Defining Hospitality

[00:00:00]
Dan Ryan: Today's guest is a passionate, driven leader with a no nonsense approach. He has a laser-like focus on providing strategic and tactical solutions. He's a results driven global
hospitality
executive with extensive operational and development experience. He is the executive vice president of of franchise, and.
development. Ladies
and gentlemen,
Keith
Pierce. Welcome Keith.
Keith Pierce: Thanks. Thanks, Dan.
Dan Ryan: It's been so, uh, good to get to know you. I know we first met at the lodging conference. Yeah. Um, we had a glass of wine in the lobby of the Marriott Desert Ridge, [00:01:00] and you were just telling me this story of the incredible growth
Yeah.
Of
from
50 hotels before the pandemic to 1200 hotels.
Keith Pierce: now.
Yeah.
Dan Ryan: Or plus or minus 1200.
Keith Pierce: Yep. it's been amazing. Yeah. Amazing ride.
Dan Ryan: and then I think about, you know, obviously the title of this podcast is Defining Hospitality, but how do you define hospitality and how do you maintain that level of hospitality throughout the growth, through this meteoric growth?
Keith Pierce: Yeah. And listen, it's, it's a, uh, it's a good question.
And, and you know, at the core of it, uh, hospitality is certainly what you know, we're all about. And I define hospitality. Uh, it's the business of caring. ultimately it's caring for first and foremost, your associates, your employees, your employees, caring for your guests, and then caring [00:02:00] for your developers or your new owners who are joining the Sonesta journey And if you don't, have At the core of it, kind of that caring dna, at least in my opinion, it's really hard to, you know, translate that down through to associates and then associates onto guests, and then your developing team onto the developing community. so at the core of it, I believe caring is really kind of the underlying, tenant, of hospitality.
Um,
Dan Ryan: I appreciate that and that really resonates with me. And then so many of the guests that we have on as well. And
Keith Pierce: I'd
Dan Ryan: love to just share with the, with the listeners or watchers. Um, I think what if we, if I could go back to that moment where we were having that glass of wine at the, at the lodging conference and to just hear, I mean, I was just so struck and impressed and, um, [00:03:00]
Keith Pierce: just
Dan Ryan: of this kind of, almost like a once in a lifetime opportunity that happened.
Yeah. So
during the pandemic. During the pandemic. So obviously to go from 50 to 1200, I think that may be unheard of in our industry.
Keith Pierce: Yeah. Um, really was a, uh, a remarkable achievement. Mm-hmm. , uh, and, you know, . If, if it, if it was accomplished outside of a pandemic, uh, it would be noted as a remarkable achievement.
But the fact that it was accomplished during the pandemic, uh, you know, really puts a, you know, a, a uh, exclamation mark on the effort. Uh, but happy to share a little bit on the journey and, and how it all came to be and how the moons uh, to take this organization from 50 to the eighth largest. hotel company In the country.
Yeah.
Dan Ryan: Eighth largest hotel company with 16 different brands. Yep. And then actually I just recently listened to John Murray, his, um, conversation with
Ong Talks. Yes. Uh, from his perspective at S svp
svc.
Svc. I'm so sorry. [00:04:00] Yeah. Um, so as far as like U two being the two main players
Yep.
Like, so walk us through the Cliff note version, if you will, because I know we're busy
and
you gotta get going.
Keith Pierce: Happy to do it. And, And, uh, you. know, With, With, uh, you know, with any, um, remarkable, uh, effort and outcome, uh, it's really a team, right? So John certainly is the architect, and, and I, I played a hand in it, but it's a team of really good people making really good decisions and strategically, you know, taking some risks, certainly during the pandemic.
Uh, but let me. let. You know, take you back a little bit and take the listeners back a little bit. So, pre Pandemic, the Sonesta Hotel Organization, which sits inside of a reit. the REIT is called svc. And, and Sonesta is 66% owned by the chairman of our company, uh, at I Portnoy in the Portnoy family. And 34% owned by the reit.
And, and Sonesta pre pandemic [00:05:00] was, you know, 50 60 hotels or so. Um, and during the pandemic, The, uh, REIT that had relationships with Marriott and I H G and Wyndham and Radison and many of the brands that we all know today. Um, those relationships, uh, fell apart during, during the, during the pandemic. So the reit, which has 300 hotels in it, uh, elected to take back the hotels from the brands.
Mm-hmm. , most notably Marriott and ihg a hundred on the Marriott side, a hundred on the ig. side, and put them into their Siesta brand.
