Arbor Lodging Management grew in 2020 but is looking ahead to 2021 with a new labor model and the ability to take on new opportunities, according to CEO Sheenal Patel.
CHICAGO—Arbor Lodging Management executives say they are focused on third-party management as part of their plan to maximize success in 2021.
Sheenal Patel, cofounder of Arbor Lodging and CEO of Arbor Lodging Management, said when demand started to slow down in March and many companies were making cuts, his company made a conscious effort at the corporate level to not do anything that would “affect our infrastructure.”
Due to the job market loosening up, the company was able to bring on some “A players” to its management team in the months following March, he said.
The management company continues to bring on new talent and recently hired an SVP of finance, Patel said.
Setting up for success
In terms of company growth, Patel said executives are setting the company up to be able to take on new opportunities as they come.
He said the company has been careful in “making sure the balance sheet is clean and that we’re capitalized well here at corporate to sustain any dips that happen over the coming months.”
“We’re currently in that second dip as occupancies have pulled back because of the resurgence of the virus,” he said.
Arbor Lodging Management has been underwriting a lot of deals, and Patel said he’s hopeful in 2021 the company will be able to invest in preferred equity or purchase new hotels.
“We think there’s going to be some good opportunities coming up,” he said. “Whether it’s owners that need capital or owners that need to sell; lenders and servicers that need to sell or lenders and servicers that need management services.”
The company has been able to grow in 2020, but the main focus is to set it up for growth in 2021, Patel said.
Not a 'pure-play management company'
Arbor Lodging Management is an affiliate of Arbor Lodging Partners, a debt and equity lender to the hospitality industry, which means the management side is not a “pure-play management company.”
“We’re vertically integrated,” Patel said. “We have the ability to invest in our assets; we have the ability to own our assets; we have the ability to provide capital where needed; and then we have the ability to just manage the assets if needed.”
Being an affiliate of Arbor Lodging Partners gives the management company flexibility, he added.
When Arbor Lodging Management invests in an asset, it then has the responsibility to make sure the asset performs, Patel said.
“We do that across the board. We look at all of our assets from an ownership perspective and know that we have to perform for our owners and having that mindset is pretty easy for us to do because that’s how we look at all of our assets,” he said.
Patel said his company looks at the top and bottom line.
“In this particular market … at a lot of our assets, we’re looking at what we can do to minimize cash burn. Because a lot of assets, especially full-service assets, are cash flow negative,” he said.
Pressing through challenging environment
Communication and a focus on values have helped Arbor Lodging Management persevere through recent challenges, Patel said.
The company has weekly and monthly meetings to make sure it is holding true to its guiding principles, he said.
“I know that may sound a little cheesy, but we’ve found that it is so important to be operating with integrity during this time even if it’s not always the easiest thing. In the long-run, it’s the best thing to do,” he said.
It’s important to operate with integrity because “people are always watching,” he said.
“Whether it’s your own folks that are watching or other third parties, banks, lenders, investors, operating with integrity is part of our culture,” he said. “Other people do the same thing and that as a whole allows us to operate our properties better.”
New labor model
Arbor Lodging Management is also rolling out a proprietary labor model, Patel said.
The company has been testing and working on the model for two years. “It’s a labor model that drives uses in technology as well as cross training to formulaically provide direction to GMs on which employees should be staffed where throughout the day,” he said.
He said the company is saving an average of 14% in labor costs by using this model.
“That range goes up to 16% at some properties, but in none of our tests so far has it gone below 12%,” he said. “We’re pretty excited about that. Because along with that we’re not seeing any declines in service scores.”
Patel said service scores for the company have increased in the past two months.