Notable openings in 2017 included the company’s first hotel in Seattle, the Pan Pacific Seattle, located near Amazon headquarters; and the company’s repositioning of the Freepoint Hotel near Cambridge, Massachusetts, with the launch of a new restaurant.
This year, HHM will open the Cadillac Hotel & Beach Club in Miami Beach, Florida, as part of Marriott’s Autograph Collection (converted from a Courtyard by Marriott).
Also set to re-open this year after an extensive two-year renovation and repositioning is the Hotel Figueroa, in downtown Los Angeles near the L.A. Live mixed-use entertainment complex.
“It easily has the best location of any hotel in downtown LA, and it will have the best F&B,” Kakarla said. “What started with a Moroccan theme that was irreplaceable is still there in vibe, but with a modern take. I think we did a great job of balancing and respecting the history of the building.”
That type of renovation and repositioning project is a particular joy for Kakarla.
“This is a meaningful repositioning and rebuilding year for many of our hotels,” he said. “Along with the obvious renovation of spaces, (there’s) the renovation of culture and service delivery and a relaunch of purpose. You have to spend equal energy not just on e-commerce and branding, but as much on your people and service delivery and on having everyone looking in the same direction with contagious enthusiasm for what you’re about to deliver. That drives the feeling you get when you launch a new product.”