Tecton’s calculated growth bridges boutique and branded worlds

MIAMI— With the opening in the first quarter of the luxury boutique Hotel Mela (via its Desires Hotels boutique division) in the heart of New York’s Times Square district, Tecton Hospitality notched another significant advance for the management company, keeping the momentum it’s enjoyed portfoliowise during the past two years. “I wouldn’t say it’s aggressive growth; it’s very calculated, particularly on the boutique side,” said Raul Leal, president of Tecton, in describing the firm’s current strategies. The executive labeled Tecton “a bit of a hybrid company,” one that has a variety of branded products and also specializes in boutique properties, an area in which it has seen robust growth. In fact, after launching the Desires division in January 2005, it doubled the number of boutique properties it handled to eight within 12 months. “I think we’re on target with the goals we want to accomplish, specifically with the Desires side of it. We said we wanted to grow that division two to four hotels a year and that’s exactly what we’re doing,” said Leal. In addition to managing the 235-room Hotel Mela, in 2006 Tecton’s Desires also acquired contracts for the 93-room Sagamore Hotel in Miami Beach, FL, and opened the 110-room Glenn Hotel in Atlanta. It’s also been selected to manage the Seven Stars luxury condo resort that’s set to open this September on Grace Bay in Turks and Caicos in the Caribbean, its third property in the region and its second condo property, which joins the 87-unit Strand Ocean Drive condo hotel in Miami Beach in the portfolio. Leal said Tecton’s not looking to put the Desires properties in a competitive set against contemporary emerging brands such as Aloft or Nylo. “The type of lifestyle and boutique hotels that we’re doing, we see them as opportunity hotels. Atlanta’s a good example: downtown Atlanta specifically had no high-end boutique hotels. We identified that market a couple of years ago, partnered with a local developer, then took an existing office building and converted the office building to a four-star boutique hotel (the Glenn), which is exactly what that market needed at that time. The cost to create it was reasonable enough in those times that if there’s any downturn, we’re not worried,” said Leal. “We’re trying to make sure that as we are re-engineering an asset that it’s something that’s going to make sense for the next 10 years.” Tecton takes a three-pronged approach to its business: it has ownership in properties, does joint ventures and then strictly manages. “It depends on the opportunity and sometimes whether we’re invited to participate or not,” said Leal. In terms of management, the executive said handling branded properties for owners “is fairly easy. A branded box is a branded box and if you get the right location you have to do what the brand wants and develop it that way. On the boutique side, definitely the ownership is more involved in the conceptualization, the design; it’s almost more personal.” He added a boutique owner typically has two to three hotels, with a branded property that is facing obsolescence and whose franchisor doesn’t want to do more. “So what do they do with it now? They still have a great piece of real estate, usually in a very good location. We typically won’t do anything unless the market has some RevPAR improvement possibilities,” Leal said. Tecton currently has such a project underway in Atlanta, where it is repositioning a property that’s been deflagged and closed for three years into “an upscale, chic boutique hotel,” Leal said. Tecton’s Desires division took on a similar challenge in opening the Hotel Mela in Manhattan for first-time hotel owner/developer O&O Properties Corp. The independent property is an adaptive reuse project that brought an office building back to its previous iteration— a hotel. The company also is looking at secondary and tertiary markets for expansion and has a joint-venture project slated for Memphis, TN, that is