Inside Omni’s plans to raise the ceiling, expand its footprint

Kurt Alexander is optimistic about the growth potential for Omni Hotels & Resorts by partnering with institutional investors and elevating the quality of its hotels. 

“In the next five years, we can easily double the size of our footprint in the country,” said Alexander, who was named president of the Dallas-based company in May of 2021 after serving as CFO for the previous four years.  

He said that growth will also change the look of Omni’s portfolio. 

“The interesting thing will be as we continue to raise the ceiling… we need to continue to raise the floor.”

Kurt Alexander

Alexander was referencing Omni’s decision in March 2021 to sell five hotels that the company felt didn’t fit the brand anymore. He said those decisions will continue. 

“We will outgrow some of our existing hotels over the next five years. I could see us harvesting the bottom 10%, reinvesting it in growth and continuing to raise the ceiling of our brand.” 

Currently, Omni has 50 properties and just over 22,000 keys in North America. It owns over 80% of those hotels outright and has third-party management in two of its properties, while the rest are partnerships where Omni owns 10% to 50% of the property. 

And partnerships is the area Alexander wants to expand. 

He identified about 50 to 100 U.S. hotels as currently “unique and compelling” enough to fit into the Omni brand, and acquiring those assets would often require partnering with institutional investors.  

“We have skin in the game in all but two hotels,” Alexander said. “The next phase of growth for us is going to be more around partnerships.”

And while he said that growth goal isn’t written in stone, he can see a path for it happening. 

“I’m not setting that as an aggressive, ‘We’re going to double the size of the company,’” Alexander said. “But I think that we can easily end up there as we continue to lean into some of these relationships that we have around the country.”

We will outgrow some of our existing hotels over the next five years. I could see us harvesting the bottom 10%, reinvesting it in growth and continuing to raise the ceiling of our brand.

Kurt Alexander

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While Hotel Investment Today interviewed Alexander before an employee and customer event at the Omni PGA Frisco Resort, he said Omni’s sweet spot is at the intersection of group and leisure, and he sees that as a key appeal to the institutional owner partners the company would like to add.

“Those are the types of hotels institutional owners,” he said. “I think they would love to have a 50% JV partner like Omni come in, sit alongside them, be aligned on interest and drive more revenue. What they care about is EBITDA.”

Elevating Omni’s quality

Part of that growth involves Omni elevating the average quality of its hotels to upper upscale and above. 

“My view of the world is everything is either moving higher end or more commoditized,” Alexander said. “And we have firmly planted our flag on the fact that we’re moving to the higher end.” 

That means Omni is now attracting a different kind of customer. Alexander said that pre-COVID, its transient rate was consistently around $225. Post-COVID, that number is now north of $300. 

“We often think about Omni as approachable luxury… The customer doesn’t know what upper upscale means. For all the industry people who know what upper upscale means, we want to be best in class in that segment,” Alexander said. “We want to continue to go after JW Marriotts and Fairmonts, and not be a Four Seasons or Ritz-Carlton, but draft underneath them. We think that’s a great white space in the market for us to continue to be way better than upper upscale.”

Mentioning Four Seasons wasn’t an unintentional comment by Alexander. Omni recently added Four Seasons veteran Vince Parrotta to its newly created COO role.

Alexander said Parrotta’s mandate is to elevate everything Omni does at the property level. 

“I have opinions. He has facts,” Alexander said. “He can go in a room and say, ‘We need to do this, this, and this. We shouldn’t have this pillow on the chair, we need to make sure the power is on that wall.’ 

“Vince coming from a brand like Four Seasons is anchored in what I call really objective truth, and that is way more informed than my perspective. He’s going to be a great complement to me. I’m going to come at it with a numbers slant just because that’s how I’m wired. And he’s going to be able to come at it with true operational expertise and lead our company in our operations.”

I have opinions. He has facts. He can go in a room and say, ‘We need to do this, this, and this. We shouldn’t have this pillow on the chair, we need to make sure the power is on that wall.'

