VANCOUVER, WA—Not only is Vesta Hospitality celebrating 20 years of being in business, it’s also boasting the upcoming lease of a public-private partnership project in its hometown, new acquisitions in a neighboring state, and reminding leaders in the hospitality space to always give back to organizations in surrounding communities.
“I think we’re in a better position today to be the type of hospitality company I want to be than we’ve ever been,” said Rick Takach, president and CEO of Vesta Hospitality.
Established in 1996, the hotel development and hospitality management company changed its name to Vesta Hospitality 10 years after opening up shop to lift the fictitious geographic restriction suggested by Northwest Hospitality Group, its founding name.
“We started doing some managing and buying product more Midwest and East Coast, so I started thinking Northwest Hospitality wasn’t necessarily the right name,” he said. “In addition, there was another Northwest Hospitality Group based in Boise, Idaho.”
Takach hired a marketing group from Portland, OR, to develop a new brand name, as well as a “better-looking business card.” Named after the goddess of home and hearth from Roman mythology, Vesta has always strived to provide “unparalleled service and accommodations to our guests, a supportive and secure workplace for our staff, and strong financial returns for our business partners,” according to its website.
While the industry itself has evolved since the company’s early beginnings (Takach reminded this reporter of the times when businesses in the industry were just starting to use email and relied heavily on faxing), there are some key timeless components of hospitality across the landscape. Without them, the foundation collapses.
“It all comes back to people,” he said. “You need people who have the willingness to serve—that stays the same. You have to have friendly people. Training programs to make sure that people are competent in knowing how to deal with guest situations.”
At the very least, guests have always expected a hot shower, a clean room, a well-maintained room and a friendly stay, Takach noted. One could argue another essential need for any guest living in the 21st century is internet access.
“The internet has become just as important as hot water and a cup of coffee,” he said.
Made up of about 12-13 properties (the number often varies because the company buys and sells properties), Vesta’s portfolio is heavily concentrated on the West Coast, but it does have locations sprinkled throughout other regions. One area lacking any Vesta presence is the Northeast, but it’s not because the firm is neglecting the market. It is looking, specifically, at properties in the Boston area, New York and the DC area.
“It’s just harder to buy and harder to get comfortable with in many cases,” he said. “We’re not restricted geographically at all. We’ll go where we think we can find the right transaction.”
Vesta is currently working on a public-private partnership project: the Port of Vancouver USA (this is the firm’s first public-private partnership of this size). The entity selected Vesta as its preferred hotel developer for the port’s Terminal 1 mixed-use project after an “extensive interviewing process.” The lease for the project still hasn’t been signed.
“This is a long-term project for us,” Takach said. “This is not a buy-and-flip in 10 years. This is going to be our new home because it’s in our backyard.”
If the lease is signed by the end of this year, he expects the riverside property, a 130-room AC Hotel by Marriott, will open at the end of 2018 or the beginning of 2019.
The biggest challenge for the property was parking. “There are many times in the winter that it’s raining, and there’s sideways rain,” he said. “I didn’t think our guests would be too happy about having to get out of their cars and pull their luggage through the rain to get into the hotel.” In collaboration with the master developer, Vesta found its answer.
“A parking garage will be built directly across the street from the hotel,” Takach said. “We anticipate putting in a sky bridge to ensure our guests can get to the hotel without being in the weather, if desired.”
The company recently acquired a couple of new properties in Oregon. Located in Bend, the Riverhouse on the Deschutes is a 221-room, full-service property situated on 15 acres. “It had significant deferred maintenance, but we saw quite a bit of upside,” he said. “We were looking for that type of opportunity. It’s doing quite well, but that market, in general, is doing well. Revenue is significantly over last year. We’re very proud of the asset.” Vesta additionally relaunched the restaurant after purchasing it.
The second property, the Best West Agate Beach Inn, located in Newport, is a “very unique property,” he said. The 148-room hotel has a restaurant and bar, and 5,000 sq. ft. of meeting space. “It sits in this little nook overlooking the Pacific Ocean, with beautiful views of the lighthouse,” he said. “The location is off to a better-than-expected start.”
When underwriting hospitality real estate, “strength of the market” is of the utmost importance. “You need to know what’s coming in. You need to know if anything is going out,” he said. “How good do you feel about the long term? Where is your hotel asset located? Real estate location is still pretty important. I think understanding the market and understanding the long-term potential of the market is extremely important.”
Vesta also factors potential market downturns into the equation. Luckily for the firm, since it typically buys existing properties, information on historical downturns is readily available. “I’ll take a look at that cash available for debt service and I’ll look at what we’re going to leverage,” Takach said. “What is our annual debt service going to be versus that downturn net operating income (NOI)? In many cases, because of interest rates of where they are today, I’m able to keep that leverage lower than that downturn NOI.”
From an operations and sales outlook, he doesn’t believe Vesta Hospitality will be doing anything differently in the upcoming year. “Obviously, we’re already trying to figure out the least-cost way to put business in the hotel,” Takach said. “We’re always trying to figure out ways to create a guest service at the best cost. I think from a 2017 standpoint, we just continue to refine what we’re already doing.”
Based on a couple of factors—wage pressures, market softening—he expects “profits will probably be lower next year” even if revenues remain the same. “I could be wrong, but that’s my thought process,” he said.
Despite potential dips in profits, Vesta Hospitality still plans to give back to its community. In fact, for its 20-year anniversary, the hospitality management and hotel development company donated a total of $20,000 to four local nonprofit organizations.
“We really believe in contributing back to our communities,” he said. “We do it in little shots of money instead of one big shot. It’s become part of our culture, so one of our focuses—other than profit, revenue generation and happy associates and guests—is responsible business, and that’s not only being sure you’re being responsible in environmentally friendly areas, but it’s also working within your communities to better help your communities—and that’s very important to us.” HB