During the recent Americas Lodging Investment Summit (ALIS), Hotel Business sat down with Jim Amorosia, president and CEO of G6 Hospitality LLC. Amorosia talked about the growth of the company and its go-forward strategy, its expansion into new markets and being part of Blackstone, as well as some industry hot topics.
Jim, in 2013, Hotel Business identified you as one of our “10 to Watch” in 2014. What are some of the goals your company achieved last year? In 2014, we opened 112 locations in the U.S. and Canada—Motel 6 and Studio 6 combined—and we had a terrific run on the top line: We finished out at 10% growth on RevPAR, compared to the segment, which was 8.7%. Moreover, we had a very good run on renovations: We renovated 99 owned assets, and our franchise partners renovated a little less than 200 assets, so we did roughly 300 units across the country. But, probably, the highlight, which was in the fourth quarter of 2014, is that we signed an area development agreement with Latina Promohoteles—a subsidiary of Promodesa Comercial—for the development of the Hotel 6 and Estudio 6 properties in key markets across Mexico. We’re starting in the middle of the country; the first one will be an Estudio 6 located in Salamanca, Guanajuato. We expect that, by the end of the year, we’ll have one property ready to open and one-to-two more well underway.
In addition to your new partnership and top-line growth, what made it such a successful year for G6 Hospitality? It wasn’t just any one piece: It wasn’t just top line, development or distribution—we made significant inroads in 2014 in all of these areas. Case in point, we spent a tremendous amount of time in 2014 structuring our new distribution platform, which will be all mobile-based in two languages with direct user interface so that it can be easily accessed and easily workable in terms of clicks. We’re in the final testing stages right now, and it will be rolled out and fully functional this year. We’re also looking at it from a revenue management standpoint and will provide a tool that can be used by our partners, as well as the owned estate, to more effectively manage the inventory and the expected usage that we’re going to get from those sites.
Furthermore, one of the things that we tested in late 2013 and started to roll out in 2014 is centrally managed automated pricing signage at individual properties. Over the past 12 months, we worked with a partner to create what we think is going to be a state-of-the-art system that will allow us to push centralized pricing decisions throughout our entire distribution network and, ultimately, to the individual property so that it simultaneously changes the prices across the entire portfolio. So, depending on market conditions, we will be able to adjust our rate position in real time. Everything is getting more streamlined, and wherever we can put those in, we are moving aggressively. We will have more than 300 done sometime next year.
What are your expansion plans beyond Mexico? Under the area development agreement with Latina Promohoteles, we plan to have either under construction or open up to 55 hotels by the end of 2020. The goal is to use that as our primary point and, ultimately, we will look at growing our brands in terms of Central and South America. As for the future, we will also look toward Europe and Asia. We believe there is tremendous opportunity there. And, of course, with our Asian-Indian community partners, we’re very focused on when the right time will be to move over into India. We’re not willing to say when because, quite frankly, it’s a question of opportunity. This is how we approached Mexico: We didn’t jump into it; we took our time, we were very patient and we found the right partner—someone who is an expert in development in Mexico because we’re not experts in Mexico, but we are experts in running, marketing and positioning hotels. We felt that our expertise matched up with the expertise of the developer.
Will the Hotel 6 and Estudio 6 brands in Mexico be similar to the domestic brands? The design of the guestrooms will be very similar—featuring some elements of our award-winning Phoenix room—but there will a couple of key differences. The first one is, historically, the typical roadside Motel 6 in the U.S. was two stories. Over the last number of years, we’ve been doing more two-, three-, four-story buildings depending on the location. On the Mexico side and, more than likely outside of the domestic U.S., there are more mid- and high-rises, so the hotels will be anywhere from six to eight or nine stories and, because of the cost of land, they will be on a much smaller footprint and will more designed to go up than out.
What’s interesting is that Latina Promohoteles is a commercial-center developer that has been in the business for nearly 30 years and is well known and respected across Mexico. As the country continues to develop, many opportunities are out there, and we will be the hotel choice for them in these mixed-use developments, which could be retail, office, restaurant, hotel, depending on the location and the footprint.
Will the properties in Mexico be new-builds or conversions? We will start with new construction because we want to make sure that the message we’re putting across to the guest who is a new user is that they can rely upon an expectation. The room will be clearly designed—and going with one developer, you have more control over that process. Based on the particular country, we’re relying on the expertise of our developers to help us understand what it is the guest most expects to have in that particular offering.
There’s so much emphasis placed on capturing the Millennial guest. Do you have a specific strategy to address that? We’re not exactly in the stream of thought on that, but we have an absolute opinion: The Millennial generation is probably one of the most frugal generations of the last two or three because in their lifetime, they have already experienced three recessions: one when they were a toddler; one when they were in grade school; and one when they were coming out into the workforce, which was probably the most impactful. Although Millennials, more than likely, have expectations above and beyond, I believe the first expectation they have is value add: ‘Don’t sell me anything that doesn’t add some sort of value to my experience because, frankly, I’m not going to come back. I’m not wasting my money a second time.’ We look at it from that perspective. I think the interesting part about the Millennial guest is that, at the same time all of that was happening, they also were being brought up in the middle of a technological explosion. So we look at it as: How do you make sure you’re offering this frugal-minded person the right value and how is it that you convince them through their systems (mobiles) to come back?
Let’s talk about Blackstone. It’s been about two-and-a-half years now since the acquisition. Yes, the deal closed on October 1, 2012 which, coincidentally, was during the convention where we were celebrating our 50th anniversary, so we had the privilege of having Jonathan Gray speak to the group about the acquisition of Motel 6 and Studio 6. Blackstone understood that they bought a fantastic brand, an iconic brand. But they also understood that it was a brand that was starved for investment. They went in with their eyes wide open and they knew they had to commit between $450-500 million in asset improvements to the owned estate, and they knew they were buying a very strong franchise operation. Their direction to me, as the CEO, was 1) take care of your capital needs, which we were very transparent about, and 2) grow the system where it is the most appropriate to grow, get in places where you’re not and get there as quickly as possible, and figure out what the right mix is to go international.
So when I look at 2014, that’s really the culmination—all those pieces are coming to fruition. Some of them have still a bit more maturity to occur, some of them are at full tilt.
What Blackstone basically said was: ‘We’re going to provide you with the resources you asked for and, after that, it’s your responsibility. Obviously, we’re investors and need a return on investment, but if you do what you say you can do, we’ll be happy.’ And, at this point, they are. And we’re thrilled with them. Timing really is everything. They bought us at a particularly good time because the segment started to take off, they invested their money in the estate, and they got the return on the investment they were looking for. HB