Dan Ryan: And, and then I have a question, when, when you say it fell apart, is that because they weren't honor able to
Keith Pierce: pay,
Dan Ryan: um,
the fees or like
Keith Pierce: it was the commercial structure? It was the commercial right. So, you know, 2019 was the best year that the hospitality industry has ever seen, certainly in my 40 years. Um, and 2020 was the worst Right. in [00:06:00] 40 years. So when you go from, you know, just in terms of RevPAR And, and and the strength of the industry. When you go from the highest in 2019 and within 90 days in 2020, you know, by March, you know, the world had, uh, been introduced to and, and the industry collapsed along with many other industries.
So when that, you know, pandemic hit the commercial structure, uh, the Marriotts and the IHGs and some of the others, uh, they couldn't comply with the terms of the commercial structure.
Dan Ryan: and usually in a commercial structure like that, is it very difficult to break away in most of those contracts, or did you guys have, did you guys negotiate a different type of
Keith Pierce: contract?
It, it is, but uh, it was the decision of Marriott and I h g, uh, to, um, you know, to not move forward. Um, and without getting, you know, too deep into the technical and the legalities of it. all, um, [00:07:00] let's just say it was the right time for the two parties to separate. Perfect. Fortunately, the svc RMR Organization, John Murray, Adam Portnoy, they had purchased a esta brand many years before.
Uh, so that in the event that there was a catastrophic event, they actually had a fallback position. Oh.
Dan Ryan: So that was
Keith Pierce: it was a strategic
Dan Ryan: boss plan for the best, hope for the
Keith Pierce: worst. Yeah. And
Dan Ryan: I mean, hope, plan for the worst. Hope for the
Keith Pierce: yeah. Yeah, yeah. Yeah. So, um, So during the pandemic, uh, Sonesta was, starting to take back these hotels and dag them as Marriotts and dfl them as Candlewoods and de flagged them as, you know, residence inns and put them into the family of Sinta, Branch, Sinta Hotels, Sinta, select Sonesta, simply Suites and Sonesta Ees. And then there's Royal Sonesta. And while that was happening, I had, uh, I had left [00:08:00] a, uh, very long career at Wyndham, uh, where I was, uh, executive Vice President of the Americas for, uh, I was there for 27 years, but, but, uh, the, the majority of my time at the tail end was running the Americas mm-hmm.
And so I had left and I was running a small hospitality investment firm, uh, and the redline hotel company based in Denver. A public company, a pre pandemic had met with some challenges. Uh, the, the, uh, leadership had made some decisions, uh, that, uh, the franchise base didn't respond well to. Uh, and the market cap of the company had dropped about 66% in one day.
So I, uh, uh, was approached, uh, to meet with the of that public company in. . Denver. And, uh, I went out to Denver a number of times pre pandemic. This is around the December timeframe. of [00:09:00] 2019, December, January of 20. Um, and met with the board. And as I was flying back one day, uh, this thing called c O v. hit, and uh, that was March of, of 20.
So, uh, you know, there our discussions had stalled because of the pandemic. Uh, And then while, uh, uh, SVC and John Marion team were taking back these hotels from Marriott and I h g, um, I got the, um, uh, inclination to see if I could raise the capital to buy the Red Line Hotel Company and do a public to private transaction.
So while I was at Wyndham as executive Vice President of the Americas, we had done a deal with s V c, and at the time it was called h. B T With John Murray Mm-hmm. and we did a 20 pack of hotels, and that's when I was introduced to John Murray and, uh, you know, started a relationship, a business [00:10:00] relationship. And that was many, many years ago.
And so, uh, you know, I thought that this would be a great opportunity for Esta to potentially abide this Red Line hotel company because it's a, it's a hundred percent franchise. platform. and Sonesta, although they were taking back all these hotels from Marriott and hg, they really didn't have franchising as an underlying growth Mm-hmm. . So I reached out, uh, to, to John, uh, connected through a friend and reached out to, uh, John and said, uh, Hey, you guys are, you know, taking back all these hotels. Um, you know, I'm kind of on the, uh, front line of this opportunity. uh, we can buy this company. It's public. We'll have to put it in a bid on the stock.
We'll have to get the shareholders to approve in our favor, but if successful, we can do a couple things. One, we can get esta FraNChiS. up very quickly because we can leverage off of the platform, right? We can leverage off of the existing platform. , [00:11:00] operations, legal, finance, it, because it's all there.
It's a platform. It's all there. Although it was, you know, banged up a little bit, you know, pre, pre pandemic because some of the decisions, and then of course the pandemic, um, was also, you know, challenging time. So John, uh, liked the thesis. Uh, the second, uh, kind of, uh, tier to the thesis, uh, was around scale.
Esta is around 50,000 rooms on the owned and managed side, SVC owned and managed. side, and lh, the redline Hotel company, around 50,000 rooms. And so when you bring these two companies together, obviously you get to a hundred thousand rooms. And having had a front row seat at Wyndham from 1990 to, you know, my 27 years, that company started with just two hotel companies, Ramon and Howard Johnson.
