The Chesapeake Point of View

Ramping Up Chesapeake Portfolio Gains Momentum

Ramping Up Chesapeake Portfolio Gains Momentum

November 07, 2011

GREENBELT, MD—Chesapeake Hospitality has always taken an opportunistic approach to growth but with many owners seeking out highly skilled hotel management firms with a proven track record of performance, those opportunities seem to be increasing in number in 2011 and beyond.

The third-party hotel management company, based here, was formed in 1957 and has 18 properties in its portfolio, including three hotels that have been added thus far this year and four that were added in 2010. In addition, at press-time, Chesapeake was in discussions to take over management of a limited-service property in Florida, according to Joe Smith, executive vice president, Chesapeake Hospitality. Smith attributed what he refers to as “pretty substantial growth” to the company’s narrow focus.

“As a pure third-party company, we’re rare birds these days. We’re not married to any brand and we have both domestic and international owners,” said Smith, who added the company expanded into select-service properties after he joined in 2010, when the Chesapeake name was actually introduced. Chesapeake operates properties within the brand families of Hilton Worldwide, Starwood Hotels & Resorts Worldwide and IHG, as well as independent hotels.

Smith noted that the company has become something of an expert in turning around underperforming properties and explained how that’s done. “Our goal is to come in and get revenue management straightened out as quick as possible,” he said. “The real trigger for us is that we do not typically go with the brand revenue management program.”

Smith noted the company prefers to manage revenues through its corporate office instead. “We really take time to look at it five, six times a day. The decision we’re making today will be revenue for four, five months from now,” he said. He also pointed out that while most systems take a 30-, 60- or 90-day outlook, Chesapeake generally looks in smaller time increments, such as two weeks. “The numbers may get smaller, but you can see the trends rather quickly,” said Smith. He added that with some of the corporate revenue management programs “there’s a tendency to set it and forget it.”

As an example, when the company signed an agreement earlier this year to operate the 199-room Holiday Inn Palm Beach Airport Conference Center in Florida, management realized the rates for the upcoming summer season had been pre-loaded and were offseason rates, which are lower and could have cost the property substantially.

Smith also cited the Holiday Inn in Columbia, MD, as another potential turnaround story, which the company took over management of in July of 2011. He noted they’ve been able to realize a 20% RevPAR increase prior to any renovations. “It’s done extremely well,” he said.

Smith also noted that during 2009, for example, 93% of the company’s hotels gained market share. He further noted, “Our owners have been extremely happy with the performance of their properties,” he said.

This year the company also added the 104-room Candlewood Suites in Clarksville, IN, its first extended-stay property. In addition, Chesapeake also ventured outside of hospitality for the first time this year when it inked an agreement to manage Hackerman-Patz on the St. Joseph Medical Center Campus in Towson, MD.

Smith acknowledged that rates remain a challenge for the entire industry, as well as for Chesapeake’s hotels. “We’ve got to reclaim rates. We always look at what happens in our individual comp set and we’re always testing the market. We don’t go six or eight months and see how it’s working out, we’re constantly trying to push that,” he said.

However, while Smith acknowledged the need to push rate aggressively, he recognizes it’s something of a balancing act. “You can’t put an owner in a situation where he’s standing tall on rate but he’s writing a check,” he added.

But it’s not just the focus on rates and revenue management that Smith attributes to the performance turnaround of many of its properties, it’s also a strong focus on sales efforts, which may be more atypical than one would think. “A lot of hotels claim to have outside sales people but they never go outside,” he said. “Research helps. We look at a small one- to five-mile radius and get a complete list of companies in that area. We analyze that and talk about their business needs. If we talk to a company and they have nothing, we won’t knock on that door again,” he said. He further added, “Some companies have an annual sales blitz, but every month we’re on them. You have to be out there in the market everyday.”

He noted the company’s sales efforts extend to social media as well, and the impact has been significant. “We’re on places like Facebook and Twitter,” said Smith. “I’ve been surprised by some of the followers. I didn’t know it would be a booking engine. In this day and age, you’ve got to do it.”

While adding to its portfolio is important, Smith said the company continues to take a measured approach to growth, and geography is a factor. “Anything east of the Mississippi we can manage,” he said, adding the company would take on properties west under the right circumstances. Smith also noted he would consider partnering with other franchise organizations if he felt it was a good fit.

That measured approach also applies to distressed properties, which may have gone into foreclosure or default. For the most part, the company is not interested in those types of deals because, as Smith said, “We don’t like being babysitters.” He added, however, “If we think we can help move the needle and turn it around, we will consider it.”