Kokua Hospitality eyes growth on the West Coast
Kokua Hospitality eyes growth on the West Coast
10 JULY 2018 7:05 AM

Kokua Hospitality prides itself on its smaller, more entrepreneurial team that allows it to give owners a personal touch, something it hopes will make it a leading management company in the industry.

REPORT FROM THE U.S.—Kokua Hospitality’s goal is to become the go-to independent, third-party management company on the West Coast and Hawaii, said company President Kirk Pederson.

Pederson described Kokua Hospitality as being the most mature startup company in the business. Kokua formed 12 years ago to be Chartres Lodging Group’s affiliated third-party management arm, and it’s only been in recent years that Kokua has leaned into the third-party business, he said.

Over the years, the company has been involved in more than 25 hotel projects with all kinds of owners, from large institutions to 29-room, high-end luxury resorts. The property type doesn’t matter, Pederson said, because what really matters is making sure they work with owners who have the same vision for the properties.

The company’s name comes from the Hawaiian work for “to help” or “to assist others,” he said. It was the name of an office where Chartres Lodging has a site in Japan, he added, and it seemed fitting.

A personal touch
Although Kokua started out in Chicago, it later moved to San Francisco after observing all of the consolidation happening among management companies, Pederson said, and it has an office in Chartres Lodging Group’s building. This allows the companies to share resources, including having the same CFO, human resources VP and analyst team, he said.

“We’ve been able to leverage all the information Chartres gets on the ownership side and use it to our advantage on the management side to provide owners with a larger suite of services when they hire us as a manager,” he said.

What differentiates one management company from another is its ability to work with the owner specifically and be hands-on, Pederson said. It’s also about knowing the markets.

“What we’ve found is that there are a lot of owners of assets that need major turnarounds that don’t get the same level of service or hands-on involvement from senior teams with all these larger management teams,” he said. “There’s been so much consolidation.”

The larger companies have done a great job, he said, but they’re all located on the East Coast. Many West Coast companies were acquired by or merged with companies in the Midwest or East Coast, he said.

Growth strategy
Kokua’s growth will mostly be organic, Pederson said, so it will look at potential merger and acquisition possibilities on the West Coast.

“We think if we could get a little more scale, organically or through merges and acquisitions, it will only help in our expansion plans on the West Coast,” he said.

Entry markets along the West Coast that aren’t as populated as San Francisco and Los Angeles are great targets, Pederson said, and the company is particularly interested in Portland and Seattle as well as the San Diego area. As always, the company will continue to be bullish on Waikiki Beach and Honolulu in general, he said.

The company will look for properties with more transient business without much meeting space or group business, he said. The ideal room count ranges from 150 to 300.

Kokua’s focus will be growing its presence on the West Coast, Pederson said, but it will also manage hotels in other cities. It has helped a group in New York over the past two years to launch a brand-new health and wellness hotel concept called Assemblage, he said. The company wanted a manager that wasn’t tied to a brand that could create a totally new product.

Everyone knows Kokua is part of Chartres Lodging Group, he said, but most don’t realize it’s a third-party management company. Of the 13 hotels in its current portfolio, he said, only four of them are associated with Chartres.

“We’re trying to give Kokua a name in the industry,” he said. “We want every institutional owner and private owner on the West Coast when they’re thinking about hiring a nimble, smaller management company to help work through whether it’s a transition issue or a long-term manager to include Kokua in that list,” he said.

If he were sitting in New York as part of a large institutional ownership group with an asset in Monterey or Carmel in California, Pederson said, he wouldn’t want to hire a big East Coast management company to run the property. Instead, he’d want someone in the market who is a quick trip away to be able to be up close and personal with the asset, he said.

Kokua is working with the Hotel Becket in South Lake Tahoe where the company is working with an owner to convert a portion of the property into a hotel within a hotel, he said. It has a separate address and the company will bifurcate it on the online travel agencies to get double the exposure for the product. The property will also have a local beer grocery on the first floor that serves coffee in the morning, he said.

The Carmel Mission Inn is starting a major renovation this year, Pederson said. The Carmel market is an interesting one that caters to more mature clientele, but that’s been changing, so Kokua is changing the product to cater to all demographics as younger travelers are coming from the San Jose, San Francisco and Los Angeles areas.

“That’s the kind of thing we do,” he said. “We go in and we work with the owner and try to maximize the revenue for the asset.”

Management philosophy
A good management company is a collection of good, hardworking people, Pederson said. When Kokua started, it moved to San Francisco and took a while to find people in the market because they didn’t know the company. Within the last five to nine months, people are seeking out the company for work, he said, and that’s in part because all the industry consolidation has stripped companies of the entrepreneurial spirit that comes with being a smaller company.

“We’ve been very fortunate to pick up some great people,” he said. “I know that’s going to really help us in our growth plans. I hate to sound cliché, but it’s all about the people. They’re doing it every day. People working here are entrepreneurs. They’re not brand management people. They’ll manage branded hotels, but they want to maximize the value for us, not the brands.”

To encourage this culture, the company allows and encourages the senior management team, the corporate team and its hotel teams to invest in the hotels, he said. If there is a Chartres Lodging Group deal, he said, the company opens up the investment deal to all of its employees.

“We literally got distribution checks for an asset we sold that we were involved in for four years,” he said. “We’re having a closing party. Those going to the party range from secretaries to the CEO. It doesn’t matter if you invested $5,000 or $100,000. We all made money, and we’re all in it together.”

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