Hotel Equities new CEO charts path

NEW YORK CITY – New Hotel Equities CEO Ben Rafter says word on the street is that management company business practices are stale. In the next breath, he said the recent merger of his old Springboard Hospitality with HE does create something different – a hotel operating company for the first time run by a tech-forward executive with a heavy focus on revenue generation now fused with an historical operating company. “If this isn’t reinventing a management company, I don’t know what is,” Rafter told Hotel Investment Today during an interview at the NYU investment conference earlier this week.

Rafter added that HE is going to get more aggressive with growth, but not growth for growth’s sake, and mostly led by organic opportunities.

They just hired Juan Corvinos to take advantage of the potential that lies in the Caribbean/Latin America region (CALA) and Rafter said they are looking for another acquisition if it fits the cultural and aligns property-wise, which could mean a company strong in the soft brand space.

Yes, HE likes CALA because leadership brashly believes that there aren’t many good third-party operators there. “I don’t think it’s easy to manage if you’re trying to do it from the mainland U.S.,” Rafter said. “So, in hiring Juan as president of CALA, having him build out a team that’s local to either the Caribbean or Latin America, we think it's almost like a startup, which obviously I love.”

With Corvinos working out of Miami and Mexico City, HE will base several executives out of Mexico, with Rafter adding that they are hiring selectively. He added that they are also hiring for the Dominican Republic and other Caribbean countries, and they have former Trust executive Michael Register on its development team for CALA.

Hotel Equities has won management of the Hampton by Hilton hotel in St. Thomas, U.S.V.I.

“My mentality as a startup person is that’s how we like to enter a new market [with boots on the ground] because it gives us flexibility, nimbleness and entrepreneurship to grow under the umbrella of Hotel Equities,” Rafter added.

CALA pipeline

At the moment, the CALA pipeline has more than a dozen properties with 11 new-builds already started and set to come online. Rafter added that HE could easily have 15 to 20 third-party properties in the region inside a year.

An obvious opportunity is in the upscale and upper upscale all-inclusive resort space, while HE also wants to build out an urban lifestyle business, especially in Mexico and starting in booming Mexico City.

To convince and make owners more comfortable with their business plan, Rafter also said they are investing in building out separate operating structures for the resort and urban businesses.

Rafter is particularly excited about the lifestyle brand opportunity in Mexico as he sees the market functioning as a bit of a hybrid between the mainland U.S., the Caribbean and Latin America all-inclusives.

Have you been to Mexico City lately? It’s aching for a great set of boutique or lifestyle hotels. We have a little bit of the experience in Hawaii doing that.

Ben Rafter

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“Have you been to Mexico City lately? It’s aching for a great set of boutique or lifestyle hotels,” Rafter said. “We have a little bit of the experience in Hawaii doing that.”

More likely, HE will first focus on building out its branded business in Mexico, including the traditional resort markets, and they are talking to all the brands about expansion there.

Rafter added that they have a separate vehicle to make sliver equity investments – maybe 10% – into projects where they have especially strong convictions.

Merger perspective

With the ink still drying on the HE-Springboard merger deal, Rafter said the two companies bring their own unique skill sets to the table. Springboard was heavily built out on the commercial side, marketing, revenue generation and digital capabilities, while HE was very strong on the core brand development and revenue management that goes with that. They also had diverse geographic strengths.

“I’ve seen in this space two companies merging with the bigger one keeping the culture. There are ‘synergies.’ People get laid off. We’re taking the opposite approaches,” Rafter said. “We’re merging the two for growth. There are no synergies, and it’s almost a combination of cultures where we want to keep the entrepreneurial, nimble, startup nature that Springboard had as part of a bigger entity, which was what Hotel Equities had.”

With a background in technology, Rafter is quick to add that any hospitality company that doesn’t understand how to embrace tech and infuse it into the culture will eventually fail.

He said AI first will help with things like building systems and various back-office functions such as labor management. “If you’re not embracing all of this, you’re just not going to have the sophistication to be able to respond in a way that maximizes your owner’s investment,” he said.

Rafter estimates that within one to three years the benefits from well-run AI-driven systems will be double digit percentage savings in larger, more heavily staffed hotels, and maybe a bit less for smaller properties.

“If you’re not excited about embracing it, you probably need to look in the mirror and either find a way to be excited about it or look for a different industry,” he said. “We have a strategic initiatives department, and part of their role is to embrace these things, figure out which ones benefit and which ones don’t.”

The lingering issue with AI-based technology and the speed of its application, Rafter said, is that so many vendors can’t finalize current solutions without getting caught up in what’s next. Ultimately, he said they reject four out of five solutions and move on. “It’s happened again and again. The startups of today do not know how to finish off their products.”

Almost as bad, Rafter continued, is that operators are building out new solution on legacy backbones. “We’re sort of limited on the amount of innovation we have. What somebody should do is change the whole legacy backbone, but that’s not going to happen anytime soon.”

For the moment, Rafter said his job Number One is to instill a culture of pride. “That obviously gets reflected in the guest experience. How to do that over a much larger company is obviously a challenge,” he said.