DENVER—After more than a decade operating as Magnolia Hotels Management Co., the privately held organization has given itself a new name along with a new direction to achieve growth.
Now known as Stout Street Hospitality, the company is looking to expand well beyond its current five-hotel portfolio.
According to President Leigh Hitz, the move had been under discussion in the C-suite for more than a year. “I thought maybe we should get a different message out so the market doesn’t just think we do historic, independent Magnolias,” she said.
The “Magnolias” are the four company-controlled and managed hotels Stout has in Denver, Dallas, Houston and Omaha. (It also third-party manages the 55-room LaSalle Hotel by Magnolia Hotels in Bryan-College Station, TX.)
Each of the properties is the result of an adaptive reuse of a historic building, which has been the company’s forte since it was first founded as the Stevens Holtze Corp. in 1993 by CEO Steven Holtze.
Hitz said the company— which has been in the process of refinancing all its properties—was encouraged in the move to expand by feedback it received from lenders and special servicers that cited its strong operating margins.
She said while the company still will focus on its Magnolia brand, independent
properties and historic redevelopment, “We wanted to get it out there that we could operate and manage any type of hotel.”
Stout Street will look to include franchise opportunities; branded hotels and resorts, including extended-stay hotels; and construction.
Bringing a new name to the company is reflective of the new mix Stout Street is seeking. “We wanted a strong name that could encompass a brand, a franchise…resorts,” said Hitz. Executives didn’t have to look far; they knew they wanted “hospitality” in the name and plucked Stout Street from the downtown location of their corporate headquarters here in the Mile High City.
“It’s very strong and a kind of powerful name,” said Hitz. And in keeping with the company’s penchant for the historic, the Stout name harks back to Denver’s early days. E.P. Stout, one of the founding fathers of Omaha, NE, also was the president of the Denver City Town Co. in 1858 and helped oversee many transactions that helped build Denver.
In terms of its own growth, Stout Street is considering the “top markets that aren’t really overpriced,” said Hitz. “We have a project under contract, it’s in financing, in Austin. Also Philadelphia. We’re looking hard at one in the Raleigh-Durham (NC) area. There are two we’re looking very hard at in New Orleans. Also Chicago, Phoenix, San Antonio. We still like the majority of the U.S.”
The markets Stout Street is working in are ones to which its clients currently travel. Austin, for instance, ties in with Dallas, Houston and College Station in Texas and also feeds into Denver. “Banking firms that we have RFPs with, that’s how we came to the Philadelphia and North Carolina areas,” said Hitz. “With New Orleans, it’s from oil and gas from Denver, Houston and Dallas. We’re trying to stay strategically aligned with where our current feeder markets are coming to and going to.”
Stout Street also plans to be flexible regarding avenues of growth. “Our philosophy in developing and operating is we don’t have SOPs, so whatever makes sense for that building and for that market is what we design to, to make sure it’s an efficient managed hotel to maintain our margins,” said Hitz.
For example, the Austin venture is a redevelopment of a condominium project that stalled two years ago. Stout is buying the building out of bankruptcy, said Hitz, noting it will be a Magnolia brand hotel. In Philadelphia and Raleigh-Durham, both projects would be adaptive reuses of historic buildings; the New Orleans venture would be acquisitions of existing hotels. Several of the properties would be owned by Stout Street; two would only be managed. Hitz did not detail which hotels would fall into which category.
Hitz also indicated Stout Street is considering an historic building proximate its headquarters that she feels would be an ideal fit for a Holiday Inn Express. “We definitely are looking at it…we would develop it, manage it and own it.” Hitz said Stout Street is open to being a franchisee of a major hotel company.
The executive added Stout Street always tries to put some equity into a deal so owners know it’s in it for more than “just management fees. We have a vested interest.”
Being strongly involved is one of the company’s hallmarks, said Hitz, which she felt has given Stout Street an advantage over the past 24 months of economic stress and has now enabled the company to move forward as it is planning.
“In managing our hotels, we have a very strong, direct sales relationship with our clients. For example, I went on sales calls; I still do,” said Hitz. “They stayed loyal to us, we stayed loyal to them. We didn’t raise rates during that time frame. We didn’t cut our services drastically. And they were still able to have a face with a contact. So we did not decrease any sales efforts. And so…we are in every single national RFP in all of the markets. That translates into loyalty from your customers.”
The vision for the reinvented company is to remain nimble. “We’re flexible so we’re not stuck with just one type of hotel and with our abilities to manage across the board profitably, we can take on other types of hotels,” she said.
She added in the current environment it also is important for Stout Street to have a portfolio “that you manage and a portfolio of ones that you own and manage so that you constantly have a good exit strategy.”
Strategic growth for the company will mean adding two to three hotels per year. “We want to do something that’s very manageable,” said Hitz.