March 16th, 2007
Omni Hotels accelerates growth plan
Irving, Texas — Riding on a wave of development projects in San Diego, Orlando and Atlanta, Omni Hotels is stepping up its growth initiative.
Earlier this year, the company brought John Rosen on board as v.p. of acquisitions and development.
“We’re very interested in not only expanding the brand but also expanding our real-estate investment holding in the hotel industry,” Rosen said.
In 2004, Omni, a privately-held company, opened the 511-room Omni San Diego Hotel and the 730-room Omni Orlando Resort at ChampionsGate. The Omni Hotel at CNN Center in Atlanta opened a 600-room, $100-million addition in late 2003.
Omni has spent a lot of time cleaning up its portfolio since being acquired by TRT Holdings in 1996, according to Mike Deitemeyer, president. The company acquired or built properties in major cities, disposed of some assets and renovated all other properties.
Omni’s 40-hotel portfolio consists of 28 owned and managed properties, five managed properties, four franchised properties, two leased and managed properties and one hotel under development for a total of 15,155 guestrooms.
“If you look at how the company is set up and the balance of the portfolio and the balance of our operating philosophy, there’s a lot of opportunity going forward,” Deitemeyer said. “We are now pushing off an incredible amount of cash flow from our organization and we need to redeploy that.”
Scott Johnson, v.p. of acquisitions and development, said the company has something that is lacking in the marketplace.
“We’re a company that brings a combination of a recognized upscale flag, a very talented management team and an enormous amount of capital that we can bring to projects,” he said. “Those three things put us in a very strong position to be a major player in the upcoming years.”
Omni’s next project will be a 600-room convention center hotel possibly with a condominium component in Fort Worth, Texas. The project is scheduled to break ground in early 2006 and open in 2008, according to Johnson.
The company expects to finalize projects in California and Washington within the next 90 days. Possible condo-hotels in the Midwest and acquisitions in Florida also are in the works, Rosen said. Toronto, Seattle, Vancouver, Scottsdale, Ariz., Palm Springs, Fla., and Minneapolis also are target markets for Omni. The company is looking to grow in New York, Washington and Chicago, where Omni properties are already located.
Because the Omni Orlando is outperforming its budget, golf and spa resorts also are a focus for the company.
All in all, the company plans to add five “high-quality” hotels to its portfolio each year, Rosen said.
“But we’re not tied to any growth thresholds that would lead us to do deals that don’t make sense,” he added.
Achieving AAA’s four-diamond status is a goal, Deitemeyer said. Eighty-five percent of the hotels already are there.
“We’ve found a way to accomplish [success] through capital deployment and more importantly through the right type of service initiatives,” he said. “If you look at the amenity creep in our industry, a lot of what we’ve done over the last five and six years is continue to push our service.”
Deitemeyer said Omni’s top two hotels, the Omni Shoreham Hotel in Washington and the Omni Parker House in Boston, are scheduled to get new bedding and other amenities.
“That shows you the amenity the consumer wants is service and execution of service,” he said. “You can have all the amenities in the world, but if you don’t get the reservation right at check-in, none of that matters.”
Challenges, concerns
The biggest concern for Omni is the evolving labor market, Deitemeyer said.
“We have low turnover, we’re proud of our associate base, but there’s outside influences that we continue to manage through,” he said. “Especially as the economy rebounds and there’s more job opportunities in the service sector, it becomes very difficult.”
Disrupted by union disputes, rising health-care costs and visa issues, labor is the most volatile expense, Deitemeyer said.
“We mitigate all of that by focusing on the right type of leadership,” he said. “An individual’s value is defined more by relationships, their feeling of worth to the organization.”
Johnson and Rosen cited the challenge of increasing awareness of the company to the investment community.
“We’re ramped up and we’ve grown our development department extensively this year, and we’re ready to be in the forefront of deals where in the past we’ve been quiet,” Johnson said. “We’re not going to be quiet any longer.”