And it is what it is today is one of the largest hotel companies in the world.
Dan Ryan: And, and with Wyndham, do you think
Keith Pierce: think that
Dan Ryan: getting to that largest.
Keith Pierce: point,
Dan Ryan: What percent of that growth could be [00:12:00] attributed to the franchise model?
Keith Pierce: It's a hundred percent
Dan Ryan: franchise, so a hundred percent.
Because
as I'm hearing you talk about, you know,
franchising really being the under underlying engine for the growth.
Um, I took a, i, I did a program at MIT on entrepreneurship and this one of the speakers that came in said, oh, he was talking about the franchise model and he said, Hey, entrepreneurs, for any business that you're in, whether you decide to franchise or. having, building a
platform
so that you could make the decision to do it, and having all the systems and processes in place,
whether
you decide to be a franchise or just carry on, it's only good.
It's only accretive to, to what you're doing.
Um, from your experience,
Keith Pierce: Fr.
Dan Ryan: I, I've just read so many times, but like, are, is franchising really the, the fastest way to grow and, and, and get that? ?
Keith Pierce: scale? Well, I'm a little biased. Um, I'm a 40 year, uh, primarily franchise, uh, growth, [00:13:00] uh, executive. Um, but objectively, um, I would say that it is for a number of reasons.
One, you're using other folks capital. you're using other individuals capital, right. To pour, put more dots on the map. Uh, it's a very elegant business because it's really a fee for service business. You just take a percentage of the gross. you're employed. The, the employees of the property are not your employees, right?
The, the capital requirements, um, at the asset are not your obligations. Um, you know, the, the underlying capital structure and the debt lends, you know, none of that's your obligation. You just take a percentage of the top line. and Your obligation is really to drive revenue to the property, and then the other support and training quality assurance.
Um, global sales, those types of things. So when you're looking to scale a business at a rapid pace, it is the most elegant way to do it. Um, and the margins on the franchise business are, uh, [00:14:00] extremely strong. The flow through on the franchise business is, is really, really impressive. What happens is once you build that underlying platform, everything that comes to the top line after your base expense is covered.
It flows right to the. . bottom line. So just by way of example, if I have a hundred employees today and I have 900 franchises, I could add 50 more franchises and only add one more body. Wow. Right? Because I just need somebody in the field from a support standpoint. But all the, infrastructure is in
Dan Ryan: I mean, that's the true definition of scale, right?
Low
lowering, operating in operating costs in proportion to net
Keith Pierce: profit. Yeah, exactly, Exactly. and then, your existing base of properties. For every increase in RevPAR, there is no incremental expense. Right. It goes a hundred percent to the bottom line. So the combination of more dots and RevPAR, you know, that drives a huge margin to the bottom [00:15:00] line.
And so the unique aspect about Esta today, is that now we have a franchise. We have a management model, and then we have an ownership structure, and then svc, um, and Senes. strategically can acquire hotels. Uh, so we'll look to acquire hotels in cities that we don't have a presence for. Royal Esta.
So it'll be in LA as an example, where we are today, or Miami Beach, um, we're actively looking to, to acquire hotels. So the Sonesta. the new Esta, the new Esta enterprise. Is really different than again, by comparison, Wyndham, which is a pure asset, light play, global asset light play, where we will always have, uh, assets in, in the esta organization uh, because of our close relationship with svc.
Dan Ryan: Great. And then so with all those dots on the map, as far as the franchisees, um, what's the benefit to someone who [00:16:00] owns a hotel to change flags to esta or. or just like to talk to you guys about, Hey, I, I'd love to know about this franchise model. What, so it's, I, I hear it's good for you as the operating company, but why is it a, how do you define the win-win for the franchisee and, and your
Keith Pierce: team?
Yep. So just back to the, um, just back to the acquisition on R lh. So once, uh, John Murray and, uh, Adam Portnoy, um, uh, approved the potential purchase for R lh, we made a. bid, Uh, ultimately we were successful and in March of 2021, we acquired the R L H business, uh, and took it private from public. We, The next day we, we took it private. I went out to Denver, uh, and for the course of 2001 21, um, you know, kinda stabilized the business, worked with our existing franchisee base of approximately 900 hotels, Uh, and then very quickly got the [00:17:00] franchise documents in. place For Sonesta, and I think that's when we chatted.
So in September of 21, we were already registered to sell franchises for, for the Sonesta brands. Ah, it'll, it'll lead back to the answer to your question. Uh, so we really weren't, uh, selling Sonesta franchises until September of 21. Oh. And by the time we ended 2021, we had one Sonesta franchise that you sold. A new one that we sold.
Uh, an open. open and operating. So here, we sit today, and if we look at 2022, which was our first full calendar year of franchise development, here we have, uh, 58 or 57 open and operating Sonesta franchises. Wow. Right. So in one calendar year, , right? So then the question is, well, why would someone come to you versus staying in their existing franchise affiliation?
