High Hotels Emphasizes Growth, High Quality

LANCASTER, PA—High Hotels, Ltd., a division of privately owned High Industries here, is taking a step in a new direction regarding its portfolio, although its aim for quality product is not about to change. According to Frank McCabe, president, quality is the guiding philosophy at the 71-year-old company that enfolds not only his division, but sibling strategic business units that encompass real estate, construction, manufacturing and business services. McCabe came to High Hotels at its inception in 1988, and has watched the group make slow, but steady progress within Pennsylvania, opening the first property in a High Industries corporate park in Lancaster in 1989, followed by a similar site in Harrisburg. Reading and York subsequently opened, while the company also branched out to singular properties in Middletown, NY, and Annapolis, MD. Now with 350 employees in the hotel division, the portfolio includes eight hotels, with two more under development: a 123-room Hilton Garden Inn slated to open this year in Wilkes-Barre, PA, and a Courtyard by Marriott set to debut next year in Middletown, NY. The 134-room Marriott product is a departure for High Hotels, which has a portfolio heavy with Hilton brands, notably Hampton Inns and Homewood Suites. “We’ve got a good history with what was formerly Promus, and made the conscious decision about three years ago that we needed to diversify a little bit; that’s what lead us to Hilton Garden Inn. Then, in the midst of developing our Hilton Garden Inn they merged Hilton and Promus,” said McCabe. “We see Marriott and Hilton as the two leading brands in the various segments where they have product, and felt that matches up philosophically where we want to be in terms of the markets we go into,” he added. High Hotels would continue to develop Hilton products, but also will look at Marriott “very strongly as something to diversify our portfolio,” McCabe said. High Hotels is still growing in the Mid-Atlantic states, and has done an “exhaustive search” of markets it feels are underserved in terms of supply and match well with the Hilton and Marriott brands, said McCabe. “We’re looking at southern New York State, New Jersey, down through Maryland and eastern Pennsylvania,” said McCabe, adding the company has toyed with going to Florida and some southeastern states where High Industries has corporate centers and apartment communities. Most of the portfolio is in secondary markets, although McCabe said he is also looking at suburban locations in primary markets. As a goal, High Hotels is looking to add one to two properties per year, and would like to achieve a “critical mass” of 20 hotels over the next five to seven years. McCabe cited economies of scale operating a company that size as improving High Hotels’ overall returns. “We’re able to generate enough equity internally to do our deals, and we’re growing at a rate that operationally we can absorb so that we don’t lose our focus on the operations side. That’s been our method,” said McCabe. In all likelihood, High Hotels will pursue these developments single-handedly. During its 14 years, the company has done only one co-venture, primarily due to the partner holding the site and franchise. “We prefer not to do joint-ventures because we like to have 100% of our deals. The only way we’ll do a joint-venture is if we’re in control, with more than 51% of the deal,” said McCabe. Challenges in the market for High Hotels continue to include fall-out from 9/11, along with the trend toward room sales over the Internet. “Initially [the Internet]may be bad for us from the standpoint it tends to make a commodity of a hotel room. I think eventually what will emerge is the customer will be seeking a certain quality level in terms of brand rather than just shopping price,” said McCabe. “But we haven’t migrated out of that price mentality yet.” Still, McCabe overall sees technology as a plus, not a minus, for the industry. “It’s going to be