At the Hunter Hotel Investment Conference last March, talks began between owner, operator and developer Hotel Equities (HE) and management company National Hospitality Services (NHS). Conversations were social at first, but it was clear that the firms weren’t just aligned professionally, but culturally.
Fast forward to today, after a year of turning those casual talks into deeper conversations and understanding: The two have formed a partnership, or as their execs are calling it, a marriage.
“If you’re going to undertake something of this magnitude, if you’re doing it right, it absolutely requires you to know their principals and senior leadership,” said Brad Rahinsky, HE president/CEO. “At some point, all of leadership has to make sure there are synergies and alignment around what you deem mission critical, what you prioritize and how you live your life.”
With culture paramount for both firms, those synergies weighed heavily during the courting process to ensure a long-term, successful marriage.
National Hospitality Services’ Norman Leslie, founder/CEO, and Sarah Koustrup, chief strategy officer
“The more we got to know each other there was clearly a very common culture and some unique skillsets they have that was appealing to NHS, and I think vice versa,” said Norman Leslie, founder/CEO, NHS. “With that backdrop, it made it really easy to start talking about a strategic partnership.”
Cultural alignment is at the top of the list for HE, especially post-pandemic when consolidation proved more essential than ever to keeping the lights on.
“We’re extremely proud of and very intentional around our 30-plus-year history in the space, led by our founder Fred ‘Coach’ Cerrone,” said Bryan DeCort, COO, HE. “Brad and I have been entrusted with ensuring that whatever decisions we make across the enterprise, particularly as it relates to these types of wide strategic partnership-driven conversations, that we find like-minded, people-focused companies that share our vision not only for how they execute across the business but in terms of how they’re deployed.”
For both Rahinsky and DeCort, it was clear that NHS fit the bill.
“As we got to learn more about their organization over the course of the last 12-14 months, that audience started to slowly widen on their side, and it just became incredibly obvious that they share our passion for people,” DeCort said. “When you look at the portfolio, they are also a best-in-class operator.”
Leslie mirrored that sentiment and has been impressed with HE’s other transactions with management companies. He said that he’s always felt HE is comprised of a reputable group of leaders, which could ultimately help NHS drive results for its owners, associates and guests.
“Where we saw huge opportunities was to really help use the power of HE’s operations team, their business intelligence and the systems they put in place through operating discipline and economies of scale that are going to significantly drive owner returns and value,” Leslie said.
HE also saw opportunities for its organization. In fact, the marriage between HE and NHS marks the largest portfolio of hotels that HE has added through a strategic partnership, 39, with properties across the U.S. This brings its combined asset count to 282 hotels and resorts (total with open/operation and under development/construction).
“We could very clearly see that not only was there a people alignment strategy that we felt made a lot of sense, but we liked the brand partners, we liked the geography and the chain scale of their assets,” DeCort said. “We feel like there were areas of the business that we could very quickly plug into and assist with, and we knew that we would create opportunity for their associates both at the unit and corporate levels. ”
More specifically, according to Joe Reardon, HE chief development officer, the alliance allows for continued expansion in the upper-Midwest part of the U.S.
“This is territory where we have not had a significant amount of growth to date,” he explained. “However, with our alliance, we will see further growth as we bring the best-in-class to hoteliers from top-line sales, driving RevPAR and truly providing procurement and cost savings across the board. We could not be more excited about the growth opportunity in this region.”
The HE team understands and gets excited around the prospect of thoughtful growth, DeCort said, particularly around its intentional focus on like-minded partnerships.
“We’ve gone beyond the proof of concept now two years post-pandemic, given the fact that we’ve done a number of these successfully,” DeCort said. “We’re excited about new relationships and opportunities, and about expanding the footprint. Our team sees opportunity beyond anything else.”
NHS’ portfolio will integrate into HE’s management platform, fueling growth and opportunity for associates while also enhancing operations at the property level.
“I think we both have strong talent acquisition, but them being larger and having more resources and more boots on the ground, we’re all able to start sharing and looking at resources; that’s a big perk for us,” said Sarah Koustrup, chief strategy officer, NHS. “We have really good, solid teams, but being able to reinforce all the good things they’re working toward by now adding this new alliance, more opportunities for movement and growth and hotels helps more people want to stay and work with us.”
