Investing In Infrastructure

By Dennis Nessler | December 8, 2020

While many hotel companies are focused squarely on survival since the outbreak of the coronavirus, Arbor Lodging Management has set its sights much higher as the operator positions itself for further growth despite the economic downturn.

The Chicago-based management company—which is an affiliate of Arbor Lodging Partners and has a portfolio of 35 branded limited-service and full-service hotels—recently took over operations of the 294-room Marriott Chicago Northwest. According to Arbor Lodging Management CEO Sheenal Patel, the company added 14 hotels to its growing portfolio of third-party managed and owned hotels this year and is looking to further grow on “both sides of that equation” going forward.

As such, the CEO touted the company’s atypical approach to staffing throughout the last several months as it has actually added to its infrastructure.

“We’ve heard of many management companies out there that cut their infrastructure during this time to save on costs and we chose the opposite strategy. When it was time for owners to make those tough choices on changing management companies we wanted to be ready and not then be focused on rebuilding our corporate infrastructure. Certainly with any sort of change like this [pandemic] there’s going to be an opportunity. We’re hoping to be able to grow and we’re ready for it,” he said.

Patel elaborated on the company’s approach to key personnel. “We didn’t do furloughs and for the most we didn’t ask everyone to drop their salaries or anything like that. Our thought was that this is a time that we’re going to need our corporate folks more than ever to manage through this crisis and I think that has served us well,” he said.

Patel further added that one of the silver linings of the industry-wide layoffs that have resulted from the significant drop in demand for hotels is that more qualified talent has been made available and subsequently joined the Arbor team.

“I’m extremely excited with some of the senior hires that we did in these last few months, as well as growing into the future. We’ve done well over these last few years so we thought it was a good time to make sure we continue investing in our staff and making sure that they’re doing everything we need to for partners and our properties,” he said.

Arbor Lodging Management closed only two properties, which have since been reopened, during the pandemic. Patel acknowledged that some are “performing better than others,” but emphasized that the vast majority of its hotels, particularly on the select-service side, are generally maintaining occupancy levels over 50 percent.

He pointed out that while the company kept its corporate infrastructure intact, it did make some significant changes at the property level. “We took pretty quick action on the cost-cutting side and we restructured how our properties operate and staffing levels,” he said.

Patel further noted for better or worse the pandemic has given the company a prime opportunity to evaluate its proprietary labor model, which has been in the works for roughly a year-and-a-half. The model employs formulas to help determine where associates should be stationed throughout the day and have them performing many different tasks. The company has tested the model at four of its properties and will be rolling it to entire portfolio in the next 12 months.

Patel confirmed that initial tests show the company is saving an average of 14 percent on labor costs with the new model in place. He added that there are a number of benefits of cross training employees, including potential monetary advantages for them, and that it produces better productivity.

“We’re real excited about it [new labor model]. That’s the thing that we’ve been working on the most. In all of them [test hotels] we had consistency and no decrease in guest service, and no issues as it relates to our associates from a morale perspective so that’s going to be a big focus for us,” he said.

Meanwhile, when it comes to growth Patel noted the company is “cautiously optimistic” and armed with strong capital partners. Earlier this year Arbor completed the acquisition of a 12-htoel portfolio through a joint venture with GFH Financial Group BSC. He also noted the company’s acquisitions department has been underwriting “quite a few deals” as he looked ahead.

“Our hope and expectation is that we have a pretty big year of growth in 2021. Although 2020 was really tough we added 14 hotels in our portfolio. Hopefully we’ll be able to do as many, if not more, in 2021,” he said.