And what's the, what's [00:18:00] the appeal and what's, what's the value proposition? And, and it, it, there are a number, um, but you know, just to kind of tie it back to the opening question about what is hospital. and, and, you know, caring and caring for your franchisees is an absolutely critical piece to the franchise.
equation because they're our customers. Our franchisees are our customers. The consumer is their customer, and they pay us to market to the consumer to drive them to the hotel. Mm-hmm. . But at the end of the day, we have to realize that the franchisee is the one that's paying the, the fees into the organization, which pays the payroll and the, and, and the salaries and everything else.
So having a culture of. caring For our franchisees, um, is a bit of a point of difference. Now, most hotel companies will say that they have The question is, are they really delivering on it? And have they gotten to a place where they've lost sight of it? Maybe because of the size or the [00:19:00] scale. The other aspect is that we're owners and operators, right?
We have 8,000 employees, give or take. Um, right? We have 50,000 hotel rooms, you know, so when we think about asking a franchisee, to do A quality improvement, we have to ask ourselves right? Mm-hmm. . And that gives franchisees a comfort level because they then know that they're not gonna be asked to do things that don't really give a return to them.
Because first we have to ask ourselves, and we, we manage now 220 hotels. own and manage. right? So, and so you can imagine that the capital commitment that we would have to make if we agree, with that Product improvement plan or that quality assurance or that new standard. Mm-hmm. . So that's a, that's a built uh, it's like a built-in governor.
Right. Which many companies don't have today. You know, many of the hotel companies that you see out there today, many of the big brands, they're all asset light. They [00:20:00] do not. own. Oh yeah. They do not own hotels. Right. They've spun them all out. Yeah. Now There might be some pockets here and there, but in the main, they're asset light. So we're 900 franchises, you know, 220 30. um, uh, Managed to known hotels. Um, so, uh, and then I would say last. in markets where there's opportunity, what you will find most of the time is that there's every Marriott brand, there's every I H G brand. There's probably every Wyndham brand, There's probably every choice brand.
So if you want to go into that marketplace, or if you want to stand alone outside of the sea of. That That brand there, you have to look for another option. Mm-hmm. ,And we're, we. we are a good alternative option and we're not public. Right. The Reed is public. SVC is public. We're we're a private, esta is a, a private, a private company.
And so, you know, we have obligations, uh, that we [00:21:00] impose on ourselves to achieve and grow. Uh, but we're not held to quarterly, you know, growth objectives to hit our quarterly earnings. To get to the stream.
Dan Ryan: you'd
probably blind 'em, uh, blowing them out of the water right now. ,
Keith Pierce: uh, we did in 22. Yeah, yeah, yeah. we did in 20.
Dan Ryan: Um, so I'm cur like being a, a fan of empathy and so much of this defying hospitality is like, how, how it makes you feel, how you make others feel, this, you know, the DNA of, uh, of caring, as you said. So with the explosive growth that you're having with.
Keith Pierce: your,
Dan Ryan: Just your overall
business
model, how do you scale that caring part of the DNA as well?
Did you build infrastructure? Um, how do you create accountability and measure that? Is there a way to do it? Like how do you distribute it across all of your growth?
Keith Pierce: Yeah, so it's, uh, it's certainly gotten, uh, it's gotten to be a bit more difficult in our post uh, covid, [00:22:00] uh, remote. work, Uh, zoom meetings. Mm-hmm.
because at the end of the day, it's, it's about the culture. Right. And when you're not sitting in the office every day with your teams, it is, I, I have found it harder to deliver the culture and stylistically to have people kind of, you know, move in the same direction that you believe in. Um, but it all starts with picking the right people on your team.
Mm-hmm. , you know, and they've got the same beliefs and the same passion, the same understanding at the core. , of it, particularly for the franchisees understanding that they're our Mm-hmm. , Yeah, that's, that sometime is lost on folks because, you know, they think that no, the customer is the person who walks through the front door and pays for the room.
Right. But, but ultimately, you know, for a franchisor, the customer is the franchisee and so you have to really have that. You have to understand and. , believe. that, that's the, that's kind of the, um, core to the franchising model. And if you do, then, you know, delivering that [00:23:00] caring attitude all the time. So it is scalable.
Um, it is, it is, uh, it is something that you can achieve. I do find it a little bit more difficult though, in a remote Environment. It's just hard. Now all of our, you know, many of our employees are, are remote, whereas, you know, years ago, you know, everyone was in the office and, you know, you could build the.
energy And, you know, you could, you could get, you know, the commitment from everybody and you could see across the table, you know who's in and who's out , you know, who's gonna, who's gonna make the run and who's not gonna make the run. Um,
Dan Ryan: but then also like internally with your team, you
Keith Pierce: c
Dan Ryan: know, you have a bit more control over who you're hiring and you can really hire for culture.
