Energized at 80: Sonesta sets new pace for portfolio

NEWTON, MA—Anyone thinking the nearly 80-year-old Sonesta is such a sleepy brand that it’s wearing a Do Not Disturb sign around its portfolio needs to get ready for a wake-up call—and a loud one at that.

While it’s true the company, Sonesta International Hotels Corp., became relatively quiet since transitioning from a publicly owned company to a private one in 2012, thanks to its acquisition by an affiliate of Newton, MA-based lodging REIT Hospitality Properties Trust (HPT) for a reported $174 million, it’s not been asleep at the wheel.

Indeed, certain events have helped drive the company forward. For starters, Carlos Flores decided to leave his job as VP/chief information officer for Reit Management & Research, Inc. (now known as The RMR Group Inc.). He joined Sonesta in 2012 as an EVP and, tasked with wrangling strategic hotel growth and conversions, helped bolster Sonesta’s domestic hotel presence from three to 25 hotels. His additional concentration on communication, marketing, sales and revenue management eventually led to his being named president/CEO in February 2015.

Flores also was in on the ground floor when the company decided to expand its brand offerings, which, at the time, included full-service Sonesta Hotels & Resorts, upper-upscale Royal Sonesta Hotels, intimate inns Sonesta Posadas del Inca (in Peru), as well as its Sonesta Cruise Collection of luxury river ships on the Nile. An extended-stay product—Sonesta ES Suites—was introduced, gaining distribution in 17 locations via the rebranding of 15 Staybridge Suites and two Residence Inns by Marriott that were owned by HPT.

Carlos Flores
Sonesta International Hotels Corp.

Like Flores, the nascent brand over the past several years has been working its way upward and was formally introduced in May 2015, adding nine hotels along the way, with two more opening in Cleveland, this year, putting it on equal footing with its full-service SH&R sibling at 27 hotels.

“My tenure with Sonesta in the past four years is probably not dissimilar to at least the prior five or 10 years, which is trying to cultivate and create and deliver for our guests our unique service delivery,” said Flores. “Although we’re very different in terms of size, even in the past three years, we’re still a relatively small organization, definitely relative to the ‘big boys’ out there in the industry, which allows us a competitive advantage to create those curated, very customized service deliveries.”

He noted while each of Sonesta’s five brands and its service is different, “the one thread throughout is that personalized, unique experience for each one.”

Taking a personal approach is a part of Sonesta’s DNA, given the hotel chain’s decades-long stewardship under the Sonnabend Family, whose patriarch, financier Abraham M. (Sonny) Sonnabend, laid the foundation for the brand in 1937, when he and six partners bought the Preston Beach Hotel in Massachusetts.

Forming Sonnabend Operated Hotels (SOH), more hotels were acquired over the ensuing years, including The Plaza in New York. Sonnabend later merged the growing hotel portfolio with Childs Restaurant Co., leading it as president from 1954 to 1963, changing its name to Hotel Corporation of America (HCA) along the way.

Sonnabend passed away in February 1964 at the age of 67, leaving his sons Roger, Paul and Stephen to transition the firm to a hotel management company that continued to add and open properties, such as the Charter House and Royal Sonesta Hotels in Boston and New Orleans.

In 1970, HCA changed its name to Sonesta International Hotels Corp. [The name reportedly is an amalgam of Sonny’s and his wife, Esther’s, names. Company lore has the couple owning a farm in Massachusetts bearing the combo name “Sonesta Farms,” with the Sonesta moniker also applied to a special side dish served in the company’s hotel restaurants: a baked potato featuring sour cream made at the farm.]

Five years later, The Plaza was sold to iconic hotelier Harry Mullikin of Western International Hotels (forerunner of Westin Hotels & Resorts).

Sonesta continued building its presence globally, most notably with hotels, resorts and casinos in Egypt and its Nile cruise ships.

In 1995, third-generation hotelier Stephanie Sonnabend became Sonesta’s president, one of the few women in such a key executive position at the time.

Four years later, Sonesta introduced country-centric brand Posada del Inca in Peru, where it has properties in Miraflores Lima, Cusco, Lake Titicaca Puno and Sacred Valley Yucay.

In 2003, Stephanie Sonnabend and first cousin Peter Sonnabend became co-CEOs of Sonesta, which continued to expand its cruise business in Egypt and its hotel business in South America, the Caribbean and domestically. Peter Sonnabend became executive chairman of the board in 2009, leaving Stephanie Sonnabend as sole CEO and president up until the company was acquired four years ago by the HPT affiliate (aka Sonesta Acquisition Corp.) for a reported $31 in cash per share of Class A common stock of Sonesta, at which point it ceased trading on the NASDAQ.