NHS’s 1,500 associates are now employees of HE and have access to additional benefits like its sabbatical program, daily pay option, HE Marketplace and its MIT (Manager in Training) program for university graduates looking for a career in hospitality.
Additionally, HE recruits from top hospitality programs around the U.S. and Canada for its learning and development programs, led by its SVP of Talent Nancy Curtin Morris.
“There’s no question that the NHS team will benefit from our scale and the energy and intentionality that we put behind the talent division of our company,” Rahinsky said. “Our turnover is about half of what the industry standard is. That’s still too high, but as you gauge us against some of our competitors, we feel like the rigor and discipline we put into the training side of our business across all our proprietary training platforms, but also how we deploy against the recruitment strategy today, is a huge differentiator for us and one of the reasons that we see lower than average turnover.”
HE is no stranger to these types of partnerships and creating paths forward for associates, despite the current environment. Following the pandemic, HE looked for ways to bring like-minded groups and individuals together to create scale.
“We basically locked ourselves in a room for a month to identify the groups that we felt had really strong leadership, values and culture; and groups we felt we could get together with and bolt engines together to create that scale and efficiencies that was going to be absolutely necessary to counterpunch COVID,” Rahinsky said.
HE found these alliances to benefit for both sides, creating additional lift and efficiencies. For example, Leslie explained that HE’s business intelligence expertise gives owners and associates insight into the business, freeing up time and energy allowing companies to shift focus.
“One of the things Sarah and I have tried to do for years—and we’ve been successful to a certain extent—is automating certain things and taking responsibilities away from the property level so our GMs and directors of sales and department heads can spend more time running the business and working with our associates and guests,” Leslie said. “That’s part of HE’s culture as well. They’re trying to find ways to move things that are more administrative and move those off property-level associates and automate them so that they can have more quality time with their families.”
From a guest experience and an associate perspective, NHS was knocking it out of the park, the company’s CEO said, but operationally, the team knew there were other opportunities that a partnership with HE could unlock.
“In the post-COVID world and with the dynamics going on right now, you’re either moving forward or moving backward—you’re not standing still,” Leslie said. “The question is if you are moving forward fast enough to really make a difference in this environment. We felt a partnership with HE would give us an opportunity to really move much faster in the area of ownership returns. What would have taken us three or more years, we will be able to accomplish in a matter of months.”
According to Reardon, HE continues to identity partnership opportunities as it now has almost every chain scale in its portfolio.
“We continue to look for scale with the right groups where a partnership adds value for both parties,” Reardon said. “Because of the lengthy due diligence involved, our alliances are only made with groups that can translate cost savings to ownership, but more importantly offer opportunity to their associates. Our abilities to grow regional leaders into VP roles and create pathways to further associates’ career goals is invaluable.”
Koustrup said that her associates responded very well to the announcement, despite being extremely brand-focused, and saw the opportunities both for the company and for themselves as hospitality professionals.
“We’re in Fargo [ND] but now considering the East Coast, Hawaii and Canada—places we’ve never been, where there is more opportunity,” she said. “It’s great building and learning from people we have a great deal of respect for. [HE] has an outstanding reputation and merging those two things together gets [our associates]excited.”
Although leadership and associates are excited for what the future holds, Koustrup made it clear that aligning wasn’t an impetuous choice.
“We definitely didn’t take this lightly; this was a big decision,” Koustrup said. “Norm started this company with blood, sweat and tears, and I was honored to become his partner. Taking on a new partnership was a big decision for both of us. We really spent a lot of time thinking what it could do for us, for our owners and for our associates, and we feel proud to have made the selection and be equally selected by them. Overall, it’s a marriage.”
Just as the conversations began last year, it all goes back to culture for both sides, with the road ahead looking bright and with the two entities building on mutual respect.
“NHS is associate-centric; they care about their people—that’s what drives them every day,” Rahinsky said. “The reality is that Norm’s a lot sharper than I am. He’s forgotten more about finance than I’ll ever know. We have a lot of similarities and connectivity in that we want to ensure that our people have an opportunity to get better to learn and grow to fulfill their purpose and aspirations.”