Keith Pierce: Yeah.
Dan Ryan: Cuz skills can always be taught, right? Yeah.
And obviously you're probably getting, pulling people who have those skills, but it's really, the culture's the most important part. Do. ,
do
you have that kind of screening for culture with your Fran potential franchisees as
Keith Pierce: well? Like
Dan Ryan: whether they would fit with this caring
Keith Pierce: dna?[00:24:00]
Uh, I would say yes and no. That's a little bit more challenging because it's once again, at another arm's length distance. Yeah. Um, you know, what you, what you attempt to do is, uh, when you look at an opportunity, you really look at a number of things, but most notably two things, the. sponsor, Meaning the owner and then the asset.
Yeah. Right. And you know, the asset. Is it the right quality? You know, the conversation we had in the elevator, is it the right property for the right brand? Is it the right asset that fits into Sonesta Select? Is it the right asset that fits into Sonesta hotel? And if you get through that, then you know, you really start to, um, kind peel back the ownership.
Mm-hmm. , know, and is the ownership and is the. sponsor, Are they the right individuals? Do they have the right intention? You know, do they add the right capital? Um, Do they, you know, what's, what's their history? Um, but in many cases, the folks that we're speaking to, they've got multiple hotels I [00:25:00] mean, they've proven themselves over and over again as entrepreneurs and as successful individuals.
Um, So, adding another hotel into their portfolio of 10 or 11 or, you know, we, we still do some, you know, one and two, you know, single. single, uh, Particularly in the economy side, and our A B V I. Uh, But when it comes to the Siesta portfolio, they're usually more sophisticated in some case, institutional owners. So,
Dan Ryan: and of the top eight hotel companies, right,
Keith Pierce: where you're
Dan Ryan: now the eighth
Keith Pierce: Yeah.
Dan Ryan: And then if you look at all the brands within those eight
Keith Pierce: companies, I mean,
Dan Ryan: It's gotta be a hundred or a hundred more. How do you, how do you guys at
Keith Pierce: sonesta
Dan Ryan: differentiate yourself to give that, you know, alternate option as you said before?
Keith Pierce: Yeah, yeah. Listen, it's, it's amazing what's occurred over the course of the last 40 years.
And, you know, number one, the consolidation in the industry, but then of course the brands creating their own brands and, and you know, there's the number of brands that each one of the [00:26:00] top six or eight companies have. Uh, so it is, it has becoming, uh, more challenging, uh, because we as industry leaders and certainly the, the developers, um, we've really cut the segment. You know, when I first started, there was probably, you know, six segments. Economy, you know, mid You know, mid without food and beverage, you know, upscale, upper upscale luxury. right Now, if you, you know, you look at, Yeah. And so, you know, we've really cut the segmentation, um, you know, in, in, in, uh, more parts.
Um, how we really try to find a point of difference is back to some of the things that we touched If there's a property that, uh, is in a marketplace, it's, it's likely there's a lot of Marriott rooms So when you go to that central res system, you're gonna be one of many Marriott properties. We have 220, [00:27:00] uh, managed properties in 55 franchise properties just on the semester side.
so that's a lot of white. space for us to grow. in the us. Just in the us right in North America. and. And, um, you know, as we were chatting, I, I, I just completed a trip, uh, back from Latin America. Uh, and then just completed, uh, back, uh, Friday of, of last week, uh, a trip from Egypt. Amazing. Yeah. Where we have presence in, in both, uh, both countries and, uh, in Latin America, we have a master developer called g h out of Columbia, and they have an exclusive to sell.
franchise. Our, our Sonesta brands and a couple of our, our R L H portfolio brands. Red Lion in Columbia, in Peru, in Chile, in Ecuador. And then in Egypt, uh, we have three hotels, one in Cairo, one in Os Juan, one in Luxor, and six Nile River cruise boats. Um, so from a, from a growth opportunity stand. [00:28:00] the Americas are now.
set. You know, we're registered to sell 16 brands from a franchising standpoint, um, you know, from Mexico to Canada Um, and, and then, uh, you know, rest of world opportunity, uh, the Sonesta name and, and, uh, the Red Lion brand name. Uh, plenty of opportunities for us to grow around the world. So we'll continue to remain focused on the Americas for opportunities where there is a lot of white space, but the rest of the world will hold us, will hold many more opportunities for.
us as well. Yeah.
Dan Ryan: Um, as you think about growth and kind of starting with a, pretty much a clean slate with a thousand hotels or 900
hotels, are, are you creating any initiatives to help the guests or potential guest to book directly through you guys, or are you guys trying to control that direct to consumer, or is it, is it an opportunity to be more [00:29:00] direct to consumer?
