June 14, 2013 | HOTELSmag.com
When Kirk Rose became president of Marcus Hotels & Resorts this past January, he was ready for a new challenge.
Although Milwaukee, Wisconsin-based Marcus currently owns and/or manages 20 hotels and resorts — including landmark properties such as the Pfister Hotel in Milwaukee and the Skirvin Hotel in Oklahoma City — the company is looking to expand its portfolio.
Rose, meanwhile, brings experience from an industry giant such as Hyatt, where he worked for nine years in positions including senior vice president and chief financial officer, and Salt Creek Hospitality, a private equity group focused on hospitality real estate that Rose cofounded.
“For me this has been a growing and a very interesting experience — I love it,” Rose said of his first few months at Marcus. “It’s so much better coming into a situation where the stability is already there. The expectations to fix something are not there. It’s really coming into a situation to all work together to achieve some growth goals.
HOTELS spoke with Rose about the keys to Marcus’ success in areas including historic renovations and F&B in addition to the company’s plans for the future.
HOTELS: What are the top priorities for Marcus Hotels & Resorts overall right now?
Kirk Rose: I think the company has a great platform. The Marcus family has a great reputation in the industry and a great portfolio of assets that have performed very well.
As a company, we are still fairly small. If we are going to grow, we have to start creating what I would call a bench strength of talent, getting the platform ready to have more than 20 assets. We’re at the point where if we had 25 it would be hard for us with our current level of support in the corporate office and in the field. If you don’t grow, your best talent finds other jobs where they can move up in their career, and we’ve got to hire those people and provide those opportunities for Marcus employees.
HOTELS: What are the company’s expansion goals?
Rose: The family and the company are very opportunistic. We have the luxury of a great balance sheet and plenty of capital. They’re willing to put it to work and invest in assets opportunistically, making sure they’re the right assets.
It’s a great time to be getting into the market as development activity is starting to ramp up. You’re starting to see hotels trade a lot more. So it’s an opportunity for us to start partnering with investors, become one of their preferred operators so we can grow through that vehicle.
We can certainly grow by buying single assets, but that’s so much slower. I would prefer to create relationships with strong hotel owners as they are expanding their own portfolios. We have the capital to partner with them, to invest alongside them.
We don’t have unit growth goals. I’m not trying to take this [portfolio] from 20 to 100 in three years. It’s more about making sure we leverage our reputation and find the right places where we have a good chance to be successful.
HOTELS: Are you looking to continue to focus on similar types of properties as you have thus far?
Rose: Not necessarily. We’re wide open.
I see us expanding hopefully faster. I think the upscale limited-service area is certainly growing very fast. I was part of that at Hyatt with the creation of the Hyatt Place brand. I see the designer boutique set, especially in urban areas, stealing market share like crazy from the major brands. All the major brands are trying to get into that space. I can see us growing that way.
HOTELS: Are there particular markets that are a focus for expansion?
Rose: Chicago is one, but it has gotten very hot. We’re so Midwestern-focused; that’s where our reputation is and where most of our pipeline opportunities come, but I would like to move into other areas. I think the [U.S.] Southeast has a lot of attraction for a company like ours.
Some of the submarkets on the East Coast [are also attractive for us]. I can’t see us in downtown New York, but I could see us being in submarkets of a large urban area — the Georgetown area of Washington, D.C., is a good example. We’re probably not going to be right on the ocean in South Beach, but could I see us in Florida? Yes.
HOTELS: Marcus has a fair amount of experience renovating and restoring historic hotels. What are some of the keys to doing this successfully?
Rose: For one, it’s very hard, very complicated, so I think a lot of people shy away from it. There are a lot of people willing to do value-add, repositioning an asset, but not as many willing to do the older historic assets.
I think it’s because of the Marcus family’s ownership of the Pfister in Milwaukee for so long and having to live that daily. They understand every aspect of both the ups and downs of having an old historic building and what works. The upside can be huge if you’re successful, but there are downsides. The buildings have a lot of capex needs. The amount of money you spend on an old historic building on an annual basis is double what you would spend on a new building. I think in many of these buildings your service expectations are higher. It becomes more of an old-world expectation; it’s not like walking into a boutique product where your service expectations are probably a lot lower. We’re used to that, and I think we’re very good at that. I think it’s a core competency.
HOTELS: How is the Marcus Hotels & Resorts’ approach to F&B evolving, and what changes do you expect in this area going forward?
Rose: With Marcus, the restaurants are an individual experience that they would love to have stand alone from the hotel. They have a long history in food and beverage, and the family owns restaurants outside Marcus.
It is a differentiator for Marcus when we compete for new projects. I think it has the opportunity to grow and potentially be a separate division of the hospitality division.
HOTELS: Where would you like to see Marcus Hotels & Resorts headed in the future?
Rose: I would like to see the level of third-party management contracts grow, whether it’s through contracts or investment. I’d like it to be through strategic partnerships we have because I think that makes the relationships more long-term and more stable. It will also help our earnings become more stable. With so much of our results being real estate, we ride a lot of the ups and downs of the economic cycle. If we have more earnings coming from third-party management contracts, it’s a little bit more stable.
I would like to see the platform not just be Midwest-based. It’s tough to grow on both coasts at the same time given how small we are. I’d rather do it in clusters where we would propose to operate a couple hotels in the same area at the same time.