Stephanie Sonnabend stayed through summer 2013 to help transition the company as it stretched into extended stay with Sonesta ES, and also opened properties within its core brands. These included Sonesta Resort Hilton Head Island, Sonesta Hotel Philadelphia, Sonesta Hotel Gwinnett Place Atlanta, Royal Sonesta Harbor Court Baltimore, Royal Sonesta Hotel Houston and the first international Royal Sonesta with hotel and casino in Panama.

Sonesta’s newest brand, ES Suites, is an extended-stay model largely growing via conversions, such as this property in Atlanta.

The expansion track continued with Sonesta ES, as well as Sonesta, which opened properties in Fort Lauderdale, FL; Ocean Point, St. Maarten; and most recently, Austin, TX.

Growth is an operative word in Flores’ vocabulary. “Most of my day is spent focused on driving that word growth,” said the CEO, explaining the two-prong approach he takes toward that effort.

“Growth as it relates to our capability as an operator, as a provider of lodging accommodations; our capabilities to do that better every day than we did the previous day. Thinking about how we’re going to evolve the product [and]what other product types we might not. For example, we do not have a select-service brand. That is something we have to consider as a strategic opportunity but also as it relates to our ability to deliver against that different product type. Even the ones that we have today like Sonesta ES Suites, we have to think about how we’re going to evolve and grow and do that better.

“Then there’s the more-traditional definition of growth as well, in terms of units,” Flores continued. “It’s very easy to say we’ve grown substantially since my employer acquired the company. Here in the U.S., Sonesta had three hotels: Cambridge, Coconut Grove and New Orleans. We’ve had very significant growth over the past four years, which is significant just in the numbers relatively, and interestingly enough in this time when hotel valuations are pretty crazy. A lot of that growth is because we benefit from our capital partnership with Hospitality Properties Trust. They are the underlying owner of many of our assets—not all, but many of them.”

The company also remains on an international growth track, Flores indicated. “Our operating partners in South America continue to bring us flags and we’re very grateful for those relationships, and expect those to grow and mature over time. Egypt is a little different story. It’s a very tough market to do business in these days and we’ll see what the future brings for that particular region. So beyond what we’ve realized in the past four years, I want to look for other opportunities, other like-operating relationships outside of the U.S. We’ve done a lot of repurpose, a lot of conversions. Almost exclusively, our U.S. portfolio is conversions; in fact, with one exception, just outside of Austin, TX, in July 2015 we opened up our first purpose-built Sonesta in a neighborhood called Bee Cave.”

In terms of other growth avenues, the executive noted while the company has yet to engage in a management or branding agreement with an unaffiliated party in the U.S., Sonesta “has had a lot of discussions over the past year. There’s a lot of interest in purpose-built, full-service, and a lot of people curious about our strategy as it relates to conversions and ES; a lot of conversations there. As we look beyond, into the future, U.S. franchising is something that is probably a when, not if, question in terms of our road map for the organization.

“Distribution is something we think a lot of and I think it will benefit our customers’ guests as well as, obviously, the strength of the brand and delivering a return for our important group of stakeholders, our owners, as well,” he added.

The CEO stressed products converted to ES Suites are “reimagined. They are no longer an old product. What you see, what you touch, what you can feel, what you sense. The design we selected, the FF&E packages we’ve curated for these particular products, where we’ve decided to put in these dollars in the most efficient way, turns out the asset is in a much better state.” Flores added, “From a market-share perspective, these hotels have repositioned themselves very radically, post renovation.”

A new name in a brand-saturated market also brings an advantage, he said.

“All of those strategies combined what we are looking at and acting on today, so growth is a very big focus for me for the organization,” he observed.

Flores acknowledged putting Sonesta product in gateway U.S. cities without representation, like Chicago, New York, Los Angeles, San Francisco and Washington, is a goal. Mexico, other Latin America locations and Europe are long-term targets.

“Culturally, we’re a very opportunistic organization. If something comes along and it makes sense, we’ll readapt to capture those opportunities. It wouldn’t be crazy for us to find ourselves in Asia or Europe sooner than later because a great opportunity presents itself,” he said.

In looking forward, the CEO indicated a strong foundation is in place for future platforms.