Rather through OTAs and, and all those other margin heating endeavors.
Keith Pierce: Yeah. Yeah. I would say that, uh, ultimately the goal is to drive consumers to your brand.com. Mm-hmm. , and, and you know, that way you're not running through the OTAs and, and paying the commission. Um, but the OTAs are very powerful, uh, drivers of business.
And, um, that's where the. scale comes in, Right. Because if you have scale, you can go back to the OTAs, and let's just say by way of example, you were paying 20% or 22% with scaler, You can go back and you can renegotiate those agreements and get it down to 16 or 15.5. right? Yeah. And so as you get the OTAs lower and lower on a commission basis, then they just become another, uh, channel for production at a reasonable commission.
Just like a travel agency, a travel. agency's 10%. So, um, but in the you. what you really [00:30:00] want to do is you want to build up your loyalty base through your loyalty, uh, club and travel Pass is our loyalty club, and then utilize your loyalty to drive consumers to your website. Because you can only give, you can only get points and we only give points if you book through brand.com.
Right. And that's really how the majors have been able. , to kind of take back the customer base from the OTAs because you can only points if you book directly with the brand. And we'll follow the same path.
Dan Ryan: I've also found that if I, sometimes I'm in a pinch, I, I usually like booking directly through the brand because usually I get a better room, um, you know, I'm not on the second floor next to the dumpster.
Yeah. Um, but I also think it's a, it's a missed opportunity for many brands when someone does book through an ota. To kind of wow them, to not put them in that less desirable room and try and change their hearts and minds to book directly through them.
Keith Pierce: Yeah. Have
Dan Ryan: you guys, have you [00:31:00] seen that in your, in your journey at all?
Keith Pierce: No. Um, that's, uh, I'm, I'm su surprised that that's been your experience. Because typically what happens is you just provide inventory and. You know, like we would never provide inventory by the dumpster , right? To OTAs, right? So we wanna give a caring experience to all of our guests, whether they come through OTAs or not.
Um, but look, the OTAs, uh, you know, between Expedia and Booking and Priceline, I go to, you know, they are powerful, powerful marketing machines and they will continue to drive, you know, consumer eyeballs, uh, to their sites. you know, if you look at the market, cap of the top four hotel companies. Price line alone is a larger market cap than the top four hotel companies.
So when you put that in perspective, What does it mean in terms of marketing dollars, right? Yeah. Um, so you have to really find a way to, to partner mm-hmm. , uh, and, and balance the relationship, uh, between the OTAs and [00:32:00] so, you know, we're working on those, um, you know, those types of, um, structures Okay.
Yeah.
And then
Dan Ryan: at what point in your career, In your career journey, did you or did the hospitality industry put its hooks in you? How did you know
this is you?
Keith Pierce: Yeah, so I really didn't have, uh, much of a choice. My, my dad was the publisher of lodging Hospitality for 25 years. Oh, wow. yeah. So we were going to the New York Hotel Show at that time.
It was in, uh, I think November and it was at the Coliseum in New York City. Oh yeah. Right. What's there now? The Mandarin Oriental and Yeah. Or Time Warner Center's Yeah, down in Central Park. Columbus Circle. Yeah. Columbus Circle. So I can remember, uh, you know, probably at the age of seven, eight years old, you know, going to the food vendors and thought this was the greatest thing you, know, you can go to, a, you can go to a trade show and just eat , you know, eat with the food vendors.
Um, but, you know, getting outta high school, not really knowing exactly what I wanted to do, you know, my [00:33:00] dad said, look, why don't you try hospitality? Cuz it has just so many, uh, unique aspects in terms. of paths You can take, you can go in finance, you can go in development, you can go in marketing, you can go in sales, you can go in operations.
You just goes on and on. and on, right? Because it is a business and it affords you travel, you know, and, um, and if you like people and you're a people person, you're social, then you'd probably find it'll be a good fit. So I did go right off into hospitality school and, uh, and then got out of, uh, got outta a Hospitality College and went right into the Waldorf Astoria.
Um, and uh, did my, did my. uh, You know, my onsite, um, operations, uh, work at the world of Astoria, and then I had an opportunity to jump out of the property level into corporate, um, ironically because it's taken me full circle in my, my career. Um, to go to Boston and start a hotel company called Hawthorne Suites with a guy by the name of Joe McInerney and Joe McInerney.
is a longtime hotel [00:34:00] guy. Sheridan Sheridan, I t t it t t. Sheridan, uh, president of DH in LA at one point in time. And, um, so he, uh, he uh, said to my father, yeah, you know, send him up. And, you know, back then there was no internet and, uh, it was a franchise company. And, and, uh, you know, when you sent out your franchise offering circulars, paper and they're very big documents.
