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LaSalle Hotel Properties (LHO-NYSE) |
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July 2, 2012 Issue |
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The Most Powerful Name In Corporate News and Information |
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CURRENT ISSUE | COVER ARCHIVES | INDEX | CONTACT | FINANCIALS | SERVICES | HOME PAGE |
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With 38 Upscale Full-Service Hotels in 9 States and the District of Columbia, LaSalle Hotel Properties is Focused on Outperforming their Peers in the Lodging and REIT Industry and Doing it with Lower Risk |
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LaSalle Hotel Properties is a leading multi-operator real estate investment trust owning 38 upscale full-service hotels, totaling over 10,100 guest rooms in 13 markets in 9 states and the District of Columbia. The Company focuses on owning, redeveloping and repositioning upscale full-service hotels located in urban, resort and convention markets. LaSalle Hotel Properties seeks to grow through strategic relationships with premier lodging companies.
President and Chief Executive Officer Michael D. Barnello is President and Chief Executive Officer of LaSalle Hotel Properties (NYSE: LHO) and has been with the company since its IPO in 1998. LaSalle Hotel Properties is a leading multi-tenant, multi-operator real estate investment trust that owns 32 up-scale and luxury full-service hotels totaling over 8,700 guest rooms in eleven states and the District of Columbia. The company seeks to grow through strategic relationships with premier recognized hotel operating companies including Westin Hotels & Resorts; Sheraton Hotels & Resorts; Denihan Hospitality Group; Outrigger Lodging Services; Noble House Hotels & Resorts; Hyatt Hotels & Resorts; Benchmark Hospitality; White Lodging Services Corp.; Sandcastle Resorts & Hotels, Inc.; Kimpton Hotels & Restaurants; Thompson Hotels; Davidson Hotel Company; and Accor Hotels.
Prior to 1998, as Senior Vice President of Jones Lang LaSalle, formerly LaSalle Partners, Inc., Mr. Barnello was instrumental in the creation of the Initial Public Offering of LaSalle Hotel Properties.
Before joining LaSalle in 1995, Mr. Barnello was Vice President of VMS Realty Partners. He received a BS in Hotel Administration from Cornell University. Mr. Barnello resides in Bethesda, Maryland with his wife, Susie, and three children, Matthew, Olivia and Sophia. |
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Interview conducted by: Lynn Fosse, Senior Editor, CEOCFO Magazine, Published – July 2, 2012
Mr. Barnello: LaSalle Hotel Properties is a lodging real estate investment trust. We are a public company and trade on the NYSE under the ticker symbol LHO. We have been public since 1998 and we focus on investing in high quality, full service, upper-upscale hotels located in resort, urban, and convention markets. We have 38 hotels in our portfolio today. We have an approximate total enterprise value of about $3.9 billion and we are always looking to grow. We are focused on major markets like New York, DC, Boston, Chicago, LA, San Diego, Seattle, and San Francisco.
Mr. Barnello: The reason our focus is upper-upscale is because we feel like we can command premium rates, and it is still at a profitable level. When you get to the super luxury tier, we have to provide a great deal more services, which is not quite as profitable for our shareholders than it is if we actual compete in the upper-upscale levels. Our hotels typically are in the 4-star category; 4-star, 4-diamond level. From a brand perspective, we have Westins, Hiltons, and Hyatts and others and we have a lot of independent hotels that are also in those categories.
Mr. Barnello: We changed physically, but we have not changed too much strategically. By physically, I mean we have sold 4 assets since I took over in 2009 and we purchased 10 hotels. Therefore, the portfolio looks a little different. As far as the strategy, it is pretty much the same. I joined LaSalle in 1995, before we went public, so the strategy and tactics that we have used over the time since we went public have been fine-tuned together between myself and the former CEO. We were able to figure out what worked and what did not work. We have continued along the same path, so not much has changed from a strategic perspective.
