LOS ANGELES—Niche is the word when it comes to hotels in the 21st century, according to Steve Rudnitsky, president and CEO of Dolce Hotels and Resorts.
Speaking during a break at last month’s Americas Lodging Investment Summit, Rudnitsky said a hotel brand that knows its niche is a successful hotel brand. Dolce knows its niche is in the meetings and conference business, and has the numbers to back up its success. That equation will lead to further expansion of the 26-property chain based in Rockleigh, New Jersey.
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“We’re starting 2012 in a very good position coming off a very strong organic growth year in 2011,” Rudnitsky said. “It’s a niche, but at the end of the day, we’re an upper upscale conference hotel brand with an (average daily rate) of (US)$140 to (US)$160 that has a mix of business of 60% group and 40% transient.
“…I’m still optimistic we can double the size of the portfolio in the next three to five years,” he said. “We’re one multi-unit deal away from making that happen.”
Rudnitsky is happy with the increased performance metrics for the company during 2011, including:
• The brand’s resort properties had a 6.5% revenue per available room increase—due mostly to higher ADRs;
• Total revenue across all properties was up 14%; and
• Transient business rose 17% while group business increased 8%.
“We were able to capture some solid rate, which is carrying over to this year,” Rudnitsky said. “Our booking pace is up 11% in Q1 and up 30% over the balance of the year. That indicates to us the market is continuing to recover. It indicates there’s not a lot of new product out there and we should be able to capture that rate.”
With six properties located in Europe, Dolce is aware of the volatile economic situation there, and has thus far emerged unscathed.
“Europe was a bit choppy in the back half of (2011), but we managed through the problems,” he said. “We saw some cancellations in Europe, but we weathered the storm.”
Rudnitsky said key industries that were the driving force for Dolce’s success in Europe included the automotive, manufacturing and technology segments. In the United States, the education, technology and medical-device industries drove performance.
New to the portfolio
The positive performance news is fueling the company’s desire to add properties to its portfolio. One coming on line late this year or early next is The Alexander under construction in Indianapolis and an adaptive reuse project in Europe that will open next year.
“The pipeline for everybody is a little less than we’d all like, particularly in the upscale arena,” Rudnitsky said. “You have to control what you can control and the rest has to play out.”
Rudnitsky called The Alexander “a home run.”
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“It’s a center-city lifestyle hotel combined with an (International Association of Conference Centers) hotel that will be state of the art, beautiful and functional for corporate meetings,” he said. “The property lends itself to a variety of different meetings with very good demand generators, such as Eli Lilly (and Company), nearby.”
One thing the hotel will feature is a large bandwidth capacity. The hotel will not charge for guestroom Internet access, and Rudnitsky said with the evolution of tablets and mobile devices that are Wi-Fi compatible, hotels need to recognize the changing requirements for guests.
“A revenue stream associated with the Internet is going to start eroding for some companies,” he said. “It’s a big deal. Our focus is on having bandwidth and the latest technology available. Guests don’t want to find out that the Internet (access) is slow when they get to a hotel, so it’s up to the hotel to ensure the proper bandwidth is in place to handle the demand.”
Other opportunities
There are other opportunities for the company to expand—mainly through management contracts.
“There are asset buyers out there looking to buy underperforming assets, take them out at an affordable price and reposition them,” Rudnitsky said. “That’s a perfect scenario for us.”
Dolce can provide sliver equity in deals, but would prefer to remain asset light, he said.
The lack of a robust supply pipeline is a double-edge sword, the Dolce executive said.
“Supply (growth) below demand (growth) gives you a chance to drive revenue on the organic side of the business,” he said.
The company would like to eventually break into the China market, but needs to focus on finding a partner there before making any plans, Rudnitsky said.