And so I managed the, uh, mail room, uh for the Franchise offering circulars in 1986. And ironically, uh, you know, the rmr SVC Sonesta organization, uh, is based in Newton, uh, which is just a, you know, a a
stone sur away from where our offices were on 1 31 State Street in Boston. 40 years later, I'm, I'm back in Boston, uh, slinging franchises again,
Dan Ryan: Wow. Full circle. Yeah. Yeah. Um, one question I, I really enjoy asking everyone. ,
Keith Pierce: um,
Dan Ryan: it's [00:35:00] kind of a time machine question. So if you, the Keith I'm talking to right now appeared at Columbus Circle in front of your seven year old self. What advice do you ha do you give
Keith Pierce: yourself?
Uh, wow, that's a, that's a deep question.
uh, I would say that, uh, you know, uh, believe that you can accomplish things greater than perhaps you thought, alright. Yeah, I mean, who would've thought that, you know, you could pull off a hundred million dollar acquisition of a, of a franchise company during. a pandemic, You know, um, and we did it without ever leaving our [00:36:00] home offices.
It's amazing. Yeah. You know, who would've thought that you could, you know, with a great team of people, you know, build a hotel organization that's, that pre pandemic was small and relatively, um, unknown, at least in the eyes of, the, the industry from a broader standpoint to then come out of a pandemic and wake.
up, um, to be recognized, you know, across the industry as a serious player and a competitor, it's just unheard of 24 months, you know?
Dan Ryan: It's wild. It's re and I guess, and I think having met you recently and just experiencing you, I think it's, you know, I get the feeling that you're, you're always open to any and all opportunities.
Keith Pierce: Well, it was a, it was certainly a, uh, a big. Uh, Uh, awareness builder for me that, that, you know, something like this could be accomplished and, you know, during that time. you [00:37:00] know,
Dan Ryan: it's a big way.
Keith Pierce: I mean, you were,
Dan Ryan: you caught a big whale. It's amazing.
Keith Pierce: Yeah, right. Yeah. Yeah, we did.
Dan Ryan: And it's, and I know you said the moons align, but I think it's like, in this instance it's really the solar system aligned.
Keith Pierce: Yeah.
Dan Ryan: it's just so impressive and I, I just love hearing about it and I love. Your insights.
Keith Pierce: Yeah. To No Thanks. Thanks.
Dan Ryan: And I think it's really important to share this story too, because I think if, you know people listening, I think that this will act as an inspiration to them and fuel for them to, you know, shoot for the
Keith Pierce: Yeah. Yeah. Look, there's great opportunities out there. Um, you know, every day you just have to get up and you have to believe. And, uh, some days are good days, some days are setbacks. Uh, some days are bad days. Um, But if you believe that there's an opportunity there, you know, just keep on pushing. Uh, you know, through the process of trying to raise the capital to, to buy the Red Line Hotel Company, I had, you know, probably 20 nos before I got one Yes.
From John Murray. [00:38:00] Wow. Yeah.
That's
Dan Ryan: a surprising, it was 20, I, I would think it would be more like a hundred.
Keith Pierce: Yeah. It was a lot of nos. Right? It was a lot of
Dan Ryan: wow.
Keith Pierce: Yeah. Yeah. It was hard. It was hard to get people to, to focus and get the capital, and certainly during a pandemic, you know, because again, you couldn't, you really just.
couldn't get to their offices and sit with them and, you know, um, it's one thing to have a conversation over Zoom and, you know, run through the models and, um, you know, the thesis. It's another thing to sit in front of them and, you know, give them that kind of, you know, Um, visual belief. . You know, and
Dan Ryan: have to sell the vision and paint that really clear picture.
Keith Pierce: Yeah. Yeah. Yeah. It, it, it, had it not been a pandemic, that organization would've been acquired by, another company, But because of the pandemic, all of the companies were playing, uh, defense except for svc. Yeah.
Dan Ryan: And I know there's been a couple who've been on the offense and they're really good stories. It's that, you know, that abundant mindset,
Keith Pierce: Yeah.
Right.
[00:39:00] Yeah. And, um, yeah, yeah.
I mean, the minute we came out of the pandemic, you know, just by way of example, in, in, uh, 2021, Uh, the underwriting model to acquire the company, we were very conservative because when we did the underwriting model, it was during a pandemic and we didn't know that, you know, by the time you got to Memorial Day, certainly in the even though everyone was masked up and people were still getting sick, the, uh, population wanted to travel.
And so by the time Memorial Day of 21 came around, the performance went off the charts, particularly for secondary locations where we have a lot of them on the highways, the economy. hotels. and, uh, so our, our, our underwriting model, um, we just blew it outta the water, right? Because performance took off we wrote it, we wrote it, to flat to 20, which was the worst year ever.
Right? And so here we are, you know, what, two and a half years later, and now we're, you know, getting back to 19 levels in some cases surpassed. Yeah.