Kurt Alexander on COO Vince Parrotta

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To that end, Omni plans to spend $1.5 billion on capital improvements over five years. That’s being financed from equity.

“We generally don’t use debt,” Alexander said. “When you think about that ($1.5 billion), that is an equity investment. We consistently target a double-digit unlevered return.”

Alexander said the ROI for improvements at the hotels often isn’t a straight line or a hard dollar figure but is usually just the right thing to do.

“I see the ROI as somebody leaves and says, ‘I can’t wait to come back.’”

Alexander said COVID reinforced trends that were already taking place. 

“Pre-COVID, we thought people were geared towards experiences,” he said. “After COVID, we became convinced that is what people want.”

Those experiences might not be obvious. Alexander cites the annual National Gingerbread House Competition in Asheville, North Carolina, which is a huge source of revenue for the Omni Grove Park Inn in that market. 

‘Conservatively capitalized’

Alexander said with continued stress in the capital markets, he likes where Omni is positioned and thinks it could lead to acquisition opportunities. 

“We’re very conservatively capitalized. We’re sitting on a lot of cash with a lot of balance sheet capability. It could be a great time for us over the next 2-3 years to get into the debt position on some hotels and end up acquiring them, investing in them and repurposing them into Omnis… Over the last, I’d say, 10 years, we have found developing to be more attractive than buying.”

He said Omni has also carved out a niche with public-private partnerships, like the Omni Nashville Hotel and the Omni PGA Frisco Resort.

“We lit the match in Nashville, and we did the same here in Frisco (a fast-growing suburb 30 miles of Dallas where an Omni resort sits alongside the PGA of America headquarters and two 18-hole golf courses)… My perspective on acquiring versus developing is right now, it’s tough to do either. But we will be able to deploy capital into some distressed markets.”

Group as a ‘flywheel’

Alexander said the mix of Omni’s business is about 50-50 between group events and luxury travel.   

“Group is a flywheel for us. A lot of brands pay a lot of money for customer acquisition,” he said. “We’ll have two-plus million people stay with us this year who are not choosing to stay with us. So, how do we repurpose that customer where they stay with us for the first time and then come back?

“Groups are always going to be something that we, as a small brand, really anchor around because we can do things from a group standpoint no other brands can do.”

It’s about EBITDA

TRT Holdings owns Omni, and CEO Robert Rowling recently handed day-to-day oversight to his youngest son, Blake. Alexander said he and Blake have an “easy relationship,” and he thinks of TRT as not so much of a boss but a shareholder.

“Ultimately, the management team’s job is to maximize value for shareholders,” he said. “They certainly have ideas about how to maximize value, and they’re going to articulate those. But it’s incumbent upon us at Omni to think about ways to maximize value and then come to them with recommendations on where we should invest capital and here’s where we need to go next as a brand.”

Omni Tempe Hotel at Arizona State

Omni has opened six new properties since 2018, including the Omni Tempe Hotel at Arizona State University and the Omni PGA Frisco Resort. The company recently broke ground on a new resort in Punta Mita, Mexico, which Alexander called a good example of the company’s development philosophy.

“We’re very opportunistic in our development. We’ve owned this land since 2006,” he said. “We’re not sitting there saying, ‘Well, let’s get into Mexico City and Cancun.’ But this is more opportunistic because it’s a great market. It’s a great location and a great piece of property.”

He said another priority for Omni is revamping its loyalty program to reward total spend versus room nights. He cites the PGA Frisco as an example where the average spend per room is $1,200 (and the room rate might only be a third of that).

“It’s making sure that we understand who our valuable customers are, getting back to how we compete and what the value proposition is,” Alexander said. “We care about EBITDA. The other brands care about room revenue only.”

Alexander uses an example of a guest who stays at an Omni hotel once a year but spends $20,000. He compared that to someone who travels and stays at an Omni site 20 times a year but doesn’t spend much while there. Omni’s current loyalty program rewards the frequent guest much more right now. Alexander said both guests are valuable, but the greater spend should also be rewarded.