NEWPORT BEACH, California—Rim Hospitality has been in business for three decades, ever since brothers Mark and Jim Burden raised funds from friends and family in order to build and operate hotels.
“At one time … we would raise the money in increments as low as $5,000, so we had about 300 different owners at one time,” said Mark LeBlanc, senior VP of development. “Managing the individual investors was as much as a challenge as managing the hotels—probably more so.”
Now just five executives own the private Newport Beach, California-based hotel management company.
By 2000, the company operated in two states with 14 hotels in primarily the limited-service sector. In November 2013, the company launched a complete rebrand.
“When we celebrated our 30th anniversary, we had to take a step back and take a look. We’re a different company than we were then,” LeBlanc said. “… We had to decide if we wanted to become a hotel real estate company or a hotel operating company.”
Now the company operates 85 hotels with nearly 14,000 rooms across 30 states, and 25% to 30% of its portfolio is in the full-service sector. However, Rim still has hotels in the limited-service sector as well as the boutique space, LeBlanc said.
“We’re truly a third-party management company, so if you’re going to be a hotel management company of size you really have to do all segments,” he said. “You have to be diverse.”
Bold and boutique
Recently the company took over management of two boutique hotels, the 208-room Hotel Angeleno in Los Angeles and the 119-room Hotel Erwin in Venice Beach, California. LeBlanc said these properties were part of strategic move for Rim.
“We had … gotten out of the boutique space because a lot of the boutiques we had been managing had gotten sold, so we weren’t doing a lot. So (these properties) got us back into the boutique space,” he said.
LeBlanc said Rim executives are excited to return to the boutique space for two reasons. First, he said boutique hotels are great when they are in the right locations.
“Second, selfishly as hoteliers, you love operating boutiques because, although brands are wonderful and returns are great, you really get to be entrepreneurial in a boutique hotel and try new things—whether it’s just from décor or from operating. As a true hotelier, they’re just a lot more fun to operate,” he said.
“What we really like is the strategy of taking a boutique and soft branding it … where you maintain your individuality but get the power of a Marriott (International) behind you through Autograph,” LeBlanc added. “We haven’t done any of those yet … but I do believe we’ll get some.”
Growth opportunities
Beyond the boutiques, LeBlanc said the company would like expand in the full-service segment.
To help grow the portfolio, he said Rim has formed a new division to attract and serve Asian investment money. The company has 12 hotels with “new” Chinese money invested. The division will manage these investments, completing tasks such as converting reports from English to Chinese.
“For us, (Chinese investors) are almost the perfect buyer,” LeBlanc said.
“Chinese investors that we’re working with today really like a per-room-key purchase price that is significantly below replacement. They look at that before they even look at the revenues at all. …
“The good news is they hold long term, so they’ll pay a little more. They’re a little more aggressive on pricing. For a management company, having groups that look at things on a long-term horizon as opposed to five-year exit is always a good thing,” he said.
However, he said the bad news is Chinese investors don’t understand branding in the United States and sometimes think the property-improvement-plan list is a suggestion list.
“That’s one of the reasons we just hired somebody from China to run the division for us,” LeBlanc said. “We think it will really help in the education process for these new investors to come in and maximize their investments.”
He believes this investment opportunity will help enable the company to capture business from outbound Chinese travelers.
“Most of the Chinese investment that’s coming over has massive businesses over in China,” LeBlanc said. “Where we think we can capitalize on that … we think they have great databases of affluent Chinese that we’ll be able to market primarily our West Coast hotels initially through those databases.”
Geographically, Rim would like to have a bigger presence on the East Coast, particularly in Florida.
“Before the crash we had three or four development deals that were signed for Florida,” he said. “When the crash came they weren’t able to get funded.”
As for the biggest challenge Rim is facing, LeBlanc said it’s finding deals. “We really haven’t seen a lot of deal flow that’s attractive to us.”
“But in the past five years we’ve grown on an average of 15% a year, so that’s the good news,” he said.