Dan Ryan: [00:40:00] It's that, you know, it's that s-curve you always read about, right? Yeah. You're, you're investing.
Keith Pierce: investing,
Dan Ryan: you dip, but then once everything comes back, you're
Keith Pierce: outperforming.
Yeah. Yeah. This one was a hockey stick. almost
Dan Ryan: I forget the S-curve. It's a ho. Yeah. And then you're always skeptical of the, when you see the hockey sticks. Yeah. Yeah. But, uh, it's such an amazing story and I thank you. One other thing I wanted to introduce, um, you, you've heard of
this
chat, open AI or chat, G p t, the open AI thing
Keith Pierce: where you a little bit?
Dan Ryan: Yeah. So I asked it a question. I said, what question should I ask you?
Keith Pierce: Oh, okay. And, , uh,
Dan Ryan: this AI said, how does
Keith Pierce: Esta
Dan Ryan: ensure that its properties maintain high standards of service and guest experience? That's from a computer, not
Keith Pierce: me.
Wow. That's a good question. , Um, from a computer. So a couple things. Uh, we own and manage 220 hotels.
Mm-hmm. , right? So, you know, we, as an example from a capital improvement standpoint, we'll put in, [00:41:00] SVC we'll, put in $600 million in. capital Into our managed estate. Right. To continue to bring up the quality of the property in terms of its fff and e and its experience and, and, and, you know, all things furnishings.
Mm-hmm. um, our managed team, uh, led by, uh, Vera and team, exceptional team and will continue to drive the, the consumer experience that's on the called the owned and managed estate on the franchise estate. You know, a little different because as we discussed earlier, you know, we. don't, We're obligated to drive to the top line performance, uh, and, and certainly ensure that the quality is there for the, for the guest through quality assurance, through training, uh, through, um, uh, you know, uh, uh, uh, social media reviews, TripAdvisor reviews, those types of things, right?
So to keep, to keep, uh, in check with the quality of the properties. So That's a core [00:42:00] competency of a franchisor. Mm-hmm. , you know, you have to have the ability to ensure your franchisees are delivering on the spirit on the experience, both on the service side as well as the quality side. We have an entire field organiz. and their, their, you know, responsibility in addition to the top line.
is ensure that the quality is there and the experience is there. It does get tricky though when you. scale. ,You know, when you have 900 hotels or 6,000 hotels, or 7,000 hotels, because to get enough human capital to deal with that level of scale is a little tricky. Right? So, you know, over the course of, uh, you know, time, um, utilizing, uh, technology has, has, has really started to play a role, um, you know, being able to do quality assurance inspections versus personal quality insurance inspections. Being able to use the social media Right. And all the, all the social, uh, tools because guests will let properties know when they have a bad experience. They let the property know when they have a good experience, [00:43:00] but more so when they have a bad experience. Right? Yeah. And so when you start to see those, you know, bad customer reviews, you can really narrow in on properties and bad behavior.
Cool. Yeah. So there's tools in place to. ensure that there's a Good experience. Great.
Dan Ryan: Um, and then last question. As you look at coming where you are now and your trajectory, what's exciting you most about the future?
Keith Pierce: I'd say global expand. Mm-hmm. , yeah. Having had the opportunity in 22 and then certainly just a little bit into this year, um, to spend time in Latin America to see the product there.
Uh, just returning back from Egypt to see the product there. The Siesta name, the Red Lion. , name, those brand names will resonate around the rest of the world. Uh, and so there's plenty of space for us to grow here in the Americas. Um, but, you know, establishing the Sonesta. presence in key strategic, um, uh, markets and countries around the world, uh, for me [00:44:00] personally, I think that that will be a, a rewarding step in the journey, um, to be able to spend a little bit more time, uh, internationally and globally Growing the band grow, growing the brand. I did that for a little bit on the, on the Wyndham business. Um, my primary responsibility in Wyndham was the Americas. Um, but I was fortunate enough to spend time in China and Latin America and e m. so we can do the same here with Siesta.
Dan Ryan: Wow. It's so exciting.
Um, well, I, I speak for myself and all of our listeners. Thank you for your time. I know how busy we're at Alice, and I know you're,
Keith Pierce: yeah, we're running,
Dan Ryan: you're swinging for the fences,
Keith Pierce: so.
We we're, we having a lot of meetings today, so we're take advantage of our time here together in the, in with all our fellow industry, uh, folks.
So thanks for the time. Really appreciate
Dan Ryan: No, I appreciate your time as well, and thank you to our listeners. Without you, um, we wouldn't be doing this, so we keep growing every week. If this change your idea on hospitality giving, receiving, growing, uh, please
Keith Pierce: pass it along. Um, [00:45:00] we're growing all by word of mouth, so thank you all very much.