ATLANTA—Industry veteran Fred Cerrone is stepping out of his role as CEO of Hotel Equities (HE), turning the keys to the C-suite and the title over to Brad Rahinsky, who has been serving as president/COO of the 28-year-old hotel ownership, management and development company.
The move follows a unanimous vote by HE’s board of directors.
The new president/CEO also has been named a partner in Hotel Equities.
Cerrone will remain in his position as chairman of the firm, which he founded. He also will retain his position as COO of Hotel Development Partners LLC (HDP), a joint venture he co-founded in 2012 that tandemed Hotel Equities with IRE Capital Inc. and McCarthy Investments LLC.
In an exclusive interview with Hotel Business, the executive duo detailed why “the timing was right” to make the shift, and the path that’s ahead for HE.
“Brad has been president/COO of Hotel Equities for nearly three years. The promotion to CEO was really the culmination and acknowledgment of the success and accomplishments he and his team have achieved and their vision for the organization moving forward,” said Cerrone.
HE’s founder had been pondering a succession plan back in 2010 and subsequently began assembling a board of directors. Two years later, Rahinsky was on Cerrone’s radar as a potential candidate for his plan.
“It was five years ago at the ALIS conference there in the lobby that I met with Coach—that’s Fred—for the first time,” recalled Rahinsky. “From that initial meeting, there was a multi-week interview process where I met with the board and other individuals who have relationships with Fred centered around the business. I had somewhere around 10 or 15 different interviews to come in initially as the VP of operations. What I later found out was that it was really more of a ‘succession-plan-interview’ process. I jokingly said to [Fred] three or four weeks into the process: ‘Fred, you need to make a decision. I’m running out of suits.’ And he did.”
Rahinsky came on board as VP/ops in charge of strategic planning and the organization’s day-to-day activities, leveraging his experience in hospitality operations, sales and marketing, and business development.
“We’re fortunate to have a distinct culture here at Hotel Equities, so I wanted to make sure that there was somebody who embraced that and was willing to nurture that,” said Cerrone. “I’m of the belief that every organization has a culture, whether they realize it or not. And there are two kinds of main cultures: one’s healthy, one’s unhealthy. I believe with healthy cultures, a lot of good things happen, including happy employees, more profits, more revenue, etc. As I got comfortable with Brad as my heir apparent and successor, I thought the timing was right.”
Rahinsky sees the change as a signal to the industry of HE’s positive trajectory.
“It communicates to the industry what the Hotel Equities team has seen and experienced over the last few years as I took over the day-to-day responsibilities for HE,” said the CEO.
During his tenure at HE, the firm realized strong growth. Rahinsky recruited and promoted talent, adding several VPs and regional directors of operations. He also initiated strategies around revenue management, sales, financial support, training and marketing, and helped expand development and third-party partnerships.
“We’ve been very fortunate,” said Cerrone. “The company doubled in size in the past three years and Brad has been a big part of that. Last year, in particular, I ‘let out the rope,’ if you will and he handled it very well from a business-acumen standpoint and his relationships with associates, with owners, with investors. He just does a great job with all those groups that are important.”
Cerrone plans to stay involved and help Rahinsky wherever he can.
“He gave me enough rope to do what I need to do and learn the role, also knowing he was there right behind me if I had questions or stumbled. And that won’t change. The reins have now been handed [over]and I’ve been given the CEO title, but he’s not going anywhere,” laughed Rahinsky. “We meet, if not daily, certainly weekly to discuss the ‘big rocks’ that are mission critical to our success today, next month and over the next few years.”
Hotel Equities currently has a portfolio of 103 hotels, 20 of which are owned and managed and 83 that are managed. Weighted toward Marriott International and Hilton Worldwide brands, the portfolio also includes product from IHG and Hyatt Hotels, as well as four independent properties: Cristata Inn, Uncasville, CT; Island House, Orange Beach, AL; Pensacola Grand, Pensacola, FL; and The Wyvern, Punta Gorda, FL.