Mr. Barnello: We are diversified in a number of ways. First, we focus on major markets spread out across the country. We are in the biggest markets because over time those markets have performed the best for shareholders. We also are diversified by the types of hotels we look at in terms of resort, convention and urban. We like this segment diversification because at some point in the cycle, one of the segments may be doing better than the others and then later on it may reverse. The last way we are diversified is that we have a lot of operators. We work with 21 different brands and operators that manage and franchise our properties, in order to get best practices from all of them and then use those that are applicable at other hotels across our portfolio.
Mr. Barnello: I would doubt if many guests know. We do not have our names on the hotels. There is no LaSalle Hotel Properties symbol or notations anywhere in the rooms themselves, so the only way you would really know is if you were probably a shareholder or some kind of investor or research analyst that was tracking us on our website. The marketing and all of the promotions are all done through the hotel operator whether it is Starwood, Destination, or Viceroy etcetera. Those are the folks who are out there marketing properties and we prefer the guests actually know them because these operators provide our distribution systems for all the properties.
Mr. Barnello: We have a crackerjack team of asset managers that work with our property. We talk to our operators all the time and they work with them about things as complicated as renovations, repositioning, the changes they are seeing in staffing, what kind of pricing they are seeing in terms of group bookings or how they are pricing the product relative to the transient business. At the same time we get monthly reports to show how they did. We also get monthly reports from a company called Smith Travel that tells us, each week, how we did on the top line relative to our competitors in the market. Therefore, we can gauge people real-time to see how they performed in the market. We can actually see how well they have done when we look at their profit/loss statements every month.
Mr. Barnello: It is an operating business. Many people think it is a combination of real estate and operations, but what is surprising might be the fact that we really do not have any long-term leases. Every single day we have to re-lease our hotel with new customers. That is a day in and day out job for a lot of sales people to get that business. Unlike office buildings or retail tenants, which have longer term leases, we have to do this every day. It provides a lot of upside in good times and also has downside in the event that the economy takes a turn for the worse.
Mr. Barnello: On the buy side, if it fits into one of our markets. That is really the first criteria. Then we look at the type of property that it is and what kind of metrics it has, in terms of how it is dong profitability wise. Obviously, the price of the asset is a big consideration. Does the property need management change, does it need renovation, does it need both or does it need a change of brand? These are things that we think about. We cannot forget that first and foremost we are in the real estate business, so the most important thing for us is location, location, location. We try to get the best assets we can that are nearest demand generators in our markets, so that people want to be in our hotels. You can imagine any market that you look at there are great locations and not so great locations. Obviously, we are more attracted to the best locations in town.
Mr. Barnello: Quite a bit. I am on the road once a week, so chances are if it is not a day trip, I am staying in one of our properties.
Mr. Barnello: We are in great shape. We had a strong 1st Quarter. Financially we are in a rock-solid position from a balance sheet perspective. We have an incredibly low leverage overall. In fact, we are among the lowest in the competitive set of other public company peers. From that perspective, we have a lot of dry powder to buy assets if assets come to market. We also have a very low cost of capital. Therefore, we feel like overall we are in great shape financially.
Mr. Barnello: That is hard to say. We focus on our segment, so I can tell you about turnover in our segment. It depends on individual owners. Some people tend to be long-term owners like us and some people tend to be flippers. They sell after two or three years.
Mr. Barnello:
The first question they have to ask themselves is if they want to invest in
hotel real estate. If they do, our perspective is that we are trying to
outperform the market. We are trying to outperform the peers in the lodging
and REIT industry. At the same time, we are trying to do it with lower risk.
Everybody will come to talk to you about trying to outperform, but our goal
is to outperform and, at the same time, minimize your risk. To minimize
risk, we diversify, we have low leverage and we have lots of operators to
work with. We ask you to check out our website and we would love to have you
at our hotels. |
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We are trying to outperform the peers in the lodging and REIT industry. At the same time, we are trying to do it with lower risk… To minimize risk, we diversify, we have low leverage and we have lots of operators to work with. We ask you to check out our website and we would love to have you at our hotels. - Michael D. Barnello |
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