LOS ANGELES—Island Hospitality Management’s growth strategy is all about focus. Focusing on the right partners to secure the right properties is the key to the company’s President Tim Walker’s goal of doubling Island’s portfolio to 150 hotels during the next three to five years.
“You can lose focus with 30 to 40 investors, so we’re focusing on finding four or five institutional investors to match the five we have now,” said Walker during a break at last week’s Americas Lodging Investment Summit. “We’re looking for institutional investors that will hold hotels for a little bit longer term and are looking for expertise and sophistication in a hands-on approach from a management company.”
The company has “an appetite to do some joint ventures,” Walker said. “We will co-invest. And we’re looking for opportunities to acquire management companies. … We’re pretty open at this point in terms of how much to invest.”
Island is targeting key financial partners that are in business of receiving distressed hotels, Walker said.
“The (real-estate owned) business is something we don’t want to focus on full time, but we do want to assist in a long-term approach to help owners reposition or remodel hotels,” he said. “The brands are getting stricter about expectations, and they’re forcing the hands of many owners to step up or step out. It is time for those owners to make a decision, especially with some of the financing options that are available out there.”
Recognizable brands in high barrier-to-entry and top metropolitan statistical markets are high on Island’s wish list, he said.
Extended-stay is a staple
Palm Beach, Florida-based Island Hospitality has 76 hotels in its portfolio—approximately three-quarters of which are owned by Innkeepers USA Trust. The company’s specialty is extended-stay hotels—it manages 40 Residence Inn properties, five Hyatt House hotels, four Gatehouse Suites assets and two Homewood Suites by Hilton hotels.
“We’ve been managing Innkeepers’ portfolio since its existence,” said Walker, who had a short stint as Innkeepers’ CEO between a 17-year stay at Island and his current tour of duty there. “It’s been a great relationship, and now we’re looking for new financial partners we can grow with.”
The extended-stay business is of particular interest to Island because of the nature of the guests, Walker said.
“We’re able to fill up on the weekends versus a transient hotel that fills up on Tuesdays and Wednesdays,” he said. “Homewood Suites and Residence Inn represent the strongest upper- upscale segment of extended-stay hotels. They also have strong performance from reservations systems that deliver.”
Nationwide infrastructure
Island’s portfolio covers 23 states, which gives the company infrastructure to support nationwide growth, Walker said.
“We have the infrastructure to support a one-stop shot management company for a bicoastal company,” he said.
Walker said the company is always on the lookout for more upscale extended-stay hotels, it also is searching for more transient properties in the select-service segment and what he called “compact full-service hotels” that have between 200 and 250 guestrooms.
In addition to the extended-stay properties, Island manages 10 Hampton Inn hotels, four Courtyard by Marriott properties, two Sheraton Hotels & Resorts, a Westin asset, a DoubleTree by Hilton hotel and an Embassy Suites property.
Walker said Island’s properties outperformed brands in revenue-per-available-room gains.
The outlook for 2012 is promising for Island. The company is projecting 5% to 7% RevPAR growth.
“There are strong opportunities to grow (average daily rate), especially in the negotiated segments,” Walker said. “We have seen very strong negotiated account growth.
We’ve held our ground on double-digit growth on most of our proposals. We feel very, very confident that they are going to accept those rates and pay more.”
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