CORAL GABLES, Florida — In roughly a year since its start, Hotel Equities' Caribbean and Latin American division grew its portfolio to eight open or soon-to-be-open hotels in the Caribbean and Latin America with commitments for over 20 more.
Hotel Equities CALA has been off to a strong but deliberate start, said Juan Corvinos, president of the division, in an interview at the Americas Lodging Investment Summit CALA.
The biggest factor in this was the hotel development and management company setting up its platform with a whole team behind it, including not just a chief development officer and head of operations but specialists in finance, revenue management, human resources, sales and marketing, and more, he said.
“That was our challenge: how to marry revenue generation for owners with our aspirations for growth,” Corvinos said. “And here we are a year later.”
The third-party management space "is getting its legs" in the CALA region as most hotels there have either been brand-managed or operated by owners directly, he said.
“The third-party segment is not prevalent,” he said, calling it the evolution of where the U.S. hotel market moved 20 years ago as brand companies moved to franchising and spun off real estate investment trusts.
There aren’t big institutional players at the moment, Corvinos said. The space is fragmented, with hotel operators in their own countries but no pan-regional operator — though companies such as Aimbridge Hospitality, Highgate and others are starting to do it. Even so, setting up such a platform takes time.
In his prior role at Hilton, Corvinos said hotel owners in the Caribbean and Latin America would often ask who could manage their hotels. At the time, there weren’t many third-party operators he could refer them to. Now, that’s changing.
At Hotel Equities CALA, with the exception of Corvinos and his chief development officer, the entire team is from the region, he said. There aren’t many companies that can say it formed a team the same way to operate in CALA.
“I think that that's the piece of what was missing,” he said. “The people that we hired have worked in corporate America, so they understand how to translate the need for flexibility in Caribbean and Latin America for both the corporation and the owner's interests. So, that was the big difference, and to me it was part of the natural evolution of the industry in this market.”
Hotel Equities CALA will bring in a taskforce from the U.S. when necessary, but for the most part, its hotels in the region are operated by locals, Corvinos said.
“This is a local management company,” he said. “We incorporate in the markets we work in and we operate like locals.”
Over time, the third-party hotel management space will resemble that of the U.S., Corvinos said. Mexico is trending in that direction already. More competition in the region will only make those already there better because it will push them to be better.
That growth won’t be easy, however. Many people fall in love with the idea of owning or operating a hotel in CALA, but it can be a challenging region, he said. Each market requires its own due diligence and has its own set of rules, taxes and employment issues.
“People get enamored with the opportunity, but very few people stay and maintain,” he said.
Hotel Equities CALA has a full business plan, which is why it’s a subset of Hotel Equities, Corvinos said. It operates in an independent space because it has to be self-contained in its objective of the end game, which is to be there for the next 100 years, not just two or three.
When Corvinos' team looks at a hotel project, they want to determine whether it will be there long-term, he said. If the market is too challenging or undergoing a change, they may decide to wait a little longer because the market will still be there.
“We’re not chasing a shiny object or shiny money,” he said. “I’m chasing sustainable, controlled growth over the next years.”
Hotel Equities CALA doesn’t have the same growth aspirations other companies may have, Corvinos said. It’s not the company’s mission to be everywhere and bite off more than it can chew. The potential for growth is there as there’s no saturation of management companies, but the trick is to do it well. The operator sits between the owner and the brand, so if something goes wrong, the operator takes the blame.
Growth will come, and its portfolio size within a year’s time is proof of that, he said. There are owners in need of its services, and they will entrust it with their properties.
The goal is to manage each hotel or resort successfully and then take on scale, Corvinos said. Companies burn a lot of resources to maintain each property as being the manager is different than being its franchisor. Each hotel needs a team and the technology in place to run it efficiently without burning anyone out.