Hotel Equities serves as the management arm of Hotel Development Partners (HDP), which was founded by Cerrone along with partners Bob McCarthy and Allen O’Brien. HDP currently owns 13 hotels, including the Hampton Inn & Suites by Hilton Atlanta Perimeter Dunwoody, GA; Residence Inn by Marriott Miami Beach Surfside, FL; and Residence Inn by Marriott Atlanta Perimeter Center, GA.
HDP also has topped off a Residence Inn in Dunwoody and is planning to break ground on a Courtyard by Marriott in Alpharetta, GA, across from a new, high-end retail outlet mall.
“That’s where I see me spending a lot of my additional time,” said Cerrone. “Looking for sites and using our relationship capital to make sure we’re in the know. And I have the benefit of a couple of really good partners. We think there’s tremendous upside there.”
In terms of growth, Rahinsky said, “Our full-service division has seen significant growth and will continue to be the fastest-growing division within our portfolio. We have a dedicated team that has 100-plus years of combined full-service experience in larger, upper-scale hotels, food and beverage, repositioning of hotels and restaurants, etc. We will continue to be focused on our mix with a 40% target for the overall portfolio over the next few years.”
The company recently opened the 237-room, full-service DoubleTree Arlington DFW South in Arlington, TX. Last month, HE inked contracts to manage the SpringHill Suites St. Petersburg Clearwater in Florida, and opened the Fairfield Inn by Marriott Corpus Christi Aransas Pass in Texas.
The company also has opened regional offices in Florida and Texas to support its expanding portfolio.
“If we get better in all the key measurables and disciplines that are important to our industry, the ‘bigger’ will happen organically,” added Rahinsky, noting this includes consistently assessing its various “buckets.”
“This means the management side, as we have a number of ownership groups that we work with; the ownership side, as we continue to grow our interest in our equity in that side of the business; the investment side; the asset management side, as we continue to diversify both geographically and segmentwise; and the full-service side. They are all important pieces to the bigger puzzle for us right now,” said Rahinsky.
As for expansion outside the U.S., Rahinsky acknowledged the company has been asked to explore opportunities, but the feeling is there are significant domestic opportunities and an international project would have to be “quite extraordinary.”
That said, HE is involved in a full-service resort project in Costa Rica. “We’ve been involved in Costa Rica as an organization for many years, and a lot of our senior leadership, including Fred, has been down there many times over the past few years. So, we feel we understand that market well. We were presented an opportunity that we’re currently assisting with and we’re hoping we’ll start putting shovels in the ground in ’17 against that,” said Rahinsky.
HE has an equity position in the project and will manage it when completed.
“We are not just a management company any longer. With ownership in over 20 hotels today, that number will move to 30-35 over the next few years,” said Cerrone. “Our geographic diversity has greatly changed over the last few years as well. We are an organization with hotels in 22 states from California to New York, Vermont to Florida and everywhere in-between.”
Rahinsky added his promotion also allows Cerrone “to spend more time on mission critical projects, such as raising funds for the firm and on ensuring that the culture that he has invested so heavily in over the past 25-plus years is thriving and being practiced and lived every day by our nearly 2,000 associates.”
From his perspective, Cerrone said, the move “affirms Brad’s leadership and oversight of all areas of business… It has Brad more involved on our fund side along with me, as he is now a partner of the firm. Brad has built an industry-leading team that has elevated the results and expectations for HE in all key areas of the business. This allows him to continue that drive and push the vision out to the next level of leadership for the foreseeable future.”
“I always say steel sharpens steel and our best marketing is word of mouth. We always say we lead by results,” said the new CEO. “We’re being strategic in the way we grow but, in many cases, [our activity]gets pushed out by ownership groups that we work with who are themselves being asked: ‘Who’s performing for you at such a high level?’ There’s that initial connection and introduction and we typically take it from there. Our scorecard is as good as anybody’s in the industry. That’s how we lead and that’s how we’ll grow.” HB