“Thinking about the history of the Sonesta brand, for a relatively small company over the past decade they’ve been able to cast an extremely large shadow. They may not have the brand awareness of the larger players within the market, but the awareness that they do have, the opinions are extremely favorable and have been for some time. In the recent tenure of the brand in the company, I can’t claim ownership of that reality; that’s been there for awhile.”

Still, the company remains evolving, adapting new business practices, seeing opportunity through a fresh lens.

“We’re just getting started; we are in the infant stages… it’s funny to say that an 80-year-old company would consider itself in its infant or adolescent stage but I’m very excited about where we’re going and we’re just now kind of waking up to the strengths that we have and starting to herald that within the marketplace,” said Flores. “Look out world, here we come.” HB

1937: A.M. (Sonny) Sonnabend purchases Preston Beach Hotel in Massachusetts with six other investors.

1944: Newly formed Sonnabend Operated Hotels (SOH) purchases the Biltmore, Whitehall and Palm Beach Country Club in Florida.
1948: SOH purchases Edgewater Beach Hotel in Chicago.
1950: SOH purchases Hotel Cleveland and Terminal Tower.
1953: Sonnabend and partners purchase The Plaza in New York from Hilton, reportedly for $15 million, sell the Mayflower Hotel in Washington, DC, and take a long-term lease on the Roosevelt Hotel New York.
1954: Sonny Sonnabend named director, then president, Childs Restaurant Corp.
1955: Childs Restaurant Corp., buys three Sonnabend-operated hotels.
1956: Childs Restaurant Corp., changes name to Hotel Corp., of America (HCA); Sonny Sonnabend is president.
1959: First international hotel built by Sonesta opens in San Juan, PR.1964: Sonny Sonnabend passes away. Sons Roger, Paul and Stephen transition firm to hotel management company, rather than real estate or finance company. Charterhouse/Hotel Sonesta/Royal Sonesta Hotel Boston opens.
1969: Royal Sonesta Hotel New Orleans opens.
1970: HCA renamed Sonesta International Hotels Corp.
1975: HCA sells The Plaza to Harry Mullikin of Western International Hotels (now Westin).
1982: Sonesta Hotel Cairo opens.
1994: Sonesta Beach Resort & Casino Sharm El Sheikh, Egypt opens.
1995: Sonny Sonnabend’s granddaughter, Stephanie, assumes responsibilities as Sonesta’s president.
1997: Sonesta St. George Hotel Luxor, opens in Egypt.
1999: Sonesta Posadas del Inca opens four hotels in Peru: Miraflores Lima, Cusco, Lake Titicaca Puno and Sacred Valley Yucay.
2000: Sonesta Moon Goddess cruise ship launched in Egypt.
2002: Sonesta Hotel & Suites Coconut Grove, FL, opens.
2003: Stephanie Sonnabend and Peter Sonnabend become Sonesta co-CEOs.
2004: Sonesta Maho Beach Resort & Casino St. Maarten opens.
2006: Sonesta cruise ships Star Goddess, St. George I launch in Egypt; Sonesta Great Bay Beach Resort St. Maarten opens.
2009: Cruise ship Sonesta Dahabeya Amirat launches on the Nile; Sonesta  Hotel Valledupar, Colombia opens; Sonesta Hotels open in Concepcion and Osorno, Chile.
2010: Sonesta Hotel Cusco opens in Peru; Le Royale-A Sonesta Collection Luxury Resort opens in Sharm El Sheikh; Sonesta Hotel Barranquilla in Colombia introduced.
2011: Sonesta Hotels open in Bogota and Cartagena, Colombia, and in Guayaquil, Ecuador.
2012: Sonesta International Hotels Corp., sold to an affiliate of Newton, MA-based Hospitality Properties Trust (HPT); Sonesta Resort Hilton Head Island, Royal Sonesta Harbor Court Baltimore, Sonesta Hotel Philadelphia and Royal Sonesta Hotel Houston open; Sonesta ES Suites brand introduced in 17 locations via rebranding of HPT-owned properties.
2013: First international Royal Sonesta opens with hotel and casino in Panama; Sonesta Hotel Gwinnett Place Atlanta opens.
2014: Sonesta Fort Lauderdale, FL, and Sonesta Ocean Point Resort St. Maarten open.
2015: Sonesta ES Suites expands with nine hotels; Sonesta Bee Cave Austin, TX, opens.
2016: Sonesta ES Suites Cleveland Westlake and Sonesta ES Suites Cleveland Airport open.

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