RICHMOND, VA—Over the course of the last decade, Sandpiper LLC has grown its portfolio of owned hotels to 26 and opened itself up to third-party management contracts. Its sweet spot is in extended-stay, and that’s no surprise, given its origins.
“We were in the apartment business and saw an opportunity in the extended-stay hotel space,” said P. Carter Rise, president and chairman of the board. “We opened two WoodSpring Suites properties in 2009, at the height of the difficult financial conditions—but the properties performed exceedingly well. It was clear to us that there was a great opportunity in midscale and economy extended-stay, and we’ve been hard at it ever since. We have expanded up the chain scale and across brands. It’s been a story of continuous and evolutionary growth.”
While the company has experience in nightly stay hotels—with one in the portfolio—and would consider more in the future if the situation was right, its niche lies in extended-stay hotels. “We like extended-stay because it offers enormous value to the customer, which we think is something that really protects you as an owner/investor,” Rise said. “The second thing we like about it is that management of extended-stay properties is different than the management of a nightly stay property, and we’ve been able to specialize in extended-stay management. We think we’ve got a significant competitive advantage there. You have better margins, a better supply/demand curve regarding new product and, at the end of the day, the better value we deliver to the customer is a fairly wide and protected moat around our investment. And, given the different requirements for managing the properties, it has allowed us to differentiate ourselves as a management company, very specialized and focused in extended-stay, which leads to a better experience for our customers, better opportunities for our associates, and better financial performance for our investors.”
Of course, Rise has seen the segment change over the past decade. “It’s a story of increased interest from institutional owners and institutional capital, increased interest from the major flags, and the development of new flags; extended-stay is taking market share from nightly stay hotel rooms,” he said. “If you look at a customer who needs a place to stay for three, four nights to six months, the specialized extended-stay product really provides the customer with the best possible option. The stays are too short for apartments, and customers need more than what a nightly stay room can offer, either in terms of amenities in the room, price point, or the whole customer experience.”
Another change for the company in the past year has been the addition of third-party management. “We believe competition makes us better and by working for third parties, we improve our skillset and what we can deliver,” Rise said. “And there’s a lot of interest and demand for us as a third-party manager now. We’ve only been at it for a year and the results have been extremely encouraging.”
There’s also been changes recently with WoodSpring Suites, given Choice Hotels International Inc.’s acquisition of the brand in 2018; WoodSpring makes up a significant portion of Sandpiper’s portfolio. “Speaking for the WoodSpring franchisees, and I think I can as I’m the chairman of the franchisee advisory committee right now, it’s been a learning process for both Choice and us,” Rise said of the integration process. “WoodSpring was always an independent company with a very narrow focus on our particular piece of hospitality, and Choice is a very large company with a clear nightly stay expertise. To its credit, Choice has taken a go-slow approach and a collaborative approach. We’re a year and a half in, and we’re still working on integration; we expect to go on the reservation system by year-end, and we’re expecting it’s going to be a significant boost to our business… Choice is listening and it’s interested in learning based on the success WoodSpring has had in this space, and franchisees are certainly listening and learning and hoping to benefit from the global reach and massive customer base that Choice has.”
Sandpiper began as a Mid-Atlantic regional operation focused solely on WoodSpring Suites and grew to a national company focused across the extended-stay spectrum. The portfolio extends from Virginia to Nevada and Washington State to Florida. Sandpiper has five development projects in the pipeline, as well as three hotels that it’s in the process of acquiring—with an acquisition pipeline much bigger than that.
“On the development and acquisition side, we would describe our growth as controlled,” Rise said. “Everyone thinks they’re careful and disciplined, and we’re no different, but we would describe our approach to growing our own portfolio as careful, measured growth with a focus on the long term. We’ve never sold a property. I’m sure we will at some point, but we are owner/developers with a long-term financial focus. We reinvest heavily in our properties and we expect to own for the long term.”
Going forward, Rise thinks the future for extended-stay is very bright. “We believe the midscale and economy extended-stay product is a particularly good place to be in any downturn,” he said. “We’re confident there remains an awful lot of opportunity in this space, and we remain confident that the hospitality business is one of the few real estate-oriented businesses where the quality of your management and the quality of your people can have a dramatic impact on the value of what you bring to the customer. It remains the type of industry where someone can truly start at the bottom and work their way to the top—and all it requires is hard work, intelligence and a spirit of a focus on customer service.”
And that’s incredibly important to Sandpiper, which prides itself on its company culture. “The hospitality business is first and always about people; it’s about our customers and associates, the communities we’re in, and our investors,” Rise said. “We try very hard never to forget that. The term we’ve coined for the hospitality business here is the spirit of welcome, always looking to make our guests feel welcome, always looking to see what more we can do for our guests and associates. The hospitality business has become an increasingly difficult and competitive business, and our key advantage is to find high-quality people and to enhance their ability to succeed as individuals and as professionals.” HB