It is somewhat ironic that it can take the experience of going through an economic downturn to reinforce the benefits an experienced asset management company can provide hoteliers. For Capital Hotel Management (CHM), LLC, which provides both investment advisory and asset management services to the industry, the current climate, while certainly not a positive for the company, is an ideal opportunity to further prove its value. Based in Beverly, MA, just outside Boston, and with offices in Detroit; Fort Lauderdale, FL; Orlando, FL; New York; Honolulu; and San Francisco, CHM is arguably the largest independent hotel asset management and investment advisory company in the U.S. with a portfolio of properties currently valued at more than $5 billion. “In good times, people are less likely to seek us out because everything is going well. But now, we’ve got experienced, savvy investors calling us for help,” said Ken Wilson, CEO of CHM. “The value of our services becomes very clear and we are viewed as a benefit when the market is in a down cycle.” However, that is not to say CHM isn’t feeling the heat of the downturn as well. As co-investors with sliver equity in a number of hotel properties in its portfolio, the company isn’t immune to tough times, according to Chad Crandell, CHM’s president. “With many of our investment partners, we’ve invested money in properties so our future returns are predicated on our success,” he said. “There are challenging times and hotel revenues are being impacted. We feel that along with our clients.” But the key, in CHM’s case, is not to panic. Rather than opt to implement new tactics to combat the shaky economy, the company is focused on staying the course. “Our mantra as an asset manager does not change. Our goal is always implement changes in order to maximize cash flow and optimize returns,” Crandell said. CHM’s comprehensive approach focuses on operational enhancement as well as strategic development or redevelopment to maximize returns. “We work to be prepared for every situation,” Crandell said. Wilson commented that perhaps what best positioned CHM for the downturn was the fact that the company had been anticipating a situation like this for quite some time. “We have been preparing for this since 2007. But still, we didn’t think it would happen so quickly,” he said. “In August of last year when the crash started we immediately went into planning mode for all of our assets. The focus went from what to do to capitalize on a good market to re-evaluating for a potential bad market.” In fact, making decisions based on how the market and individual properties are performing is business as usual for CHM. “We have strategic plans for every asset and look at economic conditions monthly and do quarterly reviews to evaluate what should and should not change. Our focus is to always keep our investment clients very well informed. We’re not magicians, but we are deep thinking planners,” Wilson explained. Crandell noted that CHM’s ability to thrive regardless of market conditions largely hinges on the company’s team approach to asset management. “On any account, we have a primary contact to interface with the hotel. But behind that is all the support from our company,” he said, likening it to Verizon’s well-known cell phone commercials stressing the power of a “network.” “There’s no dead zone,” Crandell continued. “This climate is allowing us to really flex the muscles of our organization. There are a lot of buttons being pushed right now, and whether its financing, accounting, risk management, etc., we bring our experience to all of the issues facing a hotel. And all of those buttons are being pushed right now.” Wilson added the team approach benefits CHM as much as it benefits its clients, creating a win-win situation. “Our approach is special. We make sure no one person in our company gets overwhelmed by the difficulties of asset management,” he said. “We have one person out front communicating and then an entire cast of people behind them. That is very important because in tough times when you have to deal with so many complexities in the market, it is very easy to become overwhelmed. It’s tough to duplicate our breadth of resources.” With such a powerhouse of resources within the company, it’s not surprising that CHM is continuing to add to its portfolio with properties that allow it to leverage its strengths. “Our primary focus is on full-service and luxury properties in urban or resort destinations. We like the big box convention center hotels and many are usually part of a mixed-use complex,” Wilson said. “It takes a group like ours, with very specialized expertise, to deal with those complex opportunities.” Recent properties joining the CHM portfolio include the Renaissance M Street in Washington and the new W Hotel Atlanta Downtown. Crandell added that although many other companies of the hotel industry opted to diversify their portfolios in terms of lodging segment after the last downturn, CHM is more than confident in its decision to maintain its high-end niche. “We’re very seldom involved in the limited-service segments. If we are it’s usually on a portfolio-wide basis,” he said. Having an equity stake in many properties may seem to be a kind of double-edged sword, especially in tough times, but for CHM, it reinforces the company’s commitment to its hotels. “Of course we like it better when times are good and the market is sort of on cruise control,” Wilson laughed. “Times like this are more painful for us both financially and emotionally. There are very few happy conversations with clients during a downturn. We live and breathe our assets whether we are invested in them or not.” Wilson noted that a positive for the company is that its existing clients will hopefully fare better thanks to CHM’s efforts. “This situation reinforces the value of good planning that can minimize the effects of a rough economy. We try to help bridge the gap between the ups and downs in the industry. Our regular clients understand that because we are working with them all the time. Hopefully, the new clients we attract will understand that as well and will maintain our services when the situation in the industry improves,” he said. And both Wilson and Crandell stressed that what keeps CHM forging ahead in both good and bad times in the industry is a wealth of experience. “This is a short-term situation in the larger long-term picture of hotel real estate. When you’re in the middle of an up cycle, you feel like it’s never going to end and the same can be said for when you’re in the middle of a down cycle,” Wilson explained. “We will come out of this and what’s important is to maintain a level of consistency.” Crandell added that while the situation may not be as rosy as it once was for the industry, it’s important to not let the mood be all doom and gloom. “Even when things seem dark and catastrophic, you’ve got to stay positive about what you can do in this environment. It’s easy to get discouraged, but we’re doing everything we can with our operators to help maintain or even improve their situations,” he said. “You’ve got to acknowledge the little victories, no matter